Good afternoon, ladies and gentlemen, and welcome to the TechPrecision's Third Quarter Fiscal 2021 Financial Results Conference. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Brett Maas with Hayden IR. Sir, the floor is yours.

Thank you. On the call today is Alex Shen, Chief Executive Officer; Tom Sammons, Chief Financial Officer. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements, which are subject to risks and uncertainties, that 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 risks and uncertainties in the company's filings with the SEC. In addition, projections as to the company's future performance represents management's estimates of today, February 11, 2021. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, the floor is yours.

Brett, thank you. Good day to everyone, and thank you for joining us. Our third quarter was highlighted by improved gross profit and improved gross margin, which more than doubled when compared to the same period 1 year ago. Gross profit increased by $391,000, and gross margin improved to 19.8% from 8.6% compared to the same period 1 year ago. Our results for the third quarter were highlighted by a more favorable project mix, which drove improved gross margins when compared to the same period 1 year ago. We have also realized manufacturing improvements on the remaining components that negatively impacted our prior year results with learning curve related costs. This outcome resulted in an overall improvement in reported financial results for the first 9 months of fiscal year 2021 when compared to the same period in the prior year. We expect to carry these improvements on revenues and margins into the last quarter of fiscal year 2021 and beyond. We booked $7.2 million of new orders in the third quarter as our sales order backlog increased to $18.4 million as of December 31, 2020. Now I would like to turn the call over to our CFO, Tom Sammons, for a brief review of our fiscal 2021, 3rd quarter results. Tom?

Thank you, Alex. Net sales were $3.6 million compared to $3.7 million in the same quarter a year ago. While our defense sector sales decreased by $315,000, our sales to the precision industrial sector increased by $217,000 when compared to the same quarter a year ago. Notwithstanding lower revenue, gross profit was $705,000 for the quarter, or as Alex mentioned, 19.8% of revenue, an increase of more than 100% when compared to the same quarter a year ago. SG&A expense increased by $54,000 or 8% due primarily to an increase in outside advisory fees that included $85,000 related to the proposed acquisition of STADCO. As a result, we reported a loss from operations of $11,000 for the 3 months ended December 31, 2020. The net loss for the third quarter of fiscal 2021 was $48,000 compared to a net loss of $320,000 in the same quarter a year ago. For the 9 months ended December 31, 2020, revenue increased to $11.6 million or 4% higher than the same period a year ago, driven by an increase in sales of $901,000 to the customers in the precision industrial sector. Gross profit was $2.5 million or 38% higher when compared to the same period a year ago. Gross margin was 21.9% for the 9 months ended December 31, 2020. SG&A was $2.2 million or 3% higher than the same period last year, primarily due to an increase in compensation and other office costs that more than offset the decrease in travel expense. Operating income was $326,000 for the 9 months ended December 31, 2020, compared to an operating loss of $308,000 in the same period a year ago. Net income was $106,000 for the 9 months ended December 31, 2020, compared to a net loss of $390,000 for the 9 months ended December 31, 2019. We generated approximately $400,000 of cash from operating activities during the third quarter of fiscal 2021. Our cash balance at December 31, 2020, was $1.3 million. Our total debt stands at $3.8 million or $1.20 million higher than reported on March 31, 2020. As previously disclosed, the debt increase is the result of the funds received on May 11, 2020, under the Paycheck Protection Program. Our first payment under the amended provisions of the loan will not be due before September 2021, if loan forgiveness is not achieved under the program. Our net debt at December 31, 2020, was $2.6 million compared to $1.7 million at March 31, 2020. With that, I will now turn the call back over to Alex. Alex?

Tom, thank you. TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through its Ranor subsidiary. We continue to see meaningful opportunities in our defense sector, primarily in the nuclear submarine business for the next 12 months and beyond. Before we take questions, I need to make two points. The first is with regard to STADCO. As we are continuing our due diligence and negotiations with regard to the proposed acquisition, we will not be making any comments or taking any questions with regard to any aspect of that transaction. We ask that you do not make any comments and refrain from referring to it in any way. The second point is to remind you that we do most of our work in a very sensitive group of industries that precludes us from speaking about many things that a company not operating in these fields might discuss. As such, there are very real limits as to what I can discuss, and sometimes those limits change. Please understand that my saying, I am not allowed to discuss that is based on that fact. Operator, you may now begin the line -- excuse me, you may now open the line for Q&A.

[Operator Instructions] Your first question is coming from Aaron Warwick.

Alex, you've been talking now for a while about $100 million opportunity. You kind of danced away from it for a while, and seemed to have it being pinned down. But you've talked about backlog last quarter being meaningful, and you see this meaningful opportunity in front of you. But I think the gist of it is we've been hearing the same story now for about 2 years, and I'm wondering what's going on. All the other Navy contractors have been reporting good results, good backlog. They've been pretty clear in their communication. They don't have any disclaimers at the beginning of the call that they can't talk. So I'm just wondering what's going on. Is some of that business that you thought you would win are you're not getting that now? Is it just taking more time? And if that's the case, why is it taking so much time that we continue to have these $3.5 million revenue quarters?

Aaron, thank you for your questions. I think you asked several different questions all in a row here. Right?

Yes, sir.

Okay, can you -- can we somehow chunk these down, so I can answer them one at a time.

Yes. I mean, let me...

I wasn't able to write.

Let me make -- let me make it real clear. Where is the revenue? Where is the backlog? All the other Navy contractors have been reporting it. Are you guys just further down the line? We've been hearing the same thing, meaningful opportunities for 2 years, and then you don't communicate anything to us about when these are going to come, even though we keep seeing $3 million to $5 million quarters and barely any net income -- operating income. What's going on? I mean are you not winning some of the contracts you thought you would win or is it just plain delay? I think we need some answers after all these years.

I can give you the answers that I can give you. And on the other ones that I cannot give you, I am not allowed to discuss that. I think we made this very clear, and you keep pushing for more. So I can give you what I can give you and the meaningful opportunities continue. We continue to see them. As far as winning contracts, we continue to win orders. And as I just said, we booked over -- we booked $7.2 million of new orders. So those are new orders. So I think I'm answering the question, are you able to book the orders?

Yes. How long -- so you had $5 million last quarter that you booked and now $7 million this quarter, and you had $3 million of revenue. So how long is it going to take for that step to come through to that revenue?

How long will it take? Tom, how long do you think it will take for all our backlog to come through? Probably, it's more than 1 year and less than 3, Tom?

[Audio Gap] within 3 years.

Okay. That's good to know. I appreciate that. And let me be clear. I mean, Alex, I'm frustrated with some of the stuff. I know some of it, you've done a great job turning the company around. And some of it, I feel is at the feet of the Board of Directors. I mean, again, every other Navy contractor talks very openly about what they're doing and the time lines and so forth. So I don't know why it has to be different there, but you're the one on the call. So I'm sorry, it comes out on you. As it relates to the press release today, it talked about potentially having to issue more shares beyond the 1 million. That's how I read it anyway. Is that the correct rating that you may have to issue more shares besides the 1 million?

I don't -- I'm not sure what you're referring to. The -- if you are talking about the STADCO, that's we haven't changed that.

We are not commenting on STADCO, Tom.

Yes.

It says in your press release, as recently reported, you've reached agreement with one of STADCO's major creditors. Reaching agreements with the remainder may require -- may be required for the company to close the deal. The company expects a percentage of that will be -- of that debt will be satisfied in part or full through the issuance of additional shares. So is that in addition to the 1 million shares that you already talked about earlier in the press release or is that 1 million total, and that's it?

So with regard to STADCO, we will not be making any comments or taking any questions.

I'm not talking about STADCO. I'm talking about your press release where you said that you may have to issue more shares. And is it 1 million or is it not 1 million or is it more than that?

Regarding the STADCO, we won't be taking any questions or making any comments, right? Tom, is this in regard to STADCO or is it not?

No, it's in regard to whether you're going to issue more shares and dilute shareholders. That's my question. So let me ask it, it's not in regard to STADCO. Do you have any plans or is there a possibility that you're going to need to dilute shareholders in the next year? And if you can't tell me, no, then I have to assume that it is a possibility.

If we can't tell you, no, you'll assume it's, yes.

No, I said I assume it's a possibility. You're putting words in my mouth now. I mean, Alex, I've written publicly about the company. I've given you -- I've tried to sell the company to other investors that would be interested, friends of mine. I wrote glowingly about the company. I'm asking for basic information. Are you going to dilute or are you not? Or is it a possibility? I mean it's not yes or no. It's either no or there's a possibility that we will, and we don't know.

Yes, what we put in the press release is that it's a possibility with respect to the creditors.

[Operator Instructions] Your next question is coming from Mark Gomes.

Well, gentlemen, so with regard to the $7 million in orders this quarter, that's a trend up. Is that something that we can expect to at least hold firm or continue on an upward trajectory in the quarters and years ahead?

Mark, I think there's a trend, does mean not being able to forecast how it's going to go. I report this as they come. And the business is lumpy. What comes up, sometimes goes down. We've had quarters where it's less, much less than $7 million. This time, it was $8.2 million.

But you have visibility into your opportunities, your capacity and things of that nature that we don't. So I was just looking for some visibility into -- right, you've given us a sense of your excitement level in the past and your excitement level, I would assume is related to how the business should progress as opposed to not progressing. And we see progress in the order flow. So what I'm asking is based on your visibility that understanding on my side that you cannot give us details for various reasons that I understand. All things being -- all things being said, is this perhaps the beginning of a trend, whether it has to do with sensitive contracts or not, there's many things that you do in your business that could lead to those orders. Continuing as a trend, understanding that is lumpy, but if we look at, say, a 4-quarter moving average of something less lumpy, are we seeing something shifting or an inflection point in the business?

So let me rephrase the question. Will this upward trend continue? Is that close to the question?

That is extremely close to the question, and continue is right, is a matter of definition whether you're looking at -- I'm not looking for continue this coming quarter. I'm just saying, has your business -- is your business seeing an inflection point from a fundamental standpoint that might be reflected in the total orders going forward?

So let me try to answer this question in a much broader sense of how nuclear submarine manufacturing and requirements for nuclear submarines works. This is a 3-decade opportunity that we're looking at. So I think the inflection point or not, $5 million of booked new sales orders last quarter, and this quarter, $7 million. Will that trend continue? I don't know that and I am unable to forecast that. But overall, if there's a 30-year demand for submarines, the opportunity certainly continues to be meaningful, and we continue to see these opportunities flourish in front of us. So I don't think I can comment necessarily intelligently about how this trend is going to go up or down. The opportunities certainly are not going away.

Well, let's elevate a different part. What are the impediments from a competitive standpoint relative to your positioning, right? You're a company that provides a certain service, that can provide a certain number of parts to certain programs that are destined to be a certain size. And there's a finite number of vendors, I assume, that can do what you do. So can you give us some qualitative overview that might give us a sense, at least, so that we could draw our own conclusions about the prospects for your company?

I don't think I'll be able to answer that question and try to also protect what I need to protect in order to compete and still win. I won't be able to answer that question. Sorry.

I understand. Before I go, I'll simply say that I believe that your tone with Aaron was unprofessional. He was merely asking for a clarification as to the press release. Kudos your CFO for answering that question. I'm not disappointed with your company or where you're going or anything of that nature. And I love what you did to turn things around there, but you're not doing us favors as a shareholder. You are not being a good steward of shareholder value.

Your next question is coming from Ross Taylor.

Well, it's interesting not to be the angry man on the call. I think that the comments made before me are valid. I think you have to understand people are getting quite frustrated. They've been listening to the same story for 2 years. They haven't seen the acceleration. There are obviously reasons why -- what I'd like to ask you is 2 things. One, has your near-term competitive position been in any way disadvantaged from where you felt it was 2 years ago to today? Are you losing business, is someone else moving into your space or someone else underpricing you, has something happened that's caused you to not be as valuable as we were 2 years ago to your end customer?

No, we are not.

Okay. Second, as I understand you really can't negotiate against yourself in public with regard to STADCO. And I understand Aaron's frustration and concern. It strikes me as the size of the deal is not such that it would require any meaningful dilution to shareholders. And from our perspective, as one of your largest -- your largest outside shareholder, if you were able to get -- getting this deal done with a modicum or a minimum of dilution, it's advisable. There is a level at which dilution is not attractive in the potential price level. But I think that you've got a lot of people, who trade your stock, and this is not a quarter-to-quarter stock. This is a longer-term stock. But I would like you to be able to come to us after you close this deal, should you close it, which could be as early as a few weeks from now and allow us to get a better understanding of STADCO. Because being private, there's not a great deal out there that is public. It does look to me like it's -- it will certainly increase your top line and that should flow through a variety of other lines, but if the deal is able to close. And the whole thing, as I said, unfortunately, by bringing this public when you did, you created a situation where the risk is bigger negotiating against yourself in public. But I would just say is when you get it done, and I said this to you before, I think you need to get in front of your investors and let us understand better what STADCO is, what it brings to TechPrecision and what TechPrecision brings to STADCO?

Understood.

And beyond that, I just -- I hope that we can see a near-term ramp. I think people are getting a little frustrated with the waiting for [indiscernible] aspect of it. And so I would suggest that we get off the beach and move in.

We have no further questions from the lines at this time.

Thank you all. Have a good day.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.