Good day, ladies and gentlemen. Welcome to the TechPrecision Corporation Second Quarter Fiscal 2014 Earnings Call. [Operator Instructions] This conference is being recorded today, November 14, 2013. I would like to turn the conference over to Jeff Stanlis with Hayden IR. Please go ahead. sir.

Thank you. On the call with us today are Leonard Anthony, Chairman of the Board of Directors and Principal Executive Officer; Rich Fitzgerald, Chief Financial Officer; and Bob Francis, President and General Manager of TechPrecision's Ranor Division. I would like to mention this call is being simulcast on the website at www.techprecision.com. Before we begin I would like to remind our listeners that management's remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore we refer you to a more detailed discussion of risk and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represents management's estimates as of today, November 14, 2013. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over Len Anthony, Chairman of the Board of Directors and Principal Executive Officer, to provide opening remarks. Mr. Anthony, go ahead.

Thanks, Jeff, and good afternoon to everyone, and thank you for joining us today. TechPrecision continues to work its way through a very challenging transaction period that has been lingering for several quarters due to certain legacy issues. These issues began when Ranor’s largest customer migrated its solar production from domestic sources to Asia. And as a reminder, this customer represented more than 60% of Ranor’s historical revenue, and while we expect that some revenue streams from the China operation to offset a portion of this loss, changes in our customer's business occurred, and these purchase orders did not materialize. We have worked diligently to secure new revenue and replace this loss through the transition period. Unfortunately, this required considerable first-order production and prototype work, which generated a significant increase in cost but did not result in a corresponding increase in revenue during the past 2 years. The company anticipated that several of the opportunities it was pursuing would have transitioned to full volume production by now, but clearly this was not the case. However, I am pleased to report that just prior to issuing our financial results today, we announced an $8.1 million purchase order for the same alternative energy customer. The PO is for sapphire furnaces. It is scheduled to deliver by the end of May 2014, just a little over 6 months from now. This is our first significant order from this customer in some time. Because we have had prior experience building these furnaces, we believe the execution risk to this order is relatively low, and we expect to be able to produce and ship the order for a very quick turnaround, of course maintaining our reputation for very high quality. While we currently don’t know if there's potential for additional orders ,and we certainly aren’t…

Thank you. Len. During the Q1 earnings call, we discussed the contract loss of approximately $700,000 related to a customer's turbine base program. At that time I said we were going to review our performance on these bases and work to get them to profitability. During the past month, we have fully reviewed the entire manufacturing process to determine what we believe we will achieve on the remaining bases. Unfortunately, we do not believe we will make the budget or breakeven numbers for these bases, although we have and will continue to try to do so. And unfortunately, this yielded approximately $800,000 of additional loss. We have currently delivered 3 bases in Q2 and have 16 more to deliver under this long-term agreement. Last week I met with senior management for our customer and presented the case for a price increase. Our customer too has lost money on these bases and is unable at this point to get any price concession from its customer. Although we have the LPA though 2019, we gave our customer notice in writing on November 8 that we would not take any more orders beyond the 16 we have committed to. We continue to discuss a variety of alternatives with this customer to resolve these ongoing issues, including ongoing conversations between our customer and their customer regarding a price increase. Our customer will present our findings as further evidence of the need for an adjustment, particularly when you consider that we are the second base vendor of theirs to encounter these issues. We also discussed the possible use of the previous vendor's experts in conversations with our customer's sister company, which bid against us for this project and may have some insight on ways to reduce the cost. Needless to say, this project is our…

Thank you, Bob. First I’ll cover operating results for Q2 of fiscal 2014 and then I’ll cover the 6-month year-to-date results. For the 3-month period ended September 30, 2013, revenue was $5.2 million, compared with $8.1 million in the same fiscal quarter 1 year ago. Revenues decreased in the precession industrial markets due to lower shipments of sapphire production chambers and medical components. These decreases were partially offset by increased net sales to our Navy, maritime and energy customers. For the 3 months ended September 30, 2013, revenues originating at our WCMC division in China were $0.2 million compared with $1.1 million in the 3 months ended September 30, 2012. This was as a result of weak demand for sapphire production chambers from our primary customer in China. Gross profit for the quarter ended September 30, 2013, was approximately $0.7 million or 14% of sales, compared to gross profit of $1.9 million or 24% of sales in the fiscal second quarter of last year. Gross margin in any reporting period is impacted by the mix of services we provide on projects completed within that period. Accordingly, there can be variability due to the project mix when comparing period-over-period or year-over-year margin results. Certain low-margin projects and contract losses reduced margins during the second quarter. We recorded $0.8 million of additional contract losses during the second quarter of fiscal 2014 compared with $0.1 million recorded in the same quarter 1 year ago. The majority of these contract losses are from first units of turbine base components being manufactured at our Ranor division that Bob spoke of earlier. The primary order generating contract losses that we’ve taken on is somewhat a consequence of the delayed production volume we have from Mevion, as this order was originally sourced to utilize production capacity idled…

Yes, thanks, Rich. As I expressed in our press release comments, we are diligently working to resolve the lingering issues that we face and eliminate the drag in our results. Our quotation activity is at an all-time high. We are seeking more long-term projects with more predictable cost structures and continue to target profitability by the end of the fiscal year, positioning us for a significantly improved fiscal 2015. We are going to continue to be focused on building our backlog with production orders from our key customers, and we're now starting to see signs of some progress. We believe that the quality certifications we maintain and our ability to do turnkey fabrication, machining and manufacturing services at a single facility positions us well with our tier 1 and tier 2 customer and as an attractive outsourcing partner for prime contractors looking to increase outsourced production. Because of our manufacturing capabilities, our certification from the ASME and our historic relationships with suppliers in the nuclear power industry, we believe that we are also well positioned to benefit from any increased activities in that sector. And we expect that sales volume to Mevion will increase as Mevion further expands the market launch of its innovative proton therapy device. We thank our long-term shareholders for your patience as we work through our issues. I’d now like to open the call up for Q&A. So, Calvin, could you take care of that?

Thank you, sir. [Operator Instructions] And our first question comes from the line of Walter Schenker with MAZ Partners.

I’m just trying to understand on the turbine bases, if you’ve lost $1.5 million between these 2 quarters, does that actually mean you've missed by more than $1.5 million? Because hopefully at least some profit is originally built into your quote. So maybe you’re off by $2 million or $2.5 million. Again, I’m not sure. This is probably margin business. I have been to the facility a bunch of times. I still don’t fully -- I mean, it never was fully [ph] -- understand how you can be off by that large an amount given what you do.

Well, I’ll start to answer that for you, Walter. The GAAP reporting requirements are such that we've booked the full loss as we estimate it today on the entire contract. And as Bob covered in his comments, we’ve been monitoring this and working our way through the efficiency curve to try and determine when we would get to a breakeven point on these. And that demark has been achieved and we’ve been obligated based on that analysis to book the full expected loss of anything we have in backlog on these contracts, so -- and we are at this point very confident that we are not leaving anything at risk to conclude. And further to that, Bob covered in his remarks that we're going to be working very diligently and are working very diligently with this customer to make sure that we don’t actually incur the full breadth of what we’ve accrued. That said, we're obligated to accrue the full breadth of it and then work to mitigate it, which is what we're doing.

Okay, 2 other questions now to get off: a, could you give us your thoughts on the Chinese operations; and secondly, in some of our prior discussions you indicated your goal was to bring the cost structure in line with a certain revenue level. Clearly, if we annualize the current quarter, that is below the revenue levels you thought you might be able to stabilize at. So does that mean that we're still sort of on a treadmill on cutting costs? Or should we look toward a higher revenue level to which you're trying to adjust costs.

Walter, you should look for both, higher revenues and low continued reduction of costs. Because the cost reduction programs and plans we've put in place have made a lot of progress, but they're not over, so I anticipate that there will continue to be cost reduction and more alignment. But clearly, revenues in the quarter were significantly lower than one would expect on a run rate basis, and I would presume we’ll see some recovery the next quarter.

Okay. So you're still looking for a run rate that’s below some -- some hopeful but meaningfully higher than 5 and change a quarter.

Right, yes. That’s kind of an unsustainable number, frankly. And then to address your China point. Given the fact that we've now received this interesting order from GT, and our plan is to produce the majority if not all of those units at Ranor, the position we're taking with China is to kind of mothball it, not shut it down completely, but take it down to no operations essentially and just kind of a call it a books-only entity for some period of time. Because given how the GT situation is evolving, we want to preserve the option that should we need additional capacity that we could once again ramp up for certain orders if appropriate. So again, the bulk of the cost -- 99.9% of the costs that are coming out of China won’t continue to exist, but it will remain there as a somewhat mothballed entity.

[Operator Instructions] And our next question comes from the line of Ross Taylor with Somerset Capital.

Okay, I'd like first -- Walter covered some of the questions I had, because I was trying to get a better understanding of your thought process on how -- why you're so confident you get to breakeven by year end. You made that comment last quarter, and obviously this quarter has proven to be pretty disappointing on the revenue line. And if you can give a little bit more color also on the specifics of why the revenue line was so far short of what I think many people had been expecting.

Yes, well, I’ll let Rich touch on the kind of revenue line, because clearly we expected a number more consistent with what we might see as a run rate that would get us to a $30 million or approximate $30 million run rate. But the bottom line was certain things that were expected to ship at the end of the month didn’t ship and flipped into the next quarter. But Rich would you like to add any color to that?

Yes, and I think one of the dynamics we have in the lower revenue number metric you see here is again, we're not -- we have very little revenue from GTAT in this quarter, it's not above $200,000. So that is a significant customer for us and has been. It has not been very significant the last 3 quarters, although the purchase order we announced today brings it back into the mix, and it’s a repeat production unit that we’ve made before and it has predictable outcomes for us. Mevion, which has been a nice production item that we’ve been doing for many, many years, and it’s a very good customer relationship, it's $2.3 million less revenue year-to-date this year than it was last year for the waiting game that’s taking place, while they wait to go into clinical mode and treatment out in Missouri. So a number of the key customers are -- have been in a more dormant state than we would like to see them, but we look to see both of those customers improve as we move forward, and the backlog would suggest that’s going to happen.

Have you seen shipments so far in this quarter? I mean, this comment that was just made about the idea that there were some things that didn’t happen makes me feel as though there were things on the dock that were ready ship and just didn’t ship. Is that the situation, where things just didn’t move out? Or are we now still kind of waiting for additional orders between here and the end of the year to get shipped out?

Well, you need to be careful in the quarter, because we've got -- we work with very large customers and many of them have significant holiday shutdowns in November and December. So while we've got this slippage and we think it leads to a stronger October, we’ve got to make sure we can manage those customer outages and still achieve our deliveries over the balance of the quarter so -- we get mindful [ph] of when we're in this sort of November, December quarter.

The cash drop, fairly substantial. Obviously, it appears, what, $900,000 of that went to pay off the short-term debt. When do we see this getting back to where we're staring to build the cash?

Well, as I explained, Ross, our objective and our current thinking is that we’ll see cash start to build through this next quarter, and that should continue through the fourth quarter. The one, and that’s where we were pre-GTAT. As we look at GTAT, our expectation is based on our terms and conditions that, that would be neutral to cash positive throughout its life, but we have frankly a bit more modeling to do on that. And given the high volumes, there could be some periods of potentially negative cash, and we're just taking a look at that now. But overall on the base business deal that we're trying to compare to pre-GTAT, clearly we had a view that we were going to building cash in 3Q and 4Q. Well, and in some, I wouldn’t call it significant, I wouldn’t call it like doubling the cash balance, but headed in the right direction, which has been the plan all along.

Okay, and with the GTAT, and you have this $8 million contract, you said you -- a little over $8 million, you expect to be shipped between here and, what, you said May. I believe?

That’s correct.

And obviously that’s something that just came in at this point in time. Is this tied into any of the talk we’ve heard about sapphire glass in the consumer electronic space?

Yes, it is exactly. I don’t know if you saw the announcement that GT made about a new facility in Arizona that they're operating, plan to operate for Apple. These units are going there.

Okay, and how are these units used in the production of sapphire glass? Are they consumables? Or are they something that there’s a razor blade aspect to it? Or is it once they put this new facility in, you will have sold what you are going to sell them?

I think it's -- at this point it’s the final version there, Ross, and that is, once we sell them, they go in, they maybe need some repair and maintenance, but it's not material.

Okay, and with this $8.1 million, do you have any idea how much sapphire glass that would allow them produce in their Arizona facility?

I have no idea what their plans are.

Okay, would they -- is there a coloration between how much you produce and how many furnaces they need?

No. Given the end user here, who is very, very tight-lipped about what their plans are for the obvious reasons, I think it would be a significant challenge for us even to attempt to gain such information, even though we've been in direct contact with the ultimate user.

Okay, and so the waiting game, we're still waiting for the go with regard to Mevion. Does that ever actually happen? They raise cash, but we’ve kind of been sitting here for, what, several months, expecting a shipment any day now or a treatment any day now.

Oh we've -- free [ph] to ship to Mevion.

Yes, I know, but I mean you were expecting a treatment, I think it was 2 quarters ago, and the thought was there would be someone treated within weeks, and 6 months later we're looking at it, and no one's been treated yet.

Yes, Ross, as we sit here today, there are patients, cancer patients all over the country being turned away because there's not enough proton beam capacity for them. There will be absolutely no trouble for a center with the sort of reputation that Siteman has, doing patient recruitment. In fact, there's nothing more permanent or dangerous than shooting a human being with radiation. I can assure you that radiation oncologists who are going to hit that button are going to be absolutely certain that they know what’s going to happen and they can control the machine. So they are in clinical commissioning, as they call it, and they are fully comfortable that they can put a patient through the machine and be absolutely certain of the outcome and their operating prowess, that’s when it'll happen.

Okay, you didn’t make any comment on the bank debt situation. Obviously we're still waiting for a refi. I’m one of those people who believed that I think the lack of the refi is holding down the share price, because there are still people out there who seem to believe that this company, and this quarter probably won’t help matters any in this way, is kind of hanging on the edge of the abyss. So can you talk to us about what’s it going to take to kind of get to where we put a new longer-term debt structure in place?

Well, Let me answer that partially by kind of going back to the GTAT thing. Despite the fact we just got the order, we’ve been in discussions on that for some time. And part of our thinking in terms of refi activity was that being in a position of having some significant backlog that was going to generate a net bottom line, based on our experience in producing these things, was a stronger hand to kind of go out with to talk about an appropriate refi. So while we -- maybe from your perspective, you're interested in the short term [indiscernible] in the stock, I’m kind of looking at what’s the right thing to do to minimize the cash outflow. Because we clearly could pay banks a fee, right? We could have, to do some refinancing that wasn’t necessarily appropriate or fit the current situations. We're trying to think about managing the whole process, and what we were looking at is to the extent we can be successful in building profitable backlog, good cash flow profile and we continued to get costs down [ph], our hand was a lot stronger in finding the right kind of financing versus super high-cost financing that might dilute you guys.

Well, I’m a little confused, because when I look at your balance sheet, it looks to me like you have the, effectively, the MDFA, which I believe is kind of the equivalent of a revenue bond or a industrial bond out of, what, Massachusetts. That accounts for roughly $4.9 million of your just under $5.5 million in debt. So when I’m looking at your debt obligations, I’m seeing you having roughly $500,000 -- a little over $500,000 in debt out to Sovereign, and quite honestly I’m wondering why in this case we don’t come up with an alternative. I know that there are a fair number of -- I think you probably could solicit your shareholders and come up with $500,000, $600,000 to get the banks out totally and to get away from being in the situation where you're not in compliance in that fashion.

Rob, just to be clear, Sovereign holds the MDFA bonds too. So all of our -- that entire balance you were referring was Sovereign. That said, the $840,000 we’ve had on deposit with them for almost 18 months now can be used to pay off the Sovereign-specific debt, and if there were a willing buyer, the bonds could trade freely. That’s one way to achieve a refi. So as you -- the $5 million and change, you've got $840,000 sitting with Sovereign that can do a direct paydown in any refi we achieve. So again, we can delever and use the cash that we’ve got sitting on the shelf with them. And from a collateral perspective, with the right backlog and the right forward view, we should be able to refinance the bonds and probably pay off the CapEx that you were referencing, which is at a higher rate. Clearly, our rates will go up because of the financial results and the history we have behind us, but there's certainly sufficient capital and the quality of our backlog is pretty good.

Okay, I’ll leave you with the thought that, yes, I think your shareholders are showing tremendous patience, but I don’t -- I think it’s a mistake to assume that their patience isn’t nearing the end on this. I know that there's -- this is a very valuable collection of assets, and if you're not able to operate it, I think we for one would suggest that the company explore its strategic alternatives. I think it would be relatively easy to sell this business for a substantial premium, because the problems here don’t seem to be insurmountable. They seem to be more kind of execution, timing and quite honestly lack of critical mass and size.

Yes, I would say that as we work our way though the next steps here, considering a variety of alternatives that might position the better -- the company better strategically are going to be on the table, because I agree with you. I mean, at this size, to be a public company, to bear the costs associated with that, it has significant impact. And again, I think what I’m trying to say is I completely agree with you, Ross. We need to get this company refinanced in the right way, and that may provide better valuation for everybody.

Yes, and I would argue that if it turns out that it doesn't, then I think that then it's important we explore -- because, I mean, what are your public company costs? Probably north of $1 million being public?

Well north of a $1 million. Even with the significant reduction we've realized by changing external audit firms, which is -- again, was a kind of a big reduction not yet realized. It's on its way, but yes, significant costs and frankly more than the dollars, it's the -- companies of this size don’t have the infrastructure to really deal with the issue. We're sitting here today instead of talking to customers, talking to you guys, no offense to you. But it took a lot of time, and it takes effort and sort -- even to be as prepared as we are, which may be limited in your view, but it's one of those things that you end up spending a lot of time not focused on business. And to the extent that there are small private competitors, who every day are focused on generating cash, generating profit as opposed to dealing with other issues, I think that gives them a meaningful competitive advantage.

And I would agree with you. And actually, as I said, I think that when you look at the business, the problems here are not insurmountable. And I think in fact many ways the fact that you're public actually probably hurts you, because people look at your stock price and they assume it reflects on the viability of the business as opposed to a collection of other factors.

Okay, I can’t disagree with you. It’s a painful process, but we need to -- my thinking all along, Ross, to be blunt about it, is that we needed to get this better positioned, and given the potential revenues that could be generated out of the assets, costs were way out of line and needed to get pulled back into some reasonable sort of as low as possible, when you think about that sort of revenue that Ranor might be able to generate. And so we’ve been on that mission, because I think that has and will result in a lot of value creation. And doing that plus working with some key customers that we continue to talk about, it should have a positive impact, and the question of strategic alternatives is one that every public company always has to consider.

Okay, and then lastly, you mentioned the Navy business, and that's a second half, probably 6 months or more out. Can you give us a little bit more color on that and what’s holding that up at this point?

Yes, I’ll turn that one over to Bob Francis, because he's very close.

That’s really just their procurement cycle right now. As I mentioned, there's a block for orders that we do expect will be released probably during our Q4, probably not in time for us to actually have any deliveries in Q4 of fiscal year ’14. And then on top of that, the larger programs I know are in a significant team review cycle right now with our customers. And that review cycle actually will take the better part of several months to complete. And we expect that sometime during the -- mid next calendar year is when they would actually let these orders out for the larger programs. So we stay in very close contact with them, and they really haven’t wavered too much on their timing over the past 3 or 4 months.

If you’re running this business at a $30 million plus rate, what kind of EBITDA margin should you be generating?

With the right mix, Ross?

With a realistic mix.

We should be at a 20 -- high 20s gross margin. To -- I think when we were in our halcyon days with GTAT on solar, we were -- clocked a 31% gross margin in the aggregate. And then on a net basis we should be after tax 8% to 10%, 12% margin.

So if you’re generating, if you were able to do $30-plus million in revenues, it's not unrealistic to assume you could be doing something in the neighborhood of $7 million in EBITDA out of that?

I think in -- the highest EBITDA I have on a historic basis was March 2009, that fiscal year, when the solar product was in its highest level, a $10.1 million EBITDA here.

Okay, so a $7 million number is not unrealistic or reach.

Yes, but I would call, it and this is all speculative now, way out of line, but I would say that’s probably the high end of the realistic range, because as you think about the customers we’re now pursuing, the Navy, et cetera, the defense contractor, it’s -- they're repeat business. It's not as high margin. But I think at the end of the day, what's exhibited through this whole process is Ranor needs volume. Volume helps a lot of things. So I think at the end of the day, it may turn out to be a somewhat lower-margin business than Rich described in the kind of best of days, but one that’s way more predictable.

Right, and we should -- if you look at it in that fashion, if you can generate $6 million, $7 million in EBITDA, probably it's safe to assume the underlying asset value of the company would be -- should be $40 million plus on the strategic basis.

Well, we can all move numbers around, so [indiscernible] you could certainly see that.

[Operator Instructions] And our next question comes from the line of Tony Polak with Aegis Capital.

Could you give us a little background on what’s happening in nuclear since nothing’s been mentioned on that, and that's always a prime potential avenue?

Yes, again, maybe I’ll turn that one over to Bob Francis. Bob, maybe you can just talk about the current nuclear business, what we have and where we may see opportunities.

We continue to work with some of our existing nuclear customers, and it's been steady, but fairly low-volume business with those customers. We did just this past week attend POWER-GEN down in Florida, and the nuclear section of that was actually much smaller than previously, than the previous year’s show. However, we made some contacts, and we're hoping to continue to get into other customers within the nuclear sector. But as I said starting out, our current nuclear customers that have been with us for years now have been very steady although low volume.

Is there a reason that it's such low volume?

Well, I would just say the sector itself is in that condition right now. We are -- there is a potential opportunity with one of our customers that we have bid on that’s relatively large, that they’ve actually won from their parent group and we are working that, but it's probably going to be several months before we see anything out of that. Beyond that, nuclear has just been relatively slow over the past -- as the marketplace has just been relatively slow.

And how large a contract could that be?

I'm sorry?

How large a contract could that be?

It kind of depends upon their internal capacities, but when we originally bid it against them to their parent, it could have ranged between $2 million and $8 million.

And our next question comes from the line of Michael Potter with Monarch Capital.

Much better -- even if the results aren’t there yet, much better tone of the call than the prior, Len, and obviously things are beginning to show that we’re moving in the right direction. A couple of quick questions. On the GT order that we have, should we assume that this is -- this will -- that we should achieve gross margins back to our historical margins on the DSS chambers. Is it that type of volume, that these are repetitive and we should be able to churn them out once we get up and running?

Well, again, the way we bid it, and of course it's competitive, I’d say that the bid margins that we went in with were slightly under where we were before. Because, again you can tell, I view getting this volume and getting agreement to do it at Ranor versus China as a very important thing for the company. So there may have been a little bit of trade there, but not all that much, so margins are slightly under. But, again, as Bob will tell you, I’m strongly encouraging the team to be putting together an implementation plan that drives down cost through the repetitive nature of this thing so that the margins expand into where we'd like to see them, but that’s a kind of a long answer to a short question.

No, that’s okay, but we’re also carrying much fewer employees now than we were at that time as well, I believe.

Well, yes. Look overall costs, both operating and SA&G are materially lower, although, again, as I've said, that, that's all not going to be reflected into fiscal 2015. And the thing is that we’re going -- to be blunt, that we have to [indiscernible] GT order is, what additional resources do we need, and how do we recast our operations to limit the number of resources we need to execute the order, because that will have a major impact on the margins. We have work to do, Michael, but again, as I've said to everybody earlier, that this is something that has been in discussion for some time and has had its ups and downs. We weren’t really sure where it was going to end up and we weren’t really sure that GT was going to agree that producing in the U.S., at Ranor was a sensible strategy, because they do have a focus on using capacity out of China, the reason we ended up there in the first place. So I guess what I’m saying, I think we made a ton of progress with that customer in terms of getting a sizable order and getting an agreement to produce it out of Ranor where we have much more control and from my perspective, much more capability to build a quality product quickly. And as we told you, there's a relatively short time frame here during which we got to get these out. So, again, I'm encouraging Bob and the team to really get an operating plan together quickly that allows us to exceed customer expectations on quality and delivery and get these units flowing out, because that will also have a positive cash flow impact.

And when do we start generating revenue off this contract? Yesterday, I’m hoping?

Wish it were that quickly, Michael. We are -- we do have a smaller seed order that was given to us while this was germinating and being negotiated. That’s going to conclude in this quarter out of China, and then the bulk of what we announced today, the $8.1 million is a new order, that will progress out of Ranor with first deliveries in January is the plan.

All right. So the initial production is going to come out of China for fiscal Q3, and then our production starts at Ranor in Q4?

Already -- very limited number out in Q3, and the bulk of this $8.1 million order is January through May delivery.

Okay, so Q4 and beginning of Q1.

Right.

And the -- we're still sitting with restricted cash at Sovereign of 8 -- was it just under $900,000? Is that correct?

It's, yes -- $840,000 is the...

And where is that reflected on our balance sheet?

That’s in other current assets.

In other current assets, okay. And then, Rich, can you break down the adjusted EBITDA for us as well for the quarter?

Okay, you can’t get to an EBITDA because of the loss provisions, Michael, but and if you go to the cash flow, you can certainly take the noncash items traditionally and add them back to the reported loss from operations.

Okay, if possible -- I mean, we're it's either myself or somebody else is always asking this question on the call, perhaps you could break this out for us on the future calls and the future releases?

We commit to do that.

And our next question comes from the line of Alan Reacher [ph].

I’m a individual investor. One question quickly on the sapphire equipment order. Do you have any irons in the fire with other than GTAT?

Relative to sapphire?

Yes.

The answer is no.

[Operator Instructions] And I’m showing no additional questions at this time. I’d like to turn the call back over to Management. Pardon me, one person has just queued up. The next question comes from the line of Peter Trapp with Bifrost Fund.

Now I’ve got a couple of observations, because I do quite a bit of tech, and I’m sure you're aware that this Apple order, Apple had made a commitment to try to do more business or manufacture more in the United States, and they are going to provide financing to GT for the plant, that they are going to be building. And I’m wondering if there's no chance, at least as you're short of cash or you’d like to get your hands on some cash, that there wouldn’t be a trickledown effect that if they're -- if Apple is going to fund GT, why shouldn’t GT take some of that money and help you on this order or prefund it?

Yes, well, I would say that we have good terms and conditions on this order relative to cash.

Okay. And then I think a question was asked about production, sapphire production by furnace and whether more sapphire had more furnaces. And my understanding is that yes, more sapphire is more furnaces, and this is just the beginning of what Apple and GT are going to be doing, so, I mean, I’m not trying to put the cart before the horse, but it would seem to me that this is the beginning of potentially a series of orders. Can you comment on that?

We have no visibility into what the future may hold, but I firmly believe, as I said earlier, that to the extent that the adoption of sapphire accelerates that it could have an important benefit to us. And therefore my strategy with the management team is to ensure that the commitments we've made to GT relative to these orders in terms of the quality and the timing of delivery absolutely must be met or exceeded, because at the end of the day they have a very demanding customer who is a customer that we all would love to be doing business with other than for their exceptional ability to negotiate price.

Yes. Now I remember, back in the bad old days, a conversation that had to do with Ranor and the fact that the sales cycle and the sales effort was not particularly robust and therefore Ranor was kind of waiting for the phone to ring in order for business to come in the door. And with the change in the management, and I know that you’ve cut back staff [ph] quite significantly, how does that impact on the sales and the sales initiatives and the ability to build up some more orders so that you can use more capacity at Ranor? I mean, just thinking through the logic here.

No, no, it’s an excellent question, and one observation is with the GT order we’re going to be using a lot of our capacity at Ranor during that time period. We also have a very good salesman up at Ranor, located up there now, who is doing a good job in terms of -- and, frankly, as soon as I can get myself out of the cost reduction and kind of the order management boat here, I will be starting to talk to more customers on a more strategic basis, because at the end of the day, this is a long sales cycle enterprise. Another observation I might make is that selling for this company may not have always [indiscernible] in terms of building strong relationships. So I think we need to do 2 things: a bottoms-up more aggressive day-to-day selling to fill in the backlog once GT is paid off, assuming that there isn’t another GT order right behind it. And then we've got to do some more top-down relationship building, so that the position that we want to be in relative to being called a premier outsourcer for certain companies is one that can be executed on. So the main thing is bottom line. We need to do more in that area.

Yes. Well, I think it's fair to say that as there’s been more and more pressure on the administration and on corporate America to provide jobs here in the United States, and obviously in the center of the country, that’s a huge initiative. We're seeing more and more companies now committing to bring production back onshore, whether it's from China or from Mexico or Central America or whatever. So I’m thinking that the cycle is probably coming your way in that sense. Wouldn't you say?

Yes, I think a lot of people are learning that at the end of the day those other offshore locations didn’t turn out to be as good as they thought they would be for a whole variety of reasons, including the cost of doing business there.

Well, for you it's also a security issue, because, I mean, if you have patents or if you have unique products or companies have that are passing it on to you for manufacturing, I mean, that’s a big security issue. I mean, we've been around the loop on that one.

Yes, it's kind of a question I always had about why the company might have started a China operation when we’re pursuing major defense contractors, because needless to say, they would be a bit panicked about someone in China getting into our systems or -- and maybe having access. So I agree with all your points. And, look, my view is that our principal assets are at Ranor. They weren’t in China. And we need to find a way to make Ranor successful, and that’s what we’re working hard at doing.

I mean, if the culture has changed and your actually making sales calls, that certainly is a help. I’ll just make one last comment or question. And that has to do with the solar. I mean it's no secret, but solar has been on a tear this year, and historically you’ve had good solar business, and it seems as though your initiatives or your orders in the solar side have lagged behind the success of solar here in the United States in 2013. Could you comment on that, please?

Yes, I’ll try to calibrate to that, Peter. If you look at where we participate in the solar supply chain, we provide sort of upstream, midstream production equipment. It resides upstream of the panel manufacturers. And if you look at what’s going on, the panel prices have come down. That’s good for people who want to do farms and installations. It's good for people who are brokering the panels, but we have not seen, and if you look at GTAT's most recent numbers, they don’t have very -- a great deal of backlog for upstream solar equipment and no one is putting a whole lot of extra capacity online. I think we’re at 35 gigawatts of solar panel production annually, again, 35 gigawatts. And there's talk that we’re supposed to be going to 55 gigawatts, but we haven't -- the big install for people to put that next slug of capacity online. Now if I look at long term, GT’s business, and they just reported their quarter, the majority of their sales was their polysilicon reactors, which is the ultimate piece of the upstream equation. So if people have been installing those polysilicon reactors while they haven’t been doing the midstream equipment that we participate in, eventually the midstream will catch up with the upstream install and we’ll see some orders, or at least GT will. But it's nowhere near the kind of volumes we saw when the world was going from 8 gigawatts up to 25 gigawatts and we were all riding that rapid expansion. Is that helpful?

Okay, one last thing. The breakeven sales to EBITDA of $30 million, at the current expense levels, is it still your intention to try to reduce costs? Or do you think that you’ve rung out everything you can and it's kind of time to kind of increase it a little bit as the orders are coming in, especially on the sales side?

Yes, well, there’s always costs that can be reduced, and we’re getting -- as part of our new culture we’re going to be focused on doing that, as well as adding costs where and when appropriate. So, for example, in terms of the GT thing, there may be some need to add some costs to execute those orders. There may be an interest and desire to, call it, expand the sales and marketing organization that I just finished shrinking a bit, but -- maybe another person at Ranor with good contacts in the verticals that we’re trying to supply could happen. But I think it's more been important for us given the precarious situation the company was in to try to get stabilized with what we had and build from there, and that’s what we’ve been doing. So going forward, certainly you can’t cut your cost as a strategy for success, so I understand that and we’re going to have to start to kind of do more in terms of customer development, et cetera. But at the end of the day, cost, as I've said before and many times, were way out of line for a company this size and had to be reined in. And we haven’t seen the full effect of all the actions that have been taken and will be taken, none of which should impact the business going forward. Any other questions?

There are no more questions at this time.

Okay, thank you very much for your time and attention and your investment in TechPrecision and the continued opportunity to work for you. We’ll keep you posted as we progress with the redirection of TechPrecision on our next call. Thank you very much.

Thank you, ladies and gentlemen, for attending today’s conference. You may now disconnect.