Greetings, and welcome to the TechPrecision Corporation First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brett Maas. Thank you, you may begin.

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Tom Sammons, Chief Financial Officer. The call is also being simulcast on the company's website, www.techprecision.com. Before I begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements, which are subject to risks and uncertainties. And 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 financial filings with the SEC. In addition, projections as to the company's future performance represent management's estimates as of today, August 13, 2018. 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 marks. Alex?

Thank you, Brett. Good day to everyone, and thank you for joining us. The first quarter of fiscal year 2019 was a profitable quarter. Net income was $164,000 or $0.01 per share basic and diluted, compared to net income of $425,000 in the year-ago quarter or $0.01 per share basic and diluted. Our results for the first quarter were impacted by lower gross margins, which were primarily the result of higher amounts of unabsorbed overhead related to a lower number of projects in production. By the end of the first quarter, however, we have started to return to target levels of project activity. Primarily, with certain projects that have longer-build cycles. On April 1, 2018, we adopted the new revenue recognition guidance under ASC 606 as issued by the Financial Accounting Standards Board. We adopted a revenue recognition model under the new guidance, and we expect that we will be able to apply that model to most of our contracts now and in the future. Now I'd like to turn the call over to Tom Sammons. He'll tell us more about our first quarter financial results. Tom?

Thank you, Alex. I want to begin by stating that the financial statements for the periods beginning after April 1, 2018 and all subsequent reports reflect the adoption of ASC 606. Our prior period amounts have not been restated and will continue to be reported in accordance with the legacy accounting standards in effect for those periods. Going forward under ASC 606, we will now recognize revenue ratably, based on project hours expanded over the life of certain contracts. Assuming normal business activity, this revenue recognition model should provide a steady revenue run rate for the company. Net sales for the first quarter of fiscal 2018 were $4.1 million or $1.7 million lower when compared to the same quarter a year ago. The first quarter of fiscal year 2019 included $2.5 million of revenue related to the adoption of ASC 606. In the first quarter of fiscal 2019, net sales in our defense market decreased by $1.1 million, and in our energy market by $0.6 million when compared to the same quarter a year ago. First quarter fiscal 2018 net sales were higher because revenue from a greater number of orders was recognized and because of favorable timing with customer delivery schedules in that prior year period. Cost of sales for the first quarter of fiscal 2019 decreased by $1 million, which is net of an increase of $1.6 million associated with the impact of implementation of ASC 606 compared to the same quarter a year ago, primarily due to lower volume and a change in product mix. Gross profit decreased by $0.7 million for the first quarter of fiscal 2019 when compared to the same quarter a year ago. Gross margin was 25.7% for the first quarter of fiscal 2019 and a higher volume of low-margin sales mix compared…

Tom, thank you. Since my arrival at Ranor in June 2014, our core customers have emphasized the need for Ranor to be a stable and viable player within their supply chain in order to support our U.S. Navy submarine programs over the next 20 to 30 years. Our Ranor teams of craftsmen have worked effectively to maintain a sharp focus on meeting our customers' expectations. This has resulted in sustained core customer confidence. The path forward with our core customers remained clear and our drive towards top line growth and bottom line profitability. This path is validated with the recent sourcing activity in both Virginia class and Columbia class submarine programs. In the first quarter of fiscal 2019, Ranor successfully secured initial contracts for select Virgin class Block 5 components as well as select Columbia class components. I would now like to open up the call for questions and answers.

[Operator Instructions] Our first question is from Ross Taylor from ARS Investment Partners. Please go ahead.

Alex, congratulations on both, even with the lower revenue being able to turn to profit, but also far more importantly, the success in Virginia Block 5 and Columbia class. Can you give us any more details, how many boats are involved? What kind of annualized run rate, things of that nature that we could be expecting out of these two? Are these two initial, programs initial orders? And how much more one can expect or what we should be looking to see going down the road?

To answer your first question, can I give you more detail. Probably not. But having said that, the 80-20 rule says that this is the 20, and then the rest of it's the 80 and that should be reflected in the backlog. Bear in mind the, so going back to the description of what Virginia class Block 5 is, there's 10 boats. So without saying too much, I think the 80-20 says something like 2 out of 10, and then 8 out of 10 later would probably be the wise man's choice of how to cut this pie. The Columbia class is still in very, very initial stages. But that doesn't detract from the fact that we were very successful in being one of the first ones being sourced.

Right, so let's say, these are very, these are early orders at this point for specific components but they are not ordering out the full boat's worth of components at this point. Correct?

That's correct.

So there is potential for meaningful other wins and increases in backlog beyond what you've already seen at this point, but these are early built key components?

Early builds, key components and the most important thing, it completely validates our core customers' confidence in us and our confidence in the core customers to actually start sourcing.

Yes. No, this is actually huge news possibly...

This is a huge positive news that is very significant. Because these are the first steps forward, and what we have been talking about for quite a while on Virginia Class Block 5, it started. On Columbia class, arguably the most important initiative in the U.S. Military defense work, that sourcing has started and has come to Ranor.

No, this is very big. I'd like to, and as much color as can be given, obviously, I understand the difficulty in giving a great deal of color but this is tremendous validation, and congratulations to you and your team for achieving it.

Thank you very much. We are very excited.

[Operator Instructions] Our next question is from Richard Greulich from with REG Capital Advisors. Please go ahead.

Just a couple of questions. I didn't catch, what was the backlog at the end of the fiscal year? Was that $14 million?

$14 million. Yes.

Secondly, when I go back, the fiscal first quarter generally seems to have a higher SG&A than the other quarters in the year. Is there, is that a seasonality issue or what?

We have no seasonality.

Okay, so it's not like a matter of that's the quarter you're paying higher taxes or whatever for the employees?

We have no quarter-to-quarter seasonality.

Higher taxes for employee who starts in January in the calendar year.

Okay. Referring to the Virginia class of submarine, so they going to be, they're going to be adding more missile tubes, so if you go from the original design or the most recent design of having one Payload Tube, 2 tubes to having a Payload Module adding 4 additional tubes. Is it likely that the amount that will be expended for then the missile tube area will be 3x what the original one was, having 6, having 3x the amount of tubes?

I don't know.

Okay. The original, the initial orders that you received in this last quarter for Virginia and then Columbia, are those related to components that you have previously supplied for those submarines, for the Virginia submarine at least?

I do not have a comment on that.

Let me ask another way. One of the company strategies is to increase either the number or the volume, revenue volume of components that you are supplying. Are you, do you have any sign of success in that at this point?

Due to the very competitive nature and due to the very early nature of the sourcing, it would be unwise for me to comment. So I have no comment at this time.

Okay. I want to refer back to last quarter's conference call where Alex, you had talked about you were vying for $75 million to $100 million worth of business over the next 2 years. I wanted to clarify, get a clarification on that. Are you talking about obtaining orders of that magnitude over the next, let's say, 2 years' time? Or are you talking about obtaining business that will result in revenues of that amount over the next 2 years?

I'm talking about business opportunity that we are pursuing.

So if you were to obtain orders over the next 2 years relative to that amount, that would fulfill that goal then?

I am already pursuing that much. That does not directly translate into orders or revenue. So I'm not sure that I was very clear on that then if you have this question. When I'm in pursuit of something, doesn't mean that I'm going to land it and it becomes an order. It does not either mean it's going to turn into revenue either. But I'm letting you guys know I'm pursuing.

Correct. I guess my question though is, are you pursuing business that if successful in obtaining, would result in revenues over the next 2 years of that amount? Or would result in orders, if you are successful?

I was not talking about orders or revenue. I was talking about the amount that I'm pursuing. I hope I'm clear.

[Operator Instructions] If there are no further questions, I'd like to turn the floor back over to management for any closing comments.

Thank you, everyone, for your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you, again for your participation.