TECHPRECISION CORP (Form: 10-Q, Received: 02/14/2017 17:44:45)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2016

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-51378

TECHPRECISION CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE		51-0539828
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Bella Drive Westminster, MA		01473
(Address of principal executive offices)		(Zip Code)

(978) 874-0591

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-Accelerated Filer	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

The number of shares of the Registrant's common stock, par value $0.0001 per share, issued and outstanding at February 6, 2017 was 28,824,593.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
ITEM 4.	CONTROLS AND PROCEDURES	21
PART II.	OTHER INFORMATION	21
ITEM 1.	LEGAL PROCEEDINGS	21
ITEM 6.	EXHIBITS	21
	SIGNATURES	22
EXHIBIT INDEX		23

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31, 2016			March 31, 2016
ASSETS
Current assets:
Cash	$	3,794,773		$	1,332,166
Accounts receivable, less allowance for doubtful accounts of $0 at December 31, 2016 and March 31, 2016		771,202			2,022,480
Costs on uncompleted contracts, in excess of progress billings		3,050,850			2,395,642
Inventories - raw materials		124,394			128,595
Other current assets		363,523			530,808
Total current assets		8,104,742			6,409,691
Property, plant and equipment, net		4,747,890			4,814,184
Deferred income taxes		684,270			684,270
Other noncurrent assets, net		123,900			176,344
Total assets	$	13,660,802		$	12,084,489

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	548,759		$	996,065
Accrued expenses		1,195,317			1,804,485
Income taxes payable		5,589			9,032
Advanced claims payment		--			507,835
Billings on uncompleted contracts, in excess of related costs		663,158			1,629,018
Current portion of long-term debt		696,245			953,106
Total current liabilities		3,109,068			5,899,541
Long-term debt, net		5,041,868			3,735,410
Deferred income taxes		684,270			684,270
Noncurrent accrued expenses		22,580			37,097
Commitments and contingent liabilities (see Note 14)
Stockholders' Equity:
Common stock - par value $.0001 per share, 90,000,000 shares authorized, 28,824,593 shares issued and outstanding at December 31, 2016, and 27,324,593 shares issued and outstanding at March 31, 2016		2,882			2,732
Additional paid in capital		8,188,284			7,094,749
Accumulated other comprehensive income		19,249			21,568
Accumulated deficit		(3,407,399	)		(5,390,878	)
Total stockholders' equity		4,803,016			1,728,171
Total liabilities and stockholders' equity	$	13,660,802		$	12,084,489

See accompanying notes to the condensed consolidated financial statements.

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015			2016			2015
Net sales	$	5,318,610		$	3,506,560		$	13,619,578		$	11,985,422
Cost of sales		3,266,721			2,434,900			8,558,680			8,223,349
Gross profit		2,051,889			1,071,660			5,060,898			3,762,073
Selling, general and administrative		1,955,093			768,220			3,582,856			2,482,465
Gain from claims assignment settlement		(1,122,287	)		--			(1,122,287	)		--
Income from operations		1,219,083			303,440			2,600,329			1,279,608
Other, net		1,130			471			8,705			1,561
Interest expense		(207,521	)		(291,908	)		(583,999	)		(808,209	)
Total other expense, net		(206,391	)		(291,437	)		(575,294	)		(806,648	)
Income before income taxes		1,012,692			12,003			2,025,035			472,960
Income tax expense		20,598			--			41,556			--
Net income	$	992,094		$	12,003		$	1,983,479		$	472,960
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments		(1,095	)		(1,135	)		(2,319	)		217
Other comprehensive (loss) income, before tax		(1,095	)		(1,135	)		(2,319	)		217
Income tax expense on other comprehensive (loss) income		--			--			--			--
Other comprehensive (loss) income, net of tax		(1,095	)		(1,135	)		(2,319	)		217
Comprehensive income	$	990,999		$	10,868		$	1,981,160		$	473,177
Net income per share (basic)	$	0.03		$	0.00		$	0.07		$	0.02
Net income per share (diluted)	$	0.03		$	0.00		$	0.07		$	0.02
Weighted average number of shares outstanding (basic)		28,156,115			27,324,593			27,602,775			26,084,080
Weighted average number of shares outstanding (diluted)		28,873,237			27,509,980			28,261,110			26,210,206

See accompanying notes to the condensed consolidated financial statements.

TECHPRECISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended December 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,983,479		$	472,960
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		519,114			582,628
Amortization of debt issue costs		129,383			219,876
Stock based compensation expense		1,093,685			51,100
Benefit from contract loss adjustments		(320,900	)		(111,958	)
Gain from claims assignment settlement – noncash portion		(507,835	)		--
Changes in operating assets and liabilities:
Accounts receivable		1,251,278			59,798
Costs on uncompleted contracts, in excess of progress billings		(547,812	)		(789,764	)
Inventories – raw materials		4,201			(13,738	)
Other current assets		167,263			(110,355	)
Other noncurrent assets and liabilities		(30,961	)		--
Accounts payable		(447,306	)		(438,486	)
Accrued expenses		(412,198	)		67,709
Accrued taxes		(3,443	)		--
Advanced claims payment		--			507,835
Billings on uncompleted contracts, in excess of related costs		(965,860	)		(124,327	)
Net cash provided by operating activities		1,912,088			373,278

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(452,820	)		(192,215	)
Net cash used in investing activities		(452,820	)		(192,215	)

CASH FLOWS FROM FINANCING ACTIVITIES
Deferred loan costs		(159,137	)		--
Borrowings of long-term debt		6,227,500			--
Repayment of long-term debt		(5,064,745	)		(700,174	)
Net cash provided by (used in) financing activities		1,003,618			(700,174	)
Effect of exchange rate on cash		(279	)		(913	)
Net increase (decrease) in cash		2,462,607			(520,024	)
Cash, beginning of period	$	1,332,166		$	1,336,325
Cash, end of period	$	3,794,773		$	816,301

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest	$	692,541		$	525,421
Income taxes	$	45,000		$	--

SUPPLEMENTAL INFORMATION – NONCASH INVESTING AND FINANCING TRANSACTIONS:

Nine Months Ended December 31, 2015

For the nine months ended December 31, 2015, the Company issued 2,519,634 shares of common stock in connection with the conversion of 1,927,508 shares of Series A Convertible Preferred Stock. The stock conversions increased Common Stock and Additional Paid in Capital by $252 and $523,957, respectively.

See accompanying notes to the condensed consolidated financial statements.

TECHPRECISION CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

TechPrecision Corporation, or TechPrecision, is a Delaware corporation organized in February 2005 under the name Lounsberry Holdings II, Inc. The name was changed to TechPrecision Corporation on March 6, 2006. TechPrecision is the parent company of Ranor, Inc., or Ranor, a Delaware corporation and Wuxi Critical Mechanical Components Co., Ltd., or WCMC, a wholly foreign owned enterprise (WFOE). TechPrecision, Ranor and WCMC are collectively referred to as the "Company", "we", "us" or "our".

We manufacture large scale metal fabricated and machined precision components and equipment. These products are used in a variety of industries including the defense, aerospace, nuclear, medical and precision industrial markets.

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of TechPrecision, Ranor and WCMC. Intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated balance sheet as of December 31, 2016, the condensed consolidated statements of operations and comprehensive income for the three and nine month periods ended December 31, 2016 and 2015, and the condensed consolidated statements of cash flows for the nine months ended December 31, 2016 and 2015 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 Notes to Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements and related notes should be read in conjunction with our consolidated financial statements included with our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, or the 2016 Form 10-K, filed with the SEC on June 28, 2016.

Significant Accounting Policies

Our significant accounting policies are set forth in detail in Note 2 to the 2016 Form 10-K.

NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

New Accounting Standards Recently Adopted

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update (ASU) No. 2015-03, Simplifying the Presentation of Debt Issue Costs . The new guidance requires entities to present debt issue costs in the balance sheet as a direct reduction to the related debt liability rather than as a deferred cost (i.e., an asset) as required by past guidance. The new guidance does not change the recognition or measurement of debt issuance costs. The Company adopted the standard retrospectively in the first quarter of the fiscal year ended March 31, 2017, or fiscal 2017. The adoption did not have a significant impact on our Consolidated Financial Statements.

Issued Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , the authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer. The new revenue recognition standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing and uncertainty of revenue and the related cash flows. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). We are currently assessing the impacts this guidance may have on our Consolidated Financial Statements and disclosures. The guidance is effective for annual reporting periods beginning on or after December 15, 2017. We do not plan to early adopt the standard.

In December 2016 the FASB issued Accounting Standards Update No. 2016-20, Technical Corrections and Improvements to Topic 606 , Revenue from Contracts with Customers, or ASU 2016-20. The amendments in ASU 2016-20 update and affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients , which provided revised guidance on certain issues relating to revenue from contracts with customers, including clarification of the objective of the collectability criterion. In March 2016, the FASB issued a final amendment to clarify the implementation guidance for principal versus agent considerations and in April 2016 issued a final amendment to clarify the guidance related to identifying performance obligations and the accounting for intellectual property licenses. We are currently evaluating the impact these updates may have on our Consolidated Financial Statements and disclosures.

Other significant new standards not yet adopted are set forth in detail in Note 3 to the 2016 Form 10-K.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following as of:

	December 31, 2016			March 31, 2016
Land	$	110,113		$	110,113
Building and improvements		3,252,908			3,252,908
Machinery equipment, furniture and fixtures		8,843,922			8,418,243
Equipment under capital leases		65,568			65,568
Total property, plant and equipment		12,272,511			11,846,832
Less: accumulated depreciation		(7,524,621	)		(7,032,648	)
Total property, plant and equipment, net	$	4,747,890		$	4,814,184

Depreciation expense for the three and nine months ended December 31, 2016 and 2015 was $165,626 and $519,114 and $187,908 and $582,628, respectively.

NOTE 5 - COSTS INCURRED ON UNCOMPLETED CONTRACTS

The following table sets forth information as to costs incurred on uncompleted contracts as of:

	December 31, 2016			March 31, 2016
Cost incurred on uncompleted contracts, beginning balance	$	5,491,605		$	4,068,488
Total cost incurred on contracts during the period		9,186,786			12,783,323
Less cost of sales, during the period		(8,558,680	)		(11,360,206	)
Cost incurred on uncompleted contracts, ending balance	$	6,119,711		$	5,491,605

Billings on uncompleted contracts, beginning balance	$	3,095,963		$	2,060,244
Total billings incurred on contracts, during the period		13,592,476			17,889,671
Less: Contracts recognized as revenue, during the period		(13,619,578	)		(16,853,952	)
Billings on uncompleted contracts, ending balance	$	3,068,861		$	3,095,963

Cost incurred on uncompleted contracts, ending balance	$	6,119,711		$	5,491,605
Billings on uncompleted contracts, ending balance		3,068,861			3,095,963
Costs incurred on uncompleted contracts, in excess of progress billings	$	3,050,850		$	2,395,642

Contract costs consist primarily of labor and materials and related overhead, to the extent that such costs are recoverable. Revenues associated with these contracts are recorded only when the amount of recovery can be estimated reliably and realization is probable. As of December 31, 2016 and March 31, 2016, we had billings on uncompleted contracts in excess of related costs of $663,158 and $1,629,018, respectively. Billings on uncompleted contracts represent customer prepayments on their contracts on which all revenue recognition criteria were not met. We also receive advance billings and deposits representing down payments for acquisition of materials and progress payments on contracts. The agreements with our customers allow us to offset the progress payments against the costs incurred. We record provisions for losses within cost of sales in our condensed consolidated statements of operations and comprehensive income.

NOTE 6 – OTHER CURRENT ASSETS

Other current assets included the following as of:

	December 31, 2016		March 31, 2016
Prepaid insurance	$	205,472	$	236,300
Payments advanced to suppliers		127,744		182,305
Collateral deposits		--		85,252
Other		30,307		26,951
Total	$	363,523	$	530,808

NOTE 7 – OTHER NONCURRENT ASSETS

Other noncurrent assets included the following as of:

	December 31, 2016		March 31, 2016
Fixed assets held for sale	$	123,900	$	123,900
Other		--		52,444
Total	$	123,900	$	176,344

On March 31, 2016, we classified certain machinery and equipment in the amount of $123,900 to fixed assets held for sale. This amount approximates fair value net of selling costs and we expect to sell these fixed assets before the end of fiscal 2017.

NOTE 8 - ACCRUED EXPENSES

Accrued expenses included the following as of:

	December 31, 2016		March 31, 2016
Accrued compensation	$	745,657	$	872,114
Provision for contract losses		143,885		464,785
Accrued material purchases		107,396		--
Accrued professional fees		126,636		117,981
Accrued interest expense		10,907		296,344
Other		60,836		53,261
Total	$	1,195,317	$	1,804,485

Accrued compensation includes amounts for executive bonuses, payroll and vacation and holiday pay. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in the provision are recorded in cost of sales. Our contract loss provision at March 31, 2016 included approximately $0.4 million for estimated contract losses in connection with a certain customer purchase agreement.

NOTE 9 – DEBT

	December 31, 2016		March 31, 2016
Commerce Term Loan due January 2022	$	2,850,000	$	--
People's Equipment Loan Facility due April 2021		3,031,046		--
Utica Credit Loan Note due November 2018		--		2,459,259
Revere Term Loan and Notes due January 2018		--		2,250,000
Obligations under capital lease		17,567		26,599
Total debt	$	5,898,613	$	4,735,858
Less: Debt issue costs, unamortized	$	160,500	$	47,342
Total debt, net	$	5,738,113	$	4,688,516
Less: Current portion of long-term debt	$	696,245	$	953,106
Long-term debt, net	$	5,041,868	$	3,735,410

Commerce Bank & Trust Company Loan Facility

On December 21, 2016, TechPrecision, through Ranor, closed on a Loan Agreement, or the Commerce Loan Agreement, with Commerce Bank & Trust Company, or Commerce. Pursuant to the Commerce Loan Agreement, Commerce made a term loan to Ranor in the amount of $2,850,000, or the Term Loan, and made available to Ranor a revolving line of credit in the amount of $1,000,000, or the Revolver Loan, and together with the Term Loan, collectively, the Commerce Loans. The Commerce Loans are secured by a first lien on all personal and real property of Ranor. Starting on January 20, 2017, payments on the Term Loan will be made in 60 monthly installments of $19,260.46 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on December 20, 2021 . A prepayment penalty will apply during the loan term but will not apply if a prepayment is made from either casualty loss insurance proceeds or a condemnation award applicable to any collateral or if a full prepayment is made during the 45-day period immediately preceding the maturity date. Advances under the Revolver Loan will be subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000. Advances made under the Revolver Loan bear interest at a variable rate equal to the one-month LIBOR plus 275 basis points. Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears. The Revolver Loan will mature on December 21, 2018. Ranor's obligations under the Commerce Loan Agreement are guaranteed by TechPrecision. There were no amounts outstanding under the Revolver Loan at December 31, 2016.

The Commerce Loan Agreement contains a covenant whereby the Company is required to maintain a debt service coverage ratio or DSCR, of at least 1.2 to 1.0 during the term of the Commerce Loans. The DSCR will be measured at the end of each fiscal quarter of the Company. Pursuant to the Commerce Loan Agreement, Ranor covenants (a) to cause its balance sheet leverage to be less than or equal to 3.50 to 1.00 for the fiscal year ending March 31, 2017, less than or equal to 3.00 to 1.00 for the fiscal year ending March 31, 2018, and less than or equal to 2.50 to 1.00 for the fiscal year ending March 31, 2019 and each fiscal year end thereafter, and (b) that its annual capital expenditures shall not exceed $1,000,000 for the fiscal year ending March 31, 2017, $2,500,000 for the fiscal year ending March 31, 2018, $2,500,000 for the fiscal year ended March 31, 2019, and $1,500,000 for the fiscal year ending March 31, 2020 and each fiscal year end thereafter. Compliance with the foregoing covenants will be tested annually commencing March 31, 2017. The Commerce Loan Agreement contains an additional covenant whereby Ranor is required to maintain a loan to value ratio of not greater than 0.75 to 1.00, to be measured by appraisal not more frequently than one time during each 365-day period.

The Commerce Loans may be accelerated upon the occurrence of an "Event of Default" (as defined in the Commerce Loan Agreement). Events of Default include (i) the failure to pay any monthly installment payment before the tenth day following the due date of such payment; (ii) the failure of Ranor or TechPrecision to observe, perform or pay any obligations under the Commerce Loan Agreement or any other obligation to Commerce; (iii) the failure of Ranor or TechPrecision to pay any indebtedness in excess of $100,000 (other than the Commerce Loans) when due; (iv) any representation or warranty of Ranor or TechPrecision in the Commerce Loan Agreement and related documents, or the Loan Documents, being proven to have been incorrect, in any material respect, when made; (v) the failure of Ranor to discharge any attachment, levy or distraint on its property; (vi) any default by Ranor or TechPrecision under any of the collateral security documents executed in connection with the Commerce Loan Agreement past any applicable grace period; (vii) the failure of Ranor or TechPrecision to file or pay taxes when due, unless such taxes are being contested in a manner permitted under the Loan Documents; (viii) a change in ownership or control of Ranor or change in management of Ranor where either the chief executive officer or chief financial officer as of December 21, 2016 is replaced without Commerce's prior consent; (ix) Ranor or TechPrecision ceasing to do business as a going concern, making an assignment for the benefit of creditors, or commencing a bankruptcy or other similar insolvency proceeding; and (x) the entry of a judgment against Ranor or TechPrecision in excess of $150,000. Some of the Events of Default are subject to certain cure periods.

In connection with the Commerce Loan Agreement, $2,394,875 of the proceeds from Term Loan were disbursed to Revere High Yield Fund, LP, or Revere, as payment in full of Ranor's indebtedness owed to Revere pursuant that certain Term Loan and Security Agreement, dated as of December 22, 2014, by and between Ranor and Revere, as amended, or the TLSA. Ranor retained $426,467 of the proceeds from the Term Loan for general corporate purposes. Unamortized debt issue costs at December 31, 2016 were $81,782.

People's Capital and Leasing Corp. Equipment Loan Facility

On April 26, 2016, TechPrecision, through Ranor, executed and closed a Master Loan and Security Agreement No. 4180, as supplemented with Schedule No. 001, or, together, the MLSA, with People's Capital and Leasing Corp., or People's. The MLSA is dated and effective as of March 31, 2016. Loan proceeds were disbursed to Ranor on April 26, 2016. Pursuant to the MLSA, People's loaned $3,011,648 to Ranor, or the People's Loan. The People's Loan is secured by a first lien on certain machinery and equipment of Ranor, or the Equipment Collateral. Payments on the People's Loan will be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum. The first monthly installment payment was paid on May 26, 2016. A prepayment penalty will apply during the first four years of the loan term. Ranor's obligations under the MLSA are guaranteed by TechPrecision. The Company covenants to maintain a debt service coverage ratio, or DSCR, of at least 1.5 to 1.0 during the term of the People's Loan. The DSCR will be measured at the end of each fiscal year of the Company. The People's Loan may be accelerated upon the occurrence of an "Event of Default" (as defined in the MLSA). Some of the Events of Default are subject to certain cure periods.

In connection with the MLSA, $2,653,353 of the proceeds from the People's Loan were disbursed to Utica Leaseco, LLC, or Utica, as payment in full for principal and interest under the existing Loan and Security Agreement, or LSA. People's retained a holdback in the amount of $182,763. The holdback was released to Ranor on July 6, 2016 after the Company reported a DSCR of 1.82 to 1.0 as of March 31, 2016. Ranor retained $175,532 of the proceeds from the People's Loan for general corporate purposes. Unamortized debt issue costs at December 31, 2016 were $78,718.

On October 4, 2016, TechPrecision and Ranor became committed to Schedule No. 002 to the MLSA, or Schedule 2. Pursuant to Schedule 2, People's made an additional loan in the amount of $365,852, or the Additional People's Loan, to Ranor upon the terms and conditions set forth in the MLSA and Schedule 2. Ranor will repay the Additional People's Loan in monthly installments of principal and interest over 60 months. The Additional People's Loan is guaranteed by TechPrecision pursuant to the original Corporate Guaranty from TechPrecision in favor of People's dated March 31, 2016. The Additional People's Loan is secured by a security interest in certain machinery and equipment of Ranor as provided in Schedule 2.

On December 21, 2016, TechPrecision and Ranor closed on an Amendment to the MLSA, or the MLSA Amendment, with People's. The MLSA Amendment, dated as of December 20, 2016, amends the definition of "Permitted Liens" under the MLSA to include the liens held by Commerce pursuant to the terms of the Commerce Loan Agreement and to delete the reference to the liens held by Revere.

Capital Lease

We entered into a capital lease in April 2012 for certain office equipment. This lease was amended in fiscal 2014 when we purchased a replacement copier at Ranor. The lease, as amended, will expire in March 2018, bears interest at 6.0% per annum and requires monthly payments of principal and interest of $1,117. The amount of the lease recorded in property, plant and equipment, net as of December 31, 2016 and March 31, 2016 was $14,360 and $23,124, respectively.

NOTE 10 - INCOME TAXES

We account for income taxes under the provisions of FASB ASC 740, Income Taxes . At the end of each interim period, we make an estimate of our annual expected effective tax rates in both the United States and China. For the three and nine months ended December 31, 2016, we recorded tax expense of $20,598 and $41,556, respectively, in connection with an accrual for alternative minimum tax due on taxable income in excess of net operating losses.

We maintain a full valuation allowance on our net deferred tax assets. A valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, primarily our past operating losses, which cause uncertainty as to whether we will generate sufficient taxable income to utilize the deferred tax assets. We have determined that it is more likely than not that certain future tax benefits may not be realized. A change in the estimates used to make this determination could require an increase in deferred tax assets if they become realizable.

We regularly assess the effects of various factors to determine the adequacy of our provision for income taxes. For example, our future effective tax rate would be affected if earnings were lower than anticipated in tax jurisdictions where we have lower statutory rates and higher than anticipated in tax jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof.

NOTE 11 - PROFIT SHARING PLAN

Ranor has a 401(k) profit sharing plan that covers substantially all Ranor employees who have completed 90 days of service. Ranor retains the option to match employee contributions. Our contributions were $60,127 and $44,557 for the nine months ended December 31, 2016 and 2015, respectively.

NOTE 12 - STOCK BASED COMPENSATION

2016 Equity Incentive Plan

Our board of directors, upon the recommendation of the compensation committee of our board of directors, approved the 2016 TechPrecision Equity Incentive Plan, or the 2016 Plan, on November 10, 2016. Our stockholders approved the 2016 Plan at the Company's Annual Meeting of Stockholders, or the Annual Meeting, on December 8, 2016. The 2016 Plan succeeds the 2006 Plan and applies to awards granted after the Annual Meeting. We have designed the 2016 Plan to reflect our commitment to having best practices in both compensation and corporate governance. The 2016 Plan provides for a share reserve of 5,000,000 shares of common stock.

The 2016 Plan authorizes the award of incentive and non-qualified stock options, restricted stock awards, restricted stock units, and performance awards to employees, directors, consultants, and other individuals who provide services to TechPrecision or its affiliates. The purposes of the 2016 Plan are to: (a) enable TechPrecision and its affiliated companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees, directors and consultants with an incentive for productivity; and (c) provide those employees, directors and consultants with an opportunity to share in the growth and value of the Company. Subject to adjustment as provided in the 2016 Plan, the maximum number of shares of common stock that may be issued in respect of awards under the 2016 Plan is 5,000,000 shares (inclusive of awards issued under the 2006 Long-Term Incentive Plan, or the 2006 Plan, that remained outstanding as of the effective date of the 2016 Plan), all of which shares may be issued in respect of incentive stock options. On December 8, 2016, there were 1,958,500 shares underlying awards issued under the 2006 Plan that remained outstanding. The 2006 Plan expired under its own terms in February 2016. Shares granted under the 2006 Plan will remain outstanding until expiration or settlement. Shares of our common stock subject to awards that expire unexercised or are otherwise forfeited shall again be available for awards under the 2016 Plan.

On December 27, 2016, in recognition of performance and to increase the alignment of his interests with those of our stockholders, TechPrecision granted to Alexander Shen, TechPrecision's Chief Executive Officer, a non-qualified stock option to purchase 1,000,000 shares of our common stock at an exercise price of $0.50, the closing price of our common stock on the date of the grant. The grant was made under the 2016 Plan and a Non-Qualified Stock Option Award Agreement, dated December 27, 2016, from TechPrecision to Mr. Shen. The option is immediately vested and exercisable with respect to 666,667 shares of common stock and will become vested and exercisable with respect to the remaining 333,333 shares on December 27, 2017, provided that Mr. Shen remains in continuous service as an employee of the Company through such vesting date. The options have a remaining weighted average contract life of nine years. The fair value of the options is $418,995 and $279,470 was expensed in the three months ended December 31, 2016. At December 31, 2016, there was $139,525 of total unrecognized compensation cost related to the stock options, and these costs are expected to be recognized over the next twelve months.

The fair value of the options we grant is estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The average dividend yield over the historical period for which volatility was computed is zero. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. We used the simplified method for all grants to estimate the expected life of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. The assumptions utilized for options granted during the period presented were 123.8% for volatility, 2.07% for the risk free interest rate, and approximately six years for the expected life. At December 31, 2016, there were 2,041,500 shares available for grant under the 2016 Plan.

The following table summarizes information about options under the 2006 Plan and the 2016 Plan for the periods presented below:

	Number Of Options			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at 3/31/2016		2,398,500		$	0.711	$	183,900		7.90
Granted		1,000,000		$	0.500
Expired		(440,000	)	$	0.912
Outstanding at 12/31/2016		2,958,500		$	0.383	$	640,349		8.66
Vested or expected to vest at 12/31/2016		2,958,500		$	0.383	$	640,349		8.66
Exercisable and vested at 12/31/2016		1,958,500		$	0.451	$	373,163		8.37

At December 31, 2016, there was $179,004 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over the next fifteen months. The following table summarizes the activity of our stock options outstanding but not vested for the nine months ended December 31, 2016:

	Number of Options			Weighted Average Exercise Price
Outstanding at 3/31/2016		1,028,334		$	0.117
Granted		1,000,000		$	0.500
Expired		(13,334	)	$	0.670
Vested		(1,015,000	)	$	0.080
Outstanding at 12/31/2016		1,000,000		$	0.250

Other information relating to stock options outstanding at December 31, 2016 is as follows:

Range of Exercise Prices:	Options Outstanding		Weighted Average Remaining Contractual Term		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
$0.01-$1.00		2,770,000		8.37	$	0.30		1,770,000	$	0.33
$1.01-$1.96		188,500		0.29	$	1.59		188,500	$	1.59
Totals		2,958,500						1,958,500

Restricted Stock Awards

In December 2014, each non-employee director waived any compensation owed to them for their service to the Company. On November 10, 2016, our board of directors determined that it would grant shares of common stock to each of our directors as compensation for their service to the Company during the period from January 1, 2014 to November 10, 2016. Accordingly, our board of directors granted 600,000 shares of common stock to Mr. Leonard Anthony, 250,000 shares of common stock to each of Mr. Philip Dur and Mr. Michael Holly, and 200,000 shares of common stock to Mr. Robert Isaman and Mr. Andrew Levy. The grant of shares of common stock to Mr. Anthony also recognizes his uncompensated service as Executive Chairman of the Company during the period from January 1, 2014 to November 17, 2014. The Company recorded an expense of $780,000 in connection with these grants of shares of common stock, based on the closing market price of our common stock on the date of grant.

NOTE 13 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

We maintain bank account balances, which, at times, may exceed Federal Deposit Insurance Corporation insured limits. We have not experienced any losses with these accounts and believe that we are not exposed to any significant credit risk on cash.

At December 31, 2016, there were accounts receivable balances outstanding from four customers comprising approximately 84% of the total receivables balance. The following table sets forth information as to accounts receivable from customers who accounted for more than 10% of our accounts receivable balance as of:

	December 31, 2016					March 31, 2016
Customer	Dollars		Percent			Dollars		Percent
A	$	288,182		37	%	$	*		*	%
B	$	128,053		17	%	$	*		*	%
C	$	124,102		16	%	$	*		*	%
D	$	109,662		14	%	$	225,415		11	%
E	$	*		*	%	$	834,501		41	%
F	$	*		*	%	$	315,699		16	%

*less than 10% of total

All of our sales recorded for the nine months ended December 31, 2016 are from our U.S. segment. There were no sales generated from WCMC, our subsidiary in China, during the nine months ended December 31, 2016. We have been dependent in each year on a small number of customers who generate a significant portion of our business, and these customers change from year to year. The following table sets forth information as to net sales from customers who accounted for more than 10% of our revenue for the following periods:

	Three months ended December 31, 2016					Three months ended December 31, 2015					Nine months ended December 31, 2016					Nine months ended December 31, 2015
Customer	Dollars		Percent			Dollars		Percent			Dollars		Percent			Dollars		Percent
A	$	3,113,121		59	%	$	1,568,714		45	%	$	6,398,186		47	%	$	3,057,140		26	%
B	$	*		*	%	$	*		*	%	$	2,166,171		16	%	$	*		*	%
C	$	*		*	%	$	*		*	%	$	1,537,488		11	%	$	1,971,139		17	%
D	$	1,000,198		19	%	$	594,534		17	%	$	1,383,451		10	%	$	*		*	%
E	$	*		*	%	$	*		*	%	$	*		*	%	$	1,459,013		12	%
F	$	*		*	%	$	*		*	%	$	*		*	%	$	1,192,848		10	%
G	$	*		*	%	$	354,469		10	%	$	*		*	%	$	*		*	%

*less than 10% of total

NOTE 14 – COMMITMENTS

Leases

Expiration of a Lease

The Company leased approximately 1,100 square feet located at 992 Old Eagle School Road, Wayne, Pennsylvania, or the Wayne Property, pursuant to an office lease with GPX Wayne Office Properties, L.P., or GPX Wayne. On June 30, 2016, this office lease expired under its own terms. Other than as described above, there is no relationship between the Company and GPX Wayne.

Employment Agreements

We have employment agreements with each of our executive officers. Such agreements provide for minimum salary levels, adjusted annually, and incentive bonuses that are payable if specified company goals are attained. The aggregate commitment at December 31, 2016 for future executive salaries during the next 12 months, including fiscal 2017 bonuses, was approximately $0.8 million.

NOTE 15 - EARNINGS PER SHARE (EPS)

Basic EPS is computed by dividing reported earnings available to stockholders by the weighted average shares outstanding. Diluted EPS also includes the effect of all potential common share equivalents, which consists of stock options and convertible preferred stock that would be dilutive. The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations, as required under FASB ASC 260.

	Three Months ended December 31, 2016		Three Months ended December 31, 2015		Nine Months ended December 31, 2016		Nine Months ended December 31, 2015
Basic EPS
Net income	$	992,094	$	12,003	$	1,983,479	$	472,960
Weighted average number of shares outstanding		28,156,115		27,324,593		27,602,775		26,084,080
Basic income per share	$	0.03	$	0.00	$	0.07	$	0.02
Diluted EPS
Net income	$	992,094	$	12,003	$	1,983,479	$	472,960
Dilutive effect of stock options, warrants and preferred stock		717,122		185,387		658,335		126,126
Diluted weighted average shares		28,873,237		27,509,980		28,261,110		26,210,206
Diluted income per share	$	0.03	$	0.00	$	0.07	$	0.02

All potential common share equivalents that have an anti-dilutive effect (i.e., those that increase income per share) are excluded from the calculation of diluted EPS. For the three and nine months ended December 31, 2016, there were, respectively, 423,500 and 1,428,500 of potential common share equivalents that were out-of-the-money and were not included in the EPS calculations above. For the three and nine months ended December 31, 2015, there were, respectively, 2,630,837 and 3,407,066 of potential common share equivalents that were out-of-the-money and were not included in the EPS calculations above.

NOTE 16 – CLAIM ASSIGNMENT SETTLEMENT

On April 17, 2015, we entered into an Assignment of Claim Agreement, or the Assignment Agreement, with Citigroup Financial Products, Inc., or Citigroup, whereby we sold, transferred, conveyed and assigned to Citigroup all of Ranor's right, title and interest in Ranor's $3,740,956 unsecured claim against GT Advanced Technologies, Inc., or GTAT, in connection with GTAT's bankruptcy. Pursuant to the Assignment Agreement, on April 21, 2015, Citigroup paid to Ranor an initial amount equal to $507,835, which was classified as a current liability on our balance sheet. The Assignment Agreement provided for Citigroup to pay to Ranor up to an additional $614,452 upon receipt of written notice that Ranor's claim was fully and finally allowed against GTAT without objection. On November 7, 2016, GTAT's legal counsel notified Citigroup that Ranor's unsecured claim in GTAT's bankruptcy was fully allowed without objection. In accordance with the terms of the Assignment Agreement, Citigroup paid Ranor an additional $614,452 on November 8, 2016. The resolution of this claim under the Assignment Agreement was recognized as a gain of $1,122,287 in the Statement of Operations and Comprehensive Income for the three months ended December 31, 2016.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Statement Regarding Forward Looking Disclosure

The following discussion of the results of our operations and financial condition should be read in conjunction with our condensed consolidated financial statements and the related notes which appear elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including this section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," may contain predictive or "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors. Those factors include those risks discussed in Part I Item 1A "Risk Factors" in the 2016 Form 10-K, as well as those described in any other filings which we make with the SEC. In addition, such statements could be affected by risks and uncertainties related to the availability of appropriate financing facilities, our ability to receive contract awards through competitive bidding processes, our ability to maintain standards to enable us to manufacture products to exacting specifications, our ability to enter new markets for our services, marketing and customer acceptance of our products, our reliance on a small number of customers for a significant percentage of our business, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this Quarterly Report on Form 10-Q except as required by applicable law. Investors should evaluate any statements made by us in light of these important factors.

Overview

We offer a full range of services required to transform raw materials into precise finished products. Our manufacturing capabilities include: fabrication operations (cutting, press and roll forming, assembly, welding, heat treating, blasting and painting) and machining operations including CNC (computer numerical controlled) horizontal and vertical milling centers. We also provide support services to our manufacturing capabilities: manufacturing engineering (planning, fixture and tooling development, manufacturing), quality control (inspection and testing), materials procurement, production control (scheduling, project management and expediting) and final assembly.

All manufacturing is done in accordance with our written quality assurance program, which meets specific national and international codes, standards, and specifications. Ranor holds several certificates of authorization issued by the American Society of Mechanical Engineers and the National Board of Boiler and Pressure Vessel Inspectors. The standards used are specific to the customers' needs, and our manufacturing operations are conducted in accordance with these standards.

Because our revenues are derived from the sale of goods manufactured pursuant to a contract, and we do not sell from inventory, it is necessary for us to constantly seek new contracts. There may be a time lag between our completion of one contract and commencement of work on another contract. During such periods, we may continue to incur overhead expense but with lower revenue resulting in lower operating margins. Furthermore, changes in either the scope of an existing contract or related delivery schedules may impact the revenue we receive under the contract and the allocation of manpower. Although we provide manufacturing services for large governmental programs, we usually do not work directly for the government or its agencies. Rather, we perform our services for large governmental contractors and large industrial companies. However, our business is dependent in part on the continuation of governmental programs which require our services and products.

Our contracts are generated both through negotiation with the customer and from bids made pursuant to a request for proposal. Our ability to receive contract awards is dependent upon the contracting party's perception of such factors as our ability to perform on time, our history of performance, including quality, our financial condition and our ability to price our services competitively. Although some of our contracts contemplate the manufacture of one or a limited number of units, we also pursue more long-term projects with predictable cost structures.

All of our sales recorded for the nine months ended December 31, 2016 are from our U.S. segment. There were no sales generated from WCMC, our subsidiary in China, during the nine months ended December 31, 2016. At December 31, 2016, we did not have any open customer orders for WCMC in our backlog. We are evaluating how we utilize the WCMC entity moving forward.

We historically have experienced, and continue to experience, customer concentration. For the nine months ended December 31, 2016, our largest customer accounted for approximately 47% of net sales, and our ten largest customers accounted for approximately 99% of our net sales. Our sales order backlog at December 31, 2016 was approximately $15.6 million compared with a backlog of $19.8 million at March 31, 2016.

For the nine months ended December 31, 2016, our net sales and net income were $13.6 million and $2.0 million, respectively, compared to net sales and net income of $12.0 million and $0.5 million, respectively, for the nine months ended December 31, 2015. Our gross margin for the nine months ended December 31, 2016 was 37.2% compared with gross margin of 31.4% for the nine months ended December 31, 2015.

On April 17, 2015, the Company, through Ranor, entered into the Assignment Agreement with Citigroup. Pursuant to the terms of the Assignment Agreement, Ranor sold, transferred, conveyed and assigned to Citigroup all of Ranor's right, title and interest in and to Ranor's $3,740,956 unsecured claim against GTAT. Pursuant to the Assignment Agreement, Citigroup paid to Ranor an initial amount equal to $507,835, which was classified as a current liability on our balance sheet. The Assignment Agreement provided for Citigroup to pay to Ranor up to an additional $614,452 upon receipt of written notice that Ranor's claim has been fully and finally allowed against GTAT without objection. On November 7, 2016, GTAT's legal counsel notified Citigroup that Ranor's unsecured claim was fully allowed without objection. In accordance with the terms of the Assignment Agreement, Citigroup paid Ranor an additional $614,452 on November 8, 2016. The resolution of this claim under the Assignment Agreement was recognized as a $1,122,287 gain in the three months ended December 31, 2016.

On April 26, 2016 we entered into the MLSA with People's. The proceeds from the MLSA totaled $3,377,500 and were used to pay off amounts outstanding under the LSA with Utica (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources").

On December 21, 2016 we closed the Commerce Loan Agreement with Commerce. Pursuant to the Commerce Loan Agreement, Commerce made the Term Loan to Ranor in the amount of $2,850,000 and made available to Ranor the Revolver Loan in the amount of $1,000,000. Proceeds of $2,394,875 from Term Loan were disbursed to Revere as payment in full of Ranor's indebtedness owed to Revere pursuant to the TLSA (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources").

We generated $1.9 million of cash from operating activities for the nine months ended December 31, 2016 and had a cash balance of $3.8 million at December 31, 2016.

Critical Accounting Policies and Estimates

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

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in the 2016 Form 10-K. There were no significant changes in the critical accounting policies during the nine months ended December 31, 2016, nor did we make any changes to our accounting policies that would have changed these critical accounting policies.

New Accounting Pronouncements

See Note 3 – Recently Issued Accounting Pronouncements to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.

Results of Operations

Our results of operations are affected by a number of external factors including the availability of raw materials (particularly steel), commodity prices, macroeconomic factors, including the availability of capital that may be needed by our customers, and political, regulatory and legal conditions in the United States and foreign markets. Our order and revenue stream is uneven and reflects an irregular pattern of orders we receive from our customers as they gauge their customers' demand for new and existing products. Our results of operations are affected by our success in booking new contracts, our rate of progress fulfilling our obligations under our contracts, the timing of revenue recognition, delays in customer acceptances of products, and delays in deliveries of ordered products. A delay in deliveries or cancellations of orders would cause us to have inventories in excess of our short-term needs, and may delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog. We continue to execute the business plan we developed in fiscal 2015, which has the immediate goal of realigning and stabilizing our cost structure so we can return to and sustain profitability, even at lower revenue levels. In connection with the execution of this business plan, we need to continue to replenish our backlog with orders from our key customers.

Three Months Ended December 31, 2016 and 2015

The following table sets forth information from our statements of operations in dollars and as a percentage of revenue:

( dollars in thousands)	Three Months Ended December 31, 2016						Three Months Ended December 31, 2015						Changes from 2016 to 2015
	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	5,319			100	%	$	3,507			100	%	$	1,812				52	%
Cost of sales		3,267			61	%		2,435			69	%		832				34	%
Gross profit		2,052			39	%		1,072			31	%		980				91	%
Selling, general and administrative		1,955			37	%		768			22	%		1,187			nm		%
Gain from claims assignment settlement		(1,122	)		21	%		--			--	%		(1,122	)		nm		%
Income from operations		1,219			23	%		304			9	%		915			nm		%
Other income		1			--	%		--			--	%		1				--	%
Interest expense		(207	)		(4	)%		(292	)		(8	)%		85				29	%
Total other expense, net		(206	)		(4	)%		(292	)		(8	)%		86				29	%
Income before income taxes		1,013			19	%		12			--	%		1,001		nm			%
Income tax expense		21			--	%		--			--	%		21		nm			%
Net income	$	992			19	%	$	12			--	%	$	980		nm			%

nm - not meaningful

Net Sales

For the three months ended December 31, 2016, net sales increased by approximately $1.8 million, or 52%, to $5.3 million. Our third quarter shipments reflect steady demand from our defense customers, albeit for different products and components than those shipped during the comparable period a year ago. For the three months ended December 31, 2016, net sales in our defense markets increased by $1.9 million on higher volume of components shipped to one of our largest customers, and net sales in our precision industrial markets increased by $0.2 million primarily on higher volume of components shipped for medical systems. However, net sales in our energy markets decreased by $0.3 million for the three months ended December 31, 2016 compared to the three months ended December 31, 2015, as the Company worked to replenish backlog and start up new projects. Our backlog in the energy market has increased by $2.3 million from March 31, 2016 to December 31, 2016.

Cost of Sales and Gross Margin

Gross margin in any reporting period is impacted by the mix of products and services we provide on projects completed and in-process within that period. Our cost of sales for the three months ended December 31, 2016 increased by 34% compared to the three months ended December 31, 2015 on higher shipment volume. Gross margins during the three months ended December 31, 2016 were 38.6% compared with 30.6% for the three months ended December 31, 2015. Actual production activity during the three months ended December 31, 2016 resulted in normal overhead absorption for the reporting period .

Selling, General and Administrative Expenses

Total selling, general and administrative expenses, or SG&A, increased by $1.2 million for the three months ended December 31, 2016. Non-cash share based compensation totaled $1.1 million for the three months ended December 31, 2016 as the Company remunerated its board members and chief executive officer, or CEO, for past service. Stock based compensation totaled $9,873 for the three months ended December 31, 2015. Professional fees increased by $134,952, primarily for outside advisory services rendered in connection with the Company's Annual Meeting in December 2016 and the expansion of the size of our board of directors. Salaries and related expenses decreased by $8,981 in the three months ended December 31, 2016 compared to the three months ended December 31, 2015.

Gain from Claims Assignment Settlement

On April 17, 2015, the Company entered into the Assignment Agreement with Citigroup. Pursuant to the terms of the Assignment Agreement, Ranor sold, transferred, conveyed and assigned to Citigroup all of Ranor's right, title and interest in and to Ranor's $3,740,956 unsecured claim against GTAT. On November 8, 2016, the claim was resolved to the benefit of the Company. As a result, w e recorded a gain of $1.1 million in the three months ended December 31, 2016 representing all of the proceeds received as a settlement under the Assignment Agreement.

Interest Expense and Other Income

The following table reflects interest expense and other income for the three months ended:

	December 31, 2016			December 31, 2015			$ Change		% Change
Other income	$	1,130		$	471		$	659	nm		%
Interest expense	$	(157,112	)	$	(213,188	)	$	56,076		26	%
Interest expense: non-cash	$	(50,409	)	$	(78,720	)	$	28,311		36	%

nm - not meaningful

Interest expense for the three months ended December 31, 2016 was lower compared to the three months ended December 31, 2015 due to lower interest rates. Non-cash interest expense reflects the amortization of deferred loan costs and deferred interest costs in connection with our outstanding debt.

Income Taxes

For the three months ended December 31, 2016, we recorded income tax expense of $20,598 in connection with an accrual for alternative minimum tax due on taxable income in excess of net operating losses. For the three months ended December 31, 2015, we recorded zero income tax expense. The zero income tax expense recorded for the three months ended December 31, 2015 was the result of maintaining a full valuation allowance on our net deferred tax assets.

A valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, primarily our past operating losses, which cause uncertainty as to whether we will generate sufficient taxable income to utilize the deferred tax assets. We have determined that it is more likely than not that certain future tax benefits may not be realized. A change in the estimates used to make this determination could require an increase in deferred tax assets if they become realizable.

Net Income

As a result of the foregoing, we had net income of $992,094, or $0.03 per share basic and fully diluted, for the three months ended December 31, 2016, as compared to net income of $12,003, or $0.00 per share basic and fully diluted, for the three months ended December 31, 2015.

Nine Months Ended December 31, 2016 and 2015

The following table sets forth information from our statements of operations for the nine months ended December 31, 2016 and 2015, in dollars and as a percentage of revenue:

	Nine Months Ended December 31, 2016						Nine Months Ended December 31, 2015						Changes from 2016 to 2015
(dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Net sales	$	13,620			100	%	$	11,985			100	%	$	1,635			14	%
Cost of sales		8,559			63	%		8,223			69	%		336			4	%
Gross profit		5,061			37	%		3,762			31	%		1,299			35	%
Selling, general and administrative		3,583			26	%		2,482			21	%		1,101			44	%
Gain from claims assignment settlement		(1,122	)		8	%		--			--	%		(1,122	)	nm		%
Income from operations		2,600			19	%		1,280			11	%		1,320			103	%
Other income		9			--	%		1			--	%		8		nm		%
Interest expense		(584	)		(4	)%		(808	)		(7	)%		224			28	%
Total other expense, net		(575	)		(4	)%		(807	)		(7	)%		232			29	%
Income before income taxes		2,025			15	%		473			4	%		1,552		nm		%
Income tax expense		42			--	%		--			--	%		42		nm		%
Net income	$	1,983			15	%	$	473			4	%	$	1,510		nm		%

nm - not meaningful

Net Sales

Our shipments for the nine months ended December 31, 2016 reflect steady demand from our customers for our services, albeit for different products and components than those shipped during the comparable period a year ago. For the nine months ended December 31, 2016, net sales increased by $1.6 million, or 14%, to $13.6 million. For the nine months ended December 31, 2016, net sales to our defense customers, our largest market group, increased by $1.8 million compared to the nine months ended December 31, 2015, primarily on a higher volume of components shipped to defense contractors. Net sales in our precision industrial group increased by $1.7 million compared to the nine months ended December 31, 2015, primarily on a higher shipment volume for medical components, and net sales in our energy group decreased by $1.9 million compared to the nine months ended December 31, 2015 as a result of a slower order flow as our customers gauge their demand for new components. Our backlog in the energy market has increased by $2.3 million from March 31, 2016 to December 31, 2016.

Cost of Sales and Gross Margin

Gross margin in any reporting period is impacted by the mix of services we provide on projects completed within that period. Cost of sales consists primarily of raw materials, parts, labor, overhead, and subcontracting costs. Our cost of sales for the nine months ended December 31, 2016 increased by $0.3 million compared to the nine months ended December 31, 2015 to $8.6 million primarily on higher sales volume. Gross margins were 37.1% for the nine months ended December 31, 2016 and 31.4% for the nine months ended December 31, 2015. Gross profit was $5.1 million in the nine months ended December 31, 2016, or $1.3 million higher compared with the nine months ended December 31, 2015.

Selling, General and Administrative Expenses

Total SG&A expenses increased by $1.1 million for the nine months ended December 31, 2016. Non-cash share based compensation totaled $1.1 million for the nine months ended December 31, 2016, as the Company remunerated its board members and CEO for past services. Stock based compensation totaled $51,100 for the three months ended December 31, 2015. Professional fees increased by $302,685, primarily for outside advisory services rendered in connection with the Company's Annual Meeting in December 2016 and the expansion of the size of our board of directors. Salaries and related expenses decreased by $244,880 because of lower headcount in the nine months ended December 31, 2016 when compared with the nine months ended December 31, 2015.

Gain from Claims Assignment Settlement

On April 17, 2015, the Company entered into the Assignment Agreement with Citigroup. Pursuant to the terms of the Assignment Agreement, Ranor sold, transferred, conveyed and assigned to Citigroup all of Ranor's right, title and interest in and to Ranor's $3,740,956 unsecured claim against GTAT. On November 8, 2016, the claim was resolved to the benefit of the Company. As a result, w e recorded a gain of $1.1 million for the nine months ended December 31, 2016 representing all of the proceeds received as a settlement under the Assignment Agreement.

Interest Expense and Other Income

The following table reflects interest expense and other income for the nine months ended:

	December 31, 2016			December 31, 2015			$ Change		% Change
Other income	$	8,705		$	1,561		$	7,144	nm		%
Interest expense	$	(443,541	)	$	(525,450	)	$	81,909		16	%
Interest expense: non-cash	$	(140,458	)	$	(282,759	)	$	142,301		50	%

nm - not meaningful

The Company refinanced its long-term debt during the nine months ended December 31, 2016. As a result, interest expense decreased by 28% due to lower interest rates when compared to the nine months ended December 31, 2015. Non-cash interest expense for the nine months ended December 31, 2016 reflects lower amounts of amortization for deferred loan costs in connection with our outstanding long-term debt.

Income Taxes

For the nine months ended December 31, 2016, we recorded income tax expense of $41,556 in connection with an accrual for alternative minimum tax due on taxable income in excess of net operating losses. For the nine months ended December 31, 2015, we recorded zero income tax expense, the result of maintaining a full valuation allowance on our net deferred tax assets.

Net Income

As a result of the factors described above, our net income was $2.0 million, or $0.07 per share basic and fully diluted, for the nine months ended December 31, 2016. For the nine months ended December 31, 2015, our net income was $472,960, or $0.02 per share basic and fully diluted.

Liquidity and Capital Resources

On December 21, 2016 we closed the Commerce Loan Agreement with Commerce. Pursuant to the Commerce Loan Agreement, Commerce made the Term Loan to Ranor in the amount of $2,850,000 and made available to Ranor the Revolver Loan in the amount of $1,000,000. Starting on January 20, 2017, payments on the Term Loan will be made in 60 monthly installments of $19,260.46 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on December 20, 2021 . Advances under the Revolver Loan will be subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000. Advances made under the Revolver Loan bear interest at a variable rate equal to the one-month LIBOR plus 275 basis points. Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears. The Revolver Loan will mature on December 21, 2018. There were no amounts outstanding under the Revolver Loan at December 31, 2016.

In connection with the Commerce Loan Agreement, $2,394,875 of the proceeds from Term Loan were disbursed to Revere as payment in full of Ranor's indebtedness owed to Revere pursuant to the TLSA. Ranor retained $426,467 of the proceeds from the Term Loan for general corporate purposes. The balance of the proceeds from the Term Loan were used to pay loan-related expenses.

The Company, through Ranor, entered into the Assignment Agreement with Citigroup on April 17, 2015. Pursuant to the terms of the Assignment Agreement, Ranor sold, transferred, conveyed and assigned to Citigroup all of Ranor's right, title and interest in and to Ranor's $3,740,956 unsecured claim against GTAT. Pursuant to the Assignment Agreement, Citigroup paid to Ranor an initial amount equal to $507,835, which amount was classified as a current liability on our balance sheet. The Assignment Agreement provided for Citigroup to pay to Ranor up to an additional $614,452 upon receipt of written notice that Ranor's claim has been fully and finally allowed against GTAT without objection. On November 7, 2016, GTAT's legal counsel notified Citigroup that Ranor's unsecured claim was fully allowed without objection. In accordance with the terms of the Assignment Agreement, Citigroup paid Ranor an additional $614,452 on November 8, 2016. The resolution of this claim under the Assignment Agreement was recognized as a $1,122,287 gain in the three months ended December 31, 2016.

On April 26, 2016, TechPrecision through Ranor, executed and closed the MLSA with People's. Loan proceeds were disbursed to Ranor on April 26, 2016. Pursuant to the MLSA, People's loaned $3,011,648 to Ranor under the People's Loan. Payments on the People's Loan will be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum. The Company covenants to maintain a DSCR of at least 1.5 to 1.0 during the term of the People's Loan. The DSCR will be measured at the end of each fiscal year of the Company.

People's retained a holdback in the amount of $182,763. The holdback was released to Ranor in July 2016 after the Company reported a DSCR of 1.82 to 1.0 as of March 31, 2016. Ranor retained $175,532 of the proceeds from the People's Loan for general corporate purposes.

On October 4, 2016, TechPrecision and Ranor became committed to Schedule 2 to the MLSA. Pursuant to Schedule 2, People's made the Additional People's Loan in the amount of $365,852 to Ranor upon the terms and conditions set forth in the MLSA and Schedule 2. Ranor will repay the Additional People's Loan in monthly installments of principal and interest over 60 months. The Additional People's Loan is guaranteed by TechPrecision pursuant to the original Corporate Guaranty from TechPrecision in favor of People's dated March 31, 2016. The Additional People's Loan is secured by a security interest in certain machinery and equipment of Ranor as provided in Schedule 2.

On December 21, 2016, TechPrecision and Ranor closed on the MLSA Amendment to the MLSA with People's. The MLSA Amendment amends the definition of "Permitted Liens" under the MLSA to include the liens held by Commerce pursuant to the terms of the Commerce Loan Agreement and to delete the reference to the liens held by Revere.

At December 31, 2016, we had cash of $3.8 million. Net cash provided by operating activities was $1.9 million for the nine months ended December 31, 2016. Net cash provided by operating activities for the nine months ended December 31, 2015 was $373,278. The Company is in compliance with all covenants, including financial covenants, contained in all of its debt agreements. We believe our available cash will be sufficient to fund our operations, capital expenditures and principal and interest payments under our debt obligations through the 12 months from the issuance date of our financial statements.

At December 31, 2016 and March 31, 2016, we had working capital of $5.0 million and $0.5 million, respectively. The table below presents selected liquidity and capital measures as of:

(dollars in thousands)	December 31, 2016		March 31, 2016		Change
Cash	$	3,795	$	1,332	$	2,463
Working capital	$	4,996	$	510	$	4,486
Total debt	$	5,899	$	4,736	$	1,163
Total stockholders' equity	$	4,803	$	1,728	$	3,075

The following table summarizes our primary cash flows for the nine months ended:

(dollars in thousands)	December 31, 2016			December 31, 2015			Change
Cash flows provided by (used in):
Operating activities	$	1,912		$	373		$	1,539
Investing activities		(453	)		(192	)		(261	)
Financing activities		1,004			(700	)		1,704
Effects of foreign exchange rates on cash		--			(1	)		1
Net increase (decrease) in cash	$	2,463		$	(520	)	$	2,983

Operating activities

Our primary sources of cash are from accounts receivable collections, customer advance payments, and project progress payments. Our ability to convert cash expended for materials, labor and overhead to finished goods ready for shipment and collecting the cash back from our trade receivables has improved significantly. Improved turnover of accounts receivable helped us to generate higher amounts of cash in the nine months ended December 31, 2016 when compared to the nine months ended December 31, 2015. Cash provided by operations for the nine months ended December 31, 2016 was $1.9 million compared with cash provided by operations of $0.4 million for the nine months ended December 31, 2015. For the nine months ended December 31, 2016 we recorded net income of $2.0 million compared with a net income of $0.5 million for the nine months ended December 31, 2015. Cash provided by operations for the nine months ended December 31, 2016 was augmented by the final payment of $614,452 received under the Assignment Agreement with Citigroup.

Investing activities

Net cash used in investing activities totaled $452,820 for fixed assets for the nine months ended December 31, 2016. The nine month period ended December 31, 2015 was marked by cash outflows for capital spending for new equipment of $192,215.

Financing activities

Net cash provided by financing activities was $1,003,618 for the nine months ended December 31, 2016. During the nine months ended December 31, 2016, we received proceeds from our MLSA with People's and Term Loan with Commerce of $3,377,500 and $2,850,000, respectively. In connection with the MLSA, $2,459,259 of the proceeds from the People's Loan were disbursed to Utica, as payment in full of the principal obligations under the LSA. In connection with the Commerce Loan Agreement, $2,250,000 of the proceeds from Term Loan were disbursed to Revere, as payment in full of Ranor's indebtedness owed to Revere. During the nine months ended December 31, 2016 we paid $159,137 in loan closing costs and $355,486 for monthly principal payments on our outstanding debt.

For the nine months ended December 31, 2015, cash used in financing activities was $700,174, all of which was used to make principal payments on our outstanding debt.

All of the above activity resulted in a net increase in cash for the nine months ended December 31, 2016 of $2.5 million, compared with a net decrease in cash of $520,024 for the nine months ended December 31, 2015. We have no off-balance sheet assets or liabilities.

As noted above, the Company refinanced all of its long-term debt during the nine month period ended December 31, 2016. As a result there was an increase in long-term borrowings. However, because of a decrease in the interest rates on the new long-term debt, the Company's obligation for interest on long-term fixed-rate debt will decrease compared to its obligation at March 31, 2016. During the nine months ended December 31, 2016 there were no other material changes to our commitments and contractual obligations. A table summarizing the amounts and estimated timing of future cash payments from commitments and contractual obligations was provided in the 2016 Form 10-K.

Item 4. Controls and Procedures

Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and Chief Financial Officer, or CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of December 31, 2016, our disclosure controls and procedures are effective.

Changes in Internal Controls

There has been no change to our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Class Action Lawsuit

There have been no material changes to the legal proceedings discussed in Item 3. "Legal Proceedings," in the 2016 Form 10-K.

Item 6. Exhibits

Exhibit No.	Description
10.1	Loan Agreement, dated December 20, 2016, by and between Ranor, Inc. and Commerce Bank & Trust Company.
10.2	Amendment, dated December 20, 2016, to Master Loan and Security Agreement No. 4180, dated as of March 31, 2016, by and between People's Capital and Leasing Corp. and Ranor, Inc.
10.3	Non-Qualified Stock Option Award Agreement, dated as of December 27, 2016, from TechPrecision Corporation to Alexander Shen.

10.4 †	TechPrecision Corporation 2016 Equity Incentive Plan.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	101.INS XBRL Instance Document
101.SCH 101.CAL 101.LAB 101.PRE 101.DEF	101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB XBRL Taxonomy Extension Labels Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document
†	Management contract or compensatory arrangement or plan.

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 thereunto duly authorized.

	TECHPRECISION CORPORATION

Dated: February 14, 2017	By:	/s/ Thomas Sammons
		Thomas Sammons Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
10.4 †	TechPrecision Corporation 2016 Equity Incentive Plan
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	101.INS XBRL Instance Document
101.SCH 101.CAL 101.LAB 101.PRE 101.DEF	101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB XBRL Taxonomy Extension Labels Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document

† Management contract or compensatory arrangement or plan.

Exhibit 10.4

TECHPRECISION CORPORATION

2016 EQUITY INCENTIVE PLAN

SECTION 1. Purpose; Definitions . The purposes of the Techprecision Corporation 2016 Equity Incentive Plan (the " Plan ") are to: (a) enable Techprecision Corporation (the " Company ") and its affiliated companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees, directors and consultants with an incentive for productivity; and (c) provide those employees, directors and consultants with an opportunity to share in the growth and value of the Company.

For purposes of the Plan, the following terms will have the meanings defined below, unless the context clearly requires a different meaning:

(a) " Affiliate " means, with respect to a Person, a Person that directly or indirectly controls, is controlled by, or is under common control with such Person.

(b) " Applicable Law " means the legal requirements relating to the administration of and issuance of securities under stock incentive plans, including, without limitation, the requirements of state corporations law, federal, state and foreign securities law, federal, state and foreign tax law, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted.

(c) " Award " means an award of Options, Restricted Stock, Restricted Stock Units or Performance Awards made under this Plan.

(d) " Award Agreement " means, with respect to any particular Award, the written document that sets forth the terms of that particular Award.

(e) " Board " means the Board of Directors of the Company, as constituted from time to time.

(f) " Cause " means with respect to any Participant, unless otherwise defined in the Participant's employment agreement, service agreement or signed offer letter: (i) the Participant's habitual intoxication or drug addiction; (ii) the Participant's violation of the Company's written policies, procedures or codes including, without limitation, those with respect to harassment (sexual or otherwise) and ethics; (iii) the Participant's refusal or willful failure by the Participant to perform such duties as may reasonably be delegated or assigned to him, consistent with his position; (iv) the Participant's willful refusal or willful failure to comply with any requirement of the Securities and Exchange Commission or any securities exchange or self-regulatory organization then applicable to the Company; (v) the Participant's willful or wanton misconduct in connection with the performance of his or her duties including, without limitation, breach of fiduciary duties; (vi) the Participant's breach (whether due to inattention, neglect, or knowing conduct) of any of the material provisions of his or her employment or service agreement, if any; (vii) the Participant's conviction of, guilty, no contest or nolo contendere plea to, or admission or confession to any felony (other than driving while intoxicated or driving under the influence of alcohol) or any act of fraud, misappropriation, embezzlement or any misdemeanor involving moral turpitude; (viii) the Participant's dishonesty detrimental to the best interest of the Company; (ix) the Participant's involvement in any matter which, in the opinion of the Company's Chief Executive Officer (or, in the case of the Chief Executive Officer, the Committee), is reasonably likely to cause material prejudice or embarrassment to the Company's business; or (x) solely in the case of a Non-Employee Director, any other action by the Participant which the Committee determines constitutes "cause." Notwithstanding the foregoing, if a Participant and the Company (or any of its Affiliates) have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines "cause," then with respect to such Participant, "Cause" shall have the meaning defined in such other agreement.

(g) " Change in Control " shall mean the occurrence of any of the following events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total power to vote for the election of directors of the Company; (ii) during any twelve month period, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Section 1(g)(i) , Section 1(g)(iii) , Section 1(g)(iv ) or Section 1(g)(v) hereof) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period of whose election or nomination for election was previously approved, cease for any reason to constitute a majority thereof; (iii) the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); (iv) the sale or other disposition of all or substantially all of the assets of the Company; (v) a liquidation or dissolution of the Company or (vi) acceptance by shareholders of the Company of shares in a share exchange if the shareholders of the Company immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from or surviving such share exchange in substantially the same proportion as their ownership of the voting securities outstanding immediately before such share exchange.

Notwithstanding anything in the Plan or an Award Agreement to the contrary, if an Award is subject to Section 409A of the Code, no event that, but for the application of this paragraph , would be a Change in Control as defined in the Plan or the Award Agreement, as applicable, shall be a Change in Control unless such event is also a "change in control event" as defined in Section 409A of the Code.

(h) " Code " means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

(i) " Committee " means the committee designated by the Board to administer the Plan under Section 2. To the extent required under Applicable Law, the Committee shall have at least two members and each member of the Committee shall be a Non-Employee Director and an Outside Director.

(j) " Director " means a member of the Board.

(k) " Disability " means a condition rendering a Participant Disabled.

(l) " Disabled " will have the same meaning as set forth in Section 22(e)(3) of the Code.

(m) " Exchange Act " means the Securities Exchange Act of 1934, as amended.

(n) " Fair Market Value " means, as of any date, the value of a Share determined as follows: (i) if the Shares are listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq Global Select Market, the Fair Market Value of a Share will be the closing sales price for such stock as quoted on that system or exchange (or the system or exchange with the greatest volume of trading in Shares) at the close of regular hours trading on the day of determination; (ii) if the Shares are regularly quoted by recognized securities dealers but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for Shares at the close of regular hours trading on the day of determination; or (iii) if Shares are not traded as set forth above, the Fair Market Value will be determined in good faith by the Committee taking into consideration such factors as the Committee considers appropriate, such determination by the Committee to be final, conclusive and binding. Notwithstanding the foregoing, in connection with a Change in Control, Fair Market Value shall be determined in good faith by the Committee, such determination by the Committee to be final conclusive and binding.

(o) " Incentive Stock Option " means any Option intended to be an "Incentive Stock Option" within the meaning of Section 422 of the Code.

(p) " Non-Employee Director " will have the meaning set forth in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.

(q) " Non-Qualified Stock Option " means any Option that is not an Incentive Stock Option.

(r) " Normal Retirement " means retirement from active employment with the Company and any Subsidiary or Affiliate on or after age 65 or such other age as is designated by the Company, Subsidiary or Affiliate as the normal retirement age.

(s) " Outside Director " means a member of the Board who meets the definition of an "outside director" under Section 162(m) of the Code.

(t) " Option " means any option to purchase Shares (including an option to purchase Restricted Stock, if the Committee so determines) granted pursuant to Section 5 hereof.

(u) " Parent " means, in respect of the Company, a "parent corporation" as defined in Sections 424(e) of the Code.

(v) " Participant " means an employee, consultant, Director, or other service provider of or to the Company or any of its respective Affiliates to whom an Award is granted

(w) " Performance Award " means any Award that, pursuant to Section 9 , is granted, vested and/or settled upon the achievement of specified performance conditions.

(x) " Performance Goals " means a goal that must be met by the end of a period specified by the Committee (but that is substantially uncertain of being met before the grant of the Award) based upon, at the Committee's discretion: (i) specified levels of or increases in revenue, operating income, pre-tax earnings or income, return on capital, equity measures/ratios (on a gross, adjusted, net, pre-tax or post tax basis), including basic earnings per share, diluted earnings per share, total earnings, earnings growth, earnings before interest and taxes, or EBIT, and earnings before interest, taxes, depreciation and amortization, EBITDA or operational cash flow ; (ii) completion of acquisitions or business expansion; (iii) operating efficiency; (iv) implementation or completion of critical projects or related milestones, (v) gross margin; (vi) inventory shrink; (vii) vendor allowances; (viii) inventory turns; (ix) inventory levels; (x) distribution center productivity levels; (xi) customer service levels; (xii) customer or employee satisfaction; (xiii) employee recruiting and development; (xiv) development of new markets; (xv) financial ratios; (xvi) strategic initiatives; (xvii) improvement in or attainment of operating expense levels; (xviii) improvement in or attainment of capital expense levels; (xix) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, the Company's bank debt or other public or private debt or financial obligations; (xx) the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in all or a portion of controllable expenses or costs or other expenses or costs; (xxi) individual objectives; (xxii) budget and expense management; and/or (xxiii) such other items the Committee determines to be relevant; and any combination of the foregoing. The Committee shall have discretion to determine the specific targets with respect to each of these categories of Performance Goals.

(y) " Person " means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated association, or other entity or association.

(z) " Plan " means the Techprecision Corporation 2016 Equity Incentive Plan herein set forth, as amended from time to time.

(aa) " Prior Plan " means Techprecision Corporation 2006 Long-Term Incentive Plan.

(bb) " Restricted Stock " means Shares that are subject to restrictions pursuant to Section 7 hereof.

(cc) " Restricted Stock Unit " means a right granted under and subject to restrictions pursuant to Section 8 hereof.

(dd) " Shares " means shares of the Company's common stock, par value $0.01, subject to substitution or adjustment as provided in Section 3(c) hereof.

(ee) " Subsidiary " means, in respect of the Company, a subsidiary company as defined in Sections 424(f) and (g) of the Code.

SECTION 2. Administration . The Plan shall be administered by the Committee. Any action of the Committee in administering the Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, Affiliates, their respect employees, the Participants, persons claiming rights from or through Participants and stockholders of the Company.

The Committee will have full authority to grant Awards under this Plan and determine the terms of such Awards. Such authority will include the right to:

(a) select the individuals to whom Awards are granted (consistent with the eligibility conditions set forth in Section 4 );

(b) determine the type of Award to be granted;

(d) establish the terms and conditions of each Award;

(e) subject to Section 9 , establish the performance conditions relevant to any Award and certify whether such performance conditions have been satisfied;

(f) approving forms of agreements (including Award Agreements) for use under the Plan;

(g) determine whether and under what circumstances an Option may be exercised without a payment of cash under Section 5(d) ;

(h) accelerate the vesting or exercisability of an Award and to modify or amend each Award, subject to Section 10 ; and

(i) extend the period of time for which an Option is to remain exercisable following a Participant's termination of service to the Company from the limited period otherwise in effect for that Option to such greater period of time as the Committee deems appropriate, but in no event beyond the expiration of the term of the Option.

The Committee will have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it, from time to time, deems advisable; to establish the terms and form of each Award Agreement; to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement); and to otherwise supervise the administration of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement in the manner and to the extent it deems necessary to carry out the intent of the Plan.

The Committee may delegate to one or more officers of the Company the authority to grant Awards to Participants who are not subject to the requirements of Section 16 of the Exchange Act or Section 162(m) of the Code and the rules and regulations thereunder, provided that the Committee shall have fixed the total number of Shares subject to such delegation. Any such delegation shall be subject to the applicable corporate laws of the Commonwealth of Pennsylvania. The Committee may revoke any such allocation or delegation at any time for any reason with or without prior notice.

No Director will be liable for any good faith determination, act or omission in connection with the Plan or any Award.

SECTION 3. Shares Subject to the Plan .

(a) Shares Subject to the Plan . Subject to adjustment as provided in Section 3(c) of the Plan, the maximum number of Shares that may be issued in respect of Awards under the Plan is 5,000,000 Shares (inclusive of Awards issued under the Prior Plan that remain outstanding as of the effective date of the Plan ) (the " Plan Limit "), all of which Shares may be issued in respect of Incentive Stock Options. Any shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. Any shares issued by the Company through the assumption or substitution of outstanding grants in connection with the acquisition of another entity shall not reduce the maximum number of shares available for delivery under the Plan. In accordance with the requirements under Section 162(m) of the Code, the maximum number of Shares underlying Awards (including Options, Restricted Stock, Restricted Stock Units and Performance Awards) that may be granted during a calendar year to any individual Participant shall be twenty percent (20%) of the Plan Limit.

(b) Effect of the Expiration or Termination of Awards . If and to the extent that an Option expires, terminates or is canceled or forfeited for any reason without having been exercised in full, the Shares associated with that Option will again become available for grant under the Plan. Similarly, if and to the extent an Award of Restricted Stock or Restricted Stock Units is canceled or forfeited for any reason, the Shares subject to that Award will again become available for grant under the Plan. Shares withheld in settlement of a tax withholding obligation associated with an Award, or in satisfaction of the exercise price payable upon exercise of an Option, will not become available for grant under the Plan.

(c) Other Adjustment . In the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization, stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, stock dividend, dividend in kind, or other like change in capital structure (other than ordinary cash dividends) to shareholders of the Company, or other similar corporate event or transaction affecting the Shares, the Committee, to prevent dilution or enlargement of Participants' rights under the Plan, shall, in such manner as it may deem equitable, substitute or adjust, in its sole discretion, the number and kind of shares that may be issued under the Plan or under any outstanding Awards, the number and kind of shares subject to outstanding Awards, the exercise price, grant price or purchase price applicable to outstanding Awards, and/or any other affected terms and conditions of this Plan or outstanding Awards. The Committee shall not make any adjustment that would adversely affect the status of any Award that is "performance-based compensation" under Section 162(m) of the Code.

(d) Change in Control . Notwithstanding anything to the contrary set forth in the Plan, upon any Change in Control, the Committee may, in its sole and absolute discretion and without the need for the consent of any Participant, take one or more of the following actions contingent upon the occurrence of that Change in Control:

(i) cause any or all outstanding Awards to become vested and immediately exercisable (as applicable), in whole or in part;

(ii) cause any outstanding Option to become fully vested and immediately exercisable for a reasonable period in advance of the Change in Control and, to the extent not exercised prior to that Change in Control, cancel that Option upon closing of the Change in Control;

(iii) cancel any unvested Award or unvested portion thereof, with or without consideration;

(iv) cancel any Award in exchange for a substitute award;

(v) redeem any Restricted Stock or Restricted Stock Unit for cash and/or other substitute consideration with value equal to Fair Market Value of an unrestricted Share on the date of the Change in Control;

(vi) cancel any Option in exchange for cash and/or other substitute consideration with a value equal to: (A) the number of Shares subject to that Option, multiplied by (B) the difference, if any, between the Fair Market Value per Share on the date of the Change in Control and the exercise price of that Option; provided, that if the Fair Market Value per Share on the date of the Change in Control does not exceed the exercise price of any such Option, the Committee may cancel that Option without any payment of consideration therefor;

(vii) take such other action as the Committee shall determine to be reasonable under the circumstances; and/or

(viii) notwithstanding any provision of this Section 3(d) , in the case of any Award subject to Section 409A of the Code, such Award shall vest and be distributed only in accordance with the terms of the applicable Award Agreement and the Committee shall only be permitted to use discretion to the extent that such discretion would be permitted under Section 409A of the Code.

In the discretion of the Committee, any cash or substitute consideration payable upon cancellation of an Award may be subjected to (i) vesting terms substantially identical to those that applied to the cancelled Award immediately prior to the Change in Control, or (ii) earn-out, escrow, holdback or similar arrangements, to the extent such arrangements are applicable to any consideration paid to stockholders in connection with the Change in Control.

SECTION 4. Eligibility . Employees, Directors, consultants, and other individuals who provide services to the Company or its Affiliates are eligible to be granted Awards under the Plan; provided, however , that only employees of the Company, any Parent or a Subsidiary are eligible to be granted Incentive Stock Options.

SECTION 5. Options . Options granted under the Plan may be of two types: (i) Incentive Stock Options or (ii) Non-Qualified Stock Options. The Award Agreement shall state whether such grant is an Incentive Stock Option or a Non-Qualified Stock Option. Any Option granted under the Plan will be in such form as the Committee may at the time of such grant approve.

The Award Agreement evidencing any Option will incorporate the following terms and conditions and will contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee deems appropriate in its sole and absolute discretion:

(a) Option Price . The exercise price per Share under an Option will be determined by the Committee and will not be less than 100% of the Fair Market Value of a Share on the date of the grant. However, any Incentive Stock Option granted to any Participant who, at the time the Option is granted, owns, either directly and/or within the meaning of the attribution rules contained in Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, will have an exercise price per Share of not less than 110% of Fair Market Value per Share on the date of the grant.

(b) Option Term . The term of each Option will be fixed by the Committee, but no Option will be exercisable more than 10 years after the date the Option is granted. However, any Incentive Stock Option granted to any Participant who, at the time such Option is granted, owns, either directly and/or within the meaning of the attribution rules contained in Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, may not have a term of more than 5 years. No Option may be exercised by any Person after expiration of the term of the Option.

(c) Exercisability . Options will vest and be exercisable at such time or times and subject to such terms and conditions as determined by the Committee.

(d) Method of Exercise . Subject to the terms of the applicable Award Agreement, the exercisability provisions of Section 5(c) and the termination provisions of Section 6 , Options may be exercised in whole or in part from time to time during their term by the delivery of written notice to the Company specifying the number of Shares to be purchased. Such notice will be accompanied by payment in full of the purchase price, either by certified or bank check, or such other means as the Committee may accept. The Committee may, in its sole discretion, permit payment of the exercise price of an Option in the form of previously acquired Shares based on the Fair Market Value of the Shares on the date the Option is exercised or through means of a "net settlement," whereby the Option exercise price will not be due in cash and where the number of Shares issued upon such exercise will be equal to: (A) the product of (i) the number of Shares as to which the Option is then being exercised, and (ii) the excess, if any, of (a) the then current Fair Market Value per Share over (b) the Option exercise price, divided by (B) the then current Fair Market Value per Share.

No Shares will be issued upon exercise of an Option until full payment therefor has been made. A Participant will not have the right to distributions or dividends or any other rights of a stockholder with respect to Shares subject to the Option until the Participant has given written notice of exercise, has paid in full for such Shares, if requested, has given the representation described in Section 15(a) hereof and fulfills such other conditions as may be set forth in the applicable Award Agreement.

(e) Incentive Stock Option Limitations . In the case of an Incentive Stock Option, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year under the Plan and/or any other plan of the Company, its Parent or any Subsidiary will not exceed $100,000. For purposes of applying the foregoing limitation, Incentive Stock Options will be taken into account in the order granted. To the extent any Option does not meet such limitation, that Option will be treated for all purposes as a Non-Qualified Stock Option.

(f) Termination of Service . Unless otherwise specified in the applicable Award Agreement or as otherwise provided by the Committee at or after the time of grant, Options will be subject to the terms of Section 6 with respect to exercise upon or following termination of employment or other service.

SECTION 6. Termination of Service . Unless otherwise specified with respect to a particular Option in the applicable Award Agreement or otherwise determined by the Committee, any portion of an Option that is not exercisable upon termination of service will expire immediately and automatically upon such termination and any portion of an Option that is exercisable upon termination of service will expire on the date it ceases to be exercisable in accordance with this Section 6 .

(a) Termination by Reason of Death . If a Participant's service with the Company or any Affiliate terminates by reason of death, any Option held by such Participant may thereafter be exercised, to the extent it was exercisable at the time of his or her death or on such accelerated basis as the Committee may determine at or after grant, by the legal representative of the estate or by the legatee of the Participant, for a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified by the Committee , then one year from the date of death, or (iii) if sooner than the applicable period specified under (i) or (ii) above, upon the expiration of the stated term of such Option.

(b) Termination by Reason of Disability or Retirement . If a Participant's service with the Company or any Affiliate terminates by reason of Disability or Normal Retirement, any Option held by such Participant may thereafter be exercised by the Participant or his personal representative, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine at or after grant, for a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified by the Committee, then one year from the date of termination of service, or (iii) if sooner than the applicable period specified under (i) or (ii) above, upon the expiration of the stated term of such Option; provided, however , that, if the Participant dies within such one year period (or such other period as the Committee shall specify), any unexercised Option held by such Participant shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of such death or until the expiration of the stated term of such Option, whichever period is shorter. In the event of termination of employment by reason of Disability or Normal Retirement, if an Incentive Stock Option is exercised after the expiration of the maximum exercise periods that apply for purposes of Section 422 of the Code, such Option will thereafter be treated as a Non-Qualified Stock Option.

(c) Cause . If a Participant's service with the Company or any Affiliate is terminated for Cause: (i) any Option, or portion thereof, not already exercised will be immediately and automatically forfeited as of the date of such termination, and (ii) any Shares for which the Company has not yet delivered share certificates will be immediately and automatically forfeited and the Company will refund to the Participant the Option exercise price paid for such Shares, if any.

(d) Other Termination . If a Participant's service with the Company or any Affiliate terminates for any reason other than death, Disability, Normal Retirement, or Cause, any Option held by such Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the time of such termination, or on such accelerated basis as the Committee may determine at or after grant, for a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified by the Committee, then three months (or seven months in the case of a person subject to the reporting and short-swing profit provisions of Section 16 of the Exchange Act) from the date of termination of service, or (iii) if sooner than the applicable period specified under (i) or (ii) above, upon the expiration of the stated term of such Option.

SECTION 7. Restricted Stock .

(a) Issuance . Restricted Stock may be issued either alone or in conjunction with other Awards. The Committee will determine the time or times within which Restricted Stock may be subject to forfeiture, and all other conditions of such Awards. The purchase price for Restricted Stock may, but need not, be zero. The prospective recipient of an Award of Restricted Stock will not have any rights with respect to such Award, unless and until such recipient has delivered to the Company an executed Award Agreement and has otherwise complied with the applicable terms and conditions of such Award.

(b) Certificates . Upon the Award of Restricted Stock, the Committee may direct that a certificate or certificates representing the number of shares of Common Stock subject to such Award be issued to the Participant or placed in a restricted stock account (including an electronic account) with the transfer agent and in either case designating the Participant as the registered owner. The certificate(s) representing such shares shall be physically or electronically legended, as applicable, as to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and if issued to the Participant, returned to the Company, to be held in escrow during the Restriction Period. As a condition to any Award of Restricted Stock, the Participant may be required to deliver to the Company a share power, endorsed in blank, relating to the Shares covered by such Award.

(c) Restrictions and Conditions . The Award Agreement evidencing the grant of any Restricted Stock will incorporate the following terms and conditions and such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee deems appropriate in its sole and absolute discretion:

(i) During a period commencing with the date of an Award of Restricted Stock and ending at such time or times as specified by the Committee (the " Restriction Period "), the Participant will not be permitted to sell, transfer, pledge, assign or otherwise encumber Restricted Stock awarded under the Plan. The Committee may condition the lapse of restrictions on Restricted Stock upon the continued employment or service of the recipient, the attainment of specified individual or corporate performance goals, or such other factors as the Committee may determine, in its sole and absolute discretion.

(ii) While any Share of Restricted Stock remain subject to restriction, the Participant will have, with respect to the Restricted Stock, the right to vote the Shares, but will not have the right to receive any cash distributions or dividends prior to the lapse of the Restriction Period underlying such Shares unless otherwise provided under the applicable Award Agreement or as determined by the Committee. If any cash distributions or dividends are payable with respect to the Restricted Stock, the Committee, in its sole discretion, may require the cash distributions or dividends to be subjected to the same Restriction Period as is applicable to the Restricted Stock with respect to which such amounts are paid, or, if the Committee so determines, reinvested in additional Restricted Stock to the extent Shares are available under Section 3(a) of the Plan. A Participant shall not be entitled to interest with respect to any dividends or distributions subjected to the Restriction Period. Any distributions or dividends paid in the form of securities with respect to Restricted Stock will be subject to the same terms and conditions as the Restricted Stock with respect to which they were paid, including, without limitation, the same Restriction Period.

(iii) Subject to the provisions of the applicable Award Agreement or as otherwise determined by the Committee, if a Participant's service with the Company and its Affiliates terminates prior to the expiration of the applicable Restriction Period, the Participant's Restricted Stock that then remains subject to forfeiture will then be forfeited automatically.

SECTION 8. Restricted Stock Units . Subject to the other terms of the Plan, the Committee may grant Restricted Stock Units to eligible individuals and may, in its sole and absolute discretion, impose conditions on such units as it may deem appropriate, including, without limitation, continued employment or service of the recipient or the attainment of specified individual or corporate performance goals. Each Restricted Stock Unit shall be evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan. Each Restricted Stock Unit will represent a right to receive from the Company, upon fulfillment of any applicable conditions, an amount equal to the Fair Market Value (at the time of the distribution) of one Share. Distributions may be made in Shares. All other terms governing Restricted Stock Units, such as vesting, time and form of payment and termination of units shall be set forth in the applicable Award Agreement. The Participant shall not have any shareholder rights with respect to the Shares subject to a Restricted Stock Unit Award until that Award vests and the Shares are actually issued thereunder. Subject to the provisions of the applicable Award Agreement or as otherwise determined by the Committee, if a Participant's service with the Company terminates prior to the Restricted Stock Unit Award vesting, the Participant's Restricted Stock Units that then remain subject to forfeiture will then be forfeited automatically.

SECTION 9. Performance Based Awards .

(a) Performance Awards Generally . The Committee may grant Performance Awards in accordance with this Section 9 . Performance Awards may be denominated as a number of Shares or specified number of other Awards, which may be earned upon achievement or satisfaction of such Performance Goals as may be specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the vesting or settlement of the Award upon the achievement or satisfaction of such Performance Goals as may be specified by the Committee.

(b) Adjustments to Performance Goals . The Committee may provide, at the time Performance Goals are established, that adjustments will be made to those performance goals to take into account, in any objective manner specified by that committee, the impact of one or more of the following: (A) gain or loss from all or certain claims and/or litigation and insurance recoveries, (B) the impairment of tangible or intangible assets, (C) stock-based compensation expense, (D) restructuring activities reported in the Company's public filings, (E) investments, dispositions or acquisitions, (F) loss from the disposal of certain assets, (G) gain or loss from the early extinguishment, redemption, or repurchase of debt, (H) changes in accounting principles, or (I) any other item, event or circumstance that would not cause an Award to fail to constitute "qualified performance-based compensation" under Section 162(m) of the Code (to the extent such Award is intended to be "qualified performance-based compensation"). An adjustment described in this Section may relate to the Company or to any subsidiary, division or other operational unit of the Company or its Affiliates, as determined by the committee at the time the performance goals are established. Any adjustment shall be determined in accordance with generally accepted accounting principles and standards, unless such other objective method of measurement is designated by the committee at the time performance objectives are established. In addition, adjustments will be made as necessary to any performance criteria related to the Company's stock to reflect changes in corporate capitalization, including a recapitalization, stock split or combination, stock dividend, spin-off, merger, reorganization or other similar event or transaction affecting the Company's equity.

(c) Other Terms of Performance Awards . The Committee may specify other terms pertinent to a Performance Award in the applicable Award Agreement, including terms relating to the treatment of that Award in the event of a Change in Control prior to the end of the applicable performance period. The Participant shall not have any shareholder rights with respect to the Shares subject to a Performance Award until the Shares are actually issued thereunder. Subject to the provisions of the applicable Award Agreement or as otherwise determined by the Committee, if a Participant's service with the Company terminates prior to the Performance Award vesting, the Participant's Performance Award or portion thereof that then remains subject to forfeiture will then be forfeited automatically.

SECTION 10. Amendments and Termination . The Board may amend, alter or discontinue the Plan at any time. However, except as otherwise provided in Section 3 , no amendment, alteration or discontinuation will be made which would impair the rights of a Participant with respect to an Award without that Participant's consent or which, without the approval of such amendment within 365 days of its adoption by the Board by the Company's stockholders in a manner consistent with Treas. Reg. § 1.422-3 (or any successor provision), would: (i) increase the total number of Shares reserved for issuance hereunder, or (ii) change the persons or class of persons eligible to receive Awards.

SECTION 11. Repricing Programs . The Board may, in its discretion, implement any cancellation/re-grant program pursuant to which outstanding Options under the Plan are cancelled and new Options are granted in replacement with a lower exercise or base price per share without obtaining shareholder approval.

SECTION 12. Conditions Upon Grant of Awards and Issuance of Shares .

(a) The implementation of the Plan, the grant of any Award and the issuance of Shares in connection with the issuance, exercise or vesting of any Award made under the Plan shall be subject to the Company's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Awards made under the Plan and the Shares issuable pursuant to those Awards.

(b) No Shares or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Applicable Law, including the filing and effectiveness of the Form S-8 registration statement for the Shares issuable under the Plan, and all applicable listing requirements of any stock exchange on which Shares are then listed for trading.

SECTION 13. Limits on Transferability; Beneficiaries . No Award or other right or interest of a Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participant to, any party, other than the Company, any Subsidiary or Affiliate, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, provide that Awards or other rights or interests of a Participant granted pursuant to the Plan (other than an Incentive Stock Option) be transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners. The Committee may attach to such transferability feature such terms and conditions as it deems advisable. In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which may be a person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant. A beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional restrictions deemed necessary or appropriate by the Committee.

SECTION 14. Withholding . No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the Participant will pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to such amount. The minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan will be conditioned on such payment or arrangements and the Company will have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.

SECTION 15. Liability of Company .

(a) Inability to Obtain Authority . If the Company cannot, by the exercise of commercially reasonable efforts, obtain authority from any regulatory body having jurisdiction for the sale of any Shares under this Plan, and such authority is deemed by the Company's counsel to be necessary to the lawful issuance of those Shares, the Company will be relieved of any liability for failing to issue or sell those Shares.

(b) Grants Exceeding Allotted Shares . If Shares subject to an Award exceed, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, that Award will be contingent with respect to such excess Shares, on the effectiveness under Applicable Law of a sufficient increase in the number of Shares subject to this Plan.

(c) Rights of Participants and Beneficiaries . The Company will pay all amounts payable under this Plan only to the applicable Participant, or beneficiaries entitled thereto pursuant to this Plan. The Company will not be liable for the debts, contracts, or engagements of any Participant or his or her beneficiaries, and rights to cash payments under this Plan may not be taken in execution by attachment or garnishment, or by any other legal or equitable proceeding while in the hands of the Company.

SECTION 16. Adjustment; Repayment of Incentive Bonuses . All awards made under the Plan (whether vested or unvested) are subject to rescission, cancellation or recoupment, in whole or in part, under any current or future "clawback" or similar policy of the Company that is applicable to the Participant.

SECTION 17. General Provisions .

(a) The Board may require each Participant to represent to and agree with the Company in writing that the Participant is acquiring securities of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the Board believes are appropriate.

(b) All certificates for Shares or other securities delivered under the Plan will be subject to such share-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities Act of 1933, as amended, the Exchange Act, any stock exchange upon which the Shares are then listed, and any other Applicable Law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(c) Nothing contained in the Plan will prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required.

(d) Neither the adoption of the Plan nor the execution of any document in connection with the Plan will: (i) confer upon any employee or other service provider of the Company or an Affiliate any right to continued employment or engagement with the Company or such Affiliate, or (ii) interfere in any way with the right of the Company or such Affiliate to terminate the employment or engagement of any of its employees or other service providers at any time.

SECTION 18. Effective Date of Plan . The Plan will become effective as of the date the Plan is approved by the Board; provided, however , that all Options intended to be Incentive Stock Options will automatically be converted into Non-Qualified Stock Options if the Plan is not approved by the Company's stockholders within one year (365 days) of its adoption by the Board in a manner consistent with Treas. Reg. § 1.422-5.

SECTION 19. Term of Plan . Unless the Plan shall theretofore have been terminated in accordance with Section 10, the Plan shall terminate on the 10-year anniversary of the effective date, and no Awards under the Plan shall thereafter be granted.

SECTION 20. Invalid Provisions . In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any Applicable Law, such invalidity or unenforceability will not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.

SECTION 21. Governing Law . The Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws and judicial decisions of the state of Delaware, without regard to the application of the principles of conflicts of laws.

SECTION 22. Notices . Any notice to be given to the Company pursuant to the provisions of this Plan must be given in writing and addressed, if to the Company, to its principal executive office to the attention of its Chief Financial Officer (or such other Person as the Company may designate in writing from time to time), and, if to a Participant, to the address contained in the Company's personnel files, or at such other address as that Participant may hereafter designate in writing to the Company. Any such notice will be deemed duly given: if delivered personally or via recognized overnight delivery service, on the date and at the time so delivered; if sent via telecopier or email, on the date and at the time telecopied or emailed with confirmation of delivery; or, if mailed, (5) days after the date of mailing by registered or certified mail.

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: February 14, 2017	/s/ Alexander Shen
	Alexander Shen Chief Executive Officer

Dated: February 14, 2017	/s/ Alexander Shen
	Alexander Shen
	Chief Executive Officer

Dated: February 14, 2017	/s/ Thomas Sammons
	Thomas Sammons Chief Financial Officer