UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended June 30, ~~2022~~2023


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

For the transition period from to

Commission File Number 1-5332

P&F INDUSTRIES, INC.

(Exact name of registrant as specified in its charter) before

Delaware		22-1657413
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

445 Broadhollow Road, Suite 100, Melville, New York		11747
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (631) 694-9800

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $1.00 par value	PFIN	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for ~~the~~ complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~5, 2022,~~8, 2023, there were 3,194,699 shares of the registrant’s Class A common stock outstanding.

Table of Contents

P&F INDUSTRIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, ~~2022~~2023

TABLE OF CONTENTS


		PAGE
PART I — FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	3

	Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three and ~~six–month~~six-month periods ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5

	Consolidated Statements of Shareholders’ Equity for the three and ~~six–month~~six-month periods ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	6

	Consolidated Statements of Cash Flows for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2120

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3231

Item 4.	Controls and Procedures	3331

PART II — OTHER INFORMATION		3332

Item 1.	Legal Proceedings	3332

Item 1A.	Risk Factors	3332

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3332

Item 3.	Defaults Upon Senior Securities	3332

Item 4.	Mine Safety Disclosures	3332

Item 5.	Other Information	3332

Item 6.	Exhibits	3332

Signature		3433

Exhibit Index		3534

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
	(unaudited)		(See Note 1)		(unaudited)		(See Note 1)
ASSETS
CURRENT ASSETS

Cash	$	431,000	$	539,000	$	657,000	$	667,000
Accounts receivable — net		10,418,000		7,550,000		9,885,000		7,370,000
Inventories		24,610,000		24,021,000		21,096,000		24,491,000
Prepaid expenses and other current assets		2,946,000		4,566,000		1,018,000		2,753,000
TOTAL CURRENT ASSETS		38,405,000		36,676,000		32,656,000		35,281,000

PROPERTY AND EQUIPMENT
Land		507,000		507,000		507,000		507,000
Buildings and improvements		3,902,000		3,605,000		4,007,000		4,087,000
Machinery and equipment		27,057,000		25,675,000		29,445,000		28,057,000
		31,466,000		29,787,000		33,959,000		32,651,000
Less accumulated depreciation and amortization		22,525,000		21,707,000		23,951,000		23,288,000
NET PROPERTY AND EQUIPMENT		8,941,000		8,080,000		10,008,000		9,363,000

GOODWILL		4,822,000		4,447,000		4,829,000		4,822,000

OTHER INTANGIBLE ASSETS — net		5,673,000		5,592,000		4,991,000		5,326,000

DEFERRED INCOME TAXES — net		374,000		349,000		431,000		629,000

RIGHT-OF-USE ASSETS – OPERATING LEASES		3,718,000		2,969,000		5,103,000		5,521,000

OTHER ASSETS — net		69,000		77,000		75,000		62,000

TOTAL ASSETS	$	62,002,000	$	58,190,000	$	58,093,000	$	61,004,000

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2022

December 31, 2021


(unaudited)

(See Note 1)
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term borrowings

$
10,069,000

$
5,765,000
Accounts payable

2,337,000

2,920,000
Accrued compensation and benefits

1,187,000

1,475,000
Accrued other liabilities

1,484,000

1,078,000
Current lease liabilities – operating leases

921,000

840,000
TOTAL CURRENT LIABILITIES

15,998,000

12,078,000

Noncurrent lease liabilities – operating leases

2,855,000

2,176,000
Other liabilities

83,000

96,000

TOTAL LIABILITIES

18,936,000

14,350,000

SHAREHOLDERS’ EQUITY


Preferred stock - $10 par; authorized - 2,000,000 shares; 0 shares issued

—

—
Common stock


Class A - $1 par; authorized - 7,000,000 shares; issued – 4,467,000 at June 30, 2022, and 4,453,000 at December 31, 2021

4,467,000

4,453,000
Class B - $1 par; authorized - 2,000,000 shares; 0 shares issued

0

0
Additional paid-in capital

14,214,000

14,167,000
Retained earnings

35,407,000

36,046,000
Treasury stock, at cost – 1,273,000 shares at June 30, 2022 and December 31, 2021

(10,213,000)

(10,213,000)
Accumulated other comprehensive loss

(809,000)

(613,000)

TOTAL SHAREHOLDERS’ EQUITY

43,066,000

43,840,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$
62,002,000

$
58,190,000


	June 30, 2023		December 31, 2022
	(unaudited)		(See Note 1)
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term borrowings	$	5,340,000	$	7,570,000
Accounts payable		1,958,000		3,094,000
Accrued compensation and benefits		1,500,000		1,757,000
Accrued other liabilities		1,796,000		1,002,000
Current leased liabilities – operating leases		817,000		1,020,000
TOTAL CURRENT LIABILITIES		11,411,000		14,443,000

Noncurrent leased liabilities – operating leases		4,317,000		4,535,000
Other liabilities		56,000		70,000

TOTAL LIABILITIES		15,784,000		19,048,000

SHAREHOLDERS’ EQUITY
Preferred stock - $10 par; authorized - 2,000,000 shares; no shares issued		—		—
Common stock
Class A - $1 par; authorized - 7,000,000 shares; issued – 4,467,000 at June 30, 2023, and December 31, 2022		4,467,000		4,467,000
Class B - $1 par; authorized - 2,000,000 shares; no shares issued		—		—
Additional paid-in capital		14,276,000		14,246,000
Retained earnings		34,505,000		34,251,000
Treasury stock, at cost – 1,273,000 shares at June 30, 2023, and December 31, 2022		(10,213,000)		(10,213,000)
Accumulated other comprehensive loss		(726,000)		(795,000)

TOTAL SHAREHOLDERS’ EQUITY		42,309,000		41,956,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	58,093,000	$	61,004,000

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(unaudited)


	Three months				Six months
	ended June 30,				ended June 30,
	2023		2022		2023		2022
Net revenue	$	16,163,000	$	17,810,000	$	31,906,000	$	31,831,000
Cost of sales		10,328,000		12,174,000		20,328,000		21,684,000
Gross profit		5,835,000		5,636,000		11,578,000		10,147,000
Selling, general and administrative expenses		5,368,000		5,479,000		10,543,000		10,652,000
Operating income (loss)		467,000		157,000		1,035,000		(505,000)
Other (expense) income		(4,000)		(16,000)		31,000		(16,000)
Interest expense		(107,000)		(86,000)		(216,000)		(138,000)
Income (loss) before income tax		356,000		55,000		850,000		(659,000)
Income tax (expense) benefit		(119,000)		(76,000)		(276,000)		20,000
Net income (loss)	$	237,000	$	(21,000)	$	574,000	$	(639,000)

Basic and diluted earnings (loss) per share	$	0.07	$	(0.01)	$	0.18	$	(0.20)

Weighted average common shares outstanding:

Basic and diluted		3,195,000		3,185,000		3,195,000		3,177,000

Net income (loss)	$	237,000	$	(21,000)	$	574,000	$	(639,000)
Other comprehensive income (loss) - foreign currency translation adjustment		35,000		(146,000)		69,000		(196,000)
Total comprehensive income (loss)	$	272,000	$	(167,000)	$	643,000	$	(835,000)

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

Three months ended June 30, 2023

Three months

Six months

ended June 30,

ended June 30,


2022

2021

2022

2021
Net revenue

$
17,810,000

$
13,589,000

$
31,831,000

$
27,535,000
Cost of sales

12,174,000

8,741,000

21,684,000

18,051,000
Gross profit

5,636,000

4,848,000

10,147,000

9,484,000
Selling, general and administrative expenses

5,479,000

5,458,000

10,652,000

10,449,000
Operating income (loss)

157,000

(610,000)

(505,000)

(965,000)
Other (expense) income

(16,000)

2,929,000

(16,000)

2,929,000
Interest (expense) income

(86,000)

15,000

(138,000)

(7,000)
Income (loss)

55,000

2,334,000

(659,000)

1,957,000
Income tax (expense) benefit

(76,000)

89,000

20,000

159,000
Net income (loss)

$
(21,000)

$
2,423,000

$
(639,000)

$
2,116,000

Basic (loss) earnings per share

$
(0.01)

$
0.76

$
(0.20)

$
0.67
Diluted (loss) earnings per share

$
(0.01)

$
0.76

$
(0.20)

$
0.66

Weighted average common shares outstanding:

Basic

3,185,000

3,181,000

3,177,000

3,175,000
Diluted

3,185,000

3,193,000

3,177,000

3,190,000

Net (loss) income

$
(21,000)

$
2,423,000

$
(639,000)

$
2,116,000
Other comprehensive (loss) income - foreign currency translation adjustment

(146,000)

4,000

(196,000)

19,000
Total comprehensive (loss) income

$
(167,000)

$
2,427,000

$
(835,000)

$
2,135,000


													Accumulated
			Class A common			Additional							other
			stock, $1 par			paid-in		Retained		Treasury stock			comprehensive
	Total		Shares	Amount		capital		earnings		Shares	Amount		loss
Balance, April 1, 2023	$	42,184,000	4,467,000	$	4,467,000	$	14,263,000	$	34,428,000	(1,273,000)	$	(10,213,000)	$	(761,000)

Net income		237,000	—		—		—		237,000	—		—		—

Restricted common stock-based compensation		5,000	—		—		5,000		—	—		—		—

Stock-based compensation		8,000	—		—		8,000		—	—		—		—

Dividends		(160,000)	—		—		—		(160,000)	—		—		—

Foreign currency translation adjustment		35,000	—		—		—		—	—		—		35,000

Balance, June 30, 2023	$	42,309,000	4,467,000	$	4,467,000	$	14,276,000	$	34,505,000	(1,273,000)	$	(10,213,000)	$	(726,000)

~~See accompanying notes to consolidated financial statements (unaudited).~~

~~Table of Contents~~

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)~~

Three months ended June 30, 2022

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive


Total

Shares

Amount

capital

earnings

Shares

Amount

loss
Balance, April 1, 2022

$
43,181,000

4,453,000

$
4,453,000

$
14,176,000

$
35,428,000

(1,273,000)

$
(10,213,000)

$
(663,000)

Net loss

(21,000)

0

0

0

(21,000)

0

0

0

Exercise of Stock Options

40,000

7,000

7,000

33,000

0

0

0

0

Restricted common stock compensation

12,000

7,000

7,000

5,000

0

0

0

0

Stock-based compensation

—

0

0

0

0

0

0

0

Foreign currency translation adjustment

(146,000)

0

0

0

0

0

0

(146,000)

Balance, June 30, 2022

$
43,066,000

4,467,000

$
4,467,000

$
14,214,000

$
35,407,000

(1,273,000)

$
(10,213,000)

$
(809,000)


													Accumulated
			Class A common			Additional							other
			stock, $1 par			paid-in		Retained		Treasury stock			comprehensive
	Total		Shares	Amount		capital		earnings		Shares	Amount		loss
Balance, April 1, 2022	$	43,181,000	4,453,000	$	4,453,000	$	14,176,000	$	35,428,000	(1,273,000)	$	(10,213,000)	$	(663,000)

Net loss		(21,000)	—		—		—		(21,000)	—		—		—

Exercise of Stock Options		40,000	7,000		7,000		33,000		—	—		—		—

Restricted common stock-based compensation		12,000	7,000		7,000		5,000		—	—		—		—

Foreign currency translation adjustment		(146,000)	—		—		—		—	—		—		(146,000)

Balance, June 30, 2022	$	43,066,000	4,467,000	$	4,467,000	$	14,214,000	$	35,407,000	(1,273,000)	$	(10,213,000)	$	(809,000)

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

~~Three~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

Six months ended June 30, ~~2021~~2023

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive


Total

Shares

Amount

capital

earnings

Shares

Amount

loss
Balance, April 1, 2021

$
41,261,000

4,453,000

$
4,453,000

$
14,134,000

$
33,449,000

(1,273,000)

$
(10,213,000)

$
(562,000)

Net income

2,423,000

0

0

0

2,423,000

0

0

0

Restricted common stock compensation

14,000

0

0

14,000

0

0

0

0

Stock-based compensation

1,000

0

0

1,000

0

0

0

0

Foreign currency translation adjustment

4,000

0

0

0

0

0

0

4,000

Balance, June 30, 2021

$
43,703,000

4,453,000

$
4,453,000

$
14,149,000

$
35,872,000

(1,273,000)

$
(10,213,000)

$
(558,000)


													Accumulated
			Class A common			Additional							other
			stock, $1 par			paid-in		Retained		Treasury stock			comprehensive
	Total		Shares	Amount		capital		earnings		Shares	Amount		loss
Balance, January 1, 2023	$	41,956,000	4,467,000	$	4,467,000	$	14,246,000	$	34,251,000	(1,273,000)	$	(10,213,000)	$	(795,000)

Net income		574,000	—		—		—		574,000	—		—		—

Restricted common stock-based compensation		14,000	—		—		14,000		—	—		—		—

Stock-based compensation		16,000	—		—		16,000		—	—		—		—

Dividends		(320,000)	—		—		—		(320,000)	—		—		—

Foreign currency translation adjustment		69,000	—		—		—		—	—		—		69,000

Balance, June 30, 2023	$	42,309,000	4,467,000	$	4,467,000	$	14,276,000	$	34,505,000	(1,273,000)	$	(10,213,000)	$	(726,000)

~~See accompanying notes to consolidated financial statements (unaudited).~~

~~Table of Contents~~

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)~~

Six months ended June 30, 2022

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive


Total

Shares

Amount

capital

earnings

Shares

Amount

loss
Balance, January 1, 2022

$
43,840,000

4,453,000

$
4,453,000

$
14,167,000

$
36,046,000

(1,273,000)

$
(10,213,000)

$
(613,000)

Net loss

(639,000)

0

0

0

(639,000)

0

0

0

Exercise of Stock Options

40,000

7,000

7,000

33,000

0

0

0

0

Restricted common stock compensation

20,000

7,000

7,000

13,000

0

0

0

0

Stock-based compensation

1,000

0

0

1,000

0

0

0

0

Foreign currency translation adjustment

(196,000)

0

0

0

0

0

0

(196,000)

Balance, June 30, 2022

$
43,066,000

4,467,000

$
4,467,000

$
14,214,000

$
35,407,000

(1,273,000)

$
(10,213,000)

$
(809,000)

~~Six months ended June 30, 2021~~


													Accumulated														Accumulated
			Class A common			Additional							other				Class A common			Additional							other
			stock, $1 par			paid-in		Retained		Treasury stock			comprehensive				stock, $1 par			paid-in		Retained		Treasury stock			comprehensive
	Total		Shares	Amount		capital		earnings		Shares	Amount		loss		Total		Shares	Amount		capital		earnings		Shares	Amount		loss
Balance, January 1, 2021	$	41,538,000	4,428,000	$	4,428,000	$	14,144,000	$	33,756,000	(1,273,000)	$	(10,213,000)	$	(577,000)
Balance, January 1, 2022															$	43,840,000	4,453,000	$	4,453,000	$	14,167,000	$	36,046,000	(1,273,000)	$	(10,213,000)	$	(613,000)

Net income		2,116,000	0		0		0		2,116,000	0		0		0
Net loss																(639,000)	—		—		—		(639,000)	—		—		—

Restricted common stock compensation		27,000	25,000		25,000		2,000		0	0		0		0
Exercise of Stock Options																40,000	7,000		7,000		33,000		—	—		—		—

Restricted common stock-based compensation																20,000	7,000		7,000		13,000		—	—		—		—

Stock-based compensation		3,000	0		0		3,000		0	0		0		0		1,000	—		—		1,000		—	—		—		—

Foreign currency translation adjustment		19,000	0		0		0		0	0		0		19,000		(196,000)	—		—		—		—	—		—		(196,000)

Balance, June 30, 2021	$	43,703,000	4,453,000	$	4,453,000	$	14,149,000	$	35,872,000	(1,273,000)	$	(10,213,000)	$	(558,000)
Balance, June 30, 2022															$	43,066,000	4,467,000	$	4,467,000	$	14,214,000	$	35,407,000	(1,273,000)	$	(10,213,000)	$	(809,000)

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six months

ended June 30,

2022

2021
Cash Flows from Operating Activities:

Net (loss) income

$
(639,000)

$
2,116,000

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Non-cash and other charges:

Depreciation

881,000

902,000
Amortization of other intangible assets

341,000

316,000
Amortization of operating lease assets

471,000

449,000
Amortization of debt issue costs

8,000

8,000
Amortization of consideration payable to a customer

135,000

135,000
Recovery of provision for losses on accounts receivable

42,000

59,000
Stock-based compensation

1,000

3,000
Stock-based compensation-options exercise

38,000

0
Restricted stock-based compensation

19,000

27,000
Deferred income taxes

(20,000)

(159,000)
Gain (loss) on disposal of fixed assets

(5,000)

7,000
Forgiveness of Paycheck Protection Program loan

0

(2,929,000)
Changes in operating assets and liabilities, net of effects of acquisition

Accounts receivable

(2,276,000)

(750,000)
Inventories

(353,000)

(895,000)
Prepaid expenses and other current assets

1,302,000

414,000
Accounts payable

(778,000)

1,482,000
Accrued compensation and benefits

681,000

718,000
Accrued other liabilities and other current liabilities

(524,000)

(64,000)
Operating lease liabilities

(461,000)

(443,000)
Other liabilities

(17,000)

(28,000)
Total adjustments

(515,000)

(748,000)
Net cash (used in) provided by operating activities

(1,154,000)

1,368,000


	Six months
	ended June 30,
	2023		2022
Cash Flows from Operating Activities:
Net income (loss)	$	574,000	$	(639,000)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Non-cash and other charges:
Depreciation		1,020,000		881,000
Amortization of other intangible assets		346,000		341,000
Amortization of operating lease assets		474,000		471,000
Amortization of debt issue costs		21,000		8,000
Amortization of consideration payable to a customer		—		135,000
Provision for losses on accounts receivable		47,000		42,000
Stock-based compensation		16,000		1,000
Stock-based compensation-options exercised		—		38,000
Restricted stock-based compensation		14,000		19,000
Deferred income taxes		287,000		(20,000)
Gain on disposal of fixed assets		(16,000)		(5,000)
Changes in operating assets and liabilities:
Accounts receivable		(2,547,000)		(2,276,000)
Inventories		3,445,000		(353,000)
Prepaid expenses and other current assets		1,735,000		1,302,000
Accounts payable		(1,138,000)		(778,000)
Accrued compensation and benefits		(261,000)		681,000
Accrued other liabilities and other current liabilities		708,000		(524,000)
Operating lease liabilities		(477,000)		(461,000)
Other liabilities		(14,000)		(17,000)
Total adjustments		3,660,000		(515,000)
Net cash provided by (used in) operating activities		4,234,000		(1,154,000)

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six months

ended June 30,


2022

2021
Cash Flows from Investing Activities:




Capital expenditures

$
(923,000)

$
(247,000)
Purchase of net assets of the Jackson Gear Company business

(2,300,000)

0
Net cash used in investing activities

(3,223,000)

(247,000)

Cash Flows from Financing Activities:

Net proceeds (repayments) from short-term borrowings

4,304,000

(1,004,000)
Proceeds from exercise of stock options

2,000

0
Net cash provided by (used in) financing activities

4,306,000

(1,004,000)

Effect of exchange rate changes on cash

(37,000)

(4,000)
Net (decrease) increase in cash

(108,000)

113,000
Cash at beginning of period

539,000

904,000
Cash at end of period

$
431,000

$
1,017,000

Supplemental disclosures of cash flow information:

Cash paid for:

Interest

$
114,000

$
19,000
Taxes

$
124,000

$
12,000
Cash paid for amounts included in the measurement of operating lease liabilities

$
0

$
6,000

Non-cash information:

Right of Use (“ROU”) assets recognized for new operating lease liabilities

$
987,000

$
53,000


	Six months
	ended June 30,
	2023		2022
Cash Flows from Investing Activities:
Capital expenditures	$	(1,682,000)	$	(923,000)
Proceeds from the sale of fixed assets		34,000		—
Purchase of net assets of the Jackson Gear Company business		—		(2,300,000)
Net cash used in investing activities		(1,648,000)		(3,223,000)

Cash Flows from Financing Activities:
Dividend payments		(320,000)		—
Net (repayments on) proceeds from short-term borrowings		(2,230,000)		4,304,000
Proceeds from exercise of stock options		—		2,000
Bank financing costs		(35,000)		—
Net cash (used in) provided by financing activities		(2,585,000)		4,306,000

Effect of exchange rate changes on cash		(11,000)		(37,000)
Net decrease in cash		(10,000)		(108,000)
Cash at beginning of period		667,000		539,000
Cash at end of period	$	657,000	$	431,000

Supplemental disclosures of cash flow information:

Cash paid for:
Taxes		10,000		124,000
Interest	$	255,000	$	114,000

Non-cash information:
Right of Use (“ROU”) assets recognized for new operating lease liabilities	$	—	$	987,000

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim consolidated financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. In the opinion of the management of the Company, as defined below, these unaudited consolidated financial statements include all normal, recurring adjustments necessary to present fairly the information set forth therein. Results for interim periods are not necessarily indicative of results to be expected for a full year.

The consolidated balance sheet information as of December 31, ~~2021,~~2022, was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”). The unaudited consolidated financial statements contained herein should be read in conjunction with the ~~2021~~2022 Form 10-K.

The consolidated financial statements have been reported in U.S. dollars by translating asset and liability amounts of a foreign wholly-owned subsidiary at the closing exchange rate, equity amounts at historical rates and the results of operations and cash flow at the average of the prevailing exchange rates during the periods reported. As a result, the Company is exposed to foreign currency translation gains or losses. These gains or losses are presented in the Company’s consolidated financial statements as “Other comprehensive income (loss) - foreign currency translation adjustment.”

Principles of Consolidation

The unaudited consolidated financial statements contained herein include the accounts of P&F Industries, Inc., and its subsidiaries (“P&F” or the “Company”). All significant intercompany balances and transactions have been eliminated.

The Company

P&F, a Delaware corporation incorporated in 1963, conducts its business through a wholly-owned subsidiary, Continental Tool Group, Inc. (“Continental”), which in turn operates through its wholly-owned subsidiaries, Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”) and Hy-Tech Machine, Inc. (“Hy-Tech”).

Florida Pneumatic

Florida Pneumatic directly, and through its wholly-owned subsidiaries Exhaust Technologies Inc. (“ETI”), Universal Air Tool Company Limited (“UAT”), and Jiffy Air Tool, Inc. (“Jiffy”) imports, manufactures, and markets pneumatic hand tools and related products of its own design, primarily to the retail, industrial, automotive and aerospace markets. Its products include sanders, grinders, drills, saws, and impact wrenches. These tools are similar in appearance and function to electric hand tools, but are powered by compressed air, rather than by electricity or a battery. Air tools, as they are more commonly referred to generally offer a better ~~performance, and weigh less~~power-to-weight ratio than their electrical counterparts. Florida Pneumatic imports and/or manufactures approximately 75 types of pneumatic hand tools, most of which are sold at prices ranging from $50 to $1,000, under the names “Florida ~~Pneumatic”,~~Pneumatic,” “Universal Tool”, “Jiffy Air Tool”, AIRCAT, NITROCAT, as well as under the trade names or trademarks of several private label customers. These products are sold to retailers, distributors, manufacturers and private label customers through in-house sales personnel and manufacturers’ representatives. The AIRCAT and NITROCAT brands of pneumatic tools are sold primarily to the automotive service and repair market (“automotive market”). Users of Florida Pneumatic’s hand tools include industrial maintenance and production ~~staffs,~~personnel, do-it-yourself mechanics, professional automobile mechanics and auto body personnel. Jiffy manufactures and distributes pneumatic tools and components primarily to aerospace manufacturers.

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - (Continued)

The Company - Continued

Hy-Tech

Hy-Tech designs, manufactures, and markets industrial tools, systems, gearing, accessories, and a wide variety of replacement parts under various brands including ATP, NUMATX, and Thaxton. Hy-Tech produces and sells heavy-duty pneumatic impact tools, grinders, air motors, hydro-pneumatic riveters, hydrostatic test plugs, impact sockets and custom gears, with prices ranging from $300 to ~~$42,000.~~$62,000.

Hy-Tech’s “Engineered Solutions” products are sold directly to Original Equipment Manufacturers (“~~OEM’s”~~OEMs”), and industrial branded products are sold through a broad network of specialized industrial distributors serving the power generation, petrochemical, aerospace, construction, railroad, mining, ship building and fabricated metals industries, among others. Hy-Tech works directly with its industrial customers, designing and manufacturing products from finished components to complete turnkey systems to be sold under their own brand names.

Hy-Tech’s “Power Transmission Group”, commonly referred to as “PTG”, produces spiral bevel and straight bevel gears along with a wide variety of other gearing. These products are sold ~~direct~~directly to OEMs, end-users and gearbox repair companies. PTG works directly with its ~~customer’s~~customers’ engineering departments to design or redesign gears or gearboxes to optimize a solution for functionality and manufacturability.

Effective January 15, 2022, through a wholly-owned subsidiary of Hy-Tech, we acquired substantially all the non-real estate assets comprising the business of Jackson Gear Company (“JGC”), a Pennsylvania-based corporation that manufactures and distributes custom gears and power transmission gear products. This business was consolidated into PTG and provides added market exposure into the larger gears market.

Nearly all of Hy-Tech brands are manufactured in the United States of America. Hy-Tech markets ATP branded impact sockets, striking wrenches and accessories that are imported from ~~Italy and~~ Asia.

~~Please refer to Note 2 for discussion related to the Company’s acquisition of the Jackson Gear Company business (“JGC”).~~

COVID-19

~~On March 11, 2020,~~The adverse effects of the ~~World Health Organization designated~~COVID-19 global pandemic on the ~~recent novel coronavirus, or COVID-19, as a global pandemic. COVID-19 was first detected in Wuhan City, Hubei Province, China~~Company’s results of operations and continued to spread, significantly impacting various markets around the world, including the United States. Various policies and initiatives have been implemented to reduce the global transmission of COVID-19.

~~The COVID-19 virus and the resultant global economic down-turn had a negative impact on our fiscal 2021 results and continues to negatively impact the Company~~financial condition during the three and six-month ~~period~~periods ended June 30, ~~2022. Additionally, we believe the on-going supply-chain crisis is related~~2023, have decreased significantly, compared to the ~~pandemic. Commencing in mid-2021 and continuing to date, although easing somewhat~~adverse effects the pandemic caused during the ~~latter portion of the second quarter of 2022, we encountered severe~~prior two years. The Company, however, continues to encounter intermittent supply-chain issues, most notably shipping /and receiving delays of inventory from ~~our~~its Asian suppliers, ~~which has caused intermittent~~in turn causing shortages of ~~product. Further,~~inventory. While the negative effects that the Company ~~believes the COVID-19 global pandemic has been and continues to be the primary factor in the significant increases in the cost of international ocean freight. In addition,~~was encountering during the COVID-19 pandemic ~~had since mid-2020, caused many of~~in general have eased, it is difficult for the ~~Company’s customers and potential customers to refuse or delay on-site visits, which is critical to generating revenue, easing somewhat during the second quarter of 2022. The~~ Company ~~believes that until the above issues subside, its business will likely continue~~ to be ~~adversely affected by COVID-19.~~certain that the inventory issue discussed above is in fact COVID-19 related.

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - (Continued)

Going Concern Assessment

Management assesses going concern uncertainty to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period,” as defined in US GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, it considers various scenarios, forecasts, projections, estimates and makes certain key assumptions, including the timing and nature of projected cash expenditures, its ability to reduce, delay or curtail cash outflows and its ability to raise additional capital, if necessary, among other factors. Management has prepared estimates of operations covering the look-forward period and believes that sufficient funds will be generated from operations, working capital, and its existing credit facility to fund its operations. The Company has contingency plans in which it would further reduce or defer additional expenses and cash outlays, should operations weaken beyond current forecasts.

~~The impact~~As of ~~COVID-19 on the Company’s business has been considered in these assumptions; however, it is unclear what the full impact of COVID-19 will be in the future or when~~June 30, 2023, the Company had borrowing availability on its bank facility of $9,324,000. The Company is not in default on any bank covenant and believes ~~a return to more normal operations may occur.~~its relationship with the bank is good. See Note 8 – Debt, for further discussion.

The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.

Customer Concentration

The Company had one customer that accounted for ~~36.0%~~24.7% and ~~35.9%~~24.3% of its consolidated accounts receivable at June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively. Further, this customer accounted for ~~27.1%~~18.1% and ~~24.6%, respectively,~~27.1% of the Company’s consolidated revenue during the ~~three and six-month~~three-month periods ended June 30, 2023, and 2022, respectively, and ~~27.7%~~17.1% and ~~27.4%, respectively,~~24.6% for the ~~same periods in 2021.~~six months ended June 30, 2023, and 2022, respectively. There was no other customer that accounted for more than 10% of our consolidated revenue ~~or accounts receivable for all periods presented.~~during these periods.

Management Estimates

The preparation of financial statements and related disclosures in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses in those financial statements. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, ~~accounts receivable reserve,~~ inventory, goodwill, intangible assets and other long-lived assets, ~~contingent consideration,~~ income taxes, ~~and~~ deferred taxes. Descriptions of these policies are discussed in the Company’s ~~2021~~2022 Form 10-K. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjusts when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

Significant Accounting Policies

The Company’s significant accounting policies are described in “Note 1: Summary of Significant Accounting Policies” ~~of our 2021~~to the Company’s 2022 Form 10-K.

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - (Continued)

Lease Accounting

The Company adheres to the standards set forth in Accounting Standards Codification ~~(“ASC”)~~No. 842, Leases (“~~Leases~~”ASC Topic 842”). ASC Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases’ guidance.

IfAs permitted under ASC Topic 842, if the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgement when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.

The Company’s operating leases include vehicles, office space and the use of real property. The Company has not identified any new material finance leases during the ~~three -month~~three-month period ended June 30, ~~2022.~~2023.

The Company considers any options to extend the term of a lease when measuring the ~~Right-of-Use~~right-of-use lease asset.

For the three and six-month periods ended June 30, ~~2022,~~2023, the Company had ~~$240,000~~$237,000 and ~~$471,000,~~$474,000, respectively, in operating lease expense, and ~~$225,000~~$240,000 and ~~$449,000,~~$471,000, respectively, for the same three and six-month periods in ~~2021.~~

Effective March 1, 2022, the Company and the landlord of the facility located in Punxsutawney, PA. agreed to modify the lease related to the approximate 42,000 square foot premises that was leased by Hy-Tech. This lease modification among other things, increased the rented space to approximately 62,000 square feet, extended the lease termination date to February 2027, and provided two ~~three-year options to renew. The cost per square foot for the additional space was equal to that of the original lease.~~2022.

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease ~~liabilities as of June 30, 2022:~~liabilities:


	As of June 30, 2022
2022 (excluding the six months ended June 30, 2022)	$	470,000
2023		941,000
2023 (excluding the six months ended June 30, 2023)				$	369,000
2024		668,000			923,000
2025		375,000			816,000
2026		240,000			691,000
2027					719,000
Thereafter		1,590,000			2,727,000
Total operating lease payments		4,284,000			6,245,000
Less imputed interest		(508,000)			(1,111,000)
Total operating lease liabilities	$	3,776,000		$	5,134,000

Weighted average remaining lease term		7.4	years		7.7	years
Weighted average discount rate		3.69	%		5.02	%

~~Revenue Recognition~~

The Company’s revenue recognition policies are detailed in its 2021 Form 10-K. The following tables present the Company’s revenues recognized under ASC Topic 606, “Revenue from Contracts with Customers”, for the three and six-month periods ended June 30, 2022 and 2021.

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - (Continued)

Revenue Recognition ~~- Continued~~

The Company’s revenue recognition policies are detailed in its 2022 Form 10-K. The following tables present the Company’s revenues recognized under ASC Topic 606, “Revenue from Contracts with Customers”, for the three and six-month periods ended June 30, 2023, and 2022.

Florida Pneumatic

Florida Pneumatic markets its air tool products to four primary sectors within the pneumatic tool market: Retail, Automotive, ~~Retail,~~ Industrial and Aerospace. It also generates revenue from its Berkley products line, as well as a line of air filters and other OEM parts, which are reported as Other.


	Three months ended June 30,												Three months ended June 30,
	2022				2021				Increase (decrease)				2023				2022				Increase (decrease)
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
Automotive	$	3,853,000	30.4	%	$	3,782,000	35.3	%	$	71,000	1.9	%	$	3,503,000	32.3	%	$	3,853,000	30.4	%	$	(350,000)	(9.1)	%
Retail		4,826,000	38.1			3,763,000	35.1			1,063,000	28.2			2,920,000	26.9			4,826,000	38.1			(1,906,000)	(39.5)
Industrial		1,705,000	13.5			1,303,000	12.3			402,000	30.9			1,337,000	12.3			1,705,000	13.5			(368,000)	(21.6)
Aerospace		2,179,000	17.2			1,734,000	16.2			445,000	25.7			2,963,000	27.3			2,179,000	17.2			784,000	36.0
Other		103,000	0.8			130,000	1.1			(27,000)	(20.8)			122,000	1.2			103,000	0.8			19,000	18.4
Total	$	12,666,000	100.0	%	$	10,712,000	100.0	%	$	1,954,000	18.2	%	$	10,845,000	100.0	%	$	12,666,000	100.0	%	$	(1,821,000)	(14.4)	%


	Six months ended June 30,												Six months ended June 30,
	2022				2021				Increase (decrease)				2023				2022				Increase (decrease)
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
Automotive	$	7,734,000	33.7	%	$	7,884,000	36.5	%	$	(150,000)	(1.9)	%	$	6,762,000	32.6	%	$	7,734,000	33.7	%	$	(972,000)	(12.6)	%
Retail		7,845,000	34.2			7,553,000	34.9			292,000	3.9			5,470,000	26.3			7,845,000	34.2			(2,375,000)	(30.3)
Industrial		3,111,000	13.6			2,662,000	12.3			449,000	16.9			2,914,000	14.0			3,111,000	13.6			(197,000)	(6.3)
Aerospace		3,994,000	17.4			3,262,000	15.1			732,000	22.4			5,374,000	25.9			3,994,000	17.4			1,380,000	34.6
Other		263,000	1.1			253,000	1.2			10,000	4.0			249,000	1.2			263,000	1.1			(14,000)	(5.3)
Total	$	22,947,000	100.0	%	$	21,614,000	100.0	%	$	1,333,000	6.2	%	$	20,769,000	100.0	%	$	22,947,000	100.0	%	$	(2,178,000)	(9.5)	%

Hy-Tech

Hy-Tech designs, manufactures, and sells a wide range of industrial products which are categorized as ATP for reporting purposes. In addition to Engineered Solutions, products and components manufactured for other companies under their brands are included in the OEM category in the table below. PTG revenue is comprised of products manufactured and sold by Hy-Tech’s gear business. NUMATX, Thaxton and other peripheral product lines, such as general machining, are reported as Other.


	Three months ended June 30,												Three months ended June 30,
	2022				2021				Increase (decrease)				2023				2022				Increase (decrease)
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
OEM	$	2,542,000	49.4	%	$	1,408,000	48.9	%	$	1,134,000	80.5	%	$	2,676,000	50.3	%	$	2,542,000	49.4	%	$	134,000	5.3	%
ATP		945,000	18.4			779,000	27.1			166,000	21.3			808,000	15.2			945,000	18.4			(137,000)	(14.5)
PTG		1,583,000	30.8			604,000	21.0			979,000	162.1			1,742,000	32.8			1,583,000	30.8			159,000	10.0
Other		74,000	1.4			86,000	3.0			(12,000)	(14.0)			92,000	1.7			74,000	1.4			18,000	24.3
Total	$	5,144,000	100.0	%	$	2,877,000	100.0	%	$	2,267,000	78.8	%	$	5,318,000	100.0	%	$	5,144,000	100.0	%	$	174,000	3.4	%

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - (Continued)

Revenue Recognition -– Continued

Hy-Tech - Continued


	Six months ended June 30,												Six months ended June 30,
	2022				2021				Increase				2023				2022				Increase (decrease)
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
OEM	$	4,507,000	50.7	%	$	3,019,000	51.0	%	$	1,488,000	49.3	%	$	5,749,000	51.6	%	$	4,507,000	50.7	%	$	1,242,000	27.6	%
ATP		1,687,000	19.0			1,492,000	25.2			195,000	13.1			1,505,000	13.5			1,687,000	19.0			(182,000)	(10.8)
PTG		2,522,000	28.4			1,250,000	21.1			1,272,000	101.8			3,674,000	33.0			2,522,000	28.4			1,152,000	45.7
Other		168,000	1.9			160,000	2.7			8,000	5.0			209,000	1.9			168,000	1.9			41,000	24.4
Total	$	8,884,000	100.0	%	$	5,921,000	100.0	%	$	2,963,000	50.0	%	$	11,137,000	100.0	%	$	8,884,000	100.0	%	$	2,253,000	25.4	%

Recently Adopted Accounting Pronouncements

During the ~~six-month~~three-month period ended June 30, ~~2022,~~2023, there were no accounting pronouncements or other authoritative guidance issued or that became effective, that had, or is expected to have, a material impact on the ~~Company adopted.~~

~~NOTE 2 - ACQUISITION~~

Effective January 15, 2022, through a wholly-owned subsidiary of Hy-Tech, the Company acquired (the “Acquisition”) substantially all the non-real estate assets comprising the business of JGC, a Pennsylvania-based corporation that manufactures and distributes custom gears and power transmission gear products. The purchase price consisted of an aggregate of approximately $2.3 million in cash, which was funded by Revolver (as defined in Note 9) borrowings, and the assumption of certain payables. The Company has incorporated this business into its PTG business and believes that the Acquisition will provide added market exposure into the market for larger gears.

In connection with the Acquisition, the Company entered into the Consent, Joinder and Amendment No. 9 (“Amendment No. 9”) to the Second Amended and Restated Loan and Security Agreement (the “Credit Agreement”), with Capital One, National Association. Amendment No. 9, among other things, provided consent to the Acquisition.

Total
Total purchase price

$
2,300,000

~~The following table presents the purchase price allocation:~~

Accounts receivable

$
489,000
Inventories

359,000
Machinery and equipment

823,000
Customer relationships

450,000
Goodwill

394,000
Liabilities assumed

(215,000)
Total purchase price

$
2,300,000

The excess of the total purchase price over the fair value of the net assets acquired is currently being presented as goodwill. Goodwill is amortized over 15 years for tax purposes, but not deductible forCompany’s consolidated financial ~~reporting purposes. All identifiable intangible assets subject to amortization are amortized over their useful lives for book purposes, and are amortized over 15 years for tax purposes.~~statements.

~~Table of Contents~~

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

~~NOTE 2 – ACQUISITION - (Continued)~~

The following unaudited pro-forma combined financial information gives effect to the Acquisition as if the transaction was consummated on January 1, 2021. This unaudited pro-forma financial information is presented for information purposes only and is not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2021 (the beginning of the earliest period presented) or to project potential operating results as of any future date or for any future periods.

For the

For the

three-month

six-month

period ended

period ended

June 30, 2021

June 30,2021
Revenue

$
14,399,000

$
28,855,000
Net income

$
2,398,000

$
2,099,000
Earnings per share – basic

$
0.75

$
0.66
Earnings per share – diluted

$
0.75

$
0.66

NOTE ~~3 -INCOME (LOSS)~~2 - EARNINGS /(LOSS) PER SHARE

Basic ~~loss~~earnings (loss) per common share is based only on the weighted average number of shares of Common Stock outstanding for the ~~periods.~~periods presented. Diluted ~~loss~~earnings (loss) per common share reflects the effect of shares of Common Stock issuable upon the exercise of options unless the effect on earnings is anti-dilutive.

Diluted ~~loss~~earnings (loss) per common share is computed using the treasury stock method. Under this method, the aggregate number of shares of Common Stock outstanding reflects the assumed use of proceeds from the hypothetical exercise of any outstanding options to purchase shares of Common Stock. The average market value for the period is used as the assumed purchase price.

The following table sets forth the elements of basic and diluted ~~loss~~earnings (loss) income per common share:


	Three months ended				Six months ended				Three months ended				Six months ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Numerator for basic and diluted (loss) income per common share:
Net (loss) income	$	(21,000)	$	2,423,000	$	(639,000)	$	2,116,000
Net income (loss)									$	237,000	$	(21,000)	$	574,000	$	(639,000)

Denominator:
Denominator for basic (loss) income per share - weighted average common shares outstanding		3,185,000		3,181,000		3,177,000		3,175,000
Denominator for basic income (loss) per share - weighted average common shares outstanding										3,195,000		3,185,000		3,195,000		3,177,000
Dilutive securities (1)		0		12,000		0		15,000		—		—		—		—
Denominator for diluted (loss) income per share - weighted average common shares outstanding		3,185,000		3,193,000		3,177,000		3,190,000		3,195,000		3,185,000		3,195,000		3,177,000

~~(1)~~Dilutive securities consist of the “in the money” stock options. In the event of a loss, options are considered anti-dilutive and are therefore not included in the calculation of diluted loss per share.

At June 30, 2022 and 2021, there were outstanding stock options whose exercise prices were higher than the average market values of the underlying Common Stock for the period. The weighted average of anti-dilutive stock options outstanding was as follows:

(1)

Dilutive securities consist of the “in the money” stock options. There were no “in the money” stock options at June 30, 2023. In the event of a loss, options are considered anti-dilutive and would therefore not be included in the calculation of diluted loss per share.

Three months ended

Six months ended

June 30,

June 30,


2022

2021

2022

2021
Weighted average anti-dilutive stock options outstanding

135,000

139,000

135,000

140,000

1615

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 43 – STOCK-BASED COMPENSATION

~~Stock Options~~There were no options or shares of the Company’s common stock granted or issued during the three-month period ended June 30, 2023.

The table below presents stock options for the six-month period ended June 30, 2023.


		Weighted		Weighted average				Weighted		Weighted average
		average		remaining	Aggregate			average		remaining	Aggregate
		exercise		contractual life	Intrinsic			exercise		contractual life	Intrinsic
	Option shares	price		(years)	Value		Option shares	price		(years)	Value
Outstanding, January 1, 2022	178,499	$	6.76	3.4	$	60,643
Granted	0		0	—		—
Exercised	41,809		4.74	—		38,046
Outstanding, January 1, 2023							127,600	$	7.41	3.3	$	—
Forfeited	0		0	—		—	(5,000)		—	—		—
Expired	2,090		4.29	—		—	(43,850)		—	—		—
Outstanding, June 30, 2022	134,600	$	7.42	3.9	$	—
Vested, June 30, 2022	134,600	$	7.42	3.9	$	—
Outstanding, June 30, 2023							78,750		7.15	4.2	$	—
Vested, June 30, 2023							78,750		7.15	4.2	$	—

On June 21, 2022, the Chief Financial Officer of the Company exercised 41,809 options to purchase the Company’s Common Stock. The exercise price was $4.74 per share and the closing price of the Company’s Common Stock was $5.65. As permitted by the Company’s 2021 Stock Incentive Plan and approved in advance by the Compensation Committee of the Company’s Board of Directors, this transaction was completed by the executive officer remitting $2,000 to the Company and satisfying the remaining portion of his exercise price and tax withholding and remittance obligations through the net settlement of options. The above resulted in the executive officer receiving 7,163 shares of Common Stock.

Restricted Stock

On May 25, 2022, the Company granted 1,250 restricted shares of its Common Stock to each non-employee member of its Board of Directors, totaling 6,250 restricted shares. The Company determined that the fair value of these shares was $5.50 per share, which was the closing price of the Company’s Common Stock on the date of the grant. These shares ~~cannot be~~could not have been traded earlier than the first anniversary of the grant date. The Company ratably ~~amortizes~~amortized the total non-cash compensation expense of approximately $34,000 to selling, general and administrative expenses during the period beginning May 2022 through May 2023.

On February 16, 2021, the Company granted 25,000 restricted shares of its Common Stock to its Chief Financial Officer. The Company determined that the fair value of these shares was $6.36 per share, which was the closing price of the Company’s Common Stock on the date of the grant. The Company ratably amortizes over a five-year vesting period the total non-cash compensation expense of approximately $159,000, or $32,000 per annum, to selling, general and administrative expenses.

NOTE 54 – FAIR VALUE MEASUREMENTS

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company is required to classify certain assets and liabilities based on the following hierarchy:

Level 1: Quoted prices for identical assets or liabilities in active markets that can be assessed at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

~~Table of Contents~~

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

~~NOTE 5 – FAIR VALUE MEASUREMENTS – (Continued)~~

The guidance requires the use of observable market data if such data is available without undue cost and effort.

As of June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, the carrying amounts reflected in the accompanying consolidated balance sheets for current assets and current liabilities approximated fair value due to the short-term nature of these accounts.

Assets and liabilities measured at fair value on a non-recurring basis include goodwill and intangible assets. Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 65 – ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable - net consists of:


	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Accounts receivable	$	10,726,000	$	7,817,000	$	10,245,000	$	7,683,000
Allowance for doubtful accounts, sales discounts and chargebacks		(308,000)		(267,000)		(360,000)		(313,000)
	$	10,418,000	$	7,550,000	$	9,885,000	$	7,370,000

Net accounts receivable at January 1, 2022, was $ 7,550,000.

NOTE 6 – INVENTORIES

Inventories consist of:


	June 30, 2023		December 31, 2022
Raw material	$	1,579,000	$	2,000,000
Work in process		2,115,000		2,242,000
Finished goods		17,402,000		20,249,000
	$	21,096,000	$	24,491,000

~~NOTE 7 – INVENTORIES~~

~~Inventories consist of:~~

June 30, 2022

December 31, 2021
Raw material

$
2,102,000

$
2,166,000
Work in process

2,177,000

1,360,000
Finished goods

20,331,000

20,495,000

$
24,610,000

$
24,021,000

NOTE 87 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill are as follows:

Balance, January 1, 2022

$
4,447,000
Goodwill attributable to the acquisition of JGC business (See Note 2)

394,000
Currency translation adjustment

(19,000)
Balance, June 30, 2022

$
4,822,000


Balance, January 1, 2023	$	4,822,000
Currency translation adjustment		7,000
Balance, June 30, 2023	$	4,829,000

Other intangible assets


	June 30, 2023						December 31, 2022
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value
Other intangible assets:
Customer relationships (1)	$	6,932,000	$	4,395,000	$	2,537,000	$	6,921,000	$	4,099,000	$	2,822,000
Trademarks and trade names (1)		2,174,000		—		2,174,000		2,166,000		—		2,166,000
Trademarks and trade names		200,000		93,000		107,000		200,000		86,000		114,000
Engineering drawings		330,000		276,000		54,000		330,000		268,000		62,000
Non-compete agreements (1)		327,000		319,000		8,000		322,000		303,000		19,000
Patents		1,286,000		1,175,000		111,000		1,286,000		1,143,000		143,000
Totals	$	11,249,000	$	6,258,000	$	4,991,000	$	11,225,000	$	5,899,000	$	5,326,000

(1)

A portion of these intangibles are maintained in a foreign currency and are therefore subject to foreign exchange rate fluctuations.

1817

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 87 – GOODWILL AND OTHER INTANGIBLE ASSETS – ~~(Continued~~)

~~Other intangible assets~~

June 30, 2022

December 31, 2021




Accumulated

Net book



Accumulated

Net book

Cost

amortization

value

Cost

amortization

value
Other intangible assets:

Customer relationships (1)

$
6,921,000

$
3,812,000

$
3,109,000

$
6,495,000

$
3,545,000

$
2,950,000
Trademarks and trade names (1)

2,167,000

0

2,167,000

2,187,000

0

2,187,000
Trademarks and trade names

200,000

79,000

121,000

200,000

73,000

127,000
Engineering drawings

330,000

261,000

69,000

330,000

254,000

76,000
Non-compete agreements (1)

323,000

291,000

32,000

335,000

290,000

45,000
Patents

1,286,000

1,111,000

175,000

1,286,000

1,079,000

207,000
Totals

$
11,227,000

$
5,554,000

$
5,673,000

$
10,833,000

$
5,241,000

$
5,592,000

~~(1)A portion of these intangibles are maintained in a foreign currency and are therefore subject to foreign exchange rate fluctuations.~~

~~The weighted average amortization period in years for intangible assets was as follows:~~

June 30, 2022

December 31, 2021
Customer relationships

6.3

6.7
Trademarks and trade names

9.0

9.5
Engineering drawings

4.6

5.1
Non-compete agreements

1.5

2.0
Patents

4.3

4.5

(Continued)

Amortization expense of intangible assets subject to amortization was as follows:


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	$	164,000	$	157,000	$	341,000	$	316,000
Three months ended June 30,									Three months ended June 30,			Six months ended June 30,
2023									2023	2022		2023		2022
$									167,000	$	164,000	$	346,000	$	341,000

Amortization expense for the balance of ~~2022,~~2023, and for each of the next ~~five~~four years and thereafter is estimated to be as follows:


July 1,2022 through December 31, 2022	$	346,000
2023		688,000
July 1 through December 31, 2023			$	341,000
2024		639,000		640,000
2025		606,000		611,000
2026		400,000		412,000
2027				198,000
Thereafter		827,000		615,000
	$	3,506,000	$	2,817,000

~~Table of Contents~~The weighted average amortization period for intangible assets was as follows:

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~


	June 30, 2023	December 31, 2022
Customer relationships	5.6	5.9
Trademarks and trade names	8.0	8.5
Engineering drawings	3.6	4.1
Non-compete agreements	0.5	1.0
Patents	4.2	4.1

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

NOTE 98 – DEBT

In October 2010, the Company entered into a Loan and Security Agreement (“Credit Agreement”) with an affiliate of Capital One, National Association (“Capital One” or the “Bank”). The Credit Agreement, as amended and restated in April 2017, and further amended from time-to-time, among other things, provides the ability to borrow funds under a $16,000,000 revolver line (“Revolver”), subject to certain borrowing base criteria. ~~Additionally, there is a $2,000,000 line of credit for capital expenditures (“Capex Loan”), with $1,600,000 available for future borrowings.~~ Revolver ~~and Capex Loan~~ borrowings are secured by the Company’s accounts receivable, inventory, equipment, and real property, among other things. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross guaranteed by certain other subsidiaries. ~~The Credit Agreement expires on February 8, 2024.~~

On ~~April 12, 2022, we~~March 24, 2023, the Company and the Bank entered into Amendment No. 1011 (“Amendment ~~No. 10”~~11”) to the Credit Agreement, which among other things:

●

~~Increased~~extended the ~~Revolving Commitment by $2,000,000,~~expiration date to ~~$18,000,000 through June 30, 2022;~~

●

~~Removed a $10,000,000 cap on inventory availability through June 30, 2022;~~

●

~~Prohibited any Capex Loans through June 30, 2022;~~February 8, 2027; and

●

~~Implemented Secured Overnight Financing Rate (“SOFR”) as the new benchmark interest rate immediately, in lieu~~eliminated a $1,600,000 Capex Loan line of ~~London Interbank Offered Rate (“LIBOR”).~~credit.

~~Until~~Under the ~~effective date~~terms of Amendment No. 10, ~~at the Company’s option, Revolver borrowings would bear interest at either LIBOR or the Base Rate, as the terms are defined in~~to the Credit Agreement, ~~plus an Applicable Margin, as defined in the Credit Agreement. Additionally, the Company was subject to limitations on the number of LIBOR borrowings. As noted above, effective~~dated April 12, 2022, the Company began applying Secured Overnight Financing Rate, (“SOFR”) SOFR rates instead of ~~LIBOR.~~the London Inter-Bank Offered Rate, (LIBOR). The Company ~~does not believe that this~~will continue to be subject to the number of SOFR borrowings. The change from LIBOR to SOFR ~~will~~did not have a significant effect on ~~its~~the Company’s consolidated financial statements.

At June 30, 2023, short-term or Revolver borrowing was $5,340,000, compared to $7,570,000 at December 31, 2022. The average balance of short-term borrowings during the three and six-month periods ended June 30, 2023, were $7,060,000 and $7,173,000, respectively, compared to $11,544,000 and $10,855,000, respectively, for the same periods in 2022.

Table of Contents

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 8 – DEBT – (Continued)

The Company provides Capital One with monthly borrowing base certificates, and in certain circumstances, it is required to deliver monthly financial statements and certificates of compliance with various financial covenants. Should an event of default occur the interest rate would increase by 2two percent per annum during the period of default, in addition to other remedies provided to Capital One.

AtDuring the three and six-month periods ended June 30, ~~2022, short-term or Revolver borrowing was $10,069,000, compared to $5,765,000~~2023, and at December 31, ~~2021. (See Notes 2 and 6 for further discussion related to this increase).~~2022, Applicable Margin Rates, ~~at June 30, 2022,~~as defined in the Credit Agreement were 2.10% and 1.10%, respectively for SOFR and Base Rate borrowings. ~~At December 31, 2021, these rates were 1.50% and 0.50%, respectively, for LIBOR and Base Rate borrowings.~~ Additionally, at June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, there was ~~$7,000,000~~approximately $9,324,000 and ~~$9,578,000,~~$7,678,000, respectively, available to the Company under its Revolver arrangement.

The average balances of short-term borrowings from our Bank for the three and six-month periods ended June 30, 2022, were $11,544,000 and $10,855,000, respectively, and $1,921,000 and $2,043,000, respectively, for the same periods in 2021.

NOTE 109 – SUBSEQUENT EVENT

On August ~~9, 2022,~~8, 2023, the Company’s Board of Directors declared a quarterly cash dividend in the amount equal to $0.05 ~~special dividend. This special dividend~~ per share, which will be payable on August ~~29, 2022,~~25, 2023 to all shareholders of record as of the close of business on August ~~22, 2022.~~21, 2023. The Company estimates the total cash outlay to be approximately ~~$160,000.~~$160,000.

2019

Table of Contents

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

Forward Looking Statement

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of P&F Industries, Inc. and subsidiaries (“P&F”, or the “Company”). P&F and its representatives may, from time-to-time, make written or verbal forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission and in its reports to shareholders. Generally, the inclusion of the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “would,” “could,” “should,” and their opposites and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. Any forward-looking statements contained herein, including those related to the Company’s future performance, are based upon the Company’s historical performance and on current plans, estimates and expectations. All forward-looking statements involve risks and uncertainties. These risks and uncertainties could cause the Company’s actual results for all or part the ~~2022~~2023 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company for a number of reasons including, but not limited to:

●

~~Risks related to the global outbreak of COVID-19 and other public health crises;~~

●

Risks associated with sourcing from overseas;

●

Disruption in the global capital and credit markets;

●

Importation delays;

●

Customer concentration;

●

Unforeseen inventory adjustments or changes in purchasing patterns;

●

Market acceptance of products;

●

Competition;

●

Price reductions;

●

Exposure to fluctuations in energy prices;

●

~~Exposure to fluctuations within the cost of raw materials;~~

●

The strength of the retail economy in the United States and abroad;

●

Risks associated with Brexit;

●

Adverse changes in currency exchange rates;

●

Interest rates;

●

Debt and debt service requirements;

●

Borrowing and compliance with covenants under our credit facility;

●

Impairment of long-lived assets and goodwill;

~~Table of Contents~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

●

Retention of key personnel;

●

Acquisition of businesses;

●

Regulatory environment;

●

Litigation and insurance;

●

Risks related to the global outbreak of COVID-19 and other public health crises;

●

The threat of terrorism and related political instability and economic uncertainty; ~~and~~

●

Business disruptions or other costs associated with information technology, cyber-attacks, system implementations, data privacy or catastrophic ~~losses,~~losses;

and those other risks and uncertainties described in ~~its Annual Report on~~the 2022 Form 10-K, ~~for the year ended December 31, 2021 (“2021 Form 10-K”),~~ its Quarterly Reports on Form 10-Q, and its other reports and statements filed by the Company with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The Company cautions you against relying on any of these forward-looking statements.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

OVERVIEW

During the ~~second quarter of 2022,~~three-month period ended June 30, 2023, significant factors that impacted our results of operations were the:

●

~~Ongoing negative impact of the COVID-19 pandemic on revenue, income,~~Significant improvement in gross margin at both Hy-Tech and ~~supply chain.~~Florida Pneumatic.

●

~~The acquisition of the Jackson Gear Company business.~~Decline in Florida Pneumatic’s Retail revenue.

●

~~A stocking rollout to our largest retail customer.~~Higher interest rates.

●

~~Weak customer mix at Hy-Tech.~~

OUR BUSINESS

Florida Pneumatic

Florida Pneumatic directly, and through its wholly-owned subsidiaries Exhaust Technologies Inc. (“ETI”), Universal Air Tool Company Limited (“UAT”), and Jiffy Air Tool, Inc. (“Jiffy”) imports, manufactures, and markets pneumatic hand tools and related products of its own design, primarily to the retail, industrial, automotive, and aerospace markets. Its products include sanders, grinders, drills, saws, and impact wrenches. These tools are similar in appearance and function to electric hand tools, but are powered by compressed air, rather than by electricity or a battery. Air tools, as they are more commonly referred to, generally offer better performance, and weigh less than their electrical counterparts. Florida Pneumatic imports and/or manufactures approximately 75 types of pneumatic hand tools, most of which are sold at prices ranging from $50 to $1,000, under the names “Florida ~~Pneumatic”,~~Pneumatic,” “Universal Tool”, “Jiffy Air Tool”, AIRCAT, NITROCAT, as well as under the trade names or trademarks of several private label customers. These products are sold to retailers, distributors, manufacturers and private label customers through in-house sales personnel and manufacturers’ representatives. The AIRCAT and NITROCAT brands of pneumatic tools are sold primarily to the automotive service and repair market (“automotive market”). Users of Florida Pneumatic’s hand tools include industrial maintenance and production ~~staffs,~~personnel, do-it-yourself mechanics, professional automobile mechanics and auto body personnel. Jiffy manufactures and distributes pneumatic tools and components primarily to aerospace manufacturers.

~~Table of Contents~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued~~

~~OUR BUSINESS - Continued~~

Hy-Tech

Hy-Tech designs, manufactures, and markets industrial tools, systems, gearing, accessories and a wide variety of replacement parts under various brands including ATP, NUMATX, and Thaxton. Hy-Tech produces and sells heavy-duty pneumatic impact tools, grinders, air motors, hydro-pneumatic riveters, hydrostatic test plugs, impact sockets and custom gears, with prices ranging from $300 to ~~$42,000.~~$62,000.

Hy-Tech’s “Engineered Solutions” products are sold directly to Original Equipment Manufacturers (“~~OEM’s”~~OEM”), and industrial branded products are sold through a broad network of specialized industrial distributors serving the power generation, petrochemical, aerospace, construction, railroad, mining, ship building and fabricated metals industries. Hy-Tech works directly with its industrial customers, designing and manufacturing products from finished components to complete turnkey systems to be sold under their own brand names.

Hy-Tech’s Power Transmission Group, or PTG, is a custom gear, gearbox and power transmission system ~~manufacturer.~~manufacturer located in Punxsutawney, PA. In addition to manufacturing a broad range of standard and custom gears for manufacturers in a wide variety of industries, PTG reverse engineers existing gears as well as designs new gears, utilizing state-of-the-art technologies, including 3D imaging and Gleason Gear modeling software.

Effective January 15, 2022, through a wholly-owned subsidiary of Hy-Tech, we acquired substantially all the non-real estate assets comprising the business of Jackson Gear Company (“JGC”), a Pennsylvania-based corporation that manufactures and distributes custom gears and power transmission gear products. ~~(See Note -2 for additional information).~~ This business was consolidated into ~~PTG. We believe this acquisition will provide~~PTG and provides added market exposure into the larger gears market.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

ECONOMIC MEASURES

Much of our business is driven by the ebbs and flows of the general economic conditions in both the United States and, to a lesser extent, abroad. We focus on a wide array of customer types including, but not limited to, large retailers, aerospace manufacturers, large and small resellers of pneumatic tools and parts, and automotive related customers. We tend to track the general economic conditions of the United States, industrial production, and general retail sales.

A key economic measure relevant to us is the cost of the raw materials in our products. Key materials include metals, especially various types of steel and aluminum. Also important is the value of the United States Dollar (“USD”) in relation to the Taiwanese dollar (“TWD”), as we purchase a significant portion of our products from Taiwan. Purchases from Chinese sources are made in USD; however, if the Chinese currency, the Renminbi (“RMB”), were to be revalued against the USD, there could be a negative impact on the cost of our products. Additionally, we closely monitor the fluctuation in the Great British Pound (“GBP”) to the USD, and the GBP to TWD, both of which can have an impact on the consolidated results.

We consider tariffs a key economic measure, as a significant portion of products imported by Florida Pneumatic and to a lesser degree, Hy-Tech, are subject to these tariffs. Further, we monitor transportation costs, specifically ocean freight rates, which has materially fluctuated since ~~early 2021 have become a key area.~~the beginning of the COVID-19 pandemic.

Lastly, the cost and availability of a quality labor pool in the countries where products and components are manufactured, both overseas as well as in the United States, could materially affect our overall results.

OPERATING MEASURES

Key operating measures we use to manage our operations are orders; shipments; development of new products; customer retention; inventory levels and productivity. These measures are recorded and monitored at various intervals, including daily, weekly and monthly. To the extent these measures are relevant, they are discussed in the detailed sections below.

~~Table of Contents~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued~~

FINANCIAL MEASURES

Key financial measures we use to evaluate the results of our business include various revenue metrics; gross margin; selling, general and administrative expenses; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; operating cash flows and capital expenditures; return on sales; return on assets; days’ sales outstanding and inventory turns. These measures are reviewed at monthly, quarterly and annual intervals and compared to historical periods as well as to established objectives. To the extent that these measures are relevant, they are discussed in detail below.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Descriptions of these policies are discussed in the ~~2021~~2022 Form 10-K, and in the notes to these consolidated financial statements. Certain of these accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and ~~expenses, and the related disclosure of contingent assets and liabilities, revenues and~~ expenses. On an ongoing basis, we evaluate estimates, including, but not limited to those related to ~~bad debts,~~revenue recognition, inventory reserves, goodwill and intangible assets, ~~warranty reserves,~~ taxes, and deferred taxes. We base our estimates on historical data and experience, when available, and on various other assumptions that are believed to be reasonable under the circumstances, the combined 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. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

~~TRENDS AND UNCERTAINTIES~~

~~COVID-19 PANDEMIC~~

The ~~COVID-19 virus and the resultant global economic down-turn had a negative impact on our fiscal 2021 results and continues to negatively impact certain sectors~~Company’s significant accounting policies are described in “Note 1: Summary of ~~the Company during 2022. Additionally, we believe that, while easing slightly, the on-going supply-chain crisis is related in large part~~Significant Accounting Policies” to the pandemic. Further, we believe the COVID-19 global pandemic has been and continues to be the primary factor in the significant increases in the cost of international ocean freight and related matters. We believe that until the above issues improve, our business will likely continue to be adversely affected by the COVID-19 global pandemic.

~~BOEING/AEROSPACE~~

The Federal Aviation Administration (“FAA”) and the European Union Aviation Safety Agency (“EASA”) have lifted the grounding of the 737 MAX, however, China, which is a large market for Boeing, has not lifted the grounding on the 737 MAX aircraft. Boeing is currently holding completed 737 MAX aircraft destined for Chinese carriers. As a result of the aforementioned, and airline companies limiting deliveries of new aircraft, we believe production at Boeing of its 737 MAX aircraft is likely to remain below the production levels that existed prior to the grounding of certain Boeing aircraft and the COVID-19 pandemic.

~~INTERNATIONAL SUPPLY CHAIN~~

~~During the third and fourth quarters of 2021, and early~~Company’s 2022 we encountered severe delays in receiving inventory from our Asian suppliers, which led to intermittent shortages of inventory. It should be noted however that the international supply chain crisis has, as of late, begun to ease somewhat. Lastly, our ocean freight costs, which increased in some cases five-fold during the latter half of 2021 and for much of 2022, have begun to decline, but still well in excess of pre pandemic levels. This trend of higher costs and delayed deliveries has continued for most of 2022. We believe the major factors driving the above include:Form 10-K.

●

~~Increased price of fuel;~~

2422

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

TRENDS AND UNCERTAINTIES

INTERNATIONAL SUPPLY CHAIN ~~- Continued~~

●

~~Shortage of shipping containers;~~

●

~~Congestion at the ports in Asia and the United States; and~~

●

~~Shortage of truck drivers in the United States.~~

At the present time, we believe the above-mentioned supply chain disruptions will likely continue during the remainder of 2022. While we believe that most of these related costs associated with the items above have been, or will be, passed on to our customers throughout 2022, there is no assurance that any additional cost increases can be passed on in the future.

~~DOMESTIC TRANSPORTATION COSTS~~

Due to the shortage of truckers in the U.S. there has been both difficulty in moving goods from the ports to our facilities as well as arranging for pickups to deliver to our customers. In addition, we have seen an increase in the costs for these transportation services. It is unclear when or if this situation will abate. As such, these issues will affect the Company for the foreseeable future impacting our overall margins and possibly depressing sales.

~~IMPACT OF INFLATION/GEOPOLITCAL ISSUES~~

~~Increasing prices, most notably in freight/transportation, the cost of raw materials and labor had a material effect on our results of operations~~Although much less than during the three and six-month periods ended June 30, 2022, we continue to encounter delays in receiving inventory from our Asian suppliers, which leads to intermittent shortages of inventory. Our ocean and domestic freight costs, which had increased significantly during the COVID-19 pandemic, are slowly approaching pre-pandemic levels.

DOMESTIC TRANSPORTATION COSTS

Although domestic transportation costs and associated issues discussed in prior filings have improved, compared to the prior year, they remain above pre-pandemic levels. The availability of port to warehouse transportation services has also improved compared to 2022.

At the present time, we believe that some or all of the above-mentioned uncertainties may continue for some time. While we believe that most of the related costs associated with the issues discussed above have been factored into our selling price, there is no assurance that we will be able to pass through any future additional direct costs or costs incurred related to our international supply chain issues in the future.

IMPACT OF INFLATION/GEOPOLITICAL ISSUES

We believe that the current and projected ~~significant~~ levels of inflation, as well as a possible economic recession will likely continue to ~~adversely impact~~have an effect on our manufacturing and operating costs. ~~As such, at~~At the present time, we are unable to reasonably estimate the impact ~~these~~inflation and geo-political issues will have on our results of operations for the ~~remainder~~foreseeable future.

We believe that our results of ~~2022~~operations and ~~beyond.~~

~~During~~financial condition during the three and six-month ~~period~~periods ended June 30, ~~2022, we do~~2023, have not ~~believe we were directly materially~~been impacted by ~~current geopolitical global events.~~the Russia-Ukraine conflict; however, we cannot predict what impact this conflict may have on our results in the future.

BOEING

Sales of aircraft by Boeing, a Jiffy customer, have been depressed since the two 737 MAX crashes in 2018 and 2019. Further, the Federal Aviation Administration grounded all 737 MAX aircraft for several quarters. These events, coupled with the COVID-19 pandemic, reduced Boeing’s aircraft production levels to well below those prior to the pandemic and the grounding. In 2019, Boeing produced 52 737 MAX aircraft per month. It is currently still producing below that level. Per Boeing, it plans to return to those levels in 2025 and expects to add a fourth 737 MAX production line in 2024. We believe that these stated plans along with the return of the Boeing 787 aircraft shipments, which has also had production delays to full production, will be beneficial to P&F’s aerospace sales in the next several years.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

TRENDS AND UNCERTAINTIES –Continued

TECHNOLOGIES

We believe that over time, several newer technologies and features will have a greater ~~impact~~effect on the market for our traditional pneumatic tool offerings. ~~The~~So far, the greatest impact ~~of this evolution~~ has been ~~felt initially by~~on the automotive aftermarket with the advent of advanced cordless operated ~~hand tools in~~tools. Currently, we do not offer a cordless tool to the automotive aftermarket. However, with respect to the industrial market, we have developed for one of our largest OEM customers a tool mechanism that is incorporated into a major line of their cordless power tools. These tools have been in full production with our supplied system for several years and our sales of these products have continued to grow over that time. We continue to analyze the practicality of developing or incorporating ~~more advanced~~newer technologies in our tool ~~platforms.~~platforms for other markets as well. This includes adding our internally developed mechanisms to existing cordless power sources as well as producing complete cordless tool systems. In addition, we have recently developed a cordless installation tool for the aerospace market. We have begun taking orders for this product and we expect to introduce an additional version later in 2023.

OTHER MATTERS

Other than the ~~aforementioned,~~trends and uncertainties mentioned above, or matters that may be discussed below, there are no major trends or uncertainties that had, or we could ~~have~~ reasonably ~~expected~~expect to have a material impact on our revenue and operations, nor was there any unusual or infrequent event, transaction or any significant economic change that materially affected our results of operations.

Unless otherwise discussed elsewhere in the Management’s Discussion and Analysis, we believe that our relationships with our key customers and suppliers remain satisfactory.

~~Table of Contents~~

RESULTS OF OPERATIONS

REVENUE

The tables below provide an analysis of our net revenue for the ~~three and six-month~~three-month periods ended June 30, ~~2022~~2023, and ~~2021:~~2022:

Consolidated


	Three months ended June 30,								Three months ended June 30,
					Increase								Increase (Decrease)
	2022		2021		$		%		2023		2022		$		%
Florida Pneumatic	$	12,666,000	$	10,712,000	$	1,954,000	18.2	%	$	10,845,000	$	12,666,000	$	(1,821,000)	(14.4)	%
Hy-Tech		5,144,000		2,877,000		2,267,000	78.8			5,318,000		5,144,000		174,000	3.4
Consolidated	$	17,810,000	$	13,589,000	$	4,221,000	31.1	%	$	16,163,000	$	17,810,000	$	(1,647,000)	(9.2)	%


	Six months ended June 30,								Six months ended June 30,
					Increase								Increase (Decrease)
	2022		2021		$		%		2023		2022		$		%
Florida Pneumatic	$	22,947,000	$	21,614,000	$	1,333,000	6.2	%	$	20,769,000	$	22,947,000	$	(2,178,000)	(9.5)	%
Hy-Tech		8,884,000		5,921,000		2,963,000	50.0			11,137,000		8,884,000		2,253,000	25.4
Consolidated	$	31,831,000	$	27,535,000	$	4,296,000	15.6	%	$	31,906,000	$	31,831,000	$	75,000	0.2	%

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

RESULTS OF OPERATIONS - (Continued)

REVENUE – Continued

Florida Pneumatic

Florida Pneumatic markets its air tool products to four primary sectors within the pneumatic tool market; Automotive, Retail, Aerospace and Industrial. It also generates revenue from its Berkley products line, as well as a line of air filters and other OEM parts (“Other”).


	Three months ended June 30,
	2023				2022				Increase (decrease)
			Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%
Automotive	$	3,503,000	32.3	%	$	3,853,000	30.4	%	$	(350,000)	(9.1)	%
Retail		2,920,000	26.9			4,826,000	38.1			(1,906,000)	(39.5)
Industrial		1,337,000	12.3			1,705,000	13.5			(368,000)	(21.6)
Aerospace		2,963,000	27.3			2,179,000	17.2			784,000	36.0
Other		122,000	1.2			103,000	0.8			19,000	18.4
Total	$	10,845,000	100.0	%	$	12,666,000	100.0	%	$	(1,821,000)	(14.4)	%


	Three months ended June 30,												Six months ended June 30,
	2022				2021				Increase (decrease)				2023				2022				Increase (decrease)
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
Automotive	$	3,853,000	30.4	%	$	3,782,000	35.3	%	$	71,000	1.9	%	$	6,762,000	32.6	%	$	7,734,000	33.7	%	$	(972,000)	(12.6)	%
Retail		4,826,000	38.1			3,763,000	35.1			1,063,000	28.2			5,470,000	26.3			7,845,000	34.2			(2,375,000)	(30.3)
Industrial		1,705,000	13.5			1,303,000	12.3			402,000	30.9			2,914,000	14.0			3,111,000	13.6			(197,000)	(6.3)
Aerospace		2,179,000	17.2			1,734,000	16.2			445,000	25.7			5,374,000	25.9			3,994,000	17.4			1,380,000	34.6
Other		103,000	0.8			130,000	1.1			(27,000)	(20.8)			249,000	1.2			263,000	1.1			(14,000)	(5.3)
Total	$	12,666,000	100.0	%	$	10,712,000	100.0	%	$	1,954,000	18.2	%	$	20,769,000	100.0	%	$	22,947,000	100.0	%	$	(2,178,000)	(9.5)	%

Six months ended June 30,

2022

2021

Increase (decrease)




Percent of



Percent of




Revenue

revenue

Revenue

revenue

$

%

Automotive

$
7,734,000

33.7
%
$
7,884,000

36.5
%
$
(150,000)

(1.9)
%
Retail

7,845,000

34.2

7,553,000

34.9

292,000

3.9

Industrial

3,111,000

13.6

2,662,000

12.3

449,000

16.9

Aerospace

3,994,000

17.4

3,262,000

15.1

732,000

22.4

Other

263,000

1.1

253,000

1.2

10,000

4.0

Total

$
22,947,000

100.0
%
$
21,614,000

100.0
%
$
1,333,000

6.2
%

Automotive revenue declined this quarter, compared to the same period in 2022, due primarily to an across-the-board price increase in all distribution channels in order to address rising input costs. This change in pricing strategy led to a decline in the number of unit sales and thus overall revenue in this category. However, Automotive gross margin improved as a result of this change. With respect to our Retail revenue, during the second quarter of 2022 we shipped a stocking rollout, with no such new product rollout occurring during 2023. Additionally, The Home Depot (“THD”) continued its efforts that began earlier this year of: a) reducing the number of individual stock keeping units offered, as well as the quantity of each; b) reducing the display area of their pneumatic tools, and c) increased pressure from on-line distributors, as well as and other “brick and mortar” retailers expanding their presence in this product line. Partially offsetting the above-mentioned declines our Aerospace revenue improved 36.0% when comparing the second quarter of 2023 to the same period in 2022. This improvement was driven by, among other factors, increased demand for new consumable parts, that Jiffy has begun to market, and improved market conditions in both the commercial and military aviation. Lastly, we believe the fall-off in Industrial revenue was driven by economic uncertainty and concerns of rising inflation and concerns of a possible recession.

Florida Pneumatic’s six-month revenue analysis is quite similar to that of its second quarter 2023. When compared to the six-month period ended June 30, 2022, Automotive revenue declined 12.6%, due primarily to our revised pricing and marketing changes put into effect mid-2022. As will be discussed later in this discussion and analysis, this change contributed to an overall improvement in Florida Pneumatic’s gross margin. The significant factors causing the decline in our Retail revenue for the six-month periods ended June 30, 2023, compared to the same period in 2022 was the product rollout that occurred in the second quarter of 2022 with no such event occurring during 2023. This year-over-year decline was also driven by THD’s decisions to lower its inventory of floor display space this year. During the six-month period ended June 30, 2023, Aerospace revenue increased 34.6%, when compared to the same period in the prior year. The improvement was driven by resurgence in both the commercial and military components of the Aerospace sector, and increased demand for the new, consumable parts that Jiffy has begun to market.

2625

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Continued

RESULTS OF OPERATIONS - (Continued)

REVENUE – Continued

~~Florida Pneumatic – Continued~~

When comparing the three-month periods ended June 30, 2022 and 2021, the most significant change in Florida Pneumatic’s revenue occurred within its Retail sector. The 28.2% increase was driven primarily by a stocking rollout to The Home Depot (“THD”) during the second quarter of 2022. These items effectively replaced certain tools that were discontinued. The increase in Industrial revenue was driven by among other things, slightly improved supply chain conditions, which in turn increased our in-stock inventory, allowing an increase in shipments, price increases that went into effect during the quarter, and better economic conditions this quarter, compared to the second quarter of 2021. Aerospace continued to show year-over-year improvement with revenue increasing 25.7% this quarter, compared to the second quarter of 2021, due primarily to an increase in orders from both our commercial aircraft and defense-related customers. Our Automotive revenue improved a modest 1.9% this quarter, compared to the same period a year ago. However, due to a previously disclosed change in distribution channel strategy, as well as changes in both economic and competitive factors, we believe that Automotive revenue could lessen in the future periods.

The 22.4%, or $732,000 increase in Florida Pneumatic’s Aerospace revenue during the six-month period ended June 30, 2022, compared to the same period in the prior year, is the most significant factor in analyzing the overall improvement in Florida Pneumatic’s year-to-date revenue. This improvement is being driven by increased orders from both the commercial and military markets. Its Industrial revenue for the six-month period ended June 30, 2022, grew 16.9% over the same period in 2021, due primarily to slightly improved supply chain conditions and price increases, both occurring during the second quarter of this year, and better economic conditions during most of the six-month period ended June 30, 2022, compared to the same period in 2021. Revenue for the Retail sector during the first six months of 2022 is 3.9% higher than the same period in 2021. This year-to-date improvement was driven by a stocking roll-out, which occurred during the second quarter of 2022, partially offset by a decline in the spray gun category.

Hy-Tech


	Three months ended June 30,
	2023				2022				Increase (decrease)
			Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%
OEM	$	2,676,000	50.3	%	$	2,542,000	49.4	%	$	134,000	5.3	%
ATP		808,000	15.2			945,000	18.4			(137,000)	(14.5)
PTG		1,742,000	32.8			1,583,000	30.8			159,000	10.0
Other		92,000	1.7			74,000	1.4			18,000	24.3
Total	$	5,318,000	100.0	%	$	5,144,000	100.0	%	$	174,000	3.4	%


	Three months ended June 30,												Six months ended June 30,
	2022				2021				Increase (decrease)				2023				2022				Increase
			Percent of				Percent of								Percent of				Percent of
	Revenue		revenue		Revenue		revenue		$		%		Revenue		revenue		Revenue		revenue		$		%
OEM	$	2,542,000	49.4	%	$	1,408,000	48.9	%	$	1,134,000	80.5	%	$	5,749,000	51.6	%	$	4,507,000	50.7	%	$	1,242,000	27.6	%
ATP		945,000	18.4			779,000	27.1			166,000	21.3			1,505,000	13.5			1,687,000	19.0			(182,000)	(10.8)
PTG		1,583,000	30.8			604,000	21.0			979,000	162.1			3,674,000	33.0			2,522,000	28.4			1,152,000	45.7
Other		74,000	1.4			86,000	3.0			(12,000)	(14.0)			209,000	1.9			168,000	1.9			41,000	24.4
Total	$	5,144,000	100.0	%	$	2,877,000	100.0	%	$	2,267,000	78.8	%	$	11,137,000	100.0	%	$	8,884,000	100.0	%	$	2,253,000	25.4	%

Six months ended June 30,

2022

2021

Increase


Percent of



Percent of




Revenue

revenue

Revenue

revenue

$

%

OEM

$
4,507,000

50.7
%
$
3,019,000

51.0
%
$
1,488,000

49.3
%
ATP

1,687,000

19.0

1,492,000

25.2

195,000

13.1

PTG

2,522,000

28.4

1,250,000

21.1

1,272,000

101.8

Other

168,000

1.9

160,000

2.7

8,000

5.0

Total

$
8,884,000

100.0
%
$
5,921,000

100.0
%
$
2,963,000

50.0
%

~~Table of Contents~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

~~RESULTS OF OPERATIONS - (Continued)~~

~~REVENUE – Continued~~

~~Hy-Tech - Continued~~

~~Key factors driving the 80.5% growth~~The net improvement in ~~Hy-tech’s OEM product line~~Hy-Tech’s revenue this quarter, compared to the same three-month period in ~~2021, were a significant~~2022, was driven by the 10% growth of PTG’s revenue. This improvement is due to improved manufacturing efficiency and an increase in orders from a major customer, the easing of COVID-19 travel and visitation restrictions, and overall improvement in economic conditions this quarter compared to the same period a year ago. Revenue generated from the JGC, which was acquired in early 2022, was the major component of the $979,000 increase in our PTG product line revenue. (See Note 2- Acquisition, for further discussion). Our ATPnew business. Additionally, its OEM revenue ~~increased 21.3% this quarter over the same period in the prior year~~improved 5.3%, due primarily to ~~improved economic~~improving market conditions.

The above improvements were partially offset by a decline in its ATP revenue. This decline in ATP revenue is attributable to our decision to focus our marketing efforts on OEM and PTG product offerings. The increase in Hy-Tech’s ~~six-month, year-over-year growth~~Other revenue was mostly accomplished during the three-month period ended June 30, 2022. As such, factors contributing to this growth include increased orders from a major OEM customer, the JGC business acquisition, the easing of COVID-19 restrictions, and slight improvement in the general economic conditions.

~~GROSS MARGIN/PROFIT~~

Three months ended June 30,

Increase (decrease)

2022

2021

Amount


%

Florida Pneumatic

$
4,771,000

$
4,165,000

$
606,000

14.6
%
As percent of respective revenue

37.7
%

38.9
%

(1.2)
%
pts

Hy-Tech

$
865,000

$
683,000

$
182,000

26.6

As percent of respective revenue

16.8
%

23.7
%

(6.9)
%
pts

Total

$
5,636,000

$
4,848,000

$
788,000

16.3
%
As percent of respective revenue

31.6
%

35.7
%

(4.1)
%
pts

~~Although Florida Pneumatic’s gross profit increased 14.6%, its consolidated gross margin declined 1.2 percentage points. This net decline was driven primarily~~ due to ~~a higher mix of lower gross margin Retail revenue. Related thereto, Florida Pneumatic continued to encounter higher ocean freight~~stronger NUMATX and product costs during the three-month period ended June 30, 2022, compared to the same three-month period in 2021. Partially offsetting the above were better than prior year gross margins in its Industrial, Automotive and Aerospace product lines. Hy-Tech’s gross profit declined 6.9 percentage pointsgeneral machining revenue growth this quarter, compared to the same three-month period in ~~2021,~~2022.

The 25.4% year-to-date increase in Hy-Tech’s total revenue was primarily driven by its first quarter results. The approximate $1.2 million increase in OEM revenue was driven by growth in certain markets that are served by a number of Hy-Tech’s OEM customers. The markets served by our customers include multiple industrial applications, as well as the tool rental market. PTG revenue for the six-month period ended June 30, 2023, increased 45.7% when compared to the same period in the prior year. This improvement was driven by the acquisition of the Jackson Gear Company business acquired in January 2022. The increase in Hy-Tech’s Other revenue was due ~~primarily~~ to ~~increased~~stronger NUMATX and general machining revenue growth this quarter, compared to the same three-month period in 2022. The modest decline in ATP revenue is attributable to ~~low margin customers during the second quarter of 2022. Additionally, Hy-Tech’s~~our decision to focus our marketing efforts on OEM and PTG product ~~line under absorbed its manufacturing overhead costs during the second quarter of 2022, as it is going through the process of integrating the JGC acquisition.~~

Six months ended June 30,

Increase (decrease)

2022

2021

Amount


%

Florida Pneumatic

$
8,721,000

$
8,365,000

$
356,000

4.3
%
As percent of respective revenue

38.0
%

38.7
%

(0.7)
%
pts

Hy-Tech

$
1,426,000

$
1,119,000

$
307,000

27.4

As percent of respective revenue

16.1
%

18.9
%

(2.8)
%
pts

Total

$
10,147,000

$
9,484,000

$
663,000

7.0
%
As percent of respective revenue

31.9
%

34.4
%

(2.5)
%
pts

offerings.

2826

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Continued

RESULTS OF OPERATIONS - ~~Continued~~(Continued)

GROSS MARGIN/PROFIT ~~- Continued~~


	Three months ended June 30,						Increase (decrease)
	2023			2022			Amount				%
Florida Pneumatic	$	4,511,000		$	4,771,000		$	(260,000)			(5.4)	%
As percent of respective revenue		41.6	%		37.7	%		3.9	%	pts
Hy-Tech	$	1,325,000		$	865,000		$	460,000			53.2
As percent of respective revenue		24.9	%		16.8	%		8.1	%	pts
Total	$	5,836,000		$	5,636,000		$	200,000			3.5	%
As percent of respective revenue		36.1	%		31.6	%		4.5	%	pts


	Six months ended June 30,						Increase (decrease)
	2023			2022			Amount				%
Florida Pneumatic	$	8,787,000		$	8,721,000		$	66,000			0.8	%
As percent of respective revenue		42.3	%		38.0	%		4.3	%	pts
Hy-Tech	$	2,791,000		$	1,426,000		$	1,365,000			95.7
As percent of respective revenue		25.1	%		16.1	%		9.0	%	pts
Total	$	11,578,000		$	10,147,000		$	1,431,000			14.1	%
As percent of respective revenue		36.3	%		31.9	%		4.4	%	pts

Florida Pneumatic’s gross ~~profit improved by 4.3%, when comparing~~margin for the ~~six-month periods~~three-month period ended June 30, 2023, improved compared to the same period in the prior year principally due to a shift away from their lower margin Retail and Automotive product lines to the higher margin, Industrial and Aerospace categories. Further, during the latter half of 2022, ~~and 2021. Its~~we raised prices in all product categories, which contributed to the improved gross margin.

During the second fiscal quarter of 2023 Hy-Tech’s gross margin ~~however, declined by 0.7~~increased 8.1 percentage point. Primary factors affecting these results were primarily customer and product mix, with greater low margin Retail revenue, being partially offset by stronger gross margin for all other product lines. As discussed above, under absorption of PTG manufacturing overhead and product mix are the primary factors causing the 2.8 percentage points, ~~decline in Hy-Tech’s six-month gross margin,~~ when compared to the same period ~~a year ago. We are~~in 2022. This improvement was due primarily to product/customer mix. Additionally, as was the case for our first quarter 2023 results, Hy-Tech continued to pursue cost and expense reductions, and coupled with revisions in pricing structure, enabled Hy-Tech to improve its blended gross margin, thus contributing to the overall gross margin improvement.

As with its results for the quarter, Florida Pneumatic’s gross margin for the six-month period ended June 30, 2023, improved compared to the same period in the ~~process of integrating~~prior year principally due to a shift away from their lower margin product lines to the ~~JGC business acquisition that occurred~~higher margin, categories. Further, during the ~~first quarter of this year. We expect to make significant progress on integration during the second~~latter half of 2022, we raised prices in all product categories, which contributed to the improved gross margin. This change in marketing strategy and ~~thus improve~~pricing adjustments led to a 4.3 percentage point year-to-date improvement over the same period in the prior year.

The improvement in Hy-Tech’s six-month gross margin is due primarily to product/customer mix. Further, during this period, Hy-Tech was able to reduce manufacturing costs and expenses. Also as ~~well.~~noted above, beginning in 2022, Hy-Tech modified its pricing structure, which enabled Hy-Tech to improve its gross margin. Additionally, Hy-Tech will continue to focus on improving manufacturing overhead absorption, particularly at its PTG facility.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued

RESULTS OF OPERATIONS - (Continued)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses (“SG&A”) include salaries and related costs, commissions, travel, administrative facilities costs, communications costs and promotional expenses for our direct sales and marketing staff, administrative and executive salaries and related benefits, legal, accounting, and other professional fees as well as general corporate overhead and certain engineering expenses.

During the second quarter of ~~2022,~~2023, our SG&A was ~~$5,479,000,~~$5,368,000 compared to ~~$5,458,000~~$5,479,000, incurred during the same three-month period in ~~2021. Key~~2022. Significant components to the net change ~~are:~~

During the second quarter of 2021, we incurred approximately $288,000 in costs related to the May 2021 ransomware attack at our Florida Pneumatic subsidiary, where no such costs were incurred during the second quarter of 2022.

~~ii)~~

Our compensation expense increased $151,000. Compensation expense is comprised of base salaries and wages, accrued performance-based bonus incentives and associated payroll taxes and employee benefits. Several factors contributed to this increase, among them the staffing added in connection with the JGC acquisition, increased wages primarily related to retention incentives and annual wage adjustments and a net increase in companywide bonus/incentive/performance accruals.

~~iii)~~

~~We incurred increases~~include a) compensation expenses increased $6,000; b) stock-based compensation decreased $38,000; c) professional fees and other expenses (i.e. accounting, legal, consulting, etc.) had net increase of $186,000; and d) variable expenses declined $281,000. Variable expenses include among other items, commissions, freight out, travel, advertising, shipping supplies and warranty costs. Driving this decline was lower advertising and shipping costs at Florida Pneumatic, caused primarily by lower Retail revenue this quarter and a reduction in discretionary Automotive advertising expenses, compared to ~~the same quarter in 2021 in professional fees, stock-based compensation, and amortization of $47,000, $37,000, and $23,000, respectively.~~

~~Our six-month 2022 total SG&A was $10,652,000, compared to $10,449,000 incurred during~~ the same period ina year ago.

Our SG&A for the ~~prior year.~~six-month period ended June 30, 2023, was $10,543,000, compared to $10,652,000 for the same six-month period a year ago. Key components of this net decline include among other things a reduction in variable expenses of $315,000, due primarily to lower Retail sales, and lower stock-based compensation of $39,000. The above-mentioned reductions were partially offset by increases in compensation expenses of $112,000, depreciation and amortization expense of $70,000, and $100,000 of professional fees and other expenses.

OTHER EXPENSE (INCOME) - net

During the three-month period ended June 30, 2023, we recognized a net expense of $4,000, which was primarily due to a loss on the disposal of equipment. During the three-month period ended March 31, 2023, we recognized a gain of $21,000 from the sale of fully depreciated equipment. Additionally, as a result of final resolution of our Employee Retention Tax Credit (“ERTC”) filing, we recorded an additional $15,000 as Other Income. The ERTC income is subject to federal and local tax.

Other expense recorded during the three and six-month periods ended June 30, 2022, consisted primarily of adjustments to the ~~net change are:~~fair value of certain assets during the second quarter of 2022.

Compensation expenses increased $316,000. Compensation expense is comprised of base salaries and wages, accrued performance-based bonus incentives and associated payroll taxes and employee benefits. Several factors contributed to this increase, among them the staffing added in connection with the JGC acquisition, increased wages primarily related to retention incentives and annual wage adjustments and increases in companywide bonus/incentive/performance accruals.

~~ii)~~

Professional fees and expenses increased $280,000, due primary to legal, accounting, and other fees incurred in connection with the JGC acquisition. Other expenses that contributed to the increase in professional fees were cyber security related costs and recruitment fees.

~~iii)~~

~~Our variable expenses decreased $253,000. Driving this decline were significantly lower advertising costs at Florida Pneumatic, caused by a change in a distribution channel strategy.~~

INTEREST – NET


	Three months ended June 30,				(Increase) decrease
	2023		2022		Amount		%
Interest expense attributable to:
Short-term borrowings	$	112,000	$	89,000	$	(23,000)	(25.8)	%
Amortization expense of debt issue costs		3,000		4,000		1,000	25.0
ERTC interest		(8,000)		(7,000)		1,000	14.3
Total	$	107,000	$	86,000	$	(21,000)	(24.4)	%


	Six months ended June 30,				(Increase) decrease
	2023		2022		Amount		%
Interest expense attributable to:
Short-term borrowings	$	236,000	$	137,000	$	(99,000)	(72.3)	%
Amortization expense of debt issue costs		22,000		8,000		(14,000)	(175.0)
ERTC interest		(42,000)		(7,000)		35,000	500.0
Total	$	216,000	$	138,000	$	(78,000)	(56.5)	%

2928

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~RESULTS OF OPERATIONS~~ - ~~Continued~~INTEREST – NET-Continued

~~SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – Continued~~

~~iv)~~

Our computer-related expenses declined $248,000, when comparing the six-month periods ended June 30, 2022 and 2021. During the second quarter of 2021 we incurred approximately $288,000 in costs related to the May 2021 ransomware attack at our Florida Pneumatic subsidiary, where no such costs were incurred during the second quarter of 2022.

~~Lastly, our general corporate expenses declined $61,000~~The most significant factor causing the increase in our short-term borrowings interest expense this quarter, compared to the same three-month period ~~in 2021.~~

~~OTHER EXPENSE (INCOME)~~

~~Other expense~~ in 2022, ~~consists primarily~~was the increase SOFR and prime rates. Most of ~~adjustments~~our borrowings are SOFR plus Applicable Margin. The Applicable Margin, as defined in our Credit Agreement, during the three-month period ended June 30, 2023, was 2.10% applied to ~~the fair value of certain assets.~~

~~On April 20, 2020, we received a Paycheck Protection Program (“PPP”) loan, in the amount of $2,929,000. Under the terms of the Coronavirus Aid, Relief,~~all SOFR borrowings and ~~Economic Security Act, (“CARES Act”), as amended, we~~1.10% applied to Base Rate borrowings. The Applicable Margins that were ~~eligible~~added to ~~apply for forgiveness for all or a portion of the PPP loan. In February 2021, we filed an application for forgiveness with the lender, who approved this submission~~LIBOR and submitted the application for forgiveness to the SBA. On June 9, 2021, we were advised that the SBA had approved our PPP loan forgiveness application and as such, the PPP loan and interest were forgiven in its entirety. Accordingly, the lender applied the funds and paid off PPP loan principal in its entirety and interest in full. In accordance with current accounting guidance this forgiveness of debt and related accrued interest was accounted for as Other Income in 2021.

~~INTEREST EXPENSE (INCOME)~~

Three months ended June 31,

Increase (decrease)

2022

2021

Amount

%

Interest expense attributable to:









Short-term borrowings

$
89,000

$
8,000

$
81,000

1,012.5
%
PPP loan

—

(27,000)

27,000

100.0

Amortization expense of debt issue costs

4,000

4,000

—

NA

Other

(7,000)

—

(7,000)

NA

Total

$
86,000

$
(15,000)

$
101,000

673.3
%

Six months ended June 30,

Increase (decrease)

2022

2021

Amount

%

Interest expense attributable to:









Short-term borrowings

$
137,000

$
18,000

$
119,000

661.1
%
PPP loan

—

(19,000)

19,000

100.0

Amortization expense of debt issue costs

8,000

8,000

—

NA

Other

(7,000)

—

(7,000)

NA

Total

$
138,000

$
7,000

$
131,000

1,871.4
%

~~Our average short-term~~Base Rate borrowings during the ~~three and six-month periods~~three-month period ended June 30, 2022, ~~increased significantly, when~~were 1.50% and 0.50%, respectively. Driven by the general increase in the cost of short-term borrowing rates, during the three-month period ended June 30, 2023, the SOFR ranged from 4.76% to 5.15%, compared to the same periods in 2021. This increase was due primarily to our decision to increase safety stock levels of inventory, due primarily to delays and other supply chain issues, increased inventory related to the shipment of the stocking rollout that occurredLIBOR, which we were using during the second quarter of 2022 that ranged from 0.43% to 1.51%. The Prime Rate during the three-month period ended June 30, 2023, ranged from 8.00% to 8.25%, compared to a range of 3.5% to 4.00%, during the same period a year ago.

The average balance of short-term borrowings during the three-month periods ended June 30, 2023, and 2022, were $7,060,000, and $11,544,000, respectively.

As discussed in Note 8, in late March 2023, we and the ~~purchase~~Bank amended the Credit Agreement, and ~~related costs associated with~~as a result, we wrote off the ~~acquisition in~~balance of the unamortized debt issue cost as of the date of Amendment No.11 during the first quarter of ~~2022 of the JGC business. Additionally, the Applicable Margins, as defined in the Credit Agreement with Capital One bank, NA, also increased. See Note 9-Debt for further discussion.~~

~~As discussed earlier, during the second quarter of 2021, we applied for and received forgiveness of the PPP loan. Accordingly, we recorded the reversal of associated interest expense.~~

~~Table of Contents~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

~~RESULTS OF OPERATIONS~~ - ~~Continued~~

~~INTEREST EXPENSE (INCOME) - Continued~~

2023. The Debt issue costs ~~are associated with an amendment to the Credit Agreement. There were no amortizable debt issue costs~~ incurred ~~with Amendment No. 9, or Amendment No. 10 to the Credit Agreement.~~

~~Other interest relates to interest received~~ in connection with ~~federal income tax refunds received.~~the above-referenced Amendment No. 11, are being amortized through the expiration date of credit Agreement, which is February 2027.

INCOME TAXES

At the end of each interim reporting period, we compute an effective tax rate based upon our estimated full year results. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods. Accordingly, the effective tax rate for the three and six-month periods ended June 30, 2023, were approximately 33.4% and 32.5%, respectively, and for the same periods in 2022, the effective tax rates were a tax expense of 138.2%, and a tax benefit of 3.0%, ~~compared to a tax benefit of 3.8% and 8.1% for the same three and six-month periods in 2021.~~respectively. The effective tax rates for all periods presented were impacted primarily by state taxes and non-deductible expenses. Impacting 2021’s effective tax benefit was the enactment of the CARES Act. Under the terms of the CARES Act, we applied for and were approved to treat the gain on the forgiveness of the PPP loan as non-taxable income. Accordingly, the gain resulting from the forgiveness of the PPP loan was not included in the computation of the 2021 effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

We monitor such metrics as days’ sales outstanding, inventory requirements, inventory turns, estimated future purchasing requirements and capital expenditures to project liquidity needs, as well as evaluate return on assets. Our primary ~~sources~~source of funds ~~are operating cash flows, existing working capital and~~is our Revolver ~~Loan (“Revolver”)~~loan with our Bank.

We gauge our liquidity and financial stability by various measurements, some of which are shown in the following table:


	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Working capital	$	22,407,000	$	24,598,000	$	21,245,000	$	20,838,000
Current ratio		2.40 to 1		3.04 to 1		2.86 to 1		2.44 to 1
Shareholders’ equity	$	43,066,000	$	43,840,000	$	42,309,000	$	41,956,000

~~Credit facility~~

Our Credit Facility is discussed in detail in Note 9, to our Consolidated Financial Statements. Discussed therein, we and the Bank entered into an amendment that, among other things, increased the Revolver borrowing commitment by $2,000,000 to $18,000,000 through June 30, 2022. We believe the return to the $16,000,000 maximum Revolver borrowing amount will not impact future operations.

~~At June 30, 2022, there was $7,000,000 available to us under our Revolver arrangement.~~

Should the need arise whereby the current Credit Agreement is insufficient; we believe that the current Agreement could be expanded, and/or we could obtain additional funds based on the value of our real property.

~~Cash flows~~

For the six-month period ended June 30, 2022, cash used by operating activities was $1,154,000, compared to cash provided by operating activities during the six-month period ended June 30, 2021, of $1,368,000. At June 30, 2022, our consolidated cash balance was $431,000, compared to $539,000 at December 31, 2021. We operate under the terms and conditions of the Credit Agreement. As a result, all domestic cash receipts are remitted to Capital One lockboxes and therefore does not represent cash on hand.

3129

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~RESULTS OF OPERATIONS~~ - ~~Continued~~

LIQUIDITY AND CAPITAL RESOURCES – - Continued

Credit Agreement

Our Credit Agreement is discussed in Note 8 to our consolidated financial statements. As discussed therein, we and the Bank entered into an amendment to the Credit Facility that, among other things, extended the expiration date to February 8, 2027.

At June 30, 2023, there was approximately $9,324,000 available to us under the Revolver arrangement.

Cash Flows

For the six-month period ended June 30, 2023, cash provided by operating activities was $4,234,000, compared to cash used in operating activities for the six-month period ended June 30, 2022, of $1,154,000. At June 30, 2023, and December 31, 2022, our consolidated cash balance was $657,000, and $667,000, respectively. We operate under the terms and conditions of the Credit Agreement. As a result, all domestic cash receipts are remitted to Capital One lockboxes. Thus, nearly all cash on hand represents funds to cover checks issued but not yet presented for payment.

Our total debt to total book capitalization (total debt divided by total debt plus equity) onat June 30, ~~2022,~~2023, was ~~18.9%~~11.2%, compared to ~~11.6% on~~15.3% at December 31, ~~2021.~~2022.

During the six-month period ended June 30, ~~2022, we completed the JGC acquisition, with a purchase price of $2,300,000, plus acquisition expenses that included among other things, legal, accounting, and relocation expenses. (See Note 2).~~

~~During the six-month period ended June 30, 2022,~~2023, we used ~~$923,000~~$1,682,000 for capital expenditures, compared to ~~$247,000~~$923,000 during the same period in the prior year. Capital expenditures currently planned for the remainder of ~~2022~~2023 are approximately ~~$700,000,~~$1,300,000, which we expect will be financed through the Credit Facility.

The major portion of these planned capital expenditures will be for new metal cutting equipment, tooling and information technology hardware and ~~software, and the expansion of our Punxsutawney, PA facility as a result of the acquisition of JGC business (See Note 2).~~software.

Our liquidity and capital isare primarily sourced from ~~our credit facility,~~the Credit Agreement, described in Note 98 – Debt, to our ~~Consolidated Financial Statements,~~consolidated financial statements, and cash from operations.

Should the need arise whereby the current Credit Agreement is insufficient, we believe we could obtain additional funds based on the value of our real property and believe the borrowing under the current Agreement could be increased.

Customer concentration

Refer to Note 1 – Business and summary of accounting policies – Customer Concentration for a detailed discussion.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

IMPACT OF INFLATION

During the six-month period ended June 30, 2023, with respect to our cost of inventory, we encountered price increases in raw materials, and labor. Additionally, our operating costs continue to encounter cost/price increases. It is difficult to accurately determine what portion of the above referenced increases are attributable to inflation. We have been able to pass through most of the above-mentioned price increases, however we cannot predict our ability to continue this practice, nor to what degree. We intend to continue to actively manage the impact of inflation on our results of operations; however, we cannot reasonably estimate possible future impacts at this time.

NEW ACCOUNTING PRONOUNCEMENTS

There were no new accounting standards or pronouncements ~~issued~~that became effective during the ~~three and six-month periods~~three-month period ended June 30, ~~2022~~2023, that ~~were applicable to us.~~had a material impact on our consolidated financial statements.

We do not believe that any recently issued, but not yet effective accounting standard, if adopted, will have a material effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

~~Table of Contents~~

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated, as of June 30, ~~2022,~~2023, the effectiveness of the Company’s disclosure controls and procedures, which were designed to be effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the Company’s disclosure controls and procedures as of June 30, ~~2022,~~2023, the Company’s management, including its CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective at that date.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, identified in connection with the evaluation required by Exchange Act Rule 13a-15(d), that occurred during our most recently completed fiscal quarter ended June 30, ~~2022~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the legal proceedings’ disclosure described in our ~~2021~~2022 Form 10-K.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in the ~~2021~~2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

See “Exhibit Index” immediately following the signature page.

3332

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		P&F INDUSTRIES, INC.
		(Registrant)

		/s/ JOSEPH A. MOLINO, Jr.
		Joseph A. Molino, Jr.
		Chief Financial Officer
Dated: August ~~12, 2022~~11, 2023		(Principal Financial and Chief Accounting Officer)

3433

Table of Contents

EXHIBIT INDEX

The following exhibits are either included in this report or incorporated herein by reference as indicated below:


Exhibit Number		Description of Exhibit

10.1		Amendment No. 103 to ~~Second Amended and Restated Loan and Security~~Executive Employment Agreement, dated as of ~~April 12, 2022,~~June 6, 2023, by and ~~among~~between the Registrant Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., ATSCO Holdings Corp, Jiffy Air Tool, Inc., Bonanza Properties Corp., Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Hy-Tech Illinois, Inc., Heisman Acquisition Corp., and ~~Capital One, National Association, as lender and agent (Incorporated~~Joseph A. Molino, Jr. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, ~~dated April 12, 2022).~~

~~10.2~~		Fourth Amended and Restated Revolver Note, dated April 12, 2022, by the Registrant, Florida Pneumatic Manufacturing Corporation and Hy-Tech Machine, Inc in favor of Capital One, National Association (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated April 12, 2022)dated.June 6, 2023).

31.1		Certification of Richard A. Horowitz, Principal Executive Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Joseph A. Molino, Jr., Principal Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Richard A. Horowitz, Principal Executive Officer of the Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Joseph A. Molino, Jr., Principal Financial Officer of the Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		* Inline Interactive Data

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

Attached as Exhibit 101 are the following, each formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Loss,

*Attached as Exhibit 101 are the following, each formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to consolidated financial statements.

A copy of any of the foregoing exhibits to this Quarterly Report on Form 10-Q may be obtained, upon payment of the Registrant’s reasonable expenses in furnishing such exhibit, by writing to P&F Industries, Inc., 445 Broadhollow Road, Suite 100, Melville New York 11747, Attention: Corporate Secretary.

3534


Accounts receivable	$	489,000
Inventories		359,000
Machinery and equipment		823,000
Customer relationships		450,000
Goodwill		394,000
Liabilities assumed		(215,000)
Total purchase price	$	2,300,000


	For the		For the
	three-month		six-month
	period ended		period ended
	June 30, 2021		June 30,2021
Revenue	$	14,399,000	$	28,855,000
Net income	$	2,398,000	$	2,099,000
Earnings per share – basic	$	0.75	$	0.66
Earnings per share – diluted	$	0.75	$	0.66


Balance, January 1, 2022	$	4,447,000
Goodwill attributable to the acquisition of JGC business (See Note 2)		394,000
Currency translation adjustment		(19,000)
Balance, June 30, 2022	$	4,822,000


	Three months ended June 31,				Increase (decrease)
	2022		2021		Amount		%
Interest expense attributable to:
Short-term borrowings	$	89,000	$	8,000	$	81,000	1,012.5	%
PPP loan		—		(27,000)		27,000	100.0
Amortization expense of debt issue costs		4,000		4,000		—	NA
Other		(7,000)		—		(7,000)	NA
Total	$	86,000	$	(15,000)	$	101,000	673.3	%