TPCS 10-K & 10-Q changes, risk factors and insider trading

Our liquidity is highly dependent on the availability of financing facilities and our ability to maintain a gross profit and operating income. The Company is the borrower under the amended and restated loan agreement withdated Berkshireas Bankof (August 25, 2021, as further amended, or the “Loan AgreementAgreement,” with Beacon Bank & Trust, successor by merger to Berkshire Bank, or the “Bank”. Under the Loan Agreement, the Bank continued to provide the Ranor Term Loan and the Stadco Term Loan (each as defined below) and the revolving line of credit, or the “Revolver Loan”. The Company has determined that it was not in compliance with the certain financial covenants in the Loan Agreement as of March 31, 2025.2026. Additionally, our management believes it is probable that the Company will not be in compliance with thesecertain financial covenants in future periods. Without a waiver, noncompliance with these financial and related covenants permits the lender to demand repayment in full of all outstanding amounts from the Company. In addition, the lender retains the right to act on covenant violations that occur after the date of delivery of any waiver. If the lender were to demand repayment, the Company would not be able to pay the obligation because the Company does not have existing facilities or sufficient cash on hand to satisfy these obligations.

There was $7,387$7,031 outstanding under the Loan Agreement on March 31, 2025.2026, Berkshire Bank isand the lender under the Loan Agreement and has agreed to extend the maturity date of the revolver loan to AugustSeptember 29,15, 2025.2026. The original maturity date of the revolver loan under the loan agreement was December 20, 2023. While the maturity date of the revolver loan has been extended, it is due within the next 12 months and, if we are not able to renew or further extend the maturity date of the revolver loan, we will need to raise additional funds in order meet our obligations with respect to the revolver loan and sustain our operations.

In addition to extending the maturity date of the revolver loan, the Company acknowledges that a certain event of default has occurred and is continuing under the Loan Agreement because of the Company’s failure to satisfy the DebtLeverage ServiceRatio Coverage(as Ratio,defined or DSCR, forin the twelve-monthLoan periodAgreement) endingas of March 31, 2025.2026. The lender reserves any and all rights and remedies available to it under the Loan Agreement, including, without limitation, its right to choose to accelerate and demand the outstanding indebtedness evidenced by the loan documents, and to seek immediate repayment in full.

In the event that the lender exercises its right to accelerate the repayment of this indebtedness as the result of one or more breachescovenant of covenantbreaches, or the maturity date of the revolver loan is not renewed or further extended, we do not expect to have funds available to repay these amounts in full unless we raise additional funds or find alternate financing, which, along with the uncertainty associated with the recurring operating losses at Stadco, raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements included in this Annual Report on Form 10-K are issued. The consequences of any default, waiver or forbearance, or the securing of additional equity financing could materially and adversely affect our business, financial condition, and results of operations.

We may pursue acquisitions and other strategic transactions and/or investments to complimentcomplement or expand our business that may not be successful.

Some competitors may be better known or have greater resources at their disposal, and some may have lower production costs. For certain products, being a domestic manufacturer may play a role in determining whether we are awarded a certain contract. For other products, we may be competing against foreign manufacturers who have a lower cost of production. If a contracting party has a relationship with a vendor and is required to place a contract for bids, the preferred vendor may provide or assist in the development of the specification for the product which may be tailored to that vendor’s products. In such an event, we would be at a disadvantage in seeking to obtain that contract. We believe that customers focus on such factors as quality of work, reputation of the vendor, perception of the vendor’s ability to meet the required schedule, and price in selecting a vendor for their products. Some of our customers have moved manufacturing operations or product sourcing overseas. To remain competitive, we will need to invest continuously in our manufacturing capabilities and customer service, and we may need to reduce our prices, particularly with respect to customers in industries that are experiencing downturns, which may adversely affect our results of operations. We cannot provide assurance that we will be able to maintain our competitive position in each of the markets that we serve, and any failure by us to completecompete could have a material adverse effect on our business, financial condition and results of operations.

Our business may be impacted by external factors that we may not be able to control, including health emergencies like epidemics or pandemics, government tariffs, current middle east conflict, and thegeopolitical war between Russia and Ukraine.conflicts.

To date, the company has not experienced any material effects from certain conflicts in the middle east and the war between Russia and Ukraine and sanctions placed on the Russian Federation and Belarus.Ukraine. However, because of our reliance on certain raw materials and energy supplies, an economic environment of rising government tariffs, costs and interest rates could have an unfavorable impact on our operations and financial condition.

We have, in the past, 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. For the fiscal year ended March 31, 2026, our four largest customers accounted for 52% of our revenue. For the fiscal year ended March 31, 2025, our five largest customers accounted for 79% of our revenue. For the fiscal year ended March 31, 2024, our five largest customers accounted for 68% of our revenue. In addition, our backlog on March 31, 20252026 and 20242025 was $48,625$52,198 and $49,500,$48,625, respectively, of which 73%75% and 76%73% was attributable to four customers.

As a result, we may have difficulty operating profitably if there is a default in payment by any of our major customers, we lose an existing order, or we are unable to generate orders from new or existing customers. Furthermore, to the extent that any one customer accounts for a large percentage of our revenue, the loss of that customer could materially affect our ability to operate profitably. For example, our single largest customer for the fiscal years ended March 31, 20252026 and 20242025 accounted for 22%15% and 32%,22%, respectively, of our revenue for both years. The loss of these customers could have a material adverse effect uponon our business and may impair our ability to operate profitably. We anticipate that our dependence on a limited number of customers in any given fiscal year will continue for the foreseeable future. There is always a risk that existing customers will elect not to do business with us in the future or will experience financial difficulties. If our customers experience financial difficulties or business reversals, or lose orders or anticipated orders, which would reduce or eliminate the need for the products which they ordered from us, they could be unable or unwilling to fulfill their contracts with us.

Additionally, changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact the cost of raw materials. For example, fromas Marchof 2018early until March 2021,2026, the U.S. imposed ana additional 25%50% tariff under Section 232 of the Trade Expansion Act of 1962, as amended, on steel and aluminum products imported into the U.S. While these tariffs have mostly been lifted on imports from countries other than the Peoples’ Republic of China, imports from many jurisdictions are subject to limitations on volume, after which substantial tariffs will be reimposed. The U.S. also imposed a 10% tariff on all aluminum imports into the United States,U.S., with initial exemptions for aluminum imported from certain U.S.exceptions. trading partners. Recent proposedSubsequent changes to tariffs announced by the U.S. in April 2025 could increasefurther impact steel and aluminum costs and decrease supply availability.

All our manufacturing and production is done at two locations, in California and Massachusetts. We may be exposed to significant disruption to our business as a resultbecause of unforeseeable developments at either geographic location.

We operate at two manufacturing and production facilitiesfacilities, one in Westminster, Massachusetts and the other in Los Angeles, California. It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around our manufacturing and production facilities. It is also possible that operations could be disrupted due to other unforeseen circumstances such as power outages, explosions, fires (including wildfires), floods, earthquakes, accidents, and severe weather conditions. As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered, and we may suffer damage to our reputation. Our financial condition and results of our operations could be materially adversely affected were such events occurred.

The prices for and availability of electricity, natural gas, oil, and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control, including the imposition of sanctions on thecertain Russian Federation that prevent itcountries from selling its significant sources of oil and natural gas into key international markets, which impactscan impact the global price of these commodities. Disruptions or lack of availability in the supply of energy resources could temporarily impair our ability to operate our production facility. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, may adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition.

We recognize revenue for our defense contracts and some commercial contracts basedover-time onunder percentageAccounting ofStandards completionCodification that(ASC) 606 which requires significant management judgement. Errors made to estimates of revenue and costs could result in overstated or understated profits or losses, subject to adjustment.

Due to the size and nature of the work required to be performed on many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs include material, labor, and subcontracting costs, as well as an allocation of indirect costs. We are required to make assumptions regarding the number of labor hours required to complete a task, the complexity of the work to be performed, the availability and cost of materials and performance by our subcontractors. For contract change orders, claims or similar items, we apply judgment in estimating the amounts and assessing the potential for realization.realization of revenue over time. Contract modifications - as well as other changes in estimates of revenue, costs, and profits on performance obligations - are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes in current and prior periods. If our estimate of total contract costs or our determination of whether the customer agrees that a milestone is achieved is incorrect, our revenue could be overstated or understated, and the profits or loss reported could be subject to adjustment. If our revenues and costs require adjustment, our stock price could decline.

Because certain of our products are used in a variety of military applications, including ships, submarines and helicopters, we derive most of our revenue from the defense industry. In fiscal 20252026 and 2024,2025, approximately 99% and 99% of our revenue wasin both years were derived from customers in the defense industry. Although many of the programs under which we sell products to prime U.S. government contractors extend several years, they are subject to annual funding through congressional appropriations. While spending authorizations for defense-related programs by the U.S. government have increased insince recent years2020 due to greaterinflation, homelandtechnology securitydevelopment, and foreigngeopolitical militaryconflicts commitments,abroad, these spending levels may not be sustainable and could significantly decline. Future levels of expenditures, authorizations, and appropriations for programs we support may decrease or shift to programs in areas where we do not currently provide services. Changes in spending authorizations, appropriations, and budgetary priorities could also occur due to a shift in the number, and intensity, of potential and ongoing conflicts, the rapid growth of the federal budget deficit, increasing political pressure to reduce overall levels of government spending, shifts in spending priorities from national defense as a result of competing demands for federal funds, or other factors. It is also possible that Russia’srecent invasiongeopolitical ofconflicts Ukraineabroad causes a reorientation of U.S. defense spending away from the naval submarine programs from which we derive substantial portions of our revenue towards land-based military projects, which could involve fewer programs in which our products would be needed. Our business prospects, financial condition or operating results could be materially harmed among other causes by the following: 1) budgetary constraints affecting U.S. government spending generally, or specific departments or agencies in particular, and changes in available funding, such as federal government sequestration (automatic spending cuts); 2) changes in U.S. government programs or requirements; and 3) a prolonged U.S. government shutdown and other potential delays in the appropriations process.

The nature of our manufacturing business subjects our operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damage and occupational safety and health. Failure to comply with these laws and regulations, or with the permits required for our operations, could result in fines or civil or criminal sanctions, third party claims for property damage or personal injury, and investigation and cleanup costs. Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future.

We have used, and currently use, certain substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although we implement controls and procedures designed to reduce continuing risk of adverse impacts and health and safety issues, we could incur substantial cleanup costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims as a resultbecause of violations, non-compliance or liabilities under these regulatory regimes.

Because certain of our borrowing facilities contain variable interest rate provisions, many of the above consequences could be worsened if interest rates continuewere to rise.increase. In addition, our current credit facilities contain, and any future credit facilities to which we become a party will likely contain, covenants and other provisions that restrict our operations. These restrictive covenants and provisions could limit our ability to obtain future financing, make needed capital expenditures, withstand a future downturn in our business, or the economy in general, or otherwise conduct necessary corporate activities, and may prevent us from taking advantage of business opportunities that arise in the future.

Our liquidity is highly dependent on our available financing facilities and ability to improve our gross profit and operating income. Our failure to obtain new or additional financing, if required, could impair our ability to both serve our existing customer base and develop new customers and could result in our failure to continue to operate as a going concern. To the extent that we require new or additional financing, we cannot assure you that we will be able to get such financing on terms equal to or better than the terms of our current credit facilities with Berkshirethe Bank. If we are unable to borrow funds under an existing credit facility, it may be necessary for us to conduct an offering of debt and/or equity securities on terms which may be disadvantageous to us or have a negative impact on our outstanding securities and the holders of such securities. In the event of an equity offering, it may be necessary that we offer such securities at a price that is significantly below our current trading levels which may result in substantial dilution to our investors that do not participate in the offering and a new lower trading level for our common stock.

Disruptions in the credit markets can cause severely restricted access to capital for companies. When credit markets deteriorate or are disrupted, our ability to incur additional indebtedness to fund a portion of our working capital needs and other general corporate purposes, or to refinance maturing obligations as they become due, may be constrained. This risk could be exacerbated by future deterioration in the Company’s credit ratings. In addition, if the counterparty backing our existing credit facilities were unable to perform on its commitments, our liquidity could be impacted, which could adversely affect funding of working capital requirements and other general corporate purposes. In the event we need to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time, if at all. In addition, Russia’sgeopolitical invasion of Ukraine,conflicts, high inflation and increasing interest rates have significantly disrupted world financial markets, increased volatility in U.S. capital markets, and may reduce opportunities for us to seek additional funding. Our inability to obtain financing on terms and within a time acceptable to us could have an adverse impact on our results of operations, financial condition, and liquidity.

If we fail to regain or maintain compliance with The Nasdaq Stock Market’s listing standards, our common stock could be delisted from Nasdaq.

As a listed Nasdaq Stock Market (“Nasdaq”) company, we are subject to rules covering, among other things, certain major corporate transactions, the composition of our board of directors and committees thereof, the minimum bid price of our common stock and minimum stockholders’ equity. Nasdaq also has rules governing the timely filing of periodic reports and we have received a notice from the Listing Qualifications Department of Nasdaq that we are not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Timely Filing Requirement”) because we had not timely filed our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the “10-K”) with the SEC before July 15, 2025, which was the end of the grace period for timely filing.reports. We expect to regain compliance with the Timely Filing Requirement with the filing hereby of our 10-K. However, as we have previously disclosed, we have failed in the past to comply with the TimelyNasdaq Filingrequirement Requirementto timely file our periodic financial reports with respect to some of our previous annual reports on Form 10-K (other than this 10-K) and previous quarterly reports on Form 10-Q and there can be no guarantee that we will maintain compliance with Timely Filing Requirement in the future with respectcontinue to make timely filings of our subsequent filingsperiodic financial reports with the SEC. The failure to meet any Nasdaq requirements may result in the delisting of our common stock from Nasdaq, which could adversely affect the liquidity and market price of our common stock.

Factors that could cause volatility in the market price of our common stock include market conditions affecting our customers’ businesses, including the level of mergers and acquisitions activity, anticipated changes in spending on national defense by the U.S. Government, and actual and anticipated fluctuations in our quarterly operating results, rumors relating to us or our competitors, actions of stockholders, including sales of shares by our directors and executive officers, additions or departures of key personnel, and developments concerning current or future strategic alliances or acquisitions. Volatility in our stock price may also be enhanced by the fact that our common stock is often thinly traded. Additionally, the economic and other consequences of the past instability with regional banks, Russia’s invasion of Ukraine, current Middle Eastgeopolitical conflict, high inflation, government tariffs and increasing interest rates have resulted in significant volatility in the equity capital markets.

The number of shares of common stock we have registered for resale areis significant in relation to the number of our outstanding shares of common stock.

We recentlyhave filed aregistration Registration Statementstatements with the SEC which was declared effective on January 31, 2025, to register the resale of shares of our common stock into the public market by certain stockholders (including some of our directors) that acquired shares of our common stock in transactions not registered under the Securities Act, and for the resale the Stock Termination Fee and the shares of common stock that could be sold by participants in the July 2024 Private Placement (as defined below), including shares underlying PIPEwarrant Warrantsto (aspurchase definedour below).common stock. These shares represent a significant number of shares of our total number of issued and outstanding shares of common stock. The resale by these stockholders of a significant number of these shares, or the perception in the public markets that such selling securityholders may sell all or a portion of such securities, could depress the market price of our Common Stock during the period the applicable registration statement remains effective.

During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls over financial reporting are effective. For example, in connection with the audit of our financial statements as of and for the year ended March 31, 2024,statements, we identified threecertain material weaknesses in our internal control over financial reporting. The material weaknesses we identified pertain to (i) initial purchase accounting and the continuing fair value accounting associated with our acquisition of Stadco, (ii) our failure to maintain a sufficient complement of tax accounting personnel necessary to perform management review controls related to activities for extracting information to determine the valuation allowance at Stadco on a timely basis, and (iii) we did not maintain a sufficient complement resources and expertise on the Stadco accounting staff necessary to consistently perform management review controls over financial information and complete account reconciliations on a timely basis to ensure all transactions were accurately captured and recorded prior to closing the books.books, (iii) the accounting for the impairment of long-lived assets, and (iv) the segregation of duties among people and processes to mitigate risk and meet financial reporting objectives. See “—Material WeaknessWeaknesses” and “—Management’s Remediation Plan” in the section titled “Item 9A. Controls and Procedures” for more details concerning thisthese material weakness.weaknesses.

While we have taken steps to enhance our internal control environment, we havecontinue addressedto address the underlying cause of the material weaknesses with a review of our internal controls, and may propose additional new controls, including those designed to raise the level of precision of management review controls to gain additional assurance regarding the timely completion of our quality control procedures. TheExcept for tax accounting, the steps we have taken to date were not sufficient to remediate theseall material weaknesses or to avoid the identification of other material weaknesses in the future. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to avoid additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. If we are unable to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

These forward-looking statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. 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, or implied by, the forward-looking statements due to numerous risks and uncertainties. As discussed below under “LiquidityLiquidity, Capital Resources, and CapitalGoing ResourcesConcern”, certain events and conditions, when examined in the aggregate, indicate substantial doubt about our ability to continue as a going concern for at least one year beyond the date of the financial statements. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:

OnSince DecemberMarch 19,31, 2024,2026, Ranor and certain affiliates of the otherCompany, collectively the “Borrowers”, entered into aan Tenthadditional Amendmentamendment to Amended and Restatedthe Loan Agreement and Sixth Amendment to Second Amended and Restated Promissory Note, or the “Tenth Amendment”, with Berkshire Bank. The Tenth Amendment, among other things,which extended the maturity date of the Revolver Loan from JanuaryMay 15, 20252026 to AprilSeptember 30,15, 2025.2026.

Read about the Berkshire Bank Loans under theSee “Liquidity andLiquidity, Capital Resources and Going Concern—Bank Term and Revolver Loans” section below, for a discussion of the amended debt agreement and its impact on the Company’s liquidity and on-going operations.

Changes in regulations and market demand for our manufacturing expertise can be significant and sudden, and require us to adapt to the needs of the customers that we serveserve. Understanding this dynamic, we focus on the defense industry in order to reliably pivot with our defense customers to jointly develop the capability to transform our workforce to manufacture components in accordance with our own and our external customers’ changing requirements.

We primarily serve customers in defense and aerospace, secondarily in the precision industrial sectors. Within these sectors, we have manufactured custom components for USU.S. Navy submarines and aircraft carriers, USMC military helicopters, USU.S. defense and civilian aerospace programs.

In accordance with Accounting Standards Codification (ASC) 360, Property, Plant & Equipment, our property, plant and equipment isare tested for impairment whenever events or circumstances indicate the carrying amount of an asset may be impaired. The carrying amount of an asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. If impaired, the asset is written down to fair value based on either discounted cash flows or appraised values.

Our results of operations are affected by a number of external factors including the availability of raw materials, commodity prices (particularly steel), 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 in foreign markets. Generally, our product mix is made up of short-term contracts with a production timeline of twelve months, more or less. However, contracts for larger complex components can take up to thirty-six months to complete. Units manufactured under most of our customer contracts have historically been delivered on time and with a positive gross margin, with some exceptions. Our results of operations are also affected by our success in booking new contracts, the timing of revenue recognition, delays in customer acceptance of our products, delays in deliveries of ordered products and our rate of progress fulfilling obligations under our contracts. A delay in deliveries or cancellations of orders could have an unfavorable impact on liquidity, cause us to have inventories in excess of our short-term needs, and delay our ability to recognize, or prevent us from recognizing, revenue on contracts in our order backlog. Also, our operating results may fluctuate quarter to quarter as we change over from completed projects to new projects.

We evaluate the performance of our segments based upon, among other things, segment revenue and operating profit. Segment operating profit excludes general corporate costs, which include director compensation, stock-based compensation, certain pension and other retirement benefit costs, and other corporate administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations, such as theacquisition unallocateddue PPPdiligence loan forgivenesscosts and refundabletermination employee retention tax credits.fees.

The following table presents revenue, grosscost profit,of andrevenue, gross margin,profit (loss), consolidated and by reportable segment:

Consolidated – Cost of revenue consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of revenue for the fiscal year ended March 31, 2025,2026, was $29,702,$26,669, anor increase10% of 8%lower when compared to the fiscal year ended March 31, 2024.2025. TheGross increaseprofit increased by $646, or 15% and gross margin expanded to 16% compared with 13% in costthe ofsame revenueperiod wasa primarilyyear ago. Our project mix remains favorable but has changed when compared with the resultsame ofperiod highera productionyear costs and under - absorbed overhead at Stadco. Strong production performance at Ranor resulted in an increase in gross profit. Gross margin for the fiscal years ended March 31, 2025 and 2024 was 13% and 13%, respectively.ago.

StadcoRanor -– SG&A expense increased by $173 or 6%, due$7 primarily toas an increase in allocated compensation and benefits costs whichfor morestaff thanadditions slightly offset a decrease in legalprofessional fees and other office expenses.

Other expense, net, infor the tablefiscal above,year ended March 31, 2026, includes a write-off of $83 for costs in connection with refinancing activities and other interest income of $2. Other expense for the fiscal year ended March 31, 2025, includes a payment of $108 to investors of $108 as liquidated damages andplus interest for a late registration filing in connection with the July 2024 private placement. That payment more than offset other income primarilyof $45 from non - operatingnon-operating filming activitiesactivities, at Stadco. Other income, net for the fiscal year ended March 31, 2024, includesplus a gainvendor fromrebate theand settlementother ofinterest an insurance claim related to abandoned fixed assets following a theft at the Stadco plant.income.

We primarily serve customers in the defense and aerospace; secondarily in the precision industrial sectors. Within these sectors, we have manufactured custom components for USU.S. Navy submarines and aircraft carriers, USMC military helicopters, USU.S. defense and civilian aerospace programs.

The preparation of the condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. 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 revenue recognitionrecognition, income taxes and incomelong-lived taxes.assets. These estimates and assumptions require management’s most difficult, subjective or complex judgments. Actual results may vary under different assumptions or conditions.

Our significant accounting policies are set forth in detail in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.2026. There were no significant changes to our critical accounting policies during the three months ended DecemberJune 31,30, 2025.2026.

Three Months Ended DecemberJune 31,30, 20252026 and 20242025

Consolidated – Revenue was $7,094$9,096 for the three months ended DecemberJune 31,30, 2025,2026, aan decreaseincrease of $528$1,717 or 7%23% lowerhigher when compared with revenue for the three months ended DecemberJune 31,30, 2024.2025. Our rate of progress fulfilling obligations decreasedimproved at both Ranor and Stadco in the thirdfiscal quarter2027 andfirst resulted in a 10% year-over-year decline.quarter.

Ranor – Revenue was $4,362$5,461 for the three months ended DecemberJune 31,30, 2025,2026, an increase of $52$1,164 or 1%27% higher when compared with the same period a year agoago. on a favorable customerThe project mix remained favorable as project work has shifted among our prime defense customers. The backlog at Ranor on June 30, 2026 was $31,548 as new orders continue to flow from our existing customer base of prime defense contractors.

Stadco – Revenue was $2,984$4,064 for the three months ended DecemberJune 31,30, 2025,2026, aan decreaseincrease of $328$732 or 10%22% lowerhigher when compared with the three months ended DecemberJune 31,30, 2024.2025. Under a changing project mix, our rate of progress fulfilling obligations decreasedimproved in the thirdfirst quarter andof dampenedfiscal 2027. An increase in revenue recognition.from Acertain prime defense contractors more than offset a decrease in revenue decrease underwith our military space program was offset in part by an increase under our military aircraft programcustomers when compared withto the same period a year ago. Stadco’s backlog as of June 30, 2026 was $21,133 as new orders for components continue to flow from customers in a variety of programs, including military aircraft, military helicopter, and military space programs.

Consolidated – Cost of revenue consists primarily of raw materials, parts, labor, overhead and subcontracting costs. Our cost of revenue for the three months ended DecemberJune 31,30, 2025,2026, was $6,713$7,696 or 1%21% higher when compared to the three months ended DecemberJune 31,30, 2024.2025. The cost of revenue at Ranor andincreased Stadcoby 54% primarily on higher material costs. Gross profit increased by 10% and 2%, respectively. As a result, gross profit decreased by $610,$370 or 62%36% when compared to the same period a year ago. Gross margin for the three months ended DecemberJune 31,30, 20252026 was 6%15.4% compared to 13%14.0% in the same period a year ago.

Ranor – Cost of revenue increased by $269$1,511 or 10%,54%, when compared with the same period in the prior year,year. butActual grossmanufacturing profitcosts were higher than estimated on certain projects as material costs increased by $35 or 2% when compared to the same period a year ago. Gross margin expanded and theoverhead mixwas of favorable customer projects remains steady.underabsorbed.

Consolidated – Total selling, general and administrative expenses for the three months ended DecemberJune 31,30, 2025,2026, increaseddecreased by $46,$48, or 3%, as an increase in stock-based compensation was more than offset a decrease in salaries and related expenses, outside advisory and office costs.

StadcoRanor – SG&A expense decreased by $228$8 on lower allocatedsalaries compensation,and outside advisory andcosts which more than offset higher allocated office costs.

Corporate and unallocated – SG&A increased by $370$19 or 18% primarily on a one-timehigher stock-based compensation award for certain non-employee directors. Refer to Note 6 – Stock-Based Compensation in the Notes to Condensed Consolidated Financial Statements.compensation.

Consolidated – As a result of the foregoing, for the three months ended DecemberJune 31,30, 2025,2026, we reported an operating loss of $1,352,$45, compared with an operating loss of $696$463 for the three months ended DecemberJune 31,30, 2024.2025. The change was primarily due to highera decrease in operating losses at Stadco and an increase in stock-based compensation.Stadco.

Ranor – Operating income increased by 9% on lower manufacturing costs and a favorable project mix.mix and gross margin drop through.

Stadco – Operating loss increaseddecreased by 30% on lowerhigher revenue, slowerimproved throughput and manufacturinggross costs that increased by 2%.margin.

Other income (expense) income

Interest expense decreased by $14$20 when compared with the same period a year ago, as lower interest expense was incurred in connection with the Ranor term loan and Stadco term loan (each as defined below) and borrowings under our revolving line of credit with the Bank,credit, or the “Revolver Loan”.

Amortization of debt issue costs for the three months ended DecemberJune 31,30, 20252026 decreased by $12$9 when compared to three months ended DecemberJune 31,30, 2024,2025, due primarily to lower amortized debt issue costs in connection with revolver loan renewal.

For the three months ended DecemberJune 31,30, 2025,2026, there has been no change in our judgment about the realizability of deferred tax assets in future years, and, therefore, no expense or benefit provided for income taxes.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The valuation allowance on deferred tax assets at DecemberJune 31,30, 20252026 was approximately $6,000.$6,100. We believe that it is more likely than not that the benefit from certain state NOL carryforwards and other deferred tax assets will not be realized. The assessment was based on the weight of negative evidence at the balance sheet date, our recent operating losses and unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels. In recognition of this risk, we continue to provide a valuation allowance on these items.

As a result of the foregoing, for the three months ended DecemberJune 31,30, 2025,2026, we recorded a net loss of $1,473,$153, or $0.15$0.02 per share basic and fully diluted, compared with a net loss of $799,$597, or $0.08$0.06 per share basic and fully diluted for the three months ended DecemberJune 31,30, 2024.2025.