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. Yesx No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yesx No¨

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

As of ~~November 6, 2015~~May 10, 2016 there were ~~3,616,870~~3,592,870 shares of the registrant’s Class A Common Stock outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
		(unaudited)		(See Note 1)		(unaudited)		(See Note 1)
ASSETS
CURRENT ASSETS

Cash		$	1,682,000	$	1,011,000	$	884,000	$	927,000
Accounts receivable — net			11,061,000		9,547,000		9,181,000		8,477,000
Inventories			24,252,000		24,335,000		19,979,000		19,783,000
Deferred income taxes — net			1,149,000		1,149,000
Prepaid expenses and other current assets			1,452,000		1,529,000		1,488,000		1,032,000
Assets of discontinued operations							—		8,435,000
TOTAL CURRENT ASSETS			39,596,000		37,571,000		31,532,000		38,654,000

PROPERTY AND EQUIPMENT
Land			1,550,000		1,550,000		1,550,000		1,550,000
Buildings and improvements			7,724,000		7,683,000		7,676,000		7,677,000
Machinery and equipment	��		21,288,000		20,460,000		18,728,000		18,736,000
			30,562,000		29,693,000		27,954,000		27,963,000
Less accumulated depreciation and amortization			20,145,000		19,101,000		18,653,000		18,491,000
NET PROPERTY AND EQUIPMENT			10,417,000		10,592,000		9,301,000		9,472,000

GOODWILL			12,032,000		11,980,000		10,148,000		10,154,000

OTHER INTANGIBLE ASSETS — net			11,451,000		12,437,000		10,768,000		11,098,000

OTHER ASSETS — net			355,000		514,000		1,850,000		234,000

TOTAL ASSETS		$	73,851,000	$	73,094,000	$	63,599,000	$	69,612,000

See accompanying notes to consolidated financial statements (unaudited).

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
	(unaudited)			(See Note 1)			(unaudited)			(See Note 1)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES

Short-term borrowings	$	11,461,000		$	11,817,000		$	—		$	9,623,000
Accounts payable		4,218,000			3,160,000			2,974,000			2,791,000
Accrued liabilities		5,280,000			5,500,000
Accrued compensation and benefits								699,000			1,718,000
Accrued other liabilities								1,878,000			1,666,000
Dividends payable								1,976,000			—
Current maturities of long-term debt		494,000			3,167,000			29,000			491,000
Liabilities of discontinued operations								—			1,342,000
TOTAL CURRENT LIABILITIES		21,453,000			23,644,000			7,556,000			17,631,000

Long–term debt, less current maturities		6,122,000			6,493,000			98,000			5,936,000
Deferred tax liabilities - net		2,788,000			2,720,000			2,044,000			2,175,000
Other liabilities		233,000			246,000			224,000			228,000

TOTAL LIABILITIES		30,596,000			33,103,000			9,922,000			25,970,000



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 – 4,170,000 at September 30, 2015 and 4,139,000 at December 31, 2014		4,170,000			4,139,000
Class A - $1 par; authorized - 7,000,000 shares; issued – 4,176,000 at March 31, 2016 and 4,170,000 at December 31, 2015								4,176,000			4,170,000
Class B - $1 par; authorized - 2,000,000 shares; no shares issued		—			—			—			—
Additional paid-in capital		12,840,000			12,695,000			12,891,000			12,884,000
Retained earnings		31,094,000			27,951,000			41,842,000			31,495,000
Treasury stock, at cost – 554,000 shares at September 30, 2015 and December 31, 2014		(4,566,000	)		(4,566,000	)
Treasury stock, at cost – 584,000 shares at March 31, 2016 and 554,000 shares at December 31, 2015								(4,821,000	)		(4,566,000	)
Accumulated other comprehensive loss		(283,000	)		(228,000	)		(411,000	)		(341,000	)

TOTAL SHAREHOLDERS’ EQUITY		43,255,000			39,991,000			53,677,000			43,642,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	73,851,000		$	73,094,000		$	63,599,000		$	69,612,000

See accompanying notes to consolidated financial statements (unaudited).

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

	Three months						Nine months
	ended September 30,						ended September 30,
	2015			2014			2015			2014			Three Months Ended March 31,
													2016			2015
Net revenue	$	21,678,000		$	22,932,000		$	64,064,000		$	57,132,000		$	14,499,000		$	14,559,000
Cost of sales		13,813,000			14,904,000			40,261,000			36,466,000			9,283,000			9,060,000
Gross profit		7,865,000			8,028,000			23,803,000			20,666,000			5,216,000			5,499,000
Selling, general and administrative expenses		5,962,000			6,438,000			18,510,000			17,221,000			5,056,000			4,932,000
Operating income		1,903,000			1,590,000			5,293,000			3,445,000			160,000			567,000
Other expense (income)		75,000			---			(126,000	)		---
Other income														(51,000	)		(50,000	)
Interest expense		173,000			158,000			566,000			335,000			102,000			29,000
Income before income taxes		1,655,000			1,432,000			4,853,000			3,110,000
Income from continuing operations before income taxes														109,000			588,000
Income tax expense		605,000			616,000			1,710,000			1,260,000			43,000			215,000
Income from continuing operations														66,000			373,000

Discontinued operations (Note 2)

Net income from discontinued operations, net of tax of $38,000 and $235,000 for the three-month periods ended March 31, 2016 and 2015, respectively														72,000			408,000
Gain on sale of discontinued operations, net of tax benefit of $141,000														12,185,000			—
Discontinued operations, net of tax														12,257,000			408,000

Net income	$	1,050,000		$	816,000		$	3,143,000		$	1,850,000		$	12,323,000		$	781,000

Basic earnings per share	$	0.29		$	0.22		$	0.87		$	0.50
Continuing operations													$	0.02		$	0.11
Discontinued operations														3.40			0.11
Net income													$	3.42		$	0.22

Diluted earnings per share	$	0.28		$	0.20		$	0.84		$	0.47
Continuing operations													$	0.02		$	0.10
Discontinued operations														3.24			0.11
Net income													$	3.26		$	0.21

Weighted average common shares outstanding:

Weighted average common shares outstanding
Basic		3,616,000			3,792,000			3,604,000			3,737,000			3,601,000			3,589,000

Diluted		3,792,000			3,968,000			3,764,000			3,917,000			3,778,000			3,746,000


Net income	$	1,050,000		$	816,000		$	3,143,000		$	1,850,000		$	12,323,000		$	781,000
Other comprehensive loss-foreign currency translation adjustment		(99,000	)		(63,000	)		(55,000	)		(63,000	)
Other comprehensive loss - foreign currency translation adjustment														(70,000	)		(108,000	)
Total comprehensive income	$	951,000		$	753,000		$	3,088,000		$	1,787,000		$	12,253,000		$	673,000

See accompanying notes to consolidated financial statements (unaudited).

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (unaudited)

Class A Common Stock, $1 Par Additional
Paid-in Retained Treasury stock Accumulated
other
comprehensive
Total Shares Amount capital earnings Shares Amount loss

Balance, January 1, 2015 $ 39,991,000 4,139,000 $ 4,139,000 $ 12,695,000 $ 27,951,000 (554,000 ) $ (4,566,000 ) $ (228,000 )
Net income 3,143,000 — — — 3,143,000 — — —
Exercise of stock options 73,500 23,500 23,500 50,000 — — — —
Restricted common stock compensation 30,500 7,500 7,500 23,000 — — — —
Stock-based compensation 72,000 — — 72,000 — — — —
Foreign currency translation adjustment (55,000 ) — — — �� — — (55,000 )
Balance, September 30, 2015 $ 43,255,000 4,170,000 $ 4,170,000 $ 12,840,000 $ 31,094,000 (554,000 ) $ (4,566,000 ) $ (283,000 )
Class A common
stock, $1 par Additional
paid-in Retained Treasury stock Accumulated
other
comprehensive
Total Shares Amount capital earnings Shares Amount loss

Balance, January 1, 2016 $ 43,642,000 4,170,000 $ 4,170,000 $ 12,884,000 $ 31,495,000 (554,000 ) $ (4,566,000 ) $ (341,000 )

Net income 12,323,000 — — — 12,323,000 — — —

Exercise of stock options 23,000 6,000 6,000 17,000 — — — —

Purchase of Class A common stock (255,000 ) — — — — (30,000 ) (255,000 ) —

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

Stock-based compensation (24,000 ) — — (24,000 ) — — — —

Dividend (1,976,000 ) — — — (1,976,000 ) — — —

Foreign currency translation adjustment (70,000 ) — — — — — — (70,000 )

Balance, March 31, 2016 $ 53,677,000 4,176,000 $ 4,176,000 $ 12,891,000 $ 41,842,000 (584,000 ) $ (4,821,000 ) $ (411,000 )

See accompanying notes to consolidated financial statements (unaudited).
4

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)~~
Nine months
ended September 30,
2015 2014
Cash Flows from Operating Activities:
Net income $ 3,143,000 $ 1,850,000

Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash charges:
Depreciation and amortization 1,279,000 1,137,000
Amortization of other intangible assets 971,000 361,000
Amortization of debt issue costs 83,000 67,000
Provision for (recovery of) losses on accounts receivable - net 22,000 (107,000 )
Stock-based compensation 72,000 182,000
Restricted stock-based compensation 30,000 21,000
Loss on sale of fixed assets 5,000 7,000
Deferred income taxes 72,000 1,079,000
Fair value reduction in contingent consideration (126,000 ) —
Changes in operating assets and liabilities:
Accounts receivable (1,548,000 ) (3,824,000 )
Inventories (6,000 ) 1,671,000
Prepaid expenses and other current assets 76,000 (376,000 )
Other assets 76,000 54,000
Accounts payable 1,064,000 1,212,000
Accrued liabilities (86,000 ) (214,000 )
Other liabilities (13,000 ) (12,000 )
Total adjustments 1,971,000 1,258,000
Net cash provided by operating activities 5,114,000 3,108,000
~~See accompanying notes to consolidated financial statements (unaudited).~~
5
P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine months
ended September 30,
2015 2014
Cash Flows from Investing Activities:
Capital expenditures (1,144,000 ) (713,000 )
Proceeds from disposal of assets 31,000 8,000
Purchase of net assets Air Tool Service Company — (7,559,000 )
Purchase of Exhaust Technologies, Inc. — (10,377,000 )
Purchase of Universal Air Tool Company Limited, net of cash acquired of $14,000 — (1,701,000 )
Net cash used in investing activities (1,113,000 ) (20,342,000 )

Cash Flows from Financing Activities:
Proceeds from exercise of stock options 73,000 741,000
Proceeds from short-term borrowings 55,827,000 66,166,000
Repayments of short-term borrowings (56,182,000 ) (52,107,000 )
Repayments of term loans (3,012,000 ) (428,000 )
Proceeds from term loan — 3,000,000
Bank financing costs — (65,000 )
Repayments of notes payable (30,000 ) —
Net cash (used in) provided by financing activities (3,324,000 ) 17,307,000
Effect of exchange rate changes on cash (6,000 ) 18,000
Net increase in cash 671,000 91,000
Cash at beginning of period 1,011,000 413,000
Cash at end of period $ 1,682,000 $ 504,000

Supplemental disclosures of cash flow information:

Cash paid for:
Interest $ 492,000 $ 236,000
Income taxes $ 1,149,000 $ 126,000

Supplemental disclosures of non-cash investing and financing activities:
Contingent consideration on acquisition $ — $ 425,000
Exchange of property and equipment $ 64,000 $ —
Three months
ended March 31,
2016 2015
Cash Flows from Operating Activities:
Net income from continuing operations $ 66,000 $ 373,000
Net income from discontinued operations 12,257,000 408,000

Adjustments to reconcile net income from operations to net cash used in operating activities:

Non-cash charges:
Depreciation and amortization 409,000 375,000
Amortization of other intangible assets 308,000 309,000
Amortization of debt issue costs 98,000 28,000
Provision for losses on accounts receivable - net 2,000 2,000
Stock-based compensation 11,000 38,000
Restricted stock-based compensation 14,000 6,000
Loss on sale of fixed assets - 4,000
Deferred income taxes (127,000 ) (56,000 )

Changes in operating assets and liabilities:
Accounts receivable (719,000 ) (433,000 )
Inventories (230,000 ) (1,632,000 )
Prepaid expenses and other current assets (456,000 ) (385,000 )
Other assets (1,639,000 ) 26,000
Accounts payable 190,000 809,000
Accrued compensation and benefits (1,017,000 ) (1,208,000 )
Accrued liabilities 218,000 43,000
Other liabilities (4,000 ) (4,000 )
Total adjustments (2,942,000 ) (2,078,000 )
Net cash used in operating activities – continuing operations (2,876,000 ) (1,705,000 )
Net cash used in operating activities – discontinued operations (840,000 ) (1,310,000 )

Net cash used in operating activities $ (3,716,000 ) $ (3,015,000 )

See accompanying notes to consolidated financial statements (unaudited).
6

P&F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three months
ended March 31,
2016 2015
Cash Flows from Investing Activities:
Capital expenditures $ (242,000 ) $ (151,000 )
Proceeds from disposal of assets - 12,000
Net cash used in investing activities – continuing operations (242,000 ) (139,000 )
Net cash provided by (used in) investing activities – discontinued operations 20,163,000 (33,000 )
Net cash provided by (used in) investing activities 19,921,000 (172,000 )

Cash Flows from Financing Activities:
Proceeds from exercise of stock options 23,000 20,000
Purchase of Class A common stock (255,000 ) —
Proceeds from short-term borrowings 16,998,000 18,809,000
Repayments of short-term borrowings (7,912,000 ) (15,604,000 )
Repayments of term loans (6,343,000 ) (365,000 )
Repayments of notes payable (9,000 ) (11,000 )
Payments of bank financing costs (23,000 ) —
Net cash provided by financing activities – continuing operations 2,479,000 2,849,000
Net cash used in financing activities – discontinued operations (18,716,000 ) —
Net cash (used in) provided by financing activities (16,237,000 ) 2,849,000

Effect of exchange rate changes on cash (11,000 ) (14,000 )
Net decrease in cash (43,000 ) (352,000 )
Cash at beginning of period 927,000 1,011,000
Cash at end of period $ 884,000 $ 659,000

Supplemental disclosures of cash flow information:

Cash paid for:
Interest $ 86,000 $ 161,000
Income taxes $ 8,000 $ 60,000
See accompanying notes to consolidated financial statements (unaudited).

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 (“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 financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the management of the Company, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth therein. All such adjustments, except for those adjustments relating to discontinued operations are of a normal recurring nature. 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, ~~2014~~2015 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, ~~2014~~2015 (“~~2014~~2015 Form 10-K”). The interim financial statements contained herein should be read in conjunction with the ~~2014~~2015 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)~~loss - foreign currency translation ~~adjustments”~~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.
Reclassification
Certain amounts in the consolidated financial statements of the Company have been reclassified to conform to classifications used in the current ~~period.~~year. The reclassifications had no effect on previously reported results of operations or retained earnings.

The Company

P&F is a Delaware corporation incorporated on April 19, ~~1963, that operates~~1963. Until February 11, 2016, the effective date of the sale of its Nationwide Industries, Inc. (“Nationwide”) subsidiary, P&F operated in two primary lines of business or segments: (i) tools and other products (“Tools”) and (ii) hardware and accessories (“Hardware”). As a result of the sale of Nationwide, the Company currently only operates in the Tools segment. See Notes 2 and 8 to Consolidated Financial Statements for further discussion.
Tools

The Company conducts its Tools 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”). ~~During the third quarter of 2014, the Company acquired~~ Exhaust Technologies Inc. (“ETI”) and Universal Air Tool Company Limited (“UAT”)~~. Both ETI and UAT~~, which were acquired by the Company in 2014, are wholly-owned subsidiaries of Florida Pneumatic, and unless otherwise indicated, the operations and results of operations of Florida Pneumatic herein include ETI and UAT as of the respective dates such companies were acquired. Additionally, during the third quarter of 2014, the Company acquired substantially all the assetsPneumatic. The business of Air Tool Service Company (“ATSCO”), which ~~business~~was also acquired in 2014, operates through a wholly-owned subsidiary of Hy-Tech. ~~Unless otherwise indicated, the results of operations of Hy-Tech herein include ATSCO from the date the business was acquired.~~

Florida Pneumatic is engaged in the importation and sale of pneumatic hand tools, primarily for the retail, industrial and automotive markets, and the importation and sale of compressor air filters. Florida Pneumatic also markets, through its Berkley Tool division (“Berkley”), a product line which includes pipe and bolt dies, pipe taps, wrenches, vises and stands, pipe and tubing cutting equipment, hydrostatic test pumps, and replacement electrical components for a widely-used brand of pipe cutting and threading machines.
7

Hy-Tech manufactures and distributes its own line of industrial pneumatic tools. Hy-Tech also produces and markets impact wrenches, grinders, drills, and motors. Further, it also manufactures tools to customer specifications. Its customers include refineries, chemical plants, power generation facilities, heavy construction enterprises, oil and gas and mining companies. In addition, Hy-Tech manufactures an extensive line of pneumatic tool replacement parts that are sold to original equipment manufacturers (“OEMs”). It also manufactures and distributes high pressure stoppers for hydrostatic testing fabricated pipe, gears, sprockets, splines and racks and produces a line of siphons.

7
Hardware

~~The~~Until the sale of Nationwide, which was effective February 11, 2016 (the “Closing Date”), the Company ~~conducts~~conducted its Hardware business through aits wholly-owned subsidiary, Countrywide Hardware, Inc. (“Countrywide”). Countrywide ~~conducts~~conducted its business operations through its wholly-owned subsidiary, ~~Nationwide Industries, Inc. (“Nationwide”).~~Nationwide. Nationwide is an importer and manufacturer of door, window and fencing hardware and accessories, including rollers, hinges, window operators, sash locks, custom zinc castings and door closers. ~~Nationwide’s products are~~On the Closing Date, Countrywide sold ~~through in-house sales personnel~~Nationwide to an unrelated third party for approximately $22.2 million. See Notes 2 and ~~manufacturers’ representatives~~8 to ~~distributors, retailers and OEM customers. End users of Nationwide’s products include contractors, home builders, pool and patio distributors, OEM/private label customers and general consumers.~~  Consolidated Financial Statements for further discussion.

Management Estimates

The preparation of financial statements and related disclosures in conformity with 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, inventory, goodwill, intangible assets and other long-lived assets, income taxes and deferred taxes.  Descriptions of these policies are discussed in the Company’s ~~2014~~2015 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 makes adjustments 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.

~~Recently issued~~New Accounting Pronouncements

Recently Issued Accounting Pronouncements
In ~~September 2015,~~March 2016, the ~~Financial~~FASB issued ASU 2016-09,Improvements to Employee Share-Based Payment Accounting ~~Standards Board (“FASB”)~~. The standard reduces complexity in several aspects of the accounting for employee share-based compensation, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued ~~Accounting Standards Update (“ASU”) 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting~~ASU No. 2016-02,Leases. This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for ~~Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16~~leases and requires ~~an acquirer in a business combination~~additional disclosures about leasing arrangements. It will require companies to recognize ~~adjustments~~lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. 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 ~~provisional amounts identified during the measurement period~~classification criteria for distinguishing between capital leases and operating leases in the ~~reporting period in which the adjustment amounts are determined.~~previous leases guidance. The acquirer is also required to either present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amounts recorded in the current-period earnings by line item that would have been recorded in previous periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. Under current U.S. GAAP, the acquirer is required to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. ASU ~~2015-16~~ is effective for annual periods beginning after December ~~31, 2015, with early application permitted, and shall apply to adjustments to provisional amounts that occur after~~15, 2018, including interim periods within those fiscal years; earlier adoption is permitted. In the ~~effective date. The Company is currently assessing the impact the adoption of ASU 2015-16 will have on future~~ financial statements ~~and related disclosures.~~
8
~~In July 2015,~~in which the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost or net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out (“LIFO”). This ASU is ~~effective for annual~~first applied, leases shall be measured and ~~interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted~~recognized at the beginning of the earliest comparative period presented with an ~~interim or annual reporting period.~~adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. The Company is currently evaluating the impact of ~~adopting~~the adoption of this ~~guidance.~~guidance on its consolidated financial condition, results of operations and cash flows.
In November 2015, the FASB issued ASU 2015-17,Balance Sheet Classification of Deferred Taxes . ASU 2015-17 is aimed at reducing complexity in accounting standards. Currently, GAAP requires the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. This requires a jurisdiction-by-jurisdiction analysis based on the classification of the assets and liabilities to which the underlying temporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attribute is expected to be realized. Any valuation allowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. To simplify presentation, the new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability.

The guidance does not change the existing requirement that only permits offsetting within a jurisdiction; companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The new guidance is effective in fiscal years beginning after December 15, 2016, including interim periods within those years, with early adoption permitted. The Company applied the new standard retrospectively to the prior period presented in the Consolidated Balance Sheets. The previously reported December 31, 2015 balance sheet reported Deferred income taxes-net in Current assets of $1,131,000. Current presentation reports $209,000 of deferred tax assets being included in the Current assets from discontinued operations, as detailed in Note 2, and the balance of $922,000 is presented net against the long-term deferred income tax liability.

In April 2015, the FASB issued ASU 2015-03, “Interest -– Imputation of ~~Interest (Subtopic 835-30):~~Interest: Simplifying the Presentation of Debt Issuance Costs ~~("ASU 2015-03"), in order to simplify the presentation of debt issuance costs.~~” (ASU 2015-03). The ~~ASU~~update requires debt issuance costs to be presented on the balance sheet as a direct deduction from the related debt liability rather than an asset. ASU 2015-03 is effective for public companies for annual periods beginning after December 15, 2015, and interim periods thereafter, with early adoption permitted. The guidance also requires retrospective application to all prior periods presented. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial statements. However, in August 2015, the FASB issued Accounting Standards Update 2015-15, Interest—Imputation of Interest (Subtopic 835-30) “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit” (“ASU 2015-15”). ASU 2015-15 clarifies that ~~the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the~~ deferred debt issuance costs ~~ratably over~~be reported as a reduction to long-term debt (previously reported in other noncurrent assets). We adopted ASU 2015-03 in the ~~term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.~~
In May 2014, the FASB issued ASU Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard was to become effective for annual and interim periods in fiscal years beginning after December 15, 2016. In April 2015, the FASB proposed deferring the effective date of ASU 2014-09 for one year, and proposed some modifications to the original provisions. On July 9, 2015, the one year deferral of the effective date was approved, and as such ASU 2014-09 is effective for our first quarter of ~~fiscal year 2018 using either~~2016 and for all retrospective periods, as required. The impact of the ~~retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on~~adoption was not material to our consolidated financial statements, and ~~related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.~~is discussed further in Note 8.

NOTE 2 – ~~ACQUISITIONS~~DISCONTINUED OPERATIONS

~~Exhaust Technologies Inc.~~
The Company, as part of its strategic plan, which is to focus on expanding its position in the power tool and accessories market, sold Nationwide. On ~~July 1, 2014,~~ the ~~Company acquired ETI,~~Closing Date, P&F, Countrywide, Nationwide and Argosy NWI Holdings, LLC, a ~~developer~~Delaware limited liability company (“Buyer”), entered into a Stock Purchase and ~~distributor~~Redemption Agreement (the “Stock Purchase Agreement”), pursuant to which, among other things, after giving effect to certain contributions and redemptions of ~~pneumatic tools, through a merger between a newly formed wholly-owned subsidiary of Florida Pneumatic and ETI. ETI markets its AIRCAT and NITROCAT brand pneumatic tools primarily to~~Nationwide’s common shares (“Nationwide Shares”), the ~~automotive market. ETI’s business operates through Florida Pneumatic. The purchase price for this acquisition consisted of $10,377,000 in cash plus the assumption of certain payables.~~
~~Universal Air Tool Company Limited~~
~~On July 29, 2014, the Company~~Buyer acquired all of the outstanding ~~shares of UAT, a distributor of pneumatic tools. UAT, which is located in High Wycombe, England, markets pneumatic tools to the automotive market sector primarily in the United Kingdom and Ireland.~~Nationwide Shares from Countrywide (the “Acquisition”). The purchase price for ~~this acquisition consisted~~the Nationwide Shares acquired in the Acquisition was approximately $22,200,000, before giving effect to an estimated working capital adjustment, as defined in the Stock Purchase Agreement, of approximately ~~$1,947,000 in~~$802,000, and an escrow amount of $1,955,000 (“escrow funds”). In addition, the Stock Purchase Agreement provides that, under certain circumstances, up to an additional $400,000 may be required to be contributed into the escrow fund by Countrywide. After paying closing costs, the net cash ~~net~~received from the Buyer was approximately $18.7 million.
Pursuant to the terms of ~~a post-closing~~the Stock Purchase Agreement, the final working capital ~~adjustment. As part of this transaction, there was~~amount is to be determined post-closing within the ~~possibility that~~timeframe set forth in the Stock Purchase Agreement. Subsequent to March 31, 2016, the Company ~~could pay~~and Buyer agreed on the amount of the working capital as ~~additional consideration (“contingent consideration”),~~of the Closing Date and the final adjustment, which was in favor of the Company. As $250,000 of the escrow funds relates to the ~~former shareholders of UAT (the “Sellers”) up~~working capital adjustment, and such $250,000 was determined to ~~a maximum of £250,000 should UAT’s net earnings during~~be due and owing to the ~~period from date of acquisition through~~Company, the ~~first anniversary date, July 29, 2015, after adjusting for among other things, interest, taxes, depreciation and amortization (“adjusted net income”) exceed a minimum threshold. At the time~~Company has included this $250,000 portion of the ~~acquisition,~~escrow funds in Prepaid Expenses and Other Current Assets in the Current Assets section of its Consolidated Balance Sheet. The remaining $1,705,000 of the escrow funds, which is classified as Other Assets on the Company’s Consolidated Balance Sheet, is intended to be released eighteen months from the Closing Date, less any claims made against these escrow funds, in accordance with the Stock Purchase Agreement. The Company ~~believed, based on a range of possible outcomes,~~believes that these escrow funds are highly collectible, and that it ~~was~~is more likely than not that ~~UAT would achieve~~with respect to any or all such potential claims made against the Company, these claims will not exceed the minimum dollar threshold amount of $150,000 required under the Stock Purchase Agreement. The Company has therefore included the full amount of the $1,705,000 portion of the escrow funds in its gain on sale of Nationwide. Should claims made against the Company pursuant to the Stock Purchase Agreement exceed the minimum threshold, then to the extent such claims are resolved in favor of the Buyer under the terms of the Stock Purchase Agreement, the total amount of such claims will be recorded as a loss on sale of Nationwide in future periods. See Note 8 to the Consolidated Financial Statements for further discussion.

As Nationwide was a substantial and unique business unit of the Company, its sale was a strategic shift. Accordingly, in accordance with Accounting Standard Code Topic 360, the Company has classified Nationwide as discontinued operations for all periods presented.
Income fromdiscontinued operations, net of taxes in the accompanying Consolidated Statements of Income and Comprehensive Income, is comprised of the following:
For the Period January 1, 2016
through February 11, 2016 Three months ended
March 31, 2015

Revenue $ 1,830,000 $ 5,267,000
Cost of goods sold 1,177,000 3,247,000
Gross margin 653,000 2,020,000
Selling and general and administrative expenses 483,000 1,214,000
Interest expense-net 60,000 163,000
Income before income taxes 110,000 643,000
Income tax 38,000 235,000

Net income $ 72,000 $ 408,000
The components of discontinued operations in the accompanying consolidated balance sheet are as follows:
December 31, 2015

Accounts receivable-net $ 1,245,000
Inventories 4,211,000
Prepaid expenses and other current assets 92,000
Net property and equipment 768,000
Goodwill 1,873,000
Other intangible assets-net 12,000
Other assets- net 5,000
Deferred taxes - net 229,000
Assets of discontinued operations $ 8,435,000

Accounts payable $ 765,000
Accrued compensation and benefits 247,000
Accrued other liabilities 330,000
Liabilities of discontinued operations $ 1,342,000
The Company recognized a gain of $12,185,000, on the sale of Nationwide during the three-month period ended March 31, 2016, which represents the difference between the adjusted net purchase price and the carrying book value of Nationwide. However, for income ~~that would entitle~~tax purposes, the ~~Sellers to~~Company’s tax basis in Nationwide was greater than the ~~maximum amount, and accordingly~~net proceeds, thus resulting in a tax loss. At the applicable tax rate of 34%, this loss has been recorded as a ~~$425,000 obligation as contingent consideration (£250,000 at~~tax benefit of $141,000. This tax benefit may only be applied against future capital gain transactions.
On the ~~then foreign exchange rate). Based upon projected results, at June 30, 2015, the Company adjusted the estimated contingent consideration payable to the Sellers to $224,000. Subsequently,~~Closing Date, the Company and the ~~Sellers agreed that the contingent consideration payable~~president of Nationwide, entered into a purchase agreement pursuant to ~~the Sellers shall be £193,435, or approximately $299,000. As a result,~~which, among other things the Company adjusted the contingent consideration payable to $299,000, and recognized $75,000 as Other Expense in the three-month period ended September 30, 2015. The $299,000 agreed upon amount was paid to the Sellers in October 2015.
9
~~Air Tool Service Company~~
~~On August 13, 2014, a newly formed wholly owned subsidiary of Hy-Tech,~~ acquired substantially all of the assets comprising the business of ATSCO, an Ohio based corporation engaged in the design, manufacture and distribution of pneumatic tools and parts. The purchase price consisted of approximately $7,659,000 in cash and the assumption of certain liabilities, and is subject to a post-closing working capital adjustment. The Company is still seeking to reach agreement with the seller of the ATSCO assets on the matter of the post-closing working capital adjustment, among other things.
~~All three acquisitions are included as a part~~30,000 shares of the Company’s ~~Tool segment. ETI~~Class A Common Stock (“Common Stock”) at the aggregate purchase price of $254,940 and UAT have been integrated into the business operations of Florida Pneumatic, and ATSCO has been integrated into the business operations of Hy-Tech since their respective dates of acquisition. As such, it is impracticableoptions to ~~determine the specific revenue and earnings directly attributable to any~~acquire 6,667 shares of the ~~acquired businesses.~~Company’s Common Stock at an aggregate price of $16,597.

~~The following unaudited pro-forma combined financial information gives effect~~Effective as of the Closing Date, Countrywide, as landlord, and Nationwide, as tenant, entered into a new lease relating to the ~~acquisition~~Tampa, Florida real property (the “Premises”). The lease provides for, among other things, a seven-year term commencing on the Closing Date and an annual base rent of ~~ETI, UAT~~approximately $252,000 with annual escalations. The lease also provides that the tenant will pay certain taxes and ~~ATSCO as if they were consummated January 1, 2014. This unaudited pro-forma financial information is presented for information purposes only,~~operating expenses associated with the Premises. The lease replaces the previous lease between Countrywide and ~~is not intended to present actual results that would have been attained had the acquisitions been completed~~Nationwide.

Lastly, effective as of ~~January 1, 2014 (the beginning~~the Closing Date, Countrywide and Nationwide entered into an Option and Right of First Refusal Agreement relating to the ~~earliest~~Premises, pursuant to which Countrywide granted a purchase option to Nationwide relating to the Premises if such option is initiated within 60 days following the Closing Date, which has since lapsed. In addition Countrywide granted to Nationwide a right of first refusal relating to certain offers made by third parties during the five-year period ~~presented) or to project potential operating results as of any future date or for any future periods.~~following the Closing Date.
Three months ended
September 30, 2014
(Unaudited) Nine months ended
September 30, 2014
(Unaudited)
Revenue $ 23,500,000 $ 65,452,000
Net income $ 805,000 $ 2,845,000
Earnings per share - basic $ 0.21 $ 0.76
Earnings per share - diluted $ 0.20 $ 0.73

NOTE 3 — EARNINGS PER SHARE

Basic earnings per common share is based only on the average number of shares of ~~the Company’s Class A~~ Common Stock ~~(“Common Stock”)~~ outstanding for the ~~periods presented.~~periods. Diluted earnings per common share reflects the effect of shares of ~~the common stock~~Common Stock issuable upon the exercise of options, unless the effect on earnings is antidilutive.

Diluted earnings per common share is computed using the treasury stock method. Under this method, the aggregate number of shares of ~~the~~ common stock outstanding reflects the assumed use of proceeds from the hypothetical exercise of any outstanding options to purchase shares of ~~the~~ Common Stock. The average market value for the period is used as the assumed purchase price.
10

The following table sets forth the elements of basic and diluted earnings per common share:

Three months ended Nine months ended Three months ended
September 30, September 30, March 31,
2015 2014 2015 2014 2016 2015
Numerator:
Numerator for basic and diluted earnings per common share:

Net income from continuing operations $ 66,000 $ 373,000
Net income from discontinued operations 12,257,000 408,000
Net income $ 1,050,000 $ 816,000 $ 3,143,000 $ 1,850,000 $ 12,323,000 $ 781,000

Denominator:
For basic earnings per share - weighted average common shares outstanding 3,616,000 3,792,000 3,604,000 3,737,000
Denominator for basic earnings per share weighted average common shares outstanding 3,601,000 3,589,000
Dilutive securities (1) 176,000 176,000 160,000 180,000 177,000 157,000
For diluted earnings per share - weighted average common shares outstanding 3,792,000 3,968,000 3,764,000 3,917,000
Denominator for diluted earnings per share weighted average common shares outstanding 3,778,000 3,746,000

⁽¹⁾ Dilutive securities consist of “in the money” stock options.

At ~~September 30,~~March 31, 2016 and 2015, ~~and 2014~~ and during the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ there were outstanding stock options whose exercise prices were higher than the average market values of the underlying ~~common stock~~Common Stock for the period. These options are anti-dilutive and are excluded from the computation of diluted earnings per share. The weighted average of anti-dilutive stock options outstanding was as follows:

Three months ended Nine months ended
September 30, September 30,
2015 2014 2015 2014
Weighted average antidilutive stock options outstanding 88,000 184,000 150,000 232,000
Three months ended
March 31,
2016 2015
Weighted average anti-dilutive stock options outstanding 89,000 182,000

NOTE 4 - STOCK-BASED COMPENSATION

During the three ~~and nine-month periods~~month period ended ~~September 30, 2015,~~March 31, 2016, the Company modified all previously issued outstanding options to purchase its common stock. This modification resulted in an aggregate increase of 19,174 options. The Company did not ~~grant~~record any compensation expense in connection with the issuance of these options, as the issuance was made as the result of an equity restructuring event. See Note 9 for further discussion. There were no options granted or Common Stock ~~options.~~awards issued during the three-month period ended March 31, 2015.

The following is a summary of the changes in outstanding options during the ~~nine-month~~three-month period ended ~~September 30, 2015:~~March 31, 2016:

Option Shares Weighted
Average
Exercise
Price Weighted Average
Remaining
Contractual Life
(Years) Aggregate
Intrinsic
Value Option Shares Weighted
Average
Exercise
Price Weighted Average
Remaining
Contractual Life
(Years) Aggregate
Intrinsic
Value
Outstanding, January 1, 2015 505,000 $ 6.51 4.8 $ 1,232,000
Outstanding, January 1, 2016 457,000 $ 6.15 4.0 $ 1,431,000
Granted — — — 19,174 5.89
Exercised (23,500 ) 3.11 (6,000 ) 3.81
Forfeited — — (26,500 ) 6.55
Expired (22,500 ) 16.68 — —
Outstanding, September 30, 2015 459,000 $ 6.19 4.2 $ 1,720,000
Outstanding, March 31, 2016 443,674 $ 5.90 3.5 $ 1,729,000

Vested, September 30, 2015 435,160 $ 6.08 4.0 $ 1,687,000
Vested, March 31, 2016 424,507 $ 5.81 3.4 $ 1,697,000

Included in the forfeited options in the table above are 20,998 options the Company purchased from Nationwide employees for $50,000 in connection with the sale of Nationwide.
11

The following is a summary of changes in non-vested options for the ~~nine~~three months ended ~~September 30, 2015:~~March 31, 2016:

Option Shares Weighted Average Grant-Date Fair Value Option Shares Weighted Average Grant-
Date Fair Value
Non-vested options, January 1, 2015 61,006 $ 6.14
Non-vested options, January 1, 2016 23,840 $ 6.72
Granted --- 829 6.45
Vested (37,166 ) $ 5.76 — —
Forfeited --- (5,502 ) 6.72
Non-vested options, September 30, 2015 23,840 $ 6.72
Non-vested options, March 31, 2016 19,167 $ 6.71

The number of shares of Common Stock available for issuance under the P&F Industries, Inc. 2012 Stock Incentive Plan (the “2012 Plan”), as of ~~September 30, 2015~~March 31, 2016 was ~~183,267.~~180,593. At ~~September 30, 2015,~~March 31, 2016, there were ~~113,500~~116,174 options outstanding issued under the 2012 Stock Incentive Plan and ~~345,500~~327,500 options outstanding issued under the 2002 Stock Incentive Plan.

Restricted Stock

Pursuant to the 2012 Plan, the Company, onin May ~~20,~~ 2015, ~~issued~~granted 1,000 restricted shares of its Common Stock to each non-employee member of its Board of Directors, totaling 5,000 restricted shares. The Company determined that the fair value of these shares ~~to be~~was $8.63, which was the closing price of the Company’s Common Stock on the date of the grant. These shares cannot be traded earlier than the first anniversary of the grant date. ~~The~~As such, the Company ~~will~~is ratably ~~amortize~~amortizing the total non-cash compensation expense of approximately $43,000 in its selling, general and administrative expenses through May 2016.
The Company issued 2,500 restricted shares of its common stock to Joseph A. Molino, Jr., the Company’s Chief Financial Officer, in accordance with an Employment Agreement dated April 2, 2015. The Company determined the fair value of these shares to be $6.86, which was the closing price of the Company’s Common Stock on the date of the grant. These shares shall vest as to 833 shares on April 2, 2016, 833 shares on April 2, 2017, and 834 shares on April 2, 2018; provided, however, that 100% of the then unvested portion of the shares shall vest in the event of Mr. Molino’s death or termination due to disability or upon a Change in Control (as defined in the 2012 Plan). These shares cannot be traded earlier than the first anniversary of the grant date. The Company will ratably amortize the total non-cash value of approximately $17,000 as compensation expense in its selling, general and administrative expenses through April 2018.

NOTE 5 - ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable - net consists of:

September 30, 2015 December 31, 2014 March 31, 2016 December 31, 2015
Accounts receivable $ 11,229,000 $ 9,693,000 $ 9,265,000 $ 8,559,000
Allowance for doubtful accounts (168,000 ) (146,000 ) (84,000 ) (82,000 )
$ 11,061,000 $ 9,547,000 $ 9,181,000 $ 8,477,000

NOTE 6 -– INVENTORIES

Inventories consist of:

September 30, 2015 December 31, 2014
Raw material $ 2,354,000 $ 2,014,000
Work in process 1,450,000 1,433,000
Finished goods 20,448,000 20,888,000
$ 24,252,000 $ 24,335,000
12
March 31, 2016 December 31, 2015
Raw material $ 2,133,000 $ 2,070,000
Work in process 1,335,000 1,366,000
Finished goods 16,511,000 16,347,000
$ 19,979,000 $ 19,783,000

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill ~~by segment are~~is as follows:

Consolidated Tools Hardware
Balance, January 1, 2015 $ 11,980,000 $ 10,107,000 $ 1,873,000
Adjustment to Acquisition of ATSCO 62,000 62,000 —
Currency translation adjustments (10,000 ) (10,000 ) —
Balance, September 30, 2015 $ 12,032,000 $ 10,159,000 $ 1,873,000
Balance, January 1, 2016 $ 10,154,000
Currency translation adjustment (6,000 )
Balance, March 31, 2016 $ 10,148,000

Other intangible assets were as follows:

September 30, 2015 December 31, 2014 March 31, 2016 December 31, 2015
Cost Accumulated
amortization Net book
value Cost Accumulated
amortization Net book
value Cost Accumulated
amortization Net book
value Cost Accumulated
amortization Net book
value
Other intangible assets:
Customer relationships (1) $ 13,192,000 $ 5,178,000 $ 8,014,000 $ 13,194,000 $ 4,551,000 $ 8,643,000 $ 11,276,000 $ 3,695,000 $ 7,581,000 $ 11,285,000 $ 3,486,000 $ 7,799,000
Trademarks and trade names (1) 2,025,000 — 2,025,000 2,035,000 — 2,035,000 2,003,000 — 2,003,000 2,015,000 — 2,015,000
Engineering drawings 410,000 149,000 261,000 410,000 120,000 290,000 410,000 168,000 242,000 410,000 159,000 251,000
Licensing 305,000 279,000 26,000 305,000 235,000 70,000
Non-compete agreements (1) 365,000 112,000 253,000 368,000 41,000 327,000 359,000 156,000 203,000 362,000 134,000 228,000
Patents 1,205,000 333,000 872,000 1,205,000 133,000 1,072,000 1,205,000 466,000 739,000 1,205,000 400,000 805,000
Totals $ 17,502,000 $ 6,051,000 $ 11,451,000 $ 17,517,000 $ 5,080,000 $ 12,437,000 $ 15,253,000 $ 4,485,000 $ 10,768,000 $ 15,277,000 $ 4,179,000 $ 11,098,000

(1) A portion of these intangibles are maintained in a foreign currency, and are therefore subject to foreign exchange rate fluctuations.
Amortization expense for intangible assets from continuing operations subject to amortization was as follows:

Three months ended September 30, Nine months ended September 30,
2015 2014 2015 2014
$ 324,000 $ 245,000 $ 971,000 $ 361,000

Three months ended March 31,
2016 2015
$ 308,000 $ 309,000

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

September 30, 2015 December 31, 2014 March 31, 2016 December 31, 2015
Customer relationships 10.2 10.9 9.8 10.0
Trademarks and trade names⁽¹⁾ — —
Engineering drawings 8.7 9.2 8.4 8.5
Licensing 0.5 1.2
Non-compete agreements 2.9 3.6 2.5 2.7
Patents 5.8 6.1 5.8 5.8

⁽¹⁾Haveindefinite lives.

13
Amortization expense for each of the next five years and thereafter is estimated to be as follows:

2016 $ 1,263,000
2017 1,178,000 $ 1,233,000
2018 981,000 1,052,000
2019 954,000 966,000
2020 809,000 907,000
2021 748,000
Thereafter 4,241,000 3,859,000
Total $ 9,426,000
$ 8,765,000

NOTE 8 - DEBT

~~SHORT-TERM LOANS~~
~~The~~In October 2010, the Company entered into a Loan and Security Agreement ~~in October 2010, as amended~~ (“Credit Agreement”), with an affiliate of Capital One, ~~Business Credit Corp.~~National Association (“Capital One”, ~~formerly known as Capital One Leverage Finance Corporation, as agent and lender (“COBC”). The Credit Agreement expires December 19, 2017 (the “Maturity Date”~~or the “Bank”). The Credit Agreement provides for a Revolver Loan (“Revolver”), borrowings under which are secured by the Company’s accounts receivable, mortgages on its real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”),  inventory and equipment. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross-guaranteed by certain other subsidiaries. At the Company’s option, Revolver borrowings bear interest at either LIBOR ~~(London~~(“London InterBank Offered ~~Rate)~~Rate”) or the Base Rate, as defined in the Credit Agreement, ~~(“Base Rate”), or a combination of the two,~~ plus the Applicable Margin, ~~(the “Applicable Margin”),~~ as defined in the Credit Agreement. The interest rate, either LIBOR or Base Rate, which is added to the Applicable Margin, is at the option of the Company, subject to limitations on the number of LIBOR borrowings.

InThe Company, in August 2014, ~~the Company~~ entered into an Amended and Restated Loan and Security Agreement, (the “Restated Loan Agreement”), with ~~COBC.~~Capital One. The Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing the total amount of the credit facility from $29,423,000 to $33,657,000, (2) increasing the Revolver from $20,000,000 to $22,000,000, (3) creating a new ~~$3,000,000~~ Term Loan, as defined in the Restated Loan Agreement (“Term Loan B”), and (4) re-designating as “Term Loan A”, the previously existing outstanding Term Loan, which relates primarily to the Company’s ~~real property.~~Real Property. In addition, the Restated Loan Agreement also reset certain financial covenants.

Contemporaneously with the sale of Nationwide, as discussed in Note 2, the Company entered into the Consent and Second Amendment to the Restated Loan Agreement (the “Amendment”) with Capital One. The Amendment, among other things; provided the Bank’s consent to the transactions contained in the Stock Purchase Agreement and the repurchase of certain shares and options discussed in Note 2 and Note 4 to the Consolidated Financial Statements, and amended the Restated Loan Agreement by: (a) reducing the aggregate Commitment (as defined in the Restated Loan Agreement) to $11,600,000; (b) reducing the Term Loan A to $100,000; (c) reducing the Revolver Commitment to $10,000,000 (less the new Term Loan A balance of $100,000); (d) reducing the Capex Loan Commitment to $1,600,000; (e) modifying certain financial covenants, (f) lowering interest rate margins and fee obligations; and (g) extending the expiration of the Credit Agreement to February 11, 2019. Additionally, the Bank released the mortgage on the Company’s Real Property, located in Tampa Florida.
The Company provides Capital One with, among other things, monthly financial statements, and monthly borrowing base certificates. The Company is required to comply with certain financial covenants. Under certain circumstances the Company would be required to submit certificates of compliance. The Company believes it is in compliance with all covenants under the current Credit Facility.
The net proceedsprovided by the sale of Nationwide of approximately $18.7 million were used to pay down the Revolver ~~borrowings outstanding was $11,461,000~~ and ~~$11,817,000, at September 30, 2015~~the Capex Term Loans in their entirety, and paid approximately $6 million against the Term Loan A, discussed below.

SHORT-TERM
At March 31, 2016 and December 31, ~~2014,~~2015, the Company’s Revolver borrowings were $-0- and $9,623,000, respectively. Applicable LIBOR Margins added to Revolver borrowings at ~~LIBOR and the~~December 31, 2015 was 2.00%. The Applicable Base Rate Margin added to Revolver borrowings at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 were ~~2.25%~~0.50% and ~~1.25%~~1.00%, respectively. During the nine-month period ended September 30, 2015, the Applicable Margin rates for LIBOR borrowings and Base Rate borrowings ranged from 2.25% to 2.50% and 1.25% and 1.50%, respectively, compared to 1.50% to 2.00% and 0.50% to 1.00%, respectively, for the same nine-month period in 2014.

14
The Company purchased vehicles for use by its UAT salesforce. The current portion of the balance due on these vehicles is $29,000 at March 31, 2016 and was $31,000 at December 31, 2015.
~~LONG-TERM~~
LONG-TERM

The Restated Loan Agreement provides for Term Loan A, which is secured by mortgages on the Real Property, accounts receivable, inventory and equipment. Term Loan A borrowings can be at either LIBOR, or at the Base Rate, ~~as defined in the Restated Loan Agreement,~~ or a combination of the two plus the Applicable Margins, which for LIBOR ~~and Base Rate~~ borrowings at ~~September 30, 2015~~March 31, 2016 and at December 31, ~~2014 were~~2015 was 3.0% ~~and 2.0%, respectively.~~
~~Additionally, the Restated Loan Agreement provided~~. The Applicable Margin for ~~a Term Loan B, pursuant to which the Company borrowed the maximum principal amount of $3,000,000 in connection with the ATSCO acquisition. Term Loan B~~ borrowings ~~incurred interest~~ at ~~LIBOR or~~ the Base Rate ~~or a combination, plus~~for the ~~Applicable Margins, which~~same timeframes was ~~3.25% and 2.25% at December 31, 2014. This~~2.0%. A portion of the net proceeds from the sale of Nationwide repaid all but $100,000 of this Term Loan ~~B was scheduled to be repaid~~A, and accordingly such remaining balance is included in ~~36 consecutive monthly payments of $83,000, with additional mandatory repayments each year equal to 50% of~~Long-term debt, less current maturities on the Company’s ~~Excess Cash Flow (as defined in the Restated Loan Agreement) for such year, if any. As the result of the Company’s Excess Cash Flow for the year ended December~~Consolidated Balance Sheet at March 31, ~~2014, on April 2, 2015 the Company repaid $2,417,000, which was the balance of the Term Loan B, with funds available from its Revolver.~~2016.

~~The~~During 2012, the Company borrowed $380,000 and $519,000, ~~in March 2012 and September 2012, respectively,~~ as loans ~~primarily for~~to purchase machinery and equipment (“Capex Term Loans”). Applicable Margins added to these Capex Term Loans during the period from January 1, 2016 through the Closing Date, and at ~~September 30, 2015 and~~ December 31, ~~2014~~2015, were 3.00% and 2.00%, for borrowings at LIBOR and the Base Rate, respectively. These loans were fully repaid with funds from the sale of Nationwide.
~~Long-term debt:~~
September 30, 2015 December 31, 2014
Term Loan A - $23,000 payable monthly January 2013 through December 2017, balance due December 19, 2017. $ 6,230,000 $ 6,440,000
Term Loan B - $83,000 payable monthly September 2014 through March 2015. — 2,667,000
Capex Term Loan - $6,000 payable monthly May 2012 through April 2017. 121,000 178,000
Capex Term Loan - $9,000 payable monthly October 2012 through September 2017. 208,000 285,000
Other 57,000 90,000
6,616,000 9,660,000
Less: current maturities 494,000 3,167,000
$ 6,122,000 $ 6,493,000

The long-term portion of the balance due on the purchased vehicles used by the UAT salesforce is $9,000 at March 31, 2016 and was $16,000 at December 31, 2015.
In accordance with ASU 2015-03, the Company reduced its long-term debt by $11,000 and $64,000, respectively, relating to deferred financing fees as of March 31, 2016 and December 31, 2015.
NOTE 9 – DIVIDENDS PAYABLE – OPTIONS ADJUSTMENTS (EQUITY RESTRUCTURING EVENT)
On March 8, 2016, the Company’s Board of Directors declared a special cash dividend of $0.50 per common share, which was paid on April 4, 2016, to shareholders of record at the close of business on March 21, 2016. The total amount of this special dividend payment is ~~required~~approximately $1.8 million. Further, the Company’s Board of Directors also announced that it approved the initiation of a dividend policy under which the Company intends to ~~provide COBC with, among other things, monthly financial statements, monthly borrowing base certificates~~declare a cash dividend to the Company’s shareholders in the amount of $0.20 per share per annum, payable in equal quarterly installments. In conjunction therewith, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share to shareholders of record at the close of business on March 31, 2016. This dividend of approximately $180,000 was paid on April 14, 2016.
The Compensation Committee of the Board of Directors of the Company serves as administrator of the 2012 Plan, and ~~certificates~~the P&F Industries, Inc. 2002 Stock Incentive Plan (“2002 Plan”). The 2012 Plan requires that options granted under the 2012 Plan be equitably adjusted when an equity restructuring transaction or event occurs. Additionally, the 2002 Plan allows the Compensation Committee to equitably adjust any outstanding options granted under the 2002 Plan in the event of ~~compliance with various financial covenants.~~an equity restructuring event. The Compensation Committee determined that the special dividend met the applicable criteria under both the 2012 Plan and the 2002 Plan and authorized an equitable adjustment be made to all outstanding options under both plans. The equitable adjustment lowered the exercise price of all outstanding options, and added, in the aggregate, 19,174 options to purchase Common Stock relating to options held by all Company option holders. The reduction in the exercise price ranged from $0.13 to $0.48. The Company ~~believes it is~~determined that, in ~~compliance~~accordance with ~~all covenants under~~ASU 718-20-20, the ~~Restated Loan Agreement. As part~~special dividend described above was an equity restructuring event, and, as such, there was no impact on the Company’s consolidated statement of income as the result of adjustments to the exercise price or the issuance of the ~~Restated Loan Agreement, if an event of default occurs,~~additional stock options that resulted from the ~~interest rate would increase by 2% per annum during the period of default, in addition to other remedies provided to COBC.~~aforementioned modification.

NOTE 910 - RELATED PARTY TRANSACTIONS

The president of one of the Company’s subsidiaries is part owner of one of the subsidiary’s vendors. During the ~~three and nine-month~~three-month periods ended ~~September 30, 2015;~~March 31, 2016 and 2015, the Company purchased approximately ~~$154,000~~$166,000 and ~~$477,000, respectively, of product from this vendor. During the three and nine-month periods ended September 30, 2014, the Company purchased approximately $254,000 and $672,000,~~$181,000, respectively, of product from this vendor. At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the Company had trade payables to this vendor of ~~$67,000~~$44,000 and ~~$103,000,~~$63,000, respectively. Additionally, during the ~~three and nine-month~~three-month periods ended ~~September 30,~~March 31, 2016 and 2015, the Company recorded sales to this vendor of $3,000 and $2,000, ~~and $7,000, respectively, compared to $11,000 and $22,000 for the three and nine-month periods ended September 30, 2014.~~
respectively.
15

~~NOTE 10 - BUSINESS SEGMENTS~~
P&F operates in two primary lines of business, or segments: Tools and Hardware. For reporting purposes, Florida Pneumatic and Hy-Tech are combined in the Tools segment, while Nationwide is currently the only subsidiary in the Hardware segment. The Company evaluates segment performance based primarily on segment operating income. The accounting policies of each of the segments are the same as those referred to in Note 1.
As of and for the three months ended September 30, 2015 Consolidated Tools Hardware

Revenues from unaffiliated customers $ 21,678,000 $ 15,924,000 $ 5,754,000

Segment operating income $ 3,060,000 $ 1,947,000 $ 1,113,000
General corporate expense (1,157,000 )
Other expense (75,000 )
Interest expense (173,000 )
Income before income taxes $ 1,655,000

Segment assets $ 71,608,000 $ 60,688,000 $ 10,920,000
Corporate assets 2,243,000
Total assets $ 73,851,000

Long-lived assets, including $52,000 at corporate $ 33,900,000 $ 29,338,000 $ 4,510,000
As of and for the three months ended September 30, 2014 Consolidated Tools Hardware

Revenues from unaffiliated customers $ 22,932,000 $ 17,865,000 $ 5,067,000

Segment operating income $ 3,217,000 $ 2,201,000 $ 1,016,000
General corporate expense (1,627,000 )
Interest expense (158,000 )
Income before income taxes $ 1,432,000

Segment assets $ 77,023,000 $ 65,054,000 $ 11,969,000
Corporate assets 2,344,000
Total assets $ 79,367,000

Long-lived assets, including $55,000 at corporate $ 35,470,000 $ 30,815,000 $ 4,600,000
16
As of and for the nine months ended September 30, 2015 Consolidated Tools Hardware

Revenues from unaffiliated customers $ 64,064,000 $ 46,541,000 $ 17,523,000

Segment operating income $ 9,352,000 $ 5,888,000 $ 3,464,000
General corporate expense (4,059,000 )
Other income 126,000
Interest expense (566,000 )
Income before income taxes $ 4,853,000
As of and for the nine months ended September 30, 2014 Consolidated Tools Hardware

Revenues from unaffiliated customers $ 57,132,000 $ 41,749,000 $ 15,383,000

Segment operating income $ 8,112,000 $ 4,887,000 $ 3,225,000
General corporate expense (4,667,000 )
Interest expense (335,000 )
Income before income taxes $ 3,110,000
~~Revenue and long-lived assets by geographic region were as follows:~~
Three months ended Nine months ended
September 30, September 30,
2015 2014 2015 2014
Revenue:
    North America $ 20,508,000 $ 22,132,000 $ 60,554,000 $ 55,785,000
    Europe 900,000 690,000 2,712,000 843,000
    All Other 270,000 110,000 798,000 504,000
Total Revenue $ 21,678,000 $ 22,932,000 $ 64,064,000 $ 57,132,000

Long-Lived Assets:
   North America $ 32,802,000 $ 34,094,000
   Europe 1,098,000 1,376,000
Total Long-Lived Assets $ 33,900,000 $ 35,470,000
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P&F INDUSTRIES, INC. AND SUBSIDIARIES

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

~~General~~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” 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 the ~~2015~~2016 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, as previously disclosed in the Company’s public filings, including in its Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 (“~~2014~~2015 Form 10-K”). 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.

Business

P&F and each of its subsidiaries are herein referred to collectively as the “Company.” In addition, the words “we”, “our” and “us” refer to the Company. ~~The Company operates~~Until February 11, 2016, the effective date of the sale of its Nationwide Industries, Inc. (“Nationwide”) subsidiary, P&F operated in two primary lines of business or segments: (i) tools and other products (“Tools”) and (ii) hardware and accessories (“Hardware”). As a result of the sale of Nationwide, the Company currently only operates in the Tools segment. See Notes 2 and 8 to Consolidated Financial Statements for further discussion.

Tools

The Company conducts its Tools business through a wholly-owned subsidiary, Continental Tool Group, Inc. (“Continental”), which in turn ~~currently~~ operates through its wholly-owned subsidiaries, Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”) and Hy-Tech Machine, Inc. (“Hy-Tech”). ~~During the third quarter of 2014, the Company acquired~~ Exhaust Technologies Inc. (“ETI”) and Universal Air Tool Company Limited (“UAT”)~~. Both ETI and UAT~~, which were acquired by us in 2014, are wholly-owned subsidiaries of Florida Pneumatic, and unless otherwise indicated, the operations and results of operations of Florida Pneumatic herein include ETI and UAT as of the respective dates such companies were acquired. Additionally, during the third quarter of 2014, the Company acquired substantially all of the assetsPneumatic. The business of Air Tool Service Company (“ATSCO”), which ~~business~~was also acquired in 2014, operates through a wholly-owned subsidiary of Hy-Tech. ~~Unless otherwise indicated, the results of operations of Hy-Tech herein include ATSCO from the date the business was acquired.~~

Florida Pneumatic is engaged in the importation and sale of pneumatic hand tools, primarily for the retail, industrial and automotive markets, and the importation and sale of compressor air filters. Florida Pneumatic also markets, through its Berkley Tool division (“Berkley”), a product line which includes pipe and bolt dies, pipe taps, wrenches, vises and stands, pipe and tubing cutting equipment, hydrostatic test pumps, and replacement electrical components for a widely-used brand of pipe cutting and threading machines.

Hy-Tech manufactures and distributes its own line of industrial pneumatic tools. Hy-Tech also produces and markets impact wrenches, grinders, drills, and motors. Further, it also manufactures tools to customer specifications. Its customers include refineries, chemical plants, power generation facilities, heavy construction enterprises, oil and gas and mining companies. In addition, Hy-Tech manufactures an extensive line of pneumatic tool replacement parts that are sold to original equipment manufacturers (“OEMs”). It also manufactures and distributes high pressure stoppers for hydrostatic testing fabricated pipe, gears, sprockets, splines and racks and produces a line of siphons.

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Hardware

~~The~~Until the sale of Nationwide, which was effective February 11, 2016, the Company ~~conducts~~conducted its Hardware business through aits wholly-owned subsidiary, Countrywide Hardware, Inc. (“Countrywide”). Countrywide ~~conducts~~conducted its business operations through its wholly-owned subsidiary, Nationwide. Nationwide ~~Industries, Inc. (“Nationwide”). Nationwide is~~was an importer and manufacturer of door, window and fencing hardware and accessories, including rollers, hinges, window operators, sash locks, custom zinc castings and door closers. ~~Nationwide’s products are~~On February 11, 2016, Countrywide sold ~~through in-house sales personnel~~Nationwide to a private investment organization for approximately $22.2 million. See Notes 2 and ~~manufacturers’ representatives~~8 to ~~distributors, retailers and OEM customers. End users of Nationwide’s products include contractors, home builders, pool and patio distributors, OEM/private label customers and general consumers.~~  Consolidated Financial Statements for further discussion.

~~Overview~~16

~~During the third quarter of 2015, our results of operations were impacted by a number of factors, some of which were:~~
· ~~the positive impact on revenue and earnings provided by the three acquisitions completed during the third quarter of 2014;~~
· ~~the on-going slow-down in oil and gas exploration and extraction continues to negatively impact our Tools segment;~~
· ~~Nationwide’s continued benefit from increased activity in residential construction and the renovation and remodeling markets; and~~
· ~~Final adjustment and settlement of contingent consideration payable to the former shareholders of UAT, resulting in Other expense of $75,000.~~

KEY INDICATORS

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.  Our Tools segment focuses on a wide array of customer types including, but not limited to large retailers, aerospace, large and small resellers of pneumatic tools and parts; and automotive related customers. The Tools segment tends to track the general economic conditions of the United States, industrial production and general retail sales.  ~~The key economic measures for our Hardware group are housing starts and remodeling spending activity.~~

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 USDs. However, if the Chinese currency, (“RMB”), were to be revalued against the USD, there could be a significant negative impact on the cost of our products. As the result of the UAT acquisition, 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. In addition, we monitor the number of operating rotary drilling rigs in the United States, as a means of gauging oil production, which is a key factor in our sales into the oil and gas exploration and extraction sector.

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 ~~operating segments~~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~~relevant; they are discussed in the detailed sections ~~below for each operating segment.~~below.
19

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; 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 established objectives. To the extent that these measures are relevant, they are discussed in the detailed sections below for each operating segment.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Descriptions of these policies are discussed in the ~~2014~~2015 Form 10-K. 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, inventory reserves, goodwill and intangible assets, warranty reserves and 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.

~~There~~Other than the new critical accounting policy discussed in Note 2 to our Consolidated Financial Statements, there have been no material changes in our critical accounting policies and estimates from those discussed in Item 7 of our ~~2014~~2015 Form 10-K.
17
Overview
During the first quarter of 2016, our results of operations were impacted by:
● the sale of Nationwide effective February 11, 2016, for approximately $22.2 million;
● the on-going downturn in oil and gas exploration and extraction continues to negatively impact Hy-Tech’s and, to a lesser degree, Florida Pneumatic’s results, and
● the decision by a major customer of Hy-Tech to begin to manufacture internally certain air tools that were formerly manufactured by Hy-tech contributed to the reduction in Hy-Tech’s total revenue.

RESULTS OF OPERATIONS
Continuing operations

Unless otherwise discussed elsewhere in the Management’s Discussion and Analysis, ~~(“MD&A”) section,~~ we believe that our relationships with our key customers and suppliers, given current economic conditions, remain satisfactory. ~~For~~The on-going weakness in the global oil and gas exploration and extraction markets continues to hamper both Hy-Tech and to a lesser degree, Florida Pneumatic.
We sold Nationwide to an unrelated third party for approximately $22.2 million. As a result of this transaction, Nationwide’s results are reported under discontinued operations for the three-month periods ended March 31, 2016, and 2015, ~~we have elected not~~and are therefore excluded from continuing operations for all periods presented. Please see Note 2 Discontinued Operations, to sell certain promotional-type products to Sears, which we did sell to Sears during 2014. Revenue from Sears is included in Florida Pneumatic’s Retail category. This decision will result in a reduction of approximately $3 million of Sears’ revenue during 2015. our Consolidated Financial Statements for additional information.
Other than the ~~aforementioned,~~discussed in the Management’s Discussion and Analysis, there were no major trends or uncertainties that had, or we could reasonably expect could have, a material impact on our revenue. ~~Further, other than the three acquisitions that occurred during the third quarter of 2014, there~~There was no unusual or infrequent event, transaction or any significant economic change that materially affected our results of operations. However, we believe that the on-going slowdown in the global oil and gas extraction and exploration sector continues to negatively impact our results for the three and nine-month periods ended September 30, 2015.

20
The table below provides an analysis of our net revenue from continuing operations for the ~~three and nine-month~~three-month periods ended ~~September 30, 2015~~March 31, 2016 and ~~2014:~~2015:

Three months ended March 31,
Increase (decrease)
2016 2015 $ %
Tools
Florida Pneumatic $ 10,830,000 $ 10,254,000 $ 576,000 5.6 %
Hy-Tech 3,669,000 4,305,000 (636,000 ) (14.8 )

Consolidated $ 14,499,000 $ 14,559,000 $ (60,000 ) (0.4 )%
~~Revenue~~
Three months ended September 30,
Increase (decrease)
2015 2014 $ %
Tools
Florida Pneumatic $ 11,729,000 $ 13,973,000 $ (2,244,000 ) (16.1 )%
Hy-Tech 4,195,000 3,892,000 303,000 7.8
Tools Total 15,924,000 17,865,000 (1,941,000 ) (10.9 )

Hardware
Hardware Total 5,754,000 5,067,000 687,000 13.6

Consolidated $ 21,678,000 $ 22,932,000 $ (1,254,000 ) (5.5 )%
Nine months ended September 30,
Increase (decrease)
2015 2014 $ %
Tools
Florida Pneumatic $ 33,986,000 $ 30,335,000 $ 3,651,000 12.0 %
Hy-Tech 12,555,000 11,414,000 1,141,000 10.0
Tools Total 46,541,000 41,749,000 4,792,000 11.5

Hardware
Hardware Total 17,523,000 15,383,000 2,140,000 13.9

Consolidated $ 64,064,000 $ 57,132,000 $ 6,932,000 12.1 %
~~Tools~~Florida Pneumatic

Florida Pneumatic markets its air tool products to three primary sectors within the pneumatic tool market; retail, ~~Industrial/~~industrial/catalog and the automotive market. 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 September 30,
2015 2014 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
Retail customers $ 7,035,000 60.0 % $ 9,339,000 66.8 % $ (2,304,000 ) (24.7 )%
Automotive 2,982,000 25.4 2,652,000 19.0 330,000 12.4
Industrial/catalog 1,412,000 12.0 1,591,000 11.4 (179,000 ) (11.3 )
Other 300,000 2.6 391,000 2.8 (91,000 ) (23.3 )
Total $ 11,729,000 100.0 % $ 13,973,000 100.0 % $ (2,244,000 ) (16.1 )%
Three months ended March 31,
2016 2015 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
Retail customers $ 5,549,000 51.2 % $ 5,278,000 51.5 % $ 271,000 5.1 %
Automotive 3,721,000 34.4 3,095,000 30.2 626,000 20.2
Industrial/catalog 1,357,000 12.5 1,581,000 15.4 (224,000 ) (14.2 )
Other 203,000 1.9 300,000 2.9 (97,000 ) (32.3 )
Total $ 10,830,000 100.0 % $ 10,254,000 100.0 % $ 576,000 5.6 %
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Nine months ended September 30,
2015 2014 Increase (decrease)
Percent of Percent of
Revenue revenue Revenue revenue $ %
Retail customers $ 19,352,000 56.9 % $ 21,277,000 70.1 % $ (1,925,000 ) (9.0 )%
Automotive 9,122,000 26.8 3,262,000 10.8 5,860,000 179.6
Industrial/catalog 4,679,000 13.8 4,679,000 15.4 --- ---
Other 833,000 2.5 1,117,000 3.7 (284,000 ) (25.4 )
Total $ 33,986,000 100.0 % $ 30,335,000 100.0 % $ 3,651,000 12.0 %
~~As noted earlier in this MD&A, we elected not~~The most significant factor contributing to ~~sell certain promotional-type products to Sears, which we did sell to Sears during 2014. This decision was a primary factor~~Florida Pneumatic’s total revenue growth in the ~~reduction~~first quarter 2016, compared to the first quarter of 2015, is the incremental automotive revenue generated by the AIRCAT and NITROCAT pneumatic tools lines, being slightly offset by a modest decline in ~~our~~UAT revenue, which is included in the automotive sector. This growth is primarily attributable to new product releases and expanded marketing efforts. Florida Pneumatic intends to release additional new products into the automotive market during the remainder of 2016. A portion of UAT’s revenue is derived from the sale of pneumatic air tools to customers that are located and operate in the North Sea region of Scotland, and whose businesses are in the oil and gas sector. As a result of the ongoing weakness in the global oil and gas exploration sector in the geographic area that UAT currently services, revenue from this particular portion of UAT’s customer base declined, when comparing the three-month periods ended March 31, 2016 and 2015. We are currently developing a marketing strategy that is intended to enable UAT to expand its presence into other Western European countries; however no specific timetable has been established for this expansion. With respect to Florida Pneumatic’s Retail ~~revenue. Additionally, certain promotional-type~~revenue, during the first quarter of 2016, there wasan increase over the same period in 2015, due primarily to higher sales to The Home Depot, ~~that occurred during~~as well as the ~~third quarter~~addition of ~~2014 did not occur during the third quarter of 2015. These reductions were~~The Home Depot Canada. This improvement was partially offset by ~~increases~~a decline inSearsrevenue.We continue to encounter weakness in ~~higher margin base products. As a result of~~the Industrial/catalog market, with the ~~ETI acquisition, Florida Pneumatic now markets the AIRCAT and NITROCAT line of pneumatic air tools, which are primarily targeted~~decline thisquarter compared to the automotive markets. UAT, located in the United Kingdom, currently enables Florida Pneumatic the opportunity to expand its automotive air tools product line into Europe. Currently, UAT continues to focus its sales efforts primarily in the United Kingdom and Ireland. Florida Pneumatic intends to expand UAT to other European countries; however, at this time no timetable has been established. Both ETI and UAT have been absorbed into Florida Pneumatic’s overall operations.~~The Industrial/catalog market remains sluggish,~~same period a year ago, occurring most notably in theaerospaceand oil and gas exploration/production channels. ~~We believethisweakness maycontinue.~~A special order that shipped during the first quarter of 2015 and not recurring during the first quarter of 2016 also contributed to lower Industrial/catalog revenue. Florida Pneumatic’s first quarter of 2016 Other revenue declined when compared to thesameperiod in ~~2014,~~2015, primarily due to itsdecision to place greateremphasison expanding its ~~other~~major product lines.

When comparing the nine-month periods ended September 30, 2015 and 2014, the most significant factor contributing to Florida Pneumatic’s overall revenue increase is the result of its two acquisitions made during the third quarter of 2014. As discussed previously, both ETI and UAT focus their marketing efforts to the automotive sector. As a result, Florida Pneumatic’s Automotive revenue improved by more than $5.8 million, when comparing the nine-month periods ended September 30, 2015 and 2014. The decline in Florida Pneumatic’s nine-month Retail revenue is due primarily to its decision in 2015 to not sell certain promotional-type products to Sears. It should be noted that during the nine-month period ended September 30, 2015, sales to its Retail customers of primary or basic stock pneumatic tools and accessories has increased when compared to the same period a year ago, which partially offset the decline in Retail revenue.Hy-Tech

Hy-Tech focuses primarily on the industrial sector of the pneumatic tools market.  Hy-Tech manufactures and markets its own value-added line of air tools and parts, including the ATSCO ~~products,~~product line, as well as distributes a complementary line of sockets, which in the aggregate are referred to as (“ATP”). ~~Hy-Tech Machine~~The classification of “Other” below includes special products ~~(“Hy-Tech Machine”)~~that are primarily marketed to the mining, construction and industrial manufacturing ~~sectors.~~sectors, as well as gears, sprockets, splines, and hydraulic stoppers.

Three months ended March 31,
2016 2015 Decrease
Revenue Percent of
revenue Revenue Percent of
revenue $ %
ATP $ 3,406,000 92.8 % $ 3,571,000 83.0 % $ (165,000 ) (4.6 )%
Other 263,000 7.2 734,000 17.0 (471,000 ) (64.2 )

Total $ 3,669,000 100.0 % $ 4,305,000 100.0 % $ (636,000 ) (14.8 )%
~~An analysis of Hy-Tech’s~~
ATP revenue for the ~~three and nine-month periods ended September 30, 2015 and 2014 is as follows:~~
Three months ended September 30,
2015 2014 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
ATP $ 3,248,000 77.4 % $ 2,967,000 76.2 % $ 281,000 9.5 %
Hy-Tech Machine 524,000 12.5 392,000 10.1 132,000 33.7
Major customer 303,000 7.2 453,000 11.6 (150,000 ) (33.1 )
Other 120,000 2.9 80,000 2.1 40,000 50.0
Total $ 4,195,000 100.0 % $ 3,892,000 100.0 % $ 303,000 7.8 %
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Nine months ended September 30,
2015 2014 Increase (decrease)
Percent of Percent of
Revenue revenue Revenue revenue $ %
ATP $ 9,290,000 74.0 % $ 8,131,000 71.2 % $ 1,159,000 14.3 %
Hy-Tech Machine 1,576,000 12.5 1,128,000 9.9 448,000 39.7
Major customer 1,391,000 11.1 1,941,000 17.0 (550,000 ) (28.3 )
Other 298,000 2.4 214,000 1.9 84,000 39.3
Total $ 12,555,000 100.0 % $ 11,414,000 100.0 % $ 1,141,000 10.0 %
~~The increase in Hy-Tech’s ATP third~~first quarter of 2015 revenue was driven by the new product line attained through the ATSCO acquisition, which occurred mid-third quarter of 2014. Despite the increase, Hy-Tech’s ATP business in particular, continues to be negatively impacted by the sluggish trends in the oil and gas industry world-wide. According to the October 2015 Compressed Air & Gas Institute report, new orders for mining machinery in the United Sates, during the twelve-month period ended August 31, 2015, are down more than 34%2016 declined compared to the same ~~twelve-month~~ period ~~ended August 31, 2014. Further, according~~in 2015 primarily due to ~~this report,~~ the ~~United States rotary rig count average, which is one of~~on-going weakness in the ~~measures of exploration and extraction activities, was, for the month of September 2015, 56.1% below the number for September 2014. We believe the reduced level of~~ oil and gas exploration and extraction market, which has ~~resulted in, among other things,~~caused a decline in ~~the sale of drilling motors and related~~such things as demand for pneumatic tools, spare/replacement parts and ~~sockets. With respect~~drilling motors. Evidencing the deep decline is, according to information published by Baker Hughes Incorporated, the average U.S. rig count for March 2016 was 478, down 54 from the 532 counted in February 2016, and down 632 from the 1,110 counted in March 2015. Further, the worldwide rig count for March 2016 was 1,551, down 1,006 from the 2,557 counted in March 2015. Additionally, we believe one of Hy-Tech’s ~~Major customer, orders continue~~major customers in the past has decided to ~~be erratic~~source certain impact wrenches and ~~unpredictable. We believe~~other products formerly purchased from Hy-Tech internally, which has contributed to the ~~above-mentioned market factors also negatively impact sales to this Major customer.~~ decline. Partially offsetting the revenue decline was an increase in the shipments of ATSCO products.Further, ~~we also~~we believe that should the ~~reduction in orders from this customer~~oil and gas sector remain at or near current levels of exploration and extraction,it is ~~due to~~likely that future periods may reflect a decline in ~~its international market. Additionally, we believe this Major customer may be exploring overseas sources for certain products we currently provide them. Hy-Tech’s Other~~ revenue ~~category, which focuses on specialty products manufactured for the mining, construction and industrial markets, improved primarily due to an increase in products shipped to power generation customers.~~
~~Hy-Tech’s ATP revenue for the nine-month period ended September 30, 2015 improved~~ when compared to the same period in 2014. The growth in ATP revenue attributable to ATSCO product sales were partially offset by declines in revenue of sockets and drilling motors and parts, as well as a net decline in non-ATSCO tools and parts revenue. As stated above we believe, among other factors, that the reduction in oil and gas exploration and extraction has throughout 2015 to date, negatively impacted Hy-Tech’s overall revenue, most notably its ATP product line. Until such time when major exploration and related activity levels return to recent historic levels, it is difficult to predict when this sector of the ATP category will improve. As such,prior year. Hy-Tech will continue to ~~pursue~~explore alternate markets and ~~customers with added focus on~~applications of its ~~ATSCO products releases. In line with the aforementioned,~~air tools and motors, as well as to utilize and emphasize its Hy-Tech Machine’s 2015 nine-month revenue improved nearly 40%, when compared to the same nine-month period a year ago. Lastly, revenue from Hy-Tech’s Major customer during the nine-month period ended September 30, 2015 declined when compared to the same period in 2014. As previously stated, we believe that thismanufacturing expertise. The decline in ~~orders from this customer is due to~~Hy-Tech’s Other revenue was driven primarily by two factors: (i) a ~~slow-down~~$240,000 order that shipped in ~~its international market, which services similar sectors, such as oil and gas exploration. If~~ the ~~current sales trend continues, it is likely this customer, in future reporting periods, may no longer merit specific discussion in our MD&A.~~
~~Hardware~~
~~Our Hardware segment, which currently consists of only Nationwide, generates revenue from the sale of Fence and gate hardware, OEM products and Patio hardware.~~
Three months ended September 30,
2015 2014 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
Fence and gate hardware $ 4,686,000 81.5 % $ 4,199,000 82.9 % $ 487,000 11.6 %
OEM 617,000 10.7 467,000 9.2 150,000 32.1
Patio 451,000 7.8 401,000 7.9 50,000 12.5
Total $ 5,754,000 100.0 % $ 5,067,000 100.0 % $ 687,000 13.6 %
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Nine months ended September 30,
2015 2014 Increase (decrease)
Percent of Percent of
Revenue revenue Revenue revenue $ %
Fence and gate hardware $ 14,331,000 81.8 % $ 12,785,000 83.1 % $ 1,546,000 12.1 %
OEM 1,826,000 10.4 1,339,000 8.7 487,000 36.4
Patio 1,366,000 7.8 1,259,000 8.2 107,000 8.5
Total $ 17,523,000 100.0 % $ 15,383,000 100.0 % $ 2,140,000 13.9 %
~~Fence and gate hardware continues to be Nationwide’s primary product line, accounting for 81.5% of its third~~first quarter of 2015, ~~revenue. Key drivers that impact Nationwide’s revenue are: (i) housing starts~~not recurring in the first quarter of 2016, and (ii) ~~renovation~~weakness this quarter in specialty manufacturing for the mining, mine safety and remodeling. Both these drivers continue to improve in 2015, compared to 2014. As a result, Nationwide intends to continue its growth strategy in its Fence and gate hardware sector which is to focus on developing new, innovative fence and gate hardware products and related product accessories. In addition, Nationwide intends to continue its marketing efforts outside the United States. This strategy could however, in future periods, impact the performance of Nationwide’s other product lines. The increase in Nationwide’s OEM products revenue is driven primarily by the addition of a new, lower margin customer that purchases pneumatic storm door closure kits. We expect the buying pattern of this new OEM customer to be sporadic throughout the year. The increase in Patio revenue is due primarily to increased activity in the sale of foreclosed home units occurring principally in Florida.
Nationwide believes its increase in total revenue during the nine-month period ended September 30, 2015, compared to the same period in 2014, is due primarily to an increase in both the number of housing starts and consumer spending in the remodeling and renovation sectors during the respective nine-month periods. As Fence and gate hardware remains the primary product line marketed by Nationwide, its current business strategy is to focus on the development and marketing of its Fence and gate hardware business. The 36.4% increase in its OEM product line revenue is primarily due to Nationwide obtaining a new, low margin customer that purchases pneumatic storm door closing kits. Its year to date 2015 Patio revenue continues to be driven by new home construction, renovation and the foreclosure market, primarily in Florida.
railroad markets.
24

Gross Margins / Profits

Three months ended September 30, Increase (decrease)
2015 2014 Amount %
Florida Pneumatic $ 4,007,000 $ 4,428,000 $ (421,000) (9.5)%
As percent of respective revenue 34.2 % 31.7 % 2.5% pts
Hy-Tech 1,623,000 1,543,000 80,000 5.2
As percent of respective revenue 38.7 % 39.6 % (0.9)% pts
Total Tools 5,630,000 5,971,000 (341,000) (5.7)
As percent of respective revenue 35.4 % 33.4 % 2.0% pts
Total Hardware 2,235,000 2,057,000 178,000 8.7
As percent of respective revenue 38.8 % 40.6 % (1.8)% pts
Consolidated $ 7,865,000 $ 8,028,000 $ (163,000) (2.0)%
As percent of respective revenue 36.3 % 35.0 % 1.3% pts
Nine months ended September 30, Increase (decrease)
2015 2014 Amount %
Florida Pneumatic $ 12,059,000 $ 9,990,000 $ 2,069,000 20.7%
As percent of respective revenue 35.5 % 32.9 % 2.6% pts
Hy-Tech 4,902,000 4,574,000 328,000 7.2
As percent of respective revenue 39.0 % 40.1 % (1.1)% pts
Total Tools 16,961,000 14,564,000 2,397,000 16.5
As percent of respective revenue 36.4 % 34.9 % 1.5% pts
Total Hardware 6,842,000 6,102,000 740,000 12.1
As percent of respective revenue 39.0 % 39.7 % (0.7)% pts
Consolidated $ 23,803,000 $ 20,666,000 $ 3,137,000 15.2%
As percent of respective revenue 37.2 % 36.2 % 1.0% pts
~~Tools~~
Three months ended March 31, Increase (decrease)
2016 2015 Amount %
Florida Pneumatic $ 4,124,000 $ 3,825,000 $ 299,000 7.8
As percent of respective revenue 38.1 % 37.3 % 0.8 % pts.
Hy-Tech $ 1,092,000 $ 1,674,000 $ (582,000 ) (34.8 )
As percent of respective revenue 29.8 % 38.9 % (9.1 ) % pts.
Total $ 5,216,000 $ 5,499,000 $ (283,000 ) (5.1 )
As percent of respective revenue 36.0 % 37.8 % (1.8 ) % pts.

Florida Pneumatic’s expanded automotive product line, which now includes the AIRCAT and NITROCAT suite of pneumatic power tools, plus slightly higher gross margins generated at its overseas UAT subsidiary are the significant factors contributing to Florida Pneumatic’s thirdfirst quarter of ~~2015~~2016 gross margin improvement over the same period a year ~~ago. However, its Retail~~ago was driven primarily by product mix, specifically aided by an increase in revenue of the stronger gross margin ~~for~~automotive products line. Additionally, during the ~~third~~first quarter of ~~2015~~2016, the foreign exchange rate of the U.S. dollar to the Taiwan Dollar was more favorable than during the first quarter of 2015.
Hy-Tech’s gross margin this quarter, compared to the same period in ~~2014 declined slightly,~~2015 is lower due primarily to ~~product mix. Further, due to a~~ lower margin special order, our Industrial/catalog gross margin during the third quarter of 2015 was down from the same period in the prior year. Hy-Tech’s gross margin this quarter is the same as in the third quarter last year. We continue the process of incorporating the ATSCO suite of products into Hy-Tech’s Cranberry, PA manufacturing facility; however, it is difficult to predict exactly when the entire suite can be produced. During this process we anticipate gross margins should improve as Hy-Tech’s overhead absorption, ~~should increase.~~
~~Florida Pneumatic’s gross margin during the nine-month period ended September 30, 2015 improved 2.6 percentage points over the same period~~which in ~~the prior year~~turn is due primarily to lower manufacturing activity levels. This has resulted primarily from the ~~additional $5.8 million~~on-going down-turn in the oil and gas exploration and extraction sector, which is the key market for Hy-Tech’s products. In addition, product mix had an adverse effect on Hy-Tech’s gross margins. Most notably, there was a reduction in sales of ~~Automotive sales, which generate slightly~~its higher gross ~~margins than Florida Pneumatic’s historical average. However, this improvement was somewhat offset by slight gross~~ margin ~~declines from its Retail~~ATP parts and Industrial/catalog product lines, due primarily to product and or customer mix. Hy-Tech’s gross margin during the first nine months of 2015, compared to the same period a year ago, is down slightly, due in large part to the non-productive labor used to close and relocate ATSCO’s manufacturing equipment and inventory from Mentor, Ohio into Hy-Tech’s existing facility in Cranberry, PA during the first quarter of 2015. However, as the manufacturing of the acquired ATSCO product line becomes more efficient, we anticipate that gross margins will improve.
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~~Hardware~~
~~Competitive pricing pressure in its Fence and gate hardware, and Patio product lines,~~tools, as well as a servicing a new, low margin OEM customer, resulted in a decline in Nationwide’s third quarter 2015 gross margin, compared to the third quarter of 2014. Fence and gate hardware generate the highest gross margins, followed by OEM, then Patio. As Nationwide has decided to service the lower margin OEM customer, its OEM gross margins will be lessdrilling motors, when compared to the same period in ~~prior years, which in turn could negatively affect its overall gross margin.~~
~~Significant factors contributing to Nationwide’s slight decline (0.7 percentage points) in its year to date 2015 gross margins, compared to~~2015. Additionally, during the ~~same period in the prior year are new, lower~~first quarter of 2016, Hy-Tech manufactured and sold very low gross margin ~~OEM revenue and increased competitive pricing pressure. However, introduction~~products to a key ATSCO customer. We are investigating alternate manufacturing methods in an attempt to improve our costs of ~~new products have partially mitigated~~ this ~~pressure. Nationwide intends~~product line. A decision to continue ~~its current strategy, which~~to manufacture and market this line of products is ~~to expand the development of new products for its Fence and gate hardware product line and to continue its growth into new or expanded locations.~~currently being evaluated.

Selling and general and administrative expenses

Selling, general and administrative expenses, (“SG&A”) include salaries and related costs, commissions, travel, administrative facilities, 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 ~~third~~first quarter of ~~2015,~~2016, our SG&A was ~~$5,962,000~~$5,056,000 or ~~27.5%~~34.9% of revenue, compared to ~~$6,438,000,~~$4,932,000, or ~~28.1%~~33.9% of revenue during the same three-month period in ~~2014.~~2015. Significant ~~items contributing to~~components of this change include the ~~change in SG&A include:~~following: (i) ~~with the three acquisitions occurring during the third quarter of 2014, our professional fees and transaction expenses are lower by $410,000; (ii) our~~ incremental variable costs and expenses, which ~~includes~~include such things as commissions, warranty costs, freight out and advertising/promotional fees, ~~decreased~~increased by ~~$172,000 during the third~~$145,000. This increase was due primarily to greater automotive revenue, which results in higher commission costs, and greater revenue from The Home Depot, which generally tend to increase both warranty and freight expenses; (ii) compensation, which is comprised of base salaries and wages, accrued performance-based bonus incentives, associated payroll taxes and employee benefits increased $52,000, and (iii) our professional fees and related expenses declined $69,000, this quarter, ~~of 2015,~~ compared to the same three-month period in 2015, partially offsetting the prior year; due primarily to lower revenue and (iii) depreciation and amortization increased by $75,000, when comparing the three-month periods ended September 30, 2015 and 2014, most of which is attributable to the three acquisitions completed during the third quarter of 2014.
During the nine-month period ended September 30, 2015 our SG&A was $18,510,000, or 28.9% of revenue, compared to $17,221,000, or 30.1% of revenue during the same period in 2014. Significant elements of this change are: (i) depreciation and amortization increased by $629,000, most of which being attributable to the three acquisitions occurring during the third quarter of 2014; (ii) incremental variable costs and expenses increased $292,000, due in large part to the added revenue in 2015; (iii) compensation expenses increased $558,000, due mostly to additional staffing resulting from the three acquisitions plus slightly higher, performance–based bonus incentives; (iv) bad debt expenses increased $148,000, due primarily to adjustments made during the second quarter of 2014, which lowered our 2014 bad debt expense, and (v) a decline in our professional fees and transaction expenses, in the aggregate of $457,000.
above factors.
26

Interest

Three months ended
March 31, Increase
2016 2015 Amount %
Interest expense attributable to:
Short-term borrowings $ 3,000 $ — $ (3,000 ) NA %
Term loans, including Capital Expenditure Term Loans 1,000 — (1,000 ) NA
Amortization expense of debt financing costs 98,000 29,000 (69,000 ) (237.9 )

Total $ 102,000 $ 29,000 $ (73,000 ) (251.7 )%
Our short-term and term loan interest expense ~~during the third quarter~~incurred in 2015 of ~~2015 was $173,000, compared to $158,000~~$163,000, and for the ~~same~~ period January 1, 2016 through February 11, 2016 of $60,000, the effective date of sale of Nationwide (the “Closing Date”), are included in discontinued operations. The Amendment significantly reduced or eliminated certain term loans that were originally included in the ~~prior year. Impacting our interest~~Credit Agreement. As a result, we wrote down the deferred financing costs associated with the repayment of those term loans. As such, $80,000 is included in amortization expense ~~during the third quarter~~ of ~~2015 was the~~debt financing of the three acquisitions completed during the third quarter of 2014. Interest expense incurred on our Revolver borrowings during the third quarter of 2015 was $89,000, compared to $61,000 during the third quarter of 2014. The average balance of our Revolver borrowings during the third quarter of 2015 was $13,550,000, compared to $11,852,000 during the same three-month period in 2014. Interest expense on our Long-term borrowings was $55,000, compared to $72,000 during the same three-month period in 2014. Includedcosts in our interest expense for the three-month ~~periods~~period ended ~~September 30, 2015~~March 31, 2016. See Notes 2 and ~~2014 is amortization expense of debt financing costs of $28,000 and $23,000, respectively. The applicable loan margins as defined in the Credit Agreement borrowings that are added~~8 to our ~~LIBOR (London InterBank Offered Rate)~~Consolidated Financial Statements for further discussion on the sale of Nationwide and ~~Base Rate borrowing also impact~~the Amendment to our ~~interest expense. (See~~Credit Agreement. See Liquidity and Capital Resources elsewhere in this Management’s Discussion and Analysis section for further ~~discussion.)~~information regarding our bank loans.

Our interest expense during the nine-month period ended September 30, 2015 was $566,000, compared to $335,000 for the same period in the prior year. The most significant factor affecting interest expense was the financing of the three acquisitions completed during the third quarter of 2014. As a result, interest expense on our short term, or Revolver borrowings during the first nine months of 2015 was $291,000, compared to $78,000, recorded during the first nine months of 2014. Theactual average balance of short-term borrowings during the ~~first three quarters of 2015~~three-month period ended March 31, 2016, was ~~$14,807,000,~~$5,227,000, compared to ~~$4,862,000~~$13,440,000 during the same period in 2014. Interest expense incurred during both nine-month periods ended September 30, 2015 and 2014 on our Long-term borrowings was $188,000. Lastly, included in the nine-month interest expense is amortization expense of debt financing costs of $83,000 in 2015 and $67,000 in 2014. An increase in the applicable loan margins that are added to both our LIBOR or Base Rate, may also impact our interest expense.
~~Other expense (income)~~
In connection with the UAT acquisition, there was the possibility that we could pay as additional consideration to the former shareholders of UAT (the “Sellers”) up to a maximum of £250,000 (“contingent consideration”), should UAT’s net earnings, during the period from date of acquisition, July 29, 2014 through the first anniversary date, July 29, 2015, after adjusting for among other things, interest, taxes, depreciation and amortization (“adjusted net income”) exceed a minimum threshold. At the time of the acquisition we believed, based on a range of possible outcomes that it was more likely than not that UAT would achieve the amount of adjusted net income that would entitle the Sellers to the maximum amount, and accordingly recorded a $425,000 obligation as contingent consideration (£250,000 at the then foreign exchange rate). Based upon projected results, at June 30, 2015, we adjusted the estimated contingent consideration payable to the Sellers to $224,000. Subsequently, we and the Sellers have agreed that the contingent consideration payable to the Sellers shall be £193,435, or approximately $299,000. As a result of finalizing the contingent consideration payable to the Sellers we recognized $75,000 as Other expense in the three-month period ended ~~September 30,~~March 31, 2015. ~~The $299,000 agreed upon amount was paid to the Sellers in October 2015.~~
27

Income Taxes

At the end of each interim reporting period, ~~we estimate~~ the Company estimates its effective tax rate expected to be applied for the full year. This estimate is used to determine the income tax provision or benefit applicable to continuing operations, on a year-to-date basis, and may change in subsequent interim periods. Our effective tax rates for the three and nine-months ended September 30, 2015 were 36.6% and 35.2%, respectively, compared to 43.0% and 40.5%, respectively, for the three and nine-month periods ended September 30, 2014. Expenses incurred in connection with the three acquisitions completed during the third quarter of 2014, were included in our selling and general and administrative expenses during the third quarter of 2014, however these expenses are not deductible for income tax purposes. As a result, our effective tax ~~rates~~rate applicable to continuing operations for the three months ended March 31, 2016 and ~~nine-month periods ended September 30, 2014,~~2015 were ~~higher than the statutory rate of 34.0%. Further, with regard to our 2015~~39.4% and 36.6%, respectively. The Company’s effective tax rates ~~the non-taxable income on a year to date basis related to the contingent consideration payment of approximately $126,000 is an additional factor~~ for ~~a lower effective tax rate for the nine-month period ended September 30, 2015, compared to the same~~both periods ~~in 2014. Lastly,~~were affected primarily by state taxes and ~~other~~ non-deductible expenses.
Discontinued operations
Nationwide’s results of operations in our Consolidated Financial Statements and Note 2 presents their actual revenue and cost of goods sold for the period January 1, 2016 through the Closing Date. The SG&A of $483,000 includes that of Nationwide plus approximately $19,000 of expenses ~~cause~~incurred at the corporate level that is specifically attributable to Nationwide. Nationwide’s pro-forma data for the three-month period ended March 31, 2015 represents their revenue and cost of goods sold. The SG&A for the three-month period ended March 31, 2015, includes all of Nationwide plus approximately $116,000 of corporate expenses directly attributable to Nationwide. In accordance with current accounting guidance, we have included as part of discontinued operations all interest expense incurred attributable to our ~~effective~~Bank borrowings during the three-month period ended March 31, 2015, and for the period January 1, 2016 through the Closing Date,
We recognized a gain of $12,185,000, on the sale of Nationwide during the three-month period ended March 31, 2016, which represents the difference between the adjusted net selling price and the carrying book value of Nationwide. However, for income tax ~~rates to differ from~~purposes, the ~~U.S. federal statutory~~Company’s tax basis in Nationwide was greater than the net proceeds, thus resulting in a tax loss. At the applicable tax rate of ~~34.0%.~~34%, this loss has been recorded as a tax benefit of $141,000. This tax benefit may only be applied against future capital gain transactions. See Note 2 to our Consolidated Financial Statements for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

Our cash flows from operations can be somewhat cyclical, ~~typically~~ with the greatest demand for cash typically in the first and third ~~quarters followed by positive cash flows in the second and fourth quarter as receivables and inventories trend down.~~quarters. We monitor ~~average days~~such metrics as days’ sales outstanding, inventory requirements, inventory turns, estimated future purchasing requirements and capital expenditures to project liquidity needs, ~~and~~as well as evaluate return on ~~assets employed.~~assets. Our primary sources of funds are operating cash flows and our Revolver Loan (“Revolver”) with our Bank.

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

September 30, 2015 December 31, 2014 March 31, 2016 December 31, 2015
Working Capital $ 18,143,000 $ 13,927,000 $ 23,976,000 $ 21,023,000
Current Ratio 1.85 to 1 1.59 to 1 4.17 to 1 2.19 to 1
Shareholders’ Equity $ 43,255,000 $ 39,991,000 $ 53,677,000 $ 43,642,000

21
Credit Facility

WeIn October 2010, we entered into a Loan and Security Agreement ~~in October 2010, as amended~~ (“Credit Agreement”) with ~~COBC, as agent and lender. The Credit Agreement expires December 19, 2017 (the “Maturity Date”~~an affiliate of Capital One, National Association (“Capital One”, or the “Bank”). The Credit Agreement provides for Revolver borrowings under which are secured by the Company’s accounts receivable, mortgages on its real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”),  inventory and equipment. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross-guaranteed by certain other subsidiaries.
At our option, Revolver borrowings will bear interest at either LIBOR ~~(London~~(“London InterBank Offered ~~Rate)~~Rate”) or the Base Rate, as the term is defined in the Credit Agreement, ~~(“Base Rate”),~~ plus the Applicable Margin, ~~(the “Applicable Margin”),~~ as defined in the Credit Agreement. The interest rate, either LIBOR or Base Rate, which is added to the Applicable Margin, is at the option of the Company, subject to limitations on the number of LIBOR borrowings.

OnIn August ~~13,~~ 2014, we entered into an Amended and Restated Loan and Security Agreement, (the “Restated Loan Agreement”), with ~~COBC.~~Capital One. The Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing the total amount of the credit facility from $29,423,000 to $33,657,000, (2) increasing the Revolver from $20,000,000 to $22,000,000, (3) creating a new ~~$3,000,000~~ Term Loan, as defined in the Restated Loan Agreement (“Term Loan B”), and (4) re-designating as “Term Loan A”, the previously existing outstanding Term Loan, which relates primarily to the Company’s ~~real property.~~
~~The balance of Revolver borrowings outstanding was $11,461,000 and $11,817,000, at September 30, 2015 and December 31, 2014, respectively. Applicable Margins added to Revolver borrowings at LIBOR and~~Real Property. In addition, the Base Rate at September 30, 2015 and December 31, 2014 were 2.25% and 1.25%, respectively. During the nine-month period ended September 30, 2015, the Applicable Margin rates for LIBOR borrowings and Base rate borrowings ranged from 2.25% to 2.50% and 1.25% and 1.50%, respectively, compared to 1.50% to 2.00% and 0.50% to 1.00%, respectively, for the same nine-month period in 2014.
28
~~The~~ Restated Loan Agreement ~~provided for a Term Loan B, pursuant to which we borrowed the maximum principal amount of $3,000,000, which funds were used in connection~~also reset certain financial covenants.
Contemporaneously with the ~~ATSCO acquisition. This Term~~sale of Nationwide, as discussed in Note 2 to our Consolidated Financial Statements, we entered into the Consent and Second Amendment to the Restated Loan ~~B was~~Agreement (the “Amendment”) with Capital One. The Amendment, among other things; provided the Bank’s consent to ~~be repaid~~the transactions contained in ~~36 consecutive monthly payments~~the Stock Purchase Agreement and the repurchase of ~~$83,000, with an additional mandatory repayment each year equal~~certain shares and options discussed in Note 2, and Note 4 to ~~50% of~~ the ~~Company’s Excess Cash Flow~~Consolidated Financial Statements, and amended the Restated Loan Agreement by: (a) reducing the aggregate Commitment (as defined in the Restated Loan Agreement) ~~for such year, if any. As the result, of our determination of the Excess Cash Flow for the year ended December 31, 2014, in April 2015, we repaid $2,417,000, which was the balance of~~to $11,600,000; (b) reducing the Term Loan BA to $100,000; (c) reducing the Revolver Commitment to $10,000,000 (less the new Term Loan A balance of $100,000); (d) reducing the Capex Loan Commitment to $1,600,000; (e) modifying certain financial covenants, (f) lowering interest rate margins and fee obligations; and (g) extending the expiration of the Credit Agreement to February 11, 2019. We believe that despite the reduction in the overall facility, our cash requirements to operate our business will be funded by operations and the Revolver. Further, we believe that should a need arise whereby the current credit facility is insufficient, we can borrow additional amounts against our Real Property, as well as secure additional funds.
The net funds provided by the sale of Nationwide of approximately $18.7 million were used to pay down the Revolver, the Cap-Ex loans and the Term Loan A; however, the Amendment provided for $100,000 to remain outstanding under the Term Loan A, rather than pay it off in full so that the Company and Capital One could facilitate potential increased future term loan borrowings more inexpensively and efficiently.
At March 31, 2016 and December 31, 2015, Revolver borrowings outstanding was $-0- and $9,623,000, respectively. Applicable LIBOR Margins added to Revolver borrowings at December 31, 2015 was 2.00%. The Applicable Base Rate Margin added to Revolver borrowings at March 31, 2016 and December 31, 2015 ~~with funds available from our Revolver. In accordance with the terms set forth in the Restated Loan Agreement, funds cannot be re-borrowed from this Term Loan B.~~were 0.50% and 1.00%, respectively.

~~Additionally,~~We purchased vehicles for use by our UAT salesforce. The current portion of the balance due on these loans applicable to these purchased vehicles is $29,000 at March 31, 2016 and $31,000 at December 31, 2015.
In 2012 we borrowed $380,000 and $519,000, ~~in March 2012 and September 2012, respectively,~~ as loans ~~primarily~~ for machinery and equipment (“Capex Term Loans”). ~~Currently, the maximum amount we can borrow as a Capex Term Loan is $2,123,000. As such, if necessary, we could borrow an additional $1,224,000, under the terms~~The original repayment of ~~the current credit facility. Repayment of the~~these two Capex Term Loans iswas based on sixty-month amortization periods, resulting in repayments of approximately $6,000 and $9,000 per month, respectively. Applicable Margins added to these Capex Term Loans during the period January 1, 2016 through February 11, 2016 (date of sale of Nationwide) and at ~~September 30, 2015 and~~ December 31, ~~2014~~2015 were 3.0% and 2.0%, respectively, for borrowings at LIBOR and the Base ~~Rate. Once~~Rate, respectively. As noted earlier, these loans were repaid ~~funds cannot be re-borrowed from this portion of~~in their entirety on the ~~Restated Loan Agreement.~~Closing Date

Cash flows

~~Our~~During the three-month period ended March 31, 2016, our net cash ~~at September 30, 2015 was $1,682,000, compared~~decreased $43,000 to ~~$1,011,000~~$884,000 from $927,000 at December 31, ~~2014.~~2015. Our total bank debt at ~~September 30, 2015~~March 31, 2016 was ~~$18,019,000,~~$100,000, compared to ~~$21,387,000~~$16,066,000 at December 31, ~~2014. During~~2015. As discussed earlier and in Note 2 and 8 to the ~~third quarter of 2015 we were able to reduce~~consolidated Financial Statements, our revolver borrowings approximately $3.5 million from the June 30, 2015 balance of $14,916,000, due primarily to positive cash flows. Additionally, during the nine-month period ended September 30, 2015, we made the final payment of $2,417,000reduction in ~~settlement~~debt is a result of the ~~Term Loan B, which was discussed above. We lowered the~~sale of Nationwide operations. The total debt to total book capitalization (total debt divided by total debt plus equity); at March 31, 2016 was 0.2%, ~~which was 29.5% at September 30, 2015, from 34.9%,~~compared to 26.9% at December 31, ~~2014. During~~2015.
Our Board of Directors announced that it approved the ~~remainder~~initiation of ~~2015, as we generate~~a dividend policy under which the Company intends to declare a cash dividend to its stockholders in the amount of $0.20 per share per annum, payable in equal quarterly installments. As all cash remitted to us by our customers is delivered to a Capital One Lockbox, the cash required for the payment of the special $0.50 per common share dividend and the aforementioned $0.05 quarterly dividend, both paid in April 2016, was from ~~operations, barring unexpected events,~~Revolver borrowings.
We believe the net cash flows from our current operating units should provide cash to fund our consolidated cost structure for the next twelve months. As such, we believe that the loss of the cash flows generated by Nationwide will not materially affect our ~~short-term borrowings should decline to amounts below December 31, 2014 levels.~~financial position.

Our capital spending from continuing operations was ~~$1,144,000 during~~$242,000 for the ~~nine-month~~three-month period ended ~~September 30, 2015,~~March 31, 2016, compared to ~~$713,000~~$151,000 during the same period in the prior year.  Capital expenditures for the balance of ~~2015~~2016 are expected to be approximately ~~$200,000,~~$800,000, some of which may be financed through our credit facilities or financed through independent third party financial institutions. The remaining ~~2015~~2016 capital expenditures will primarily be for expansion of existing product lines and replacement of equipment.
~~Customer concentration~~
Within our Tools segment we have two retail customers that, in the aggregate account for 41.0% and 56.1% of our consolidated accounts receivable at September 30, 2015 and 2014. To date, these customers, with minor exceptions, are current in their payments. Further, these two customers in the aggregate, accounted for 32.5% and 30.2%, of our consolidated revenue for the three and nine-month periods ended September 30, 2015, compared to 40.7% and 37.2% during the same three and nine-month periods in 2014.
~~We believe that the loss of one or both of these customers would negatively impact our financial condition, but would not affect our ability to remain a going concern.~~

RECENT ACCOUNTING PRONOUNCEMENTS

Management does not believe that any other recently issued, but not yet effective accounting standards, if currently adopted would have a material effect on our consolidated financial statements.

Customer concentration
29
We have two customers that account for 12.7% and 36.3% at March 31, 2016, and 11.4% and 35.6% at December 31, 2015 of our consolidated accounts receivable. To date, these customers, with minor exceptions, are current in their payments. Further, these two customers in the aggregate, accounted for 38.3% of our consolidated revenue from continuing operations for the three-month period ended March 31, 2016, compared to 35.6% for the same three-month period in 2015.

We believe the loss of either of these customers would negatively impact our working capital, but would not affect our ability to remain a going concern.

Item 3.             Quantitative And Qualitative Disclosures About Market Risk

Not required.

Item 4.             Controls and Procedures

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's CEO and CFO, evaluated, as of ~~September 30, 2015,~~March 31, 2016, 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 ~~September 30, 2015,~~March 31, 2016, the Company’s management, including its CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level 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 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
30

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the legal proceedings disclosure described in our ~~2014~~2015 Form 10-K.

Item 1A. Risk Factors

~~Set out below is risk factor to be considered in addition~~There were no material changes to the risk factors previously disclosed in our ~~2014~~2015 Form 10-K. ~~Other than this additional risk factor, there were no material changes to such previously disclosed risk factors.~~
~~Exposure to fluctuations in energy prices.~~Fluctuations in energy prices, including crude oil and gas prices, could negatively impact the activities of those of our customers involved in extracting, refining or exploring crude oil and gas, resulting in a corresponding adverse effect on the demand for the products that they purchase from us. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply of, and demand for, oil and gas, market uncertainty and a variety of other economic factors that are beyond our control. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by the Organization of the Petroleum Exporting Countries (OPEC), have contributed, and are likely to continue to contribute, to price and volume volatility.
Crude oil prices have declined significantly in the past year. We believe this in large part due to increasing global supply of oil due to factors such as weakening demand from slowing economic growth in Europe and Asia and trends towards increased fuel-efficiency. The resulting negative shift in demand of our products by our customers has negatively impacted us, and could in the future have a material adverse effect on our business, results of operations or financial position.

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

~~None.~~On February 11, 2016, the Company and the president of Nationwide, entered into a Purchase Agreement, pursuant to which, among other things the Company acquired 30,000 shares of the Company’s Common Stock at the aggregate purchase price of $254,940. None of such shares were purchased as part of a publicly announced plan or program, nor has the Company announced any plan to purchase any additional shares.

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.
31

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: ~~November~~May 13, ~~2015~~2016 (Principal Financial and Chief Accounting Officer)
32

EXHIBIT INDEX

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

Exhibit

Number
Description of Exhibit
2.1
Stock Purchase and Redemption Agreement, dated as of February 11, 2016, by and among Countrywide Hardware, Inc., Argosy NWI Holdings, LLC, the Company and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.1
Purchase Agreement, dated as of February 11, 2016, by and between the Company and Christopher J. Kliefoth (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 11, 2016).
10.2
Consent and Second Amendment to Amended and Restated Loan and Security Agreement, dated as of February 11, 2016, by and among the Company, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp, Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One, National Association, as lender and agent (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.3
Lease, dated as of February 11, 2016, between Countrywide Hardware, Inc. and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.4
Option and Right of First Refusal Agreement, dated as of February 11, 2016, between Countrywide Hardware, Inc. and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.5
Third Amendment to Amended and Restated Loan and Security Agreement, dated as of March 31, 2016, by and among the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp, Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One, National Association, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 31, 2016).
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 *  Interactive Data

* Attached as Exhibit 101 are the following, each formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income and Comprehensive Income; (iii) Consolidated Statement 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.
33

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)

Large accelerated filer¨	Accelerated filer¨	Non-accelerated filer¨	Smaller reporting company x
		(Do not check if a smaller reporting company)

		PAGE

PART I — FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Consolidated Balance Sheets as of ~~September 30, 2015~~March 31, 2016 (unaudited) and December 31, ~~2014~~2015	1

	Consolidated Statements of Income and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (unaudited)	3

	Consolidated Statement of Shareholders’ Equity for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 (unaudited)	4

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1816

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3023

Item 4 4.	Controls and Procedures	3023

PART II — OTHER INFORMATION		24

Item 1.	Legal Proceedings	3124

Item 1A.	Risk Factors	3124

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3124

Item 3.	Defaults Upon Senior Securities	3124

Item 4.	Mine Safety Disclosures	3124

Item 5.	Other Information	3124

Item 6.	Exhibits	3124

Signature		3225

Exhibit Index		3326

				Class A Common Stock, $1 Par				Additional Paid-in		Retained		Treasury stock						Accumulated other comprehensive
	Total			Shares		Amount		capital		earnings		Shares			Amount			loss

Balance, January 1, 2015	$	39,991,000			4,139,000	$	4,139,000	$	12,695,000	$	27,951,000		(554,000	)	$	(4,566,000	)	$	(228,000	)
Net income		3,143,000			—		—		—		3,143,000		—			—			—
Exercise of stock options		73,500			23,500		23,500		50,000		—		—			—			—
Restricted common stock compensation		30,500			7,500		7,500		23,000		—		—			—			—
Stock-based compensation		72,000			—		—		72,000		—		—			—			—
Foreign currency translation adjustment		(55,000	)		—		—		—		��		—			—			(55,000	)
Balance, September 30, 2015	$	43,255,000			4,170,000	$	4,170,000	$	12,840,000	$	31,094,000		(554,000	)	$	(4,566,000	)	$	(283,000	)

				Class A common stock, $1 par				Additional paid-in			Retained			Treasury stock						Accumulated other comprehensive
	Total			Shares		Amount		capital			earnings			Shares			Amount			loss

Balance, January 1, 2016	$	43,642,000			4,170,000	$	4,170,000	$	12,884,000		$	31,495,000			(554,000	)	$	(4,566,000	)	$	(341,000	)

Net income		12,323,000			—		—		—			12,323,000			—			—			—

Exercise of stock options		23,000			6,000		6,000		17,000			—			—			—			—

Purchase of Class A common stock		(255,000	)		—		—		—			—			(30,000	)		(255,000	)		—

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

Stock-based compensation		(24,000	)		—		—		(24,000	)		—			—			—			—

Dividend		(1,976,000	)		—		—		—			(1,976,000	)		—			—			—

Foreign currency translation adjustment		(70,000	)		—		—		—			—			—			—			(70,000	)

Balance, March 31, 2016	$	53,677,000			4,176,000	$	4,176,000	$	12,891,000		$	41,842,000			(584,000	)	$	(4,821,000	)	$	(411,000	)

	Three months
	ended March 31,
	2016			2015
Cash Flows from Operating Activities:
Net income from continuing operations	$	66,000		$	373,000
Net income from discontinued operations		12,257,000			408,000

Adjustments to reconcile net income from operations to net cash used in operating activities:

Non-cash charges:
Depreciation and amortization		409,000			375,000
Amortization of other intangible assets		308,000			309,000
Amortization of debt issue costs		98,000			28,000
Provision for losses on accounts receivable - net		2,000			2,000
Stock-based compensation		11,000			38,000
Restricted stock-based compensation		14,000			6,000
Loss on sale of fixed assets		-			4,000
Deferred income taxes		(127,000	)		(56,000	)

Changes in operating assets and liabilities:
Accounts receivable		(719,000	)		(433,000	)
Inventories		(230,000	)		(1,632,000	)
Prepaid expenses and other current assets		(456,000	)		(385,000	)
Other assets		(1,639,000	)		26,000
Accounts payable		190,000			809,000
Accrued compensation and benefits		(1,017,000	)		(1,208,000	)
Accrued liabilities		218,000			43,000
Other liabilities		(4,000	)		(4,000	)
Total adjustments		(2,942,000	)		(2,078,000	)
Net cash used in operating activities – continuing operations		(2,876,000	)		(1,705,000	)
Net cash used in operating activities – discontinued operations		(840,000	)		(1,310,000	)

Net cash used in operating activities	$	(3,716,000	)	$	(3,015,000	)

	For the Period January 1, 2016 through February 11, 2016		Three months ended March 31, 2015

Revenue	$	1,830,000	$	5,267,000
Cost of goods sold		1,177,000		3,247,000
Gross margin		653,000		2,020,000
Selling and general and administrative expenses		483,000		1,214,000
Interest expense-net		60,000		163,000
Income before income taxes		110,000		643,000
Income tax		38,000		235,000

Net income	$	72,000	$	408,000

	December 31, 2015

Accounts receivable-net	$	1,245,000
Inventories		4,211,000
Prepaid expenses and other current assets		92,000
Net property and equipment		768,000
Goodwill		1,873,000
Other intangible assets-net		12,000
Other assets- net		5,000
Deferred taxes - net		229,000
Assets of discontinued operations	$	8,435,000

Accounts payable	$	765,000
Accrued compensation and benefits		247,000
Accrued other liabilities		330,000
Liabilities of discontinued operations	$	1,342,000

	Three months ended September 30, 2014 (Unaudited)		Nine months ended September 30, 2014 (Unaudited)
Revenue	$	23,500,000	$	65,452,000
Net income	$	805,000	$	2,845,000
Earnings per share - basic	$	0.21	$	0.76
Earnings per share - diluted	$	0.20	$	0.73

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2015		2014		2015		2014		2016		2015
Numerator:
Numerator for basic and diluted earnings per common share:

Net income from continuing operations									$	66,000	$	373,000
Net income from discontinued operations										12,257,000		408,000
Net income	$	1,050,000	$	816,000	$	3,143,000	$	1,850,000	$	12,323,000	$	781,000

Denominator:
For basic earnings per share - weighted average common shares outstanding		3,616,000		3,792,000		3,604,000		3,737,000
Denominator for basic earnings per share weighted average common shares outstanding										3,601,000		3,589,000
Dilutive securities (1)		176,000		176,000		160,000		180,000		177,000		157,000
For diluted earnings per share - weighted average common shares outstanding		3,792,000		3,968,000		3,764,000		3,917,000
Denominator for diluted earnings per share weighted average common shares outstanding										3,778,000		3,746,000

	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value		Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding, January 1, 2015		505,000		$	6.51		4.8	$	1,232,000
Outstanding, January 1, 2016											457,000		$	6.15		4.0	$	1,431,000
Granted		—			—				—		19,174			5.89
Exercised		(23,500	)		3.11						(6,000	)		3.81
Forfeited		—			—						(26,500	)		6.55
Expired		(22,500	)		16.68						—			—
Outstanding, September 30, 2015		459,000		$	6.19		4.2	$	1,720,000
Outstanding, March 31, 2016											443,674		$	5.90		3.5	$	1,729,000

Vested, September 30, 2015		435,160		$	6.08		4.0	$	1,687,000
Vested, March 31, 2016											424,507		$	5.81		3.4	$	1,697,000

	Option Shares			Weighted Average Grant-Date Fair Value		Option Shares			Weighted Average Grant- Date Fair Value
Non-vested options, January 1, 2015		61,006		$	6.14
Non-vested options, January 1, 2016							23,840		$	6.72
Granted		---					829			6.45
Vested		(37,166	)	$	5.76		—			—
Forfeited		---					(5,502	)		6.72
Non-vested options, September 30, 2015		23,840		$	6.72
Non-vested options, March 31, 2016							19,167		$	6.71

	September 30, 2015		December 31, 2014
Raw material	$	2,354,000	$	2,014,000
Work in process		1,450,000		1,433,000
Finished goods		20,448,000		20,888,000
	$	24,252,000	$	24,335,000

	Consolidated			Tools			Hardware
Balance, January 1, 2015	$	11,980,000		$	10,107,000		$	1,873,000
Adjustment to Acquisition of ATSCO		62,000			62,000			—
Currency translation adjustments		(10,000	)		(10,000	)		—
Balance, September 30, 2015	$	12,032,000		$	10,159,000		$	1,873,000

Balance, January 1, 2016	$	10,154,000
Currency translation adjustment		(6,000	)
Balance, March 31, 2016	$	10,148,000

Three months ended September 30,				Nine months ended September 30,
2015		2014		2015		2014
$	324,000	$	245,000	$	971,000	$	361,000

2016	$	1,263,000
2017		1,178,000	$	1,233,000
2018		981,000		1,052,000
2019		954,000		966,000
2020		809,000		907,000
2021				748,000
Thereafter		4,241,000		3,859,000
Total	$	9,426,000
			$	8,765,000

	September 30, 2015		December 31, 2014
Term Loan A - $23,000 payable monthly January 2013 through December 2017, balance due December 19, 2017.	$	6,230,000	$	6,440,000
Term Loan B - $83,000 payable monthly September 2014 through March 2015.		—		2,667,000
Capex Term Loan - $6,000 payable monthly May 2012 through April 2017.		121,000		178,000
Capex Term Loan - $9,000 payable monthly October 2012 through September 2017.		208,000		285,000
Other		57,000		90,000
		6,616,000		9,660,000
Less: current maturities		494,000		3,167,000
	$	6,122,000	$	6,493,000

As of and for the three months ended September 30, 2015	Consolidated			Tools		Hardware

Revenues from unaffiliated customers	$	21,678,000		$	15,924,000	$	5,754,000

Segment operating income	$	3,060,000		$	1,947,000	$	1,113,000
General corporate expense		(1,157,000	)
Other expense		(75,000	)
Interest expense		(173,000	)
Income before income taxes	$	1,655,000

Segment assets	$	71,608,000		$	60,688,000	$	10,920,000
Corporate assets		2,243,000
Total assets	$	73,851,000

Long-lived assets, including $52,000 at corporate	$	33,900,000		$	29,338,000	$	4,510,000

As of and for the nine months ended September 30, 2015	Consolidated			Tools		Hardware

Revenues from unaffiliated customers	$	64,064,000		$	46,541,000	$	17,523,000

Segment operating income	$	9,352,000		$	5,888,000	$	3,464,000
General corporate expense		(4,059,000	)
Other income		126,000
Interest expense		(566,000	)
Income before income taxes	$	4,853,000

	Three months ended March 31,
					Increase (decrease)
	2016		2015		$			%
Tools
Florida Pneumatic	$	10,830,000	$	10,254,000	$	576,000			5.6	%
Hy-Tech		3,669,000		4,305,000		(636,000	)		(14.8	)

Consolidated	$	14,499,000	$	14,559,000	$	(60,000	)		(0.4	)%

	Three months ended March 31,				Increase
	2016		2015		Amount			%
Interest expense attributable to:
Short-term borrowings	$	3,000	$	—	$	(3,000	)		NA	%
Term loans, including Capital Expenditure Term Loans		1,000		—		(1,000	)		NA
Amortization expense of debt financing costs		98,000		29,000		(69,000	)		(237.9	)

Total	$	102,000	$	29,000	$	(73,000	)		(251.7	)%

Item 1.	Legal Proceedings

	There have been no material changes to the legal proceedings disclosure described in our ~~2014~~2015 Form 10-K.

Item 1A.	Risk Factors

	~~Set out below is risk factor to be considered in addition~~There were no material changes to the risk factors previously disclosed in our ~~2014~~2015 Form 10-K. ~~Other than this additional risk factor, there were no material changes to such previously disclosed risk factors.~~ ~~Exposure to fluctuations in energy prices.~~Fluctuations in energy prices, including crude oil and gas prices, could negatively impact the activities of those of our customers involved in extracting, refining or exploring crude oil and gas, resulting in a corresponding adverse effect on the demand for the products that they purchase from us. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply of, and demand for, oil and gas, market uncertainty and a variety of other economic factors that are beyond our control. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by the Organization of the Petroleum Exporting Countries (OPEC), have contributed, and are likely to continue to contribute, to price and volume volatility. Crude oil prices have declined significantly in the past year. We believe this in large part due to increasing global supply of oil due to factors such as weakening demand from slowing economic growth in Europe and Asia and trends towards increased fuel-efficiency. The resulting negative shift in demand of our products by our customers has negatively impacted us, and could in the future have a material adverse effect on our business, results of operations or financial position.

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

	~~None.~~On February 11, 2016, the Company and the president of Nationwide, entered into a Purchase Agreement, pursuant to which, among other things the Company acquired 30,000 shares of the Company’s Common Stock at the aggregate purchase price of $254,940. None of such shares were purchased as part of a publicly announced plan or program, nor has the Company announced any plan to purchase any additional shares.

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.

	P&F INDUSTRIES, INC.
	(Registrant)

	/s/ JOSEPH A. MOLINO, Jr.
	Joseph A. Molino, Jr.
	Chief Financial Officer
Dated: ~~November~~May 13, ~~2015~~2016	(Principal Financial and Chief Accounting Officer)

Exhibit Number		Description of Exhibit
2.1		Stock Purchase and Redemption Agreement, dated as of February 11, 2016, by and among Countrywide Hardware, Inc., Argosy NWI Holdings, LLC, the Company and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.1		Purchase Agreement, dated as of February 11, 2016, by and between the Company and Christopher J. Kliefoth (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 11, 2016).
10.2		Consent and Second Amendment to Amended and Restated Loan and Security Agreement, dated as of February 11, 2016, by and among the Company, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp, Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One, National Association, as lender and agent (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.3		Lease, dated as of February 11, 2016, between Countrywide Hardware, Inc. and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.4		Option and Right of First Refusal Agreement, dated as of February 11, 2016, between Countrywide Hardware, Inc. and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated February 11, 2016)
10.5		Third Amendment to Amended and Restated Loan and Security Agreement, dated as of March 31, 2016, by and among the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp, Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One, National Association, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 31, 2016).
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		* Interactive Data