Three months ended
March 31,
2021 2020
Weighted average anti-dilutive stock options outstanding 141,000 146,000

P&F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 53 – ~~EQUITY – COMMON STOCK REPURCHASE PLAN – (Continued)~~STOCK-BASED COMPENSATION

~~Stock option compensation~~
~~The Company accounts for stock-based compensation, including options and non-vested shares, according to the provisions of FASB ASC 718,~~~~Share Based Payment~~.
On September 5, 2017 (“Grant Date”), the compensation committee of Company’s Board of Directors authorized the issuance of 89,000 options to purchase shares of the Company’s Class A Common Stock under the Company’s 2012 Stock Incentive Plan. The options expire ten years from the Grant Date. The Company granted an aggregate of 55,000 of these options to its Chief Executive Officer and its Chief Financial Officer, with the balance to non-executive employees of the Company. AllThere were no options granted on the Grant Date vest one-third on each of the first three anniversaries of the Grant Date. Further, all options granted on the Grant Date have an exercise price of $7.09, which was the closing price of the Company’s common stock on the Grant Date.
Stock option compensation expense is attributable to the granting of, and the remaining requisite service periods of, stock options. Compensation expense attributable to stock-options was approximately $20,000 and $0or issued during the three-month ~~periods~~period ended September 30, 2017 and 2016, respectively. Compensation expense attributable to stock-options was approximately $20,000 and $13,000 during the nine-month periods ended September 30, 2017 and 2016, respectively. The compensation expense is recognized in selling, general and administrative expenses on the Company’s Statements of Operations and Comprehensive Income (Loss) on a straight-line basis over the vesting periods. The exercisability of the respective non-vested options, which are at pre-determined dates on a calendar year, does not necessarily correspond to the period(s) in which straight-line amortization of compensation cost is recorded. As of September 30, 2017, the Company had approximately $373,000 of total unrecognized compensation cost related to non-vested awards granted under its stock-based plans, which it expects to recognize over a weighted average period of 1.9 years. The expected term of stock options is based on historical exercises and terminations. The volatility is determined using historical volatilities based on historical stock prices.March 31, 2021.
~~The Company estimated the fair value of these options using the following assumption:~~

Risk-free interest rate 2.07 %
Expected term (in years) 10 years
Volatility 87.16 %
Dividend yield 2.82 %
Weighted average fair value of options granted $ 4.41

The following is a summary of the changes in outstanding options during the ~~nine-month~~three-month period ended ~~September 30, 2017:~~March 31, 2021:

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 and vested, January 1, 2017 423,817 $ 5.68 2.9 $ 1,271,704
Outstanding, January 1, 2021 200,878 $ 6.59 4.1 $ 85,663
Granted 89,000 7.09 —
Exercised (16,722 ) 3.65 —
Forfeited (6,793 ) 7.86 —
Expired (71,069 ) 10.72 —
Outstanding, September 30, 2017 418,233 $ 5.17 4.1 $ 907,347

Vested, September 30, 2017 329,233 $ 4.65 2.5 $ 891,327
Outstanding, March 31, 2021 200,878 $ 6.59 3.8 $ 118,716
Vested, March 31, 2021 198,210 $ 6.56 3.8 $ 118,716

15
~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~NOTE 5 – EQUITY – COMMON STOCK REPURCHASE PLAN – (Continued)~~
Option Shares Weighted Average Grant-
Date Fair Value Option shares Weighted
average
grant-
date fair
value
Non-vested options, January 1, 2017 — $ —
Non-vested options, January 1, 2021 5,334 $ 4.60
Granted 89,000 4.41
Vested — — (2,666 ) 4.60
Forfeited — — —
Non-vested options, September 30, 2017 89,000 $ 4.41
Non-vested options, March 31, 2021 2,668 $ 4.60

The remaining 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, 2017~~March 31, 2021 was ~~88,812.~~21,158. At ~~September 30, 2017,~~March 31, 2021, there were ~~192,233~~185,378 options outstanding issued under the 2012 Plan and ~~226,000~~15,500 options outstanding issued under the 2002 Stock Incentive Plan.

Restricted Stock

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

On May ~~2017,~~20, 2020, the Company granted ~~1,000~~1,250 restricted shares of its Common Stock to each non-employee member of its Board of Directors, totaling ~~5,000~~6,250 restricted shares. The Company determined that the fair value of these shares was ~~$6.17~~$5.14 per share, 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. ~~As such, the~~The Company iswill ratably ~~amortizing~~amortize the total non-cash compensation expense of approximately ~~$30,000 in its~~$32,000 to selling, general and administrative expenses through May ~~2018.~~2021.

The Company, in May 2016, 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 was $8.72 per share, which was the closing price of the Company’s Common Stock on the date of the grant. These shares could not have been traded earlier than the first anniversary of the grant date. As such, the Company ratably amortized the total non-cash compensation expense of approximately $44,000 in its selling, general and administrative expenses through May 2017.P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 64 – FAIR VALUE MEASUREMENTS

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

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

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

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

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

As of ~~September 30, 2017~~March 31, 2021, and December 31, ~~2016,~~2020, the carrying amounts reflected in the accompanying ~~Consolidated Balance Sheets~~consolidated balance sheets for current assets and current liabilities approximated fair value due to the short-term nature of these accounts.

The fair value of the prepaid expenses and other current assets at December 31, 2016 consisted primarily of escrowed funds from the sale of Nationwide, which was estimated to be the same as its carrying value, based on Level 3 inputs. In August 2017, the Company received the entire $2,105,000, in accordance with the terms and conditions set forth in the Stock Purchase Agreement.

The fair value of the contingent consideration payable to the Jiffy Seller, of $706,000, included in other liabilities was determined applying Level 3 inputs. The fair value of this contingent consideration is being adjusted quarterly.

16

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

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

~~NOTE 6 – FAIR VALUE MEASUREMENTS – (Continued)~~

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

NOTE 75 – ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable - net consists of:

	September 30, 2017			December 31, 2016			March 31, 2021			December 31, 2020
Accounts receivable	$	11,067,000		$	7,991,000		$	9,842,000		$	7,726,000
Allowance for doubtful accounts		(73,000	)		(85,000	)
Allowance for doubtful accounts, sales discounts and chargebacks								(304,000	)		(258,000	)
	$	10,994,000		$	7,906,000		$	9,538,000		$	7,468,000

NOTE 86 – INVENTORIES

Inventories consist of:

	September 30, 2017		December 31, 2016		March 31, 2021		December 31, 2020
Raw material	$	1,681,000	$	1,918,000	$	2,063,000	$	2,077,000
Work in process		1,642,000		658,000		1,336,000		1,127,000
Finished goods		16,767,000		17,325,000		15,232,000		15,158,000
	$	20,090,000	$	19,901,000	$	18,631,000	$	18,362,000

P&F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 97 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill are as follows:

Balance, January 1, 2017 $ 3,897,000
Acquisition of Jiffy Air Tool, Inc. 534,000
Currency translation adjustment 14,000
Balance, September 30, 2017 $ 4,445,000
Balance, January 1, 2021 $ 4,449,000
Currency translation adjustment 2,000
Balance, March 31, 2021 $ 4,451,000

The Company determined that no triggering event occurred during the first quarter fiscal of 2021.
Other intangible assets ~~were as follows:~~

September 30, 2017 December 31, 2016 March 31, 2021 December 31, 2020
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) $ 6,834,000 $ 1,427,000 $ 5,407,000 $ 5,143,000 $ 1,022,000 $ 4,121,000 $ 6,504,000 $ 3,163,000 $ 3,341,000 $ 6,502,000 $ 3,034,000 $ 3,468,000
Trademarks and trade names (1) 2,326,000 — 2,326,000 1,507,000 — 1,507,000 2,188,000 — 2,188,000 2,187,000 — 2,187,000
Trademarks and trade names ~~(2)~~ 200,000 15,000 185,000 200,000 5,000 195,000 200,000 62,000 138,000 200,000 59,000 141,000
Engineering drawings 330,000 168,000 162,000 330,000 148,000 182,000 330,000 243,000 87,000 330,000 239,000 91,000
Non-compete agreements (1) 238,000 201,000 37,000 212,000 150,000 62,000 336,000 274,000 62,000 335,000 266,000 69,000
Patents ~~(3)~~ 1,405,000 813,000 592,000 1,205,000 666,000 539,000 1,286,000 1,032,000 254,000 1,286,000 1,016,000 270,000
Totals $ 11,333,000 $ 2,624,000 $ 8,709,000 $ 8,597,000 $ 1,991,000 $ 6,606,000 $ 10,844,000 $ 4,774,000 $ 6,070,000 $ 10,840,000 $ 4,614,000 $ 6,226,000

(1) A portion of these intangibles are maintained in a foreign currency and are therefore subject to foreign exchange rate fluctuations.
~~(2)~~ These were previously considered an indefinite-lived intangible asset of Hy-Tech.  However, as the result of a prior impairment, the Company began amortizing these intangible assets over a 15 year useful life.
~~(3)~~ ~~The $200,000 increase represents a patent acquired during the third quarter of 2017.~~

P&F INDUSTRIES, INC. AND SUBSIDIARIES
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS - (Continued)
The weighted average amortization period for intangible assets was as follows:
March 31, 2021 December 31, 2020
Customer relationships 7.4 7.6
Trademarks and trade names 10.3 10.5
Engineering drawings 5.9 6.1
Non-compete agreements 2.8 3.0
Patents 5.0 5.2
Amortization expense of intangible assets subject to amortization was as follows:
Three months ended March 31,
2021 2020
$ 159,000 $ 195,000
Amortization expense for the balance of 2021, and for each of the next five years and thereafter is estimated to be as follows:
2021 $ 472,000
2022 630,000
2023 626,000
2024 577,000
2025 548,000
Thereafter 1,029,000
$ 3,882,000
NOTE 8 – DEBT
In October 2010, the Company entered into a Loan and Security Agreement (“Credit Agreement”) with an affiliate of Capital One, National Association (“Capital One” or the “Bank”). The Credit Agreement, as amended and restated in April 2017 and further amended from time-to-time, among other things, provides the ability to borrow funds under a $16,000,000 revolver line (“Revolver”), subject to certain borrowing base criteria. Additionally, there is a $2,000,000 line for capital expenditures (“Capex Loan”), with $1,600,000 available for future borrowings. Revolver and Capex Loan borrowings are secured by the Company’s accounts receivable, inventory, equipment, and real property, among other things. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross guaranteed by certain other subsidiaries. The Credit Agreement expires on February 8, 2024.
At the Company’s option, Revolver borrowings bear interest at either London Interbank Offered Rate (“LIBOR”) or the Base Rate, as the term is defined in the Credit Agreement, plus an Applicable Margin, as defined in the Credit Agreement. The Company is subject to limitations on the number of LIBOR borrowings.
The Company provides Capital One with monthly borrowing base certificates, and in certain circumstances, it is required to deliver monthly financial statements and certificates of compliance with various financial covenants. Should an event of default occur the interest rate would increase by two percent per annum during the period of default, in addition to other remedies provided to Capital One.
At March 31, 2021, short-term or Revolver borrowing was $3,481,000, compared to $1,374,000, at December 31, 2020. Applicable Margin Rates at March 31, 2021 and December 31, 2020 for LIBOR and Base Rates were 1.50% and 0.50%, respectively. Additionally, at March 31, 2021 and December 31, 2020, there was approximately $12,011,000 and $11,971,000, respectively, available to the Company under its Revolver arrangement.
The average balance of short-term borrowings from our Bank during the three-month period ended March 31, 2021 was $2,167,000, compared to $6,281,000, for the same three-month period in 2020.

P&F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 9 – ~~GOODWILL AND OTHER INTANGIBLE ASSETS – (Continued)~~CARES Act

~~Amortization expense of intangible assets from continuing operations subject~~On April 20, 2020, the Company received a $2.9 million PPP loan, as provided pursuant to ~~amortization~~the CARES Act and administered by the SBA. The PPP Loan, which is unsecured and guaranteed by the SBA, was designed to create economic stimulus by providing additional operating capital to small businesses in the U.S., such as ~~follows:~~
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
$ 181,000 $ 217,000 $ 620,000 $ 803,000
~~The weighted average amortization period for intangible assets was as follows:~~
September 30, 2017 December 31, 2016
Customer relationships 10.4 9.3
Trademarks and trade names (see note 2 to the table above) 13.8 14.5
Engineering drawings 8.3 8.8
Non-compete agreements 1.9 1.2
Patents 9.0 6.1
~~Amortization expense for each of~~P&F. To facilitate the ~~next five years and thereafter is estimated to be as follows:~~
2018 $ 709,000
2019 686,000
2020 653,000
2021 638,000
2022 635,000
Thereafter 3,062,000
$ 6,383,000
~~NOTE 10 – DEBT~~
~~In October 2010,~~PPP Loan, the Company entered into a ~~Loan and Security Agreement (as~~Promissory Note dated April 17, 2020, with BNB Bank as the lender (the “Lender”) (the “PPP Promissory Note”).
Under the terms of the CARES Act, as amended from time to time, “Credit Agreement”) with an affiliate of Capital One, National Association (“Capital One”, or the “Bank”). The Credit Agreement provides for a Revolver Loan (“Revolver”), borrowings under which are secured by the ~~Company’s accounts receivable, mortgages~~Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”), the Company is eligible to apply for and receive forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on ~~its real property (“Real Property”), inventory and equipment. P&F and~~the use of the loan proceeds for certain ~~of its subsidiaries are borrowers~~permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the ~~Credit Agreement,~~PPP) and ~~their obligations are cross-guaranteed by certain other subsidiaries. Revolver borrowings will bear~~mortgage interest, ~~at either London InterBank Offered Rate (“LIBOR”~~rent or utility costs (collectively, “Qualifying Expenses”) orincurred during the ~~Base Rate,~~24 weeks subsequent to funding, and on the maintenance of employee compensation levels, as defined, infollowing the ~~Credit Agreement, plus the Applicable Margin, as defined in the Credit Agreement. Further, the interest rate, either LIBOR or Base Rate, which is added to the Applicable Margin, is at the option~~funding of the ~~Company. The Company is limited as to the number of LIBOR borrowings.~~
Contemporaneously with the Jiffy Acquisition, the Company entered into a Second Amended and Restated Loan and Security Agreement, effective as of the Jiffy Closing Date (the “Second Amended and Restated Loan Agreement”), with Capital One. The Second Amended and Restated Loan Agreement amended and restated the Credit Agreement.
The Second Amended and Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing the maximum amount the Company can borrow under the Revolver Commitment (as defined in the Second Amended and Restated Loan Agreement) to $16,000,000, subject to certain borrowing base criteria, and (2) modifying certain borrowing base criteria as well as financial and other covenants.
~~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.~~PPP Loan. The Company believes it has used the proceeds of the PPP Loan for Qualifying Expenses. The Company has filed an application for forgiveness with the Lender in February 2021, who has approved this submission and has submitted it to the SBA. However, there is no assurance that the Company will be able to obtain forgiveness of the PPP Loan in ~~compliance with all covenants under~~whole or in part from the ~~Credit Agreement.~~SBA. Any amounts that are not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred until the SBA makes a determination on forgiveness.

18
~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~
~~NOTE 10 – DEBT – (Continued)~~
~~In connection with~~As of March 31, 2021, the ~~Company’s common stock repurchase plan discussed in Note 5,~~current maturities of long-term debt pursuant to the ~~Company~~PPP Loan, was $2,727,000 and the ~~Bank amended~~long-term debt, less current maturities pursuant to the ~~Second Amended and Restated~~PPP Loan ~~Agreement to permit the Company to implement the plan. Among other things, the amendment also reduced the Fixed Charge Coverage Ratio, as defined in the Credit Agreement.~~
~~Short-term Borrowings~~
~~The Company had no revolver borrowings at~~was $202,000. At December 31, ~~2016, whereas at September 30, 2017, its Revolver borrowings were $2,334,000. During~~2020, the nine-month period ended September 30, 2017, the primary item impacting the Company’s Revolver borrowings was the acquisition discussed in Note 3. The Applicable Margin added to LIBOR borrowings at September 30, 2017 was 1.75%, compared to 1.50% at December 31, 2016. The Applicable Margin added to the Base Rate (Prime rate) borrowings at September 30, 2017 was 0.75% and 0.50% at December 31, 2016.
~~The Company owns vehicles for use by its UAT salesforce. The~~ current portion of the ~~balance due relating to these vehicles is $0 at September 30, 2017 and $13,000 at December 31, 2016.~~
~~Long-term Borrowings~~
~~The Credit Agreement,~~PPP Loan debt was $1,983,000, with $946,000 accounted for as amended, provides for a Term Loan A, which is secured by mortgages on the Company’s Real Property, accounts receivable, inventory and equipment. Term Loan A borrowings can be at either LIBOR, or at the Base Rate, or a combination of the two plus the Applicable Margins. The Applicable Margin added to LIBOR borrowings at September 30, 2017 was 1.75% and 1.50% at December 31, 2016. Applicable Margin for borrowings at the Base Rate (Prime rate) for the same timeframes was 0.75% and 0.50%, respectively. A portion of the net proceeds from the sale of Nationwide repaid all but $100,000 of Term Loan A. This balance is being borrowed at the LIBOR Rate, and is included in long-term ~~debt, less debt issue costs on the Company’s Consolidated Balance Sheets at September 30, 2017 and December 31, 2016.~~debt.
~~In accordance with ASU No. 2015-03, the Company reduced its long-term debt by $8,000 and $12,000, respectively, relating to debt issue costs as of September 30, 2017 and December 31, 2016.~~

NOTE 1110 – DIVIDEND PAYMENTS

The Company’s Board of Directors has not issued dividends in 2021.
On ~~August 10, 2017,~~February 11, 2020, the Company’s Board of Directors, in accordance with ~~their~~its dividend policy, declared a quarterly cash dividend of $0.05 per common share, which was paid on ~~August 25, 2017,~~February 28, 2020, to shareholders of record at the close of business on ~~August 21, 2017.~~February 24, 2020. The total amount of this dividend payment was approximately ~~$180,000. During~~$157,000. The Company’s Board of Directors did not issue any additional dividends in 2020.
Note 11 – Subsequent Event
On May 13, 2021, the ~~nine-month~~Company’s Florida Pneumatic subsidiary detected a ransomware attack on its information technology systems that caused data to be encrypted. The threat actor is demanding a ransom payment for the release of a decryption key. Florida Pneumatic promptly launched an investigation and notified law enforcement, and legal counsel, who in turn engaged independent third-party incident response professionals to assist in, among other areas, determining the extent of this cyber incident, remediation and restoration. Additionally, Florida Pneumatic implemented a series of containment measure. At the present time, the Company believes that its corporate offices and its other subsidiaries, all of which operate on separate, independent networks, have not been affected by this incident. Florida Pneumatic is assessing the potential effect on its operations and financial results, while managing the situation to mitigate its impact.
The Company does not believe the incident had an impact on its consolidated financial data that was used in the preparation of its Quarterly Report filed on Form 10-Q for the three-month period ended September 30, 2017, the Company has paid approximately $542,000 in dividends. The Company currently intends to continue its quarterly dividend payment; however, it will review its policy on a quarterly basis. March 31, 2021.

19

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statement

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of P&F Industries, Inc. and subsidiaries (“P&F”, or the “Company”). P&F and its representatives may, from ~~time to time,~~time-to-time, make written or verbal forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission and in its reports to shareholders. Generally, the inclusion of the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “would,” “could,” ~~“should”~~“should,” and their opposites and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. Any forward-looking statements contained herein, including those related to the Company’s future performance, are based upon the Company’s historical performance and on current plans, estimates and expectations. All forward-looking statements involve risks and uncertainties. These risks and uncertainties could cause the Company’s actual results for all or part the ~~2017~~2021 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company for a number of reasons including, but not limited to:

·• ~~Exposure~~Risks related to ~~fluctuations in energy prices;~~the global outbreak of COVID-19 and other public health crises;
·• ~~Debt and debt service requirements;~~Risks associated with sourcing from overseas;
· ~~Borrowing and compliance with covenants under our credit facility;~~
·• Disruption in the global capital and credit markets;
·• Importation delays;
• Customer concentration;
• Unforeseen inventory adjustments or changes in purchasing patterns;
• Market acceptance of products;
• Competition;
• Price reductions;
• Exposure to fluctuations in energy prices;
• The strength of the retail economy in the United States and abroad;
·• ~~Supply chain disruptions;~~Risks associated with Brexit;
· ~~Customer concentration;~~
·• Adverse changes in currency exchange rates;
·• Interest rates;
• Debt and debt service requirements;
• Borrowing and compliance with covenants under our credit facility;
• Impairment of long-lived assets and goodwill;
· ~~Unforeseen inventory adjustments or changes in purchasing patterns;~~
· ~~Market acceptance of products;~~
· ~~Competition;~~
· ~~Price reductions;~~
· ~~Interest rates;~~
· ~~Litigation and insurance;~~
·• Retention of key personnel;
·• Acquisition of businesses;
·• Regulatory environment;
·• Litigation and insurance;
• The threat of terrorism and related political instability and economic uncertainty; and
·• ~~Information~~Business disruptions or other costs associated with information technology, cyber-attacks, system ~~failures and attacks,~~implementations, data privacy or catastrophic losses,

and those other risks and uncertainties described in its Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (“~~2016~~2020 Form 10-K”), its Quarterly Reports on Form 10-Q, and its other reports and statements filed by the Company with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The Company cautions you against relying on any of these forward-looking statements.

20
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~P&F INDUSTRIES, INC. AND SUBSIDIARIES~~
~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~Business~~OVERVIEW

~~P&F~~During the first quarter of 2021, significant factors that impacted our results of operations were the:
Ongoing negative impact of the COVID-19 pandemic on revenue and ~~each~~income;
Ongoing production slow-down by Boeing of its ~~subsidiaries are herein referred to collectively~~737 MAX aircraft, as ~~the “Company.” In addition, the words “we”, “our”~~well as significant reductions in activity at other commercial and “us” refer to the Company. Prior to February 11, 2016, (the “Nationwide Closing Date”) the effective date of the sale of its Nationwide Industries, Inc. (“Nationwide”) subsidiary, P&F operatedmilitary aerospace manufacturing facilities; and
Continued weakness in ~~two primary lines of business or segments: (i) tools~~oil and ~~other products (“Tools”)~~gas exploration and (ii) hardware and accessories (“Hardware”). As a result of the sale of Nationwide, the Company currently only operates in the Tools segment. See Note 2 to the consolidated financial statements for further discussion.drilling.
OUR BUSINESS

~~Tools~~Florida Pneumatic

~~The Company conducts its Tools business through a wholly-owned subsidiary, Continental Tool Group, Inc. (“Continental”), which in turn operates~~Florida Pneumatic directly, and through its wholly-owned subsidiaries ~~Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”) and Hy-Tech Machine, Inc. (“Hy-Tech”).~~ Exhaust Technologies Inc. (“ETI”) ~~and~~, Universal Air Tool Company Limited (“UAT”) ~~are wholly-owned subsidiaries of Florida Pneumatic. Effective April 5, 2017, we purchased substantially all of the operating assets, less certain payables of~~, and Jiffy Air Tool, Inc. ~~through~~(“Jiffy”) imports, manufactures, and markets pneumatic hand tools of its own design, primarily to the retail, industrial, automotive, and aerospace markets. Its products include sanders, grinders, drills, saws, and impact wrenches. These tools are similar in appearance and function to electric hand tools, but are powered by compressed air, rather than by electricity or a ~~wholly-owned subsidiary (“Jiffy”). See Note 3~~battery. Air tools, as they are more commonly referred to, ~~our consolidated financial statements for further discussion. The business of Air Tool Service Company (“ATSCO”) operates through a wholly-owned subsidiary of Hy-Tech.~~
generally offer better performance, and weigh less than their electrical counterparts. Florida Pneumatic ~~is engaged in the importation and sale~~imports and/or manufactures approximately 75 types of pneumatic hand tools, ~~primarily for~~most of which are sold at prices ranging from $50 to $1,000, under the ~~retail, industrial~~names “Florida Pneumatic,” “Universal Tool”, “Jiffy Air Tool”, AIRCAT, NITROCAT, as well as under the trade names or trademarks of several private label customers. These products are sold to retailers, distributors, manufacturers and ~~automotive markets. Florida Pneumatic also markets,~~private label customers through ~~its Berkley Tool division (“Berkley”), a product line which includes pipe~~in-house sales personnel and ~~bolt dies, pipe taps, wrenches, vises~~manufacturers’ representatives. The AIRCAT and ~~stands, pipe and tubing cutting equipment, hydrostatic test pumps, and replacement electrical components for a widely-used brand~~NITROCAT brands of ~~pipe cutting and threading machines. Lastly, as the result of the acquisition of Jiffy, Florida Pneumatic now manufactures~~ pneumatic tools ~~marketed~~are sold primarily to the automotive service and repair market (“automotive market”). Users of Florida Pneumatics’ hand tools include industrial maintenance and production staffs, do-it-yourself mechanics, professional automobile mechanics and auto body personnel. Jiffy manufactures and distributes pneumatic tools and components primarily to aerospace ~~sector.~~manufacturers.
Hy-Tech

Hy-Tech designs, manufactures, and ~~distributes its own line~~markets industrial tools, systems, gearing, accessories and a wide variety of ~~industrial pneumatic tools.~~replacement parts under various brands including ATP, Numatx, and Thaxton. Hy-Tech ~~also~~ produces and ~~markets~~sells heavy-duty pneumatic impact ~~wrenches,~~tools, grinders, ~~drills,~~air motors, hydro-pneumatic riveters, hydrostatic test plugs, impact sockets and ~~motors. Further, it also manufactures tools~~custom gears, with prices ranging from $300 to ~~customer specifications. Its customers include refineries, chemical plants,~~$42,000.
Hy-Tech’s “Engineered Solutions” products are sold directly to Original Equipment Manufacturers (“OEM’s”), and industrial branded products are sold through a broad network of specialized industrial distributors serving the power generation, ~~facilities, heavy~~petrochemical, aerospace, construction, ~~enterprises, oil~~railroad, mining, ship building and ~~gas~~fabricated metals industries. Hy-Tech works directly with its industrial customers, designing and ~~mining companies.~~manufacturing products from finished components to complete turnkey systems to be sold under their own brand names.
Hy-Tech’s Power Transmission Group, or PTG, combined three separate gear companies: its Quality Gear division, Blaz-man Gear, Inc., and Gear Products and Manufacturing, Inc. PTG is a custom gear, gearbox and power transmission system manufacturer located in Punxsutawney, PA In addition ~~Hy-Tech manufactures an extensive line~~to manufacturing a broad range of ~~pneumatic tool replacement parts~~standard and custom gears for ~~its own tools~~manufacturers in a wide variety of industries, PTG reverse engineers existing gears as well as ~~several other widely-used brands~~designs new gears, utilizing state-of-the-art technologies, including 3D imaging and Gleason Gear modeling software.

Management’s Discussion and Analysis of ~~pneumatic tools. It also manufactures~~Financial Condition and distributes high pressure stoppers for hydrostatic testing fabricated pipe, gears, sprockets, splines and racks. Additionally, the Company develops highly engineered product solutions to specific customer requirements in the pneumatic tool market.Results of Operations – Continued

~~Hardware~~
Prior to the Nationwide Closing Date, we conducted our Hardware business through our wholly-owned subsidiary, Countrywide Hardware, Inc. (“Countrywide”). Countrywide conducted its business operations through its wholly-owned subsidiary, Nationwide. Nationwide 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. On the Nationwide Closing Date, Countrywide sold Nationwide to an unrelated third party for approximately $22,200,000. See Note 2 to consolidated financial statements for further discussion.
~~KEY INDICATORS~~
~~Economic Measures~~ECONOMIC MEASURES

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

A key economic measure relevant to us is the cost of the raw materials in our products. Key materials include metals, especially various types of steel and aluminum. Also important is the value of the United States Dollar (“USD”) in relation to the Taiwanese dollar (“TWD”), as we purchase a significant portion of our products from Taiwan. Purchases from Chinese sources are made in USD; however, if the Chinese currency, the Renminbi (“RMB”), were to be revalued against the USD, there could be a negative impact on the cost of our products. Additionally, we closely monitor the fluctuation in the Great British Pound (“GBP”) to the USD, and the GBP to TWD, both of which ~~has had~~can have an impact on ~~our~~the consolidated ~~results in 2017.~~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~~We now consider tariffs a key economic measure, as a significant portion of products imported by Florida Pneumatic and to a lesser degree, Hy-Tech, are subject to these tariffs.
Lastly, the cost and availability of a quality labor pool in the countries where products and components are manufactured, both overseas as well as in the United States, could materially affect our overall results.
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~~Operating Measures~~OPERATING MEASURES

Key operating measures we use to manage our operations ~~are:~~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.

~~Financial Measures~~FINANCIAL MEASURES

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Descriptions of these policies are discussed in the ~~2016~~2020 Form ~~10-K.~~10-K, and in the notes to these consolidated financial statements. Certain of these accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities, revenues and expenses. On an ongoing basis, we evaluate estimates, including, but not limited to those related to bad debts, 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.

~~OVERVIEW~~
~~Key factors or events impacting our third quarter 2017 results of operations were:~~
● ~~Decline in Florida Pneumatic’s Automotive and Retail revenue~~
● ~~Improvement in Hy-Tech’s gross margin~~
● ~~Addition of Jiffy’s operations~~
~~RESULTS OF OPERATIONS~~
~~Continuing operations~~
~~Unless otherwise discussed elsewhere in the~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued
TRENDS AND UNCERTAINTIES
COVID-19 PANDEMIC
On March 11, 2020, the World Health Organization designated the recent novel coronavirus, or COVID-19, as a global pandemic. COVID-19 was first detected in Wuhan City, Hubei Province, China and continued to spread, significantly impacting various markets around the world, including the United States. Various policies and initiatives have been implemented to reduce the global transmission of COVID-19.
The impact of the COVID-19 virus and the resultant global economic down-turn has had a material impact on our results in the first quarter of 2021. There are delays in receiving containers from Asia due to a significant increase in international shipping traffic, which has caused intermittent shortages of inventory. In addition, the COVID-19 pandemic has caused many of our customers and potential customers to refuse on-site visits which is critical to generating revenue. We believe that until this pandemic subsides, these two issues will continue to affect our operations.
BOEING/AEROSPACE
The Federal Aviation Administration (“FAA”) and the European Union Aviation Safety Agency (“EASA”) have lifted the grounding of the 737 MAX. However, production is still very limited due to the inventory at Boeing and the reluctance of airlines to accept deliveries due to weak air travel demand. This will likely continue to have an adverse effect on our revenue. In addition, production of military and other commercial aircraft throughout the industry has slowed as well due to the ongoing global COVID-19 pandemic. However, we believe ~~that~~when all other commercial and military production lines throughout the United States come back online, an increase in our ~~relationships with~~revenue should follow.
OIL AND GAS
We believe the primary factor contributing to the significant decline occurring in our ~~key customers and suppliers remain satisfactory. Global~~ oil and gas ~~exploration and extraction have been the primary market of Hy-Tech, which until recently has begun~~revenue is due to ~~show signs of improving. Further, there remains~~ a ~~persistent weakness~~decline in the ~~other markets~~price for oil and gas that ~~Hy-Tech serves~~began in 2020 related to the COVD-19 pandemic. The profitability of crude oil production generally declines as prices fall. As a result, as prices dropped in 2020, production slowed worldwide. This activity is most ~~notably power generation and construction.~~easily measured by analyzing the number of active rotary rigs, which is discussed further below. Until these counts return to pre-pandemic levels, we will continue to be impacted negatively.

We elected not to renew our supply agreement with Sears, which expired on September 30, 2017. This decision was based on a number of factors including Sears’ continuing financial difficulties, the sale of the Craftsman brand to Stanley Black & Decker and our level of working capital exposure in relation to our return on that investment pertaining to Sears. There is no Sear’s inventory exposure at September 30, 2017. Further, we believe that all accounts receivable attributable to Sears, which approximates $1,100,000 at September 30, 2017, should be collected by December 31, 2017. However, at the present time, there can be no assurance that we will fully recover this.TECHNOLOGIES

We believe that over time, several newer technologies, and features will ~~begin to~~ have ana greater impact on the market for ~~the Company’s~~our traditional pneumatic tool offerings. ~~This~~The impact of this evolution has been felt initially by the advent of ~~some~~advanced cordless operated hand tools in the automotive aftermarket. ~~We are currently evaluating~~For certain non-automotive applications, we have begun to develop cordless models of tools and expect to introduce these products in the ~~development of more advanced technologies in our tool platforms.~~
22
near future.

~~RESULTS OF OPERATIONS~~OTHER MATTERS

~~Continuing~~On May 13, 2021 Florida Pneumatic detected a ransomware attack on its information technology systems that caused data to be encrypted. The threat actor is demanding a ransom payment for the release of a decryption key. Florida Pneumatic promptly launched an investigation and notified law enforcement, and legal counsel, who in turn engaged independent third-party incident response professionals to assist in, among other areas, determining the magnitude of this cyber incident, restoration and, remediation. Additionally, Florida Pneumatic implemented a series of containment measures. At the present time, the Company believes that its corporate offices and its other subsidiaries, all of which operate on separate, independent networks, have not been affected by this incident. Florida Pneumatic is assessing the potential effect on its operations ~~- (Continued)~~and financial results, while managing the situation to mitigate its impact.
We do not believe the incident had an impact on its consolidated financial data that was used in the preparation of its Quarterly Report filed on Form 10-Q for the three-month period ended March 31, 2021.

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

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
REVENUE
During the first quarter of ~~2016, we sold Nationwide~~2021, many of our product lines were adversely affected by the global COVID-19 pandemic, which continues to ~~an unrelated third party~~result in greatly reduced orders and revenue for approximately $22,200,000. As a result of this transaction, Nationwide’s 2016 results are reported under discontinued operations. Please see Note 2 - Discontinued Operations, to our consolidated financial statements for additional information.
~~REVENUE~~the three-month period ended March 31, 2021.

The tables below provide an analysis of our net revenue ~~from continuing operations~~ for the ~~three and nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:

Three months ended September 30,
Increase
2017 2016 $ %
Florida Pneumatic $ 12,295,000 $ 11,702,000 $ 593,000 5.1 %
Hy-Tech 3,487,000 2,931,000 556,000 19.0

Consolidated $ 15,782,000 $ 14,633,000 $ 1,149,000 7.9 %
Consolidated

Nine months ended September 30,
Decrease Three months ended March 31,
2017 2016 $ % Increase (decrease)
2021 2020 $ %
Florida Pneumatic $ 34,936,000 $ 35,270,000 $ (334,000 ) (0.9 )% $ 10,901,000 $ 10,030,000 $ 871,000 8.7 %
Hy-Tech 9,421,000 9,499,000 (78,000 ) (0.8 ) 3,044,000 3,320,000 (276,000 ) (8.3 )

Consolidated $ 44,357,000 $ 44,769,000 $ (412,000 ) (0.9 )% $ 13,945,000 $ 13,350,000 $ 595,000 4.5 %

Florida Pneumatic

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

Three months ended September 30, Three months ended March 31,
2017 2016 Increase (decrease) 2021 2020 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ % Revenue
Percent of
revenue
Revenue
Percent of
revenue
$ %
Retail customers $ 5,212,000 42.4 % $ 6,631,000 56.7 % $ (1,419,000 ) (21.4 )%
Automotive 3,021,000 24.6 3,723,000 31.8 (702,000 ) (18.9 ) $ 4,102,000 37.6 % $ 3,232,000 32.2 % $ 870,000 26.9 %
Industrial/catalog 1,228,000 10.0 1,026,000 8.7 202,000 19.7
Retail 3,790,000 34.8 2,990,000 29.8 800,000 26.8
Industrial 1,359,000 12.5 1,062,000 10.6 297,000 28.0
Aerospace 2,564,000 20.8 89,000 0.8 2,475,000 2,780.9 1,528,000 14.0 2,599,000 25.9 (1,071,000 ) (41.2 )
Other 270,000 2.2 233,000 2.0 37,000 15.9 122,000 1.1 147,000 1.5 (25,000 ) (17.0 )
Total $ 12,295,000 100.0 % $ 11,702,000 100.0 % $ 593,000 5.1 % $ 10,901,000 100.0 % $ 10,030,000 100.0 % $ 871,000 8.7 %

23
~~RESULTS OF OPERATIONS~~
~~Continuing operations - (Continued)~~
Nine months ended September 30,
2017 2016 Increase (decrease)
Percent of Percent of
Revenue revenue Revenue revenue $ %
Retail customers $ 15,976,000 45.7 % $ 19,411,000 55.1 % $ (3,435,000 ) (17.7 )%
Automotive 10,024,000 28.7 11,336,000 32.1 (1,312,000 ) (11.6 )
Industrial/catalog 3,812,000 10.9 3,523,000 10.0 289,000 8.2
Aerospace 4,426,000 12.7 320,000 0.9 4,106,000 1,283.1
Other 698,000 2.0 680,000 1.9 18,000 2.6
Total $ 34,936,000 100.0 % $ 35,270,000 100.0 % $ (334,000 ) (0.9 )%
~~The majority of~~Despite the ~~decline in~~ongoing negative effects on the US and global economies, total fiscal first quarter 2021 revenue at Florida Pneumatic’s third quarter 2017 Retail revenue was due to the reduction in shipments to Sears this quarter, compared to the same period in 2016. As discussed above, we elected not to renew an agreement with Sears, which expired on September 30, 2017. Also impacting our Retail revenue this quarter was a decline in shipments to The Home Depot, which was due primarily to their decision to reduce the number of items offered for sale at certain locations. Additionally, we believe that the recent hurricanes, which impacted the southern portion of the United States, was a contributing factor to the decline in our Retail revenue this quarter, compared to the third quarter of 2016. A major factor contributing to the net decline in our Automotive revenue this quarter compared toPneumatic increased 8.7% over the same three-month period in ~~2016,~~2020. This improvement was driven by revenue gains in its Automotive, Retail and Industrials sectors. A decline in Aerospace revenue partially offset the above improvements. Stronger consumer demand for its AIRCAT products and, to a lesser degree, modest increased sales at our United Kingdom (“U.K.”) operations, were ~~two major automotive parts distributors continuing~~the primary factors for the increase in Automotive revenue. We believe that as the result of the ongoing battle to ~~adjust their inventory levels of pneumatic hand tools. Partially offsetting this decline was~~disinfect and sanitize homes and businesses alike, Florida Pneumatic encountered an increase in demand, compared to the first quarter of 2020, for various “spray gun” tools and accessories which are sold into the retail channel. Stronger Industrial revenue ~~from our UAT division headquartered~~this quarter than in the same period in the prior year, was driven primarily by increased industrial production. The Boeing Corporation is a major customer of Jiffy. The Boeing 737 MAX aircraft was grounded by the FAA and the EASA in March 2019. Although both agencies have lifted the “No Fly” ruling it imposed on all Boeing 737 MAX aircraft, allowing it to begin flights in the United ~~Kingdom. OurIndustrial/catalog revenue increased slightly compared~~States, we believe it will take several years for the Boeing Corporation to increase its manufacturing of its 737 MAX aircraft to a volume that would be comparable to pre COVID-19 levels, and thus require our Jiffy tools. Further, the ~~same period a year ago. We believe~~travel restrictions that ~~activity in this sector has begun~~developed as the result of the COVID-19 pandemic, caused most commercial airlines to ~~improve; however, no assurance can be given that this trend will continue. Lastly, the Jiffy acquisition in April of this yearhas enabled us to approach the aerospace sector with a much stronger brand. As a result, aerospace sales contributed nearly $2.5 million to~~curtail orders for other aircraft, which also negatively impacted Florida Pneumatic’s ~~total third quarter 2017~~Aerospace revenue. Lastly, orders relating to military aircraft declined, we believe due to COVID-19 constraints placed in manufacturing facilities.

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

With respect to our year to date results, seventy-five percent of the decline in our Retail revenue was due primarily to the reduction in shipments to Sears, compared to the same nine-month period in 2016. During 2016, The Home Depot rolled-out several new tools, which did not occur in 2017, accounting for much of the decline in The Home Depot’s year-to-date revenue. Additionally, year to date revenue was negatively affected by The Home Depot’s decision to reduce the number of items being offered at certain locations. We believe two major automotive distributors have been adjusting their inventory levels. As such, their decision is a primary cause of the year to date decline in our Automotive revenue. It should be noted that we have encountered increased sales to other major Automotive customers and distributors. Additionally, UAT’s 2017 year to date revenue has declined approximately 11%, when compared to the same period a year ago. Our Industrial/catalog revenue, while sluggish during the first three months of 2017, has begun to see slight improvement during the second and third quarters of 2017. Lastly, aerospace revenue, driven by the Jiffy acquisition, added more than $4.1 million to Florida Pneumatic’s year to date 2017 revenue, compared to the same period a year ago.RESULTS OF OPERATIONS - (Continued)

Hy-Tech

Hy-Tech designs, manufactures, and sells a wide range of industrial products under the brands ATP ~~ATSCO~~ and ~~Ozat~~ATSCO which are categorized as ~~“ATP”~~ATP for reporting ~~purposes~~purposes. In addition to Engineered Solutions, products and ~~include heavy duty air tools, industrial grinders~~components manufactured for other companies under their brands are included in the OEM category in the table below. PTG revenue is comprised of products manufactured and ~~impact sockets. Hy-Tech’s~~sold by Hy-tech’s gear business. NUMATX, Thaxton and other peripheral product lines, ~~Numatx, Thaxton and Quality Gear,~~such as general machining, are reported as ~~“Other” and include the hydro-pneumatic riveters, hydrostatic test plugs, air motors and custom gears.~~Other.

Three months ended September 30,
2017 2016 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
ATP $ 3,092,000 88.7 % $ 2,515,000 85.8 % $ 577,000 22.9 %
Other 395,000 11.3 416,000 14.2 (21,000 ) (5.0 )
Total $ 3,487,000 100.0 % $ 2,931,000 100.0 % $ 556,000 19.0 %
24
Three months ended March 31,
2021 2020 Increase (decrease)
Revenue Percent of
revenue Revenue Percent of
revenue $ %
OEM $ 1,611,000 52.9 % $ 1,439,000 43.3 % $ 172,000 12.0 %
ATP 713,000 23.4 1,061,000 32.0 (348,000 ) (32.8 )
PTG 646,000 21.2 735,000 22.1 (89,000 ) (12.1 )
Other 74,000 2.5 85,000 2.6 (11,000 ) (12.9 )
Total $ 3,044,000 100.0 % $ 3,320,000 100.0 % $ (276,000 ) (8.3 )%

~~RESULTS OF OPERATIONS~~
~~Continuing operations - (Continued)~~
Nine months ended September 30,
2017 2016 Decrease
Percent of Percent of
Revenue revenue Revenue revenue $ %
ATP $ 8,386,000 89.0 % $ 8,411,000 88.5 % $ (25,000 ) (0.3 )%
Other 1,035,000 11.0 1,088,000 11.5 (53,000 ) (4.9 )
Total $ 9,421,000 100.0 % $ 9,499,000 100.0 % $ (78,000 ) (0.8 )%
~~Significant components contributing to the increase~~The decline in Hy-Tech’s ~~third~~fiscal first quarter ~~2017 ATP~~2021 total revenue, compared to the same period in ~~2016, include~~2020, was primarily due to the ~~resurgence~~following key factors: i) the ongoing negative effects on the US economy caused by the global COVID-19 pandemic; and ii) the severe downturn of the oil and gas market. We believe that our ATP products offering is likely to continue to struggle due to among other things, the ongoing sluggishness of the price of oil and natural gas, which in ~~activity from a large customer acquired~~turn inhibits exploration and drilling. The oil and gas sector in the ~~ATSCO acquisition~~US has been hindered by the downward pricing pressure caused by among other things, excess supply, and ripple effects from the pandemic. This is evidenced by the significant decline in drilling rigs, which is a metric that ~~had reduced its orders until~~we monitor. According to Baker Hughes Inc., the ~~second~~average number of oil rotary rigs in operation during fiscal first quarter 2021 were 302, compared to 671 during the same three-month period in 2020. Similarly, the average number of active gas rotary rigs during the three-month period ended March 31, 2021 was 90, compared to 112, during the same period in the prior year. In the aggregate, the average rotary rigs in operation during the first quarter of ~~2017,~~2021 is down by 392, or 50%, when compared to the same three-month period in 2020. As such, early in 2020 we made a decision to focus a greater portion of our product development and ~~continues to place orders during the third quarter of 2017. Additionally, in 2016 we began to pursue alternate markets where we believed we could exploit~~marketing efforts on our ~~engineering~~OEM and ~~manufacturing expertise, and develop different applications for our tools, motors and accessories.~~PTG products offering. We believe the development of ~~this new marketing strategy provides~~these lines of business should provide Hy-Tech an opportunity to generate new, additional sources of revenue from new markets in 2017 and beyond. While third quarter 2017 revenue from this new initiative was $156,000, at September 30, 2017 Hy-Tech had future orders just shy of $750,000. Although Hy-Tech’s third quarter 2017 revenue has increased compared to both the first and second quarters of 2017, we believe that there continues to be an excess inventory of tools and spare parts in the distribution channels. Additionally, we believe that the turn-around activities in the oil and gas sector continue to lag, compared to historic levels, further negatively impacting Hy-Tech’s revenue. Recent hurricanes and other major storms have also impacted Hy-Tech’s revenue.future. Further, we ~~believe lower-priced imported tools~~are optimistic that as travel restrictions and ~~spare parts are adversely impacting~~on-site visitation controls begin to ease, Hy-Tech’s ~~position in the marketplace.~~revenue could increase.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
RESULTS OF OPERATIONS - (Continued)
GROSS MARGIN/PROFIT
Three months ended March 31, Increase (decrease)
2021 2020 Amount %
Florida Pneumatic $ 4,200,000 $ 3,774,000 $ 426,000 11.3 %
As percent of respective revenue 38.5 % 37.6 % 0.9 % pts
Hy-Tech $ 436,000 $ 708,000 $ (272,000 ) (38.4 )
As percent of respective revenue 14.3 % 21.3 % (7.0 )% pts
Total $ 4,636,000 $ 4,482,000 $ 154,000 3.4 %
As percent of respective revenue 33.2 % 33.6 % (0.4 )% pts

The ~~fluctuation~~slight improvement in ~~Hy-Tech’s year~~Florida Pneumatic’s gross margin was due primarily to ~~date~~product mix. The improved Automotive, Industrial and Retail revenue ~~for~~this quarter, compared to the ~~nine-month~~same three-month period ~~ended September 30, 2017,~~in 2020, contributed to the overall increase in gross margin. This improvement was partially offset by reduced manufacturing at Jiffy, which in turn resulted in under absorption of its manufacturing overhead. As previously discussed, the COVID-19 pandemic continued to have an adverse effect on Hy-Tech, notably reducing revenue causing a reduction in volume through both manufacturing facilities. The reduced manufacturing volume resulted in lower absorption of manufacturing costs during the first quarter of 2021, compared to the same three-month period in 2020. Additionally, Hy-Tech recorded an increase in its obsolete, slow moving inventory charge during the first quarter of 2021, compared to the same period in ~~2016 was primarily due to a number of factors. A decline in ATP revenue from a large~~ 2020. Lastly, Hy-Tech’s overall product/customer ~~that was acquired in the ATSCO acquisition that had greatly reduced~~mix negatively impacted its ~~purchases in the first quarter of 2017, compared to its purchases~~gross margin during the first quarter of 2016. By mid-2016 this customer ceased placing orders. However, as discussed above, this customer began placing orders during the second quarter of 2017 and continued into the third quarter of this year. A major component of Hy-Tech’s revenue is derived from the oil and gas sector. Currently, we estimate that the oil and gas sector revenue accounts for approximately 30% to 35% of Hy-Tech’s total revenue. This revenue stream is driven by a number of factors, such as, the number of off-shore rigs located in the Gulf of Mexico, “turn-arounds” or plant maintenance activities and, to a lesser extent, land rigs. We believe the lag in turn-around activities, the hurricanes that severely damaged the Gulf of Mexico and many of the oil refineries in the Gulf States, along with the growing presence of lower-priced imported tools and spare parts are impacting the markets in which Hy-Tech operates. However, as discussed earlier, Hy-Tech continues to pursue alternate markets where it believes it can exploit its engineering and manufacturing expertise, and develop different applications for its tools, motors and accessories. Revenue from these new sources during the first nine months of 2017 was approximately $657,000, and is included in the ATP grouping. Lastly, Hy-Tech has recently begun a new marketing strategy that is intended to re-energize its gear and hydraulic stopper business.
25
~~RESULTS OF OPERATIONS~~
~~Continuing operations - (Continued)~~three-month period ended March 31, 2021.

~~Gross profit / margin~~
Three months ended September 30, Increase
2017 2016 Amount %
Florida Pneumatic $ 4,579,000 $ 4,219,000 $ 360,000 8.5 %
As percent of respective revenue 37.2 % 36.1 % 1.1 % pts
Hy-Tech $ 1,005,000 $ 286,000 $ 719,000 251.4
As percent of respective revenue 28.8 % 9.8 % 19.0 % pts
Total $ 5,584,000 $ 4,505,000 $ 1,079,000 24.0 %
As percent of respective revenue 35.4 % 30.8 % 4.6 % pts
Nine months ended September 30, Increase
2017 2016 Amount %
Florida Pneumatic $ 13,116,000 $ 13,070,000 $ 46,000 0.4 %
As percent of respective revenue 37.5 % 37.1 % 0.4 % pts
Hy-Tech $ 2,864,000 $ 1,956,000 $ 908,000 46.4
As percent of respective revenue 30.4 % 20.6 % 9.8 % pts
Total $ 15,980,000 $ 15,026,000 $ 954,000 6.3 %
As percent of respective revenue 36.0 % 33.6 % 2.4 % pts
Customer and product mix were the primary factors that contributed to the increase in Florida Pneumatic’s third quarter 2017 gross margin, compared to the same period a year ago. Of note, Jiffy’s gross margin approximates that of Florida Pneumatic’s non-retail product lines. As such, the gross profit associated with the Aerospace revenue this quarter exceeded the gross profits lost as the result of the decline in Retail revenue. There were no significant changes to our cost structure or selling price during this quarter.
~~Florida Pneumatic’s overall gross margin for the nine-month period ended September 30, 2017 is essentially the same as the gross margin for the same period in 2016.~~
Hy-Tech’s 2017 third quarter gross margin increased 19.0 percentage points, a more than 250% improvement over the same period a year ago. Factors contributing to the positive change include, among other things: (a) in the third quarter of 2016, we increased Hy-Tech’s allowance for obsolete / slow moving inventory (“OSMI”). This adjustment in 2016 was compounded by lower overhead absorption, due to reduced manufacturing, in turn due to weakness in the oil and gas and power generation sectors and (b) during 2016, we were shipping a line of very low gross margin tools to a major customer. However, during the second and third quarters of 2017, shipments of these low gross margin tools declined compared to the prior year. Additional factors contributing to the improvement in Hy-Tech’s gross margin include: (a) improved overhead absorption as manufacturing activity has increased; (b) improved inventory turns, which directly impacts fluctuations in Hy-Tech’s OSMI, and (c) the sale of the low margin tools has been lower this year compared to the prior year.
Hy-Tech’s gross margin for the nine-month period ended September 30, 2017, improved 9.8 percentage points, when compared to the same period a year ago. Offsetting the primary factors to this improvement discussed above, gross margin on the products being sold under its new marketing initiative are below Hy-Tech’s historical range. In addition to margins on these products increasing as the result of manufacturing experience, we also expect average margins in this category to improve as we develop additional product offerings.
~~Selling and general and administrative expenses~~SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses (“SG&A” ~~or “operating expenses”~~) 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.

26
~~RESULTS OF OPERATIONS~~
~~Continuing operations - (Continued)~~
During the ~~third~~first quarter of ~~2017,~~2021, our SG&A ~~was $5,352,000, compared~~declined to ~~$4,915,000 for~~$4,991,000, from $5,690,000 incurred during the same three-month period in ~~2016.~~2020. The ~~net increase was due in large part~~most significant factor contributing to the ~~acquisition~~net decrease was a reduction of professional fees of $493,000. During the ~~Jiffy business in April 2017, with SG&A of approximately $575,000 for the third~~first quarter of ~~2017. Other significant components~~2020, we incurred more than $480,000 of expenses related to the ~~change include: (i) a $17,000 reduction~~relocation and set up the two gear businesses that were acquired in ~~non-Jiffy~~late 2019. Additionally, we reduced our compensation expenses ~~which~~by $246,000. Compensation expense is comprised of base salaries and wages, accrued performance-based bonus incentives and associated payroll taxes and employee ~~benefits; (ii) a decrease~~benefits. A reduction in accrued performance-based bonus incentives was the bulk of the savings. Further, depreciation expense decline by $40,000. Partially offsetting the above reductions of operating expenses was an increase in variable expenses of ~~$78,000, due primarily to lower Retail revenue; (iii) a decrease~~$103,000, driven by improved revenue this quarter in ~~professional fees of $56,000 and (iv) a reduction in amortization and depreciation expenses of $60,000. These reductions were partially offset by an increase in corporate related expenses of $24,000.~~
~~Our SG&A for the nine-month period ended September 30, 2017 was $15,765,000,~~certain sectors, compared to ~~$15,088,000 for~~revenue in the same three-month period in ~~2016. As noted above,~~ the ~~most significant component to the net increase was the addition of Jiffy, with year to date 2017 SG&A of approximately $1,025,000. Other significant components~~prior year. Variable expenses include ~~reductions in: (i) non-Jiffy compensation expenses of $74,000; (ii) variable expenses of $300,000, due primarily to lower Retail revenue; (iii) depreciation~~among other things, commissions, freight out, travel, advertising, shipping supplies and amortization of $236,000, due mostly to the reduction in Hy-Tech’s intangible assets, which were written down in 2016; and (iv) corporate related expenses of $80,000. The reductions were partially offset by an increase in professional fees of $381,000, which include fees and expenses related to the Jiffy Acquisition and recruitment fees for executive positions at Hy-Tech.
~~Impairment of goodwill and other intangible assets - 2016~~
During the second quarter of 2016, we determined that an interim impairment analysis of the goodwill recorded in connection with Hy-Tech and ATSCO was necessary. As a result of the aforementioned, it was determined that Hy-Tech's short and long-term projections at that time had indicated an inability to generate sufficient discounted future cash flows to support the recorded amounts of goodwill, other intangible assets and other long-lived assets necessitating the impairment charge. Accordingly, adhering to current accounting literature, we recorded an impairment charge of $8,311,000 relating to goodwill and other intangible assets during the second quarter of 2016.
~~Other expense (income), net~~
The three-month period ended September 30, 2017 included $11,000 consisting primarily of an adjustment to the fair value of the contingent consideration obligation to the Jiffy Seller. During the same period in 2016, the most significant factor contributing to the net Other income was rental income of real property that was sold in November of 2016. There is no income of a similar nature for 2017.
For the nine-month period ended September 30, 2017, our Other expense (income), net, is primarily the fair value adjustment discussed above partially offsetting the receipt of the balance of an escrow related to the sale of the real property that was located in Tampa, Florida and used by Nationwide Industries Inc. See Note 2 to our consolidated financial statements for further discussion. The amount for the same period in 2016 was the net rental income on the real property that was sold in November of 2016.warranty costs.

27

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Continued
RESULTS OF OPERATIONS- (Continued)

~~Continuing operations - (Continued)~~
~~Interest~~INTEREST

Three months ended
September 30, Increase
2017 2016 Amount %
Interest expense attributable to:
Short-term borrowings $ 32,000 $ 15,000 $ 17,000 113.3 %
Term loans, including Capital Expenditure Term Loans 1,000 1,000 - -
Amortization expense of debt issue costs 17,000 10,000 7,000 70.0

Total $ 50,000 $ 26,000 $ 24,000 92.3 %
Nine months ended
September 30, Increase (decrease) Three months ended March 31, Increase (decrease)
2017 2016 Amount % 2021 2020 Amount %
Interest expense attributable to:
Short-term borrowings $ 80,000 $ 41,000 $ 39,000 95.1 % $ 10,000 $ 51,000 $ (41,000 ) (80.4 )%
Term loans, including Capital Expenditure Term Loans 2,000 5,000 (3,000 ) (60.0 )
PPP loan 8,000 — 8,000 100.0
Amortization expense of debt issue costs 42,000 118,000 (76,000 ) (64.4 ) 4,000 4,000 — —

Total $ 124,000 $ 164,000 $ (40,000 ) (24.4 )% $ 22,000 $ 55,000 $ (33,000 ) (60.0 )%

~~Primarily due to~~The Applicable Margin, as defined in our Credit Agreement was the result of the sale of Nationwide and the real property located in Tampa, Florida, occurring in February and November 2016, respectively, our total bank borrowings have been minimal. However, as discussed in Note 3 - Acquisition, to our consolidated financial statements, on April 5, 2017, we purchased the net assets of the Jiffy business and real property located in Carson City, Nevada. The funding for this transaction was from our Revolver Loan, which is our short-term borrowing.
~~In accordance with accounting guidance we have reported our short-term and term loan interest expense incurred~~same during the ~~period January 1, 2016 through February 11, 2016, which was the effective date of sale of Nationwide, in Discontinued operations. Further, as the result of the Company~~three-month periods ended March 31, 2021 and Capital One, National Association (“Capital One”, or the “Bank”) agreeing to significantly modify the Credit Agreement, as defined below in our Liquidity and Capital Resources, we were required to write down and recognize as interest expense the debt issue costs associated with the then existing Credit Agreement. These costs are identified in the table above as “Amortization expense of debt issue costs”. See Note 2 to our consolidated financial statements for further discussion on the sale of Nationwide. See Liquidity and Capital Resources elsewhere in this Management’s Discussion and Analysis section for further information regarding our bank loans.
~~Our~~2020. The average balance of short-term borrowings during the ~~three and nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and 2020, were $2,167,000 and $6,281,000, respectively. As the average balance of our short-term borrowings was ~~$3,635,000 and $3,263,000, respectively,~~significantly lower during the first three months of 2021, compared to ~~$2,585,000 and $3,593,000, respectively, during~~ the same ~~periods~~three-month period in ~~2016.~~2020, our short-term interest expense (revolver borrowings) declined.
As discussed in Note 9 – CARES Act, to the Company’s consolidated financial statements, in late April 2020, we borrowed approximately $2.9 million from BNB Bank as provided under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The PPP Loan, as defined in Note 9, accrues interest at a rate of 1.0% per annum. Pursuant to the Flexibility Act, as defined in Note 9, interest on any unforgiven amount is deferred until the forgiveness determination is made by the SBA. We will continue to accrue interest charges until a final determination is received from the SBA.
Lastly, we and our bank amended the Credit Agreement in February 2019. The debt issue costs are associated with such amendment.

~~Income taxes~~INCOME TAXES

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property.
At the end of each interim reporting period, ~~we estimate an~~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. Additionally, in the year to date computation we included the impact of options that expired, were exercised, or were forfeited. The aggregate net effect of these options reduced our deferred tax asset and increased the tax provision by approximately $116,000. As a result of the aforementioned,Accordingly, our effective tax rate ~~applicable to continuing operations~~ for the three and nine-month periods ended September 30, 2017 was 97.1% and 136.5%, respectively. For the same periods in 2016 our effective tax rate applicable to continuing operations was 27.2% and 33.9%, respectively. The Company’s effective tax rates were also affected by state taxes, non-deductible expenses and foreign tax rate differentials.
28
~~RESULTS OF OPERATIONS~~
~~Discontinued operations - 2016~~
Nationwide’s results of operations in our consolidated financial statements and Note 2, presents their revenue and cost of goods sold for the period January 1, 2016 through February 11, 2016. The SG&A incurred during the same period includes that of Nationwide plus $19,000 of expenses incurred at the corporate level that is specifically attributable to Nationwide. In accordance with current accounting guidance, we included, as part of discontinued operations, all interest expense incurred attributable to our Bank borrowings during the period January 1, 2016 through February 11, 2016. Additionally, we initially recognized an after tax gain of $12,171,000, on the sale of Nationwide. For income tax purposes, the Company’s tax basis in Nationwide was greater than the net proceeds, thus resulting in a tax loss. This gain represents the difference between the adjusted net purchase price and the carrying value of Nationwide. Further, in 2016, Countrywide completed the sale of the Tampa, Florida real property, which was treated as a capital gain transaction for tax purposes. During the three-month period ended ~~September 30, 2016,~~March 31, 2021 was a tax benefit of 18.6%, compared to tax benefit of 40.0% for the ~~Company removed~~three-month period ended March 31, 2020. Included in the three-month period ended March 31, 2020 is a ~~valuation allowance initially recorded against~~discrete item for net operating loss carrybacks under the CARES Act. The effective tax ~~loss, resulting in an additional gain on sale $187,000.~~ rates for all periods presented were impacted primarily by state taxes, and non-deductible expenses.

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

LIQUIDITY AND CAPITAL RESOURCES

We monitor such metrics as days’ sales outstanding, inventory requirements, inventory turns, estimated future purchasing requirements and capital expenditures to project liquidity needs, as well as evaluate return on assets. Our primary sources of funds are operating cash flows, existing working capital 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, 2017 December 31, 2016
Working Capital $ 24,490,000 $ 28,373,000
Current Ratio 3.81 to 1 5.60 to 1
Shareholders’ Equity $ 47,221,000 $ 47,590,000
March 31, 2021 December 31, 2020
Working capital $ 20,773,000 $ 21,258,000
Current ratio 2.90 to 1 3.57 to 1
Shareholders’ equity $ 41,261,000 $ 41,538,000
Credit facility

~~In October 2010, we entered into a Loan and Security Agreement (as amended from time to time, “Credit Agreement”) with an affiliate of Capital One. The~~Our Credit Agreement provides for Revolver borrowings, which are secured by the Company’s accounts receivable, mortgages on its real property (“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 InterBank Offered Rate”) or the Base Rate, as the term~~Facility is defined in the Credit Agreement, plus 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 our option. We are limited in the number of LIBOR borrowings.
~~Contemporaneously with the acquisition of the Jiffy business~~ discussed in Note 38 to the consolidated financial statements.
Payroll Protection Program Loan
On April 20, 2020, we received a $2.9 million PPP Loan, as provided pursuant to the CARES Act. This loan obtained from BNB Bank is unsecured and is guaranteed by the SBA. See Note 9 to the consolidated financial statements we entered into a Second Amended and Restated Loan and Security Agreement, effective as of the April 5, 2017 closing date of the Jiffy Acquisition (the “Second Amended and Restated Loan Agreement”), with Capital One which amended and restated the previous amendment to the Credit Agreement.
The Second Amended and Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing the maximum amount we can borrow under the Revolver Commitment (as defined) from $10,000,000 to $16,000,000, subject to certain borrowing base criteria, and (2) modifying certain borrowing base criteria as well as financial and other covenants.
29
~~LIQUIDITY AND CAPITAL RESOURCES – (Continued)~~
The net funds of approximately $18,700,000 provided by the sale of Nationwide in 2016 were used to pay down the Revolver, Capex loans and the Term Loan A; however, we and the Bank agreed to have $100,000 remain outstanding under the Term Loan A, rather than pay it off in full, thus providing the Company and Capital One the ability to potentially increase future term loan borrowings more efficiently and at lower costs.
We funded the $7,000,000 Jiffy acquisition from Revolver borrowings. Cash flows from operations thereafter and receipt in August of the $2,100,000 escrow from the sale of Nationwide have reduced our Revolver balance to $2,334,000 at September 30, 2017. Revolver borrowings can be at either LIBOR or at the Base Rate, as defined in the Credit Agreement with Capital One. Applicable LIBOR Margins in effect at September 30, 2017 was 1.75%, compared to 1.50% at December 31, 2016. The Applicable Base Rate Margins in effect as of September 30, 2017 and December 31, 2016 were 0.75% and 0.50%, respectively.for further discussion.

Cash flows

During the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2021, our net cash ~~decreased~~increased to ~~$1,205,000~~$1,047,000 from ~~$3,699,000 at~~$904,000 on December 31, ~~2016.~~2020. Our total bank debt, which includes borrowings under the CARES Act, at ~~September 30, 2017, primarily driven by the Jiffy acquisition, which~~March 31, 2021 was ~~discussed in Note 3 to the accompanying consolidated financial statements, was $2,434,000,~~$6,410,000 compared to ~~$100,000~~$4,303,000 at December 31, ~~2016.~~2020. The total debt to total book capitalization (total debt divided by total debt plus equity) at ~~September 30, 2017~~March 31, 2021 was ~~4.9%,~~13.4% compared to ~~0.2%~~9.4% at December 31, ~~2016.~~2020.

InAt March ~~2016,~~31, 2021, our ~~Board of Directors approved the initiation of a dividend policy under which the Company intends~~short-term or Revolver borrowing was $3,481,000 compared to declare quarterly cash dividends to its stockholders in the amount of $0.05 per quarter. During the nine-month period ended September 30, 2017, our Board of Directors voted to approve the payment of three quarterly dividends. As such, in February 2017, May 2017,$1,374,000, at December 31, 2020. Additionally, at March 31, 2021 and ~~August 2017, we paid a $0.05 per share dividend to the shareholders of record. The aggregate of such dividend payments~~December 31, 2020, there was approximately ~~$542,000. Our Board of Directors expects~~$12,011,000 and $11,971,000, respectively, available to ~~maintain this dividend policy; however,~~us under the future declaration of dividends under this policy is dependent upon several factors, which includes such things as our overall financial condition, results of operations, capital requirements and other factors our board may deemed relevant.
~~We believe we will be able to fund the repurchase of the remaining shares in accordance with our Repurchase Program, as discussed in Note 5 – Equity – Common Stock Repurchase Plan.~~Revolver arrangement.

During the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2021, we used ~~$444,000~~$68,000 for capital expenditures, compared to ~~$894,000~~$658,000 during the same period in the prior year. Capital expenditures for the balance of ~~2017 are~~2021 is expected to be approximately ~~$500,000,~~$800,000, some of which may be financed through our credit facilities with Capital One Bank or financed through independent ~~third party~~third-party financial institutions. The remaining ~~2017~~2021 capital expenditures will likely be for machinery and equipment, tooling, and computer hardware and software.

We believe that net cash flows from operations and available borrowings under our Credit Facility should provide sufficient cash to fund our consolidated cost structure for at least the next 12 months from the date of this filing.
30
~~LIQUIDITY AND CAPITAL RESOURCES – (Continued)~~
Customer concentration
~~Florida Pneumatic has two customers, Sears~~At March 31, 2021 and December 31, 2020, accounts receivable from The Home Depot ~~that, in~~(“THD”) was 36.8% and 38.0%, respectively, of total accounts receivable. Revenue from THD during the ~~aggregate,~~three-month periods ended March 31, 2021 and 2020 was 27.2% and 22.4%, respectively, of total revenue. Additionally, during the three-month periods ended March 31, 2021 and 2020, revenue attributable to Amazon.Com, Inc (“Amazon”) was 12.1% and 8.6%, respectively, of the Company’s total net revenue. Accounts receivable attributable to Amazon at ~~September 30, 2017,~~March 31, 2021 and December 31, ~~2016, accounted for 39.6%~~2020 was 12.3% and ~~53.5%~~15.8%, respectively, of ~~our~~total net accounts receivable. ~~To date, these~~There were no other customers ~~remain at or close to complying with their payment terms. Additionally, these two customers in the aggregate,~~that accounted for ~~31.3% and 35.4%, respectively,~~more than 10% of ~~our~~consolidated revenue ~~for~~or accounts receivable during the ~~three and nine-month~~three-month periods ended ~~September 30, 2017, compared to 45.3% and 43.4% for the same periods in 2016.~~
As previously mentioned, we elected not to renew an agreement with Sears, which terminated on September 30, 2017. We believe the loss of Sears’s revenue will have a negative impact on our financial condition, but will not affect our ability to remain a going concern. March 31, 2021 or 2020.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 to our consolidated financial statements for a discussion of recent accounting standards and pronouncements.

We ~~are currently evaluating the impact of the adoption of ASU No. 2016-02,~~~~Leases~~, on our consolidated financial condition, results of operations and cash flows. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity.
~~The Company is in the final assessment phaseof what impact, if any, the new revenue standard, ASU No. 2014-09,~~~~Revenue from Contracts with Customers~~, and related updates will have on its consolidated financial statements and related disclosures, and based on its preliminary assessment, other than additional disclosures in its Notes to its consolidated financial statements, there will be no material impact to its consolidated financial statements.
~~Other than the aforementioned, we~~ do not believe that any other recently issued, but not yet effective accounting standard, if adopted, will have a material effect on our consolidated financial statements.

31
Item 3. Quantitative ~~And~~and Qualitative Disclosures About Market Risk

Not required.

Item 4. Controls and Procedures
Disclosure Controls and Procedures

The ~~Company's~~Company’s management, with the participation of the ~~Company's~~Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated, as of ~~September 30, 2017,~~March 31, 2021, the effectiveness of the ~~Company's~~Company’s disclosure controls and procedures, which were designed to be effective at the reasonable assurance level. The term ~~"disclosure~~“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~~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~~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~~Company’s disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2021, the Company’s management, including its CEO and CFO, concluded that the ~~Company's~~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.

32

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the legal ~~proceedings~~proceedings’ disclosure described in our ~~2016~~2020 Form 10-K.

Item 1A. Risk Factors

There have been no material changes to the risk factors ~~previously~~ disclosed under Part I, Item 1A “Risk Factors” in the 2020 Form 10-K, other than the following, which replaces the final risk factor in such Part I, Item 1A in its entirety, the current effects of which are discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q:
Business disruptions or other costs associated with information technology, cyber-attacks, system implementations, data privacy, or catastrophic losses. We rely heavily on computer systems to manage and operate our businesses, and record and process transactions. Computer systems are important to production planning, customer service and order fulfillment among other business-critical processes. Consistent and efficient operation of the computer hardware and software systems is imperative to the successful sales and earnings performance. Despite efforts to prevent such situations, and loss control and risk management practices that partially mitigate these risks, our systems may be affected by damage or interruption from, among other causes, fire, natural disasters, power outages, system failures or computer viruses. Computer hardware and storage equipment that is integral to efficient operations, such as e-mail, telephone, and other functionality, is concentrated in certain physical locations in which we operate. Additionally, we rely on software applications and enterprise cloud storage systems and cloud computing services provided by third-party vendors, and our business may be adversely affected by service disruptions or security breaches in such third-party systems. Security threats and sophisticated computer crime pose a potential risk to the security of our information technology systems, cloud storage systems, networks, services, and assets, as well as the confidentiality and integrity of some of our customers’ data. If we suffer a loss or disclosure of business or stakeholder information due to security breaches, including as a result of human error and technological failures, and business continuity plans do not effectively address these issues on a timely basis, we may suffer interruptions in our ~~2016 Form 10-K~~ability to manage operations as well as reputational, competitive, or business harm, which may adversely impact our results of operations and ~~subsequent~~financial condition.
As described in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Trends and Uncertainties,” of this Quarterly ~~reports~~Report on Form ~~10-Q.~~10-Q, on May 13, 2021, the Company’s Florida Pneumatic subsidiary detected a ransomware attack on its information technology systems that caused data to be encrypted.

PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~The following table presents our repurchase activity of our Class A Common stock during the three-month period ended September 30, 2017.~~None

Maximum
Number
Total Number of of shares
Shares Purchased as that May Yet
Part of Publicly Be Purchased
Total Number of Average Price Announced Plan Under the Plan
Period Shares Purchased Paid per Share or Program or Program (1)

July 1, 2017 - July 31, 2017 - - - -
Aug., 1, 2017 – Aug., 31, 2017 1,505 $ 6.32 1,505 98,495
Sept. 1, 2017 – Sept 30, 2017 10,860 $ 7.26 10,860 87,635
~~(1)~~ On August 24, 2017, the Company announced that it had adopted a written trading plan for the purpose of repurchasing up to 100,000 shares of its common stock. This trading plan expires on August 23, 2018, and was adopted pursuant to an authorization of a stock repurchase program by the Company’s Board which was publicly announced on August 10, 2017.
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.

33
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.~~ Jr.
Joseph A. Molino, Jr.
Chief Financial Officer
Dated: ~~November 13, 2017~~May 17, 2021 (Principal Financial and Chief Accounting Officer)

34
EXHIBIT INDEX

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

Exhibit
Number Description of Exhibit
~~10.1~~ Amendment No. 1 to Second Amended and Restated Loan and Security Agreement dated as of August 9, 2017, (executed on September 20, 2017) by and among the Company, Florida Pneumatic Manufacturing Corporation and Hy-Tech Machine, Inc. as Borrowers, ATSCO Holdings Corp. Jiffy Air Tool, Inc., Bonanza Properties Corp., Continental Tool Group, Inc., Countrywide Hardware, Inc. Embassy Industries, Inc., Green Manufacturing, Inc., Exhaust Technologies, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc. and Woodmark International, L.P. as Guarantors and Capital One, National Association as Agent and Lender (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 20, 2017).

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 .~~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 Operations and Comprehensive ~~Income (Loss);~~Loss, (iii) Consolidated ~~Statement~~Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to ~~Consolidated Financial Statements.~~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.

35

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)

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

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

	September 30, 2017		December 31, 2016		March 31, 2021		December 31, 2020
	(unaudited)		(See Note 1)		(unaudited)		(See Note 1)
ASSETS
CURRENT ASSETS

Cash	$	1,205,000	$	3,699,000	$	1,047,000	$	904,000
Accounts receivable — net		10,994,000		7,906,000		9,538,000		7,468,000
Inventories		20,090,000		19,901,000		18,631,000		18,362,000
Prepaid expenses and other current assets		925,000		3,030,000		2,471,000		2,806,000
TOTAL CURRENT ASSETS		33,214,000		34,536,000		31,687,000		29,540,000

PROPERTY AND EQUIPMENT
Land		1,281,000		1,150,000		507,000		507,000
Buildings and improvements		6,136,000		5,209,000		3,544,000		3,544,000
Machinery and equipment		20,160,000		19,401,000		25,617,000		25,673,000
		27,577,000		25,760,000		29,668,000		29,724,000
Less accumulated depreciation and amortization		18,770,000		18,671,000		20,659,000		20,329,000
NET PROPERTY AND EQUIPMENT		8,807,000		7,089,000		9,009,000		9,395,000

GOODWILL		4,445,000		3,897,000		4,451,000		4,449,000

OTHER INTANGIBLE ASSETS — net		8,709,000		6,606,000		6,070,000		6,226,000

DEFERRED INCOME TAXES — net		1,643,000		1,793,000		298,000		226,000

RIGHT-OF-USE ASSETS – OPERATING LEASES						3,118,000		3,281,000

OTHER ASSETS — net		120,000		130,000		178,000		250,000

TOTAL ASSETS	$	56,938,000	$	54,051,000	$	54,811,000	$	53,367,000

	September 30, 2017			December 31, 2016
	(unaudited)			(See Note 1)
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term borrowings	$	2,334,000		$	—
Accounts payable		3,247,000			2,398,000
Accrued compensation and benefits		1,694,000			1,733,000
Accrued other liabilities		1,449,000			2,019,000
Current maturities of long-term debt		—			13,000
TOTAL CURRENT LIABILITIES		8,724,000			6,163,000

Long - term debt, less current maturities		92,000			88,000
Other liabilities		901,000			210,000

TOTAL LIABILITIES		9,717,000			6,461,000

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 – 4,203,000 at September 30, 2017 and 4,181,000 at December 31, 2016		4,203,000			4,181,000
Class B - $1 par; authorized - 2,000,000 shares; no shares issued		—			—
Additional paid-in capital		12,996,000			12,906,000
Retained earnings		35,481,000			36,061,000
Treasury stock, at cost – 596,000 shares at September 30, 2017 and 584,000 at December 31, 2016		(4,910,000	)		(4,821,000	)
Accumulated other comprehensive loss		(549,000	)		(737,000	)

TOTAL SHAREHOLDERS’ EQUITY		47,221,000			47,590,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	56,938,000		$	54,051,000

’		PAGE

PART I — FINANCIAL INFORMATION		12

Item 1.	Financial Statements	12

	Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 (unaudited) and December 31, ~~2016~~2020	12

	Consolidated Statements of Operations and Comprehensive ~~Income (Loss)~~Loss for the three months ended March 31, 2021 and ~~nine-month periods ended September 30, 2017 and 2016~~2020 (unaudited)	34

	Consolidated ~~Statement~~Statements of Shareholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and 2020 (unaudited)	45

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (unaudited)	56

	Notes to Consolidated Financial Statements (unaudited)	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3228

Item 4.	Controls and Procedures	3228

PART II — OTHER INFORMATION		3329

Item 1.	Legal Proceedings	3329

Item 1A.	Risk Factors	3329

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3330

Item 3.	Defaults Upon Senior Securities	3330

Item 4.	Mine Safety Disclosures	3330

Item 5.	Other Information	3330

Item 6.	Exhibits	3330

Signature		3431

Exhibit Index		3532

	Three months					Nine months
	ended September 30,					ended September 30,
	2017		2016			2017			2016

Net revenue	$	15,782,000	$	14,633,000		$	44,357,000		$	44,769,000
Cost of sales		10,198,000		10,128,000			28,377,000			29,743,000
Gross profit		5,584,000		4,505,000			15,980,000			15,026,000
Selling, general and administrative expenses		5,352,000		4,915,000			15,765,000			15,088,000
Impairment of goodwill and other intangible assets		—		—			—			8,311,000
Operating income (loss)		232,000		(410,000	)		215,000			(8,373,000	)
Other expense (income), net		11,000		(43,000	)		(13,000	)		(75,000	)
Interest expense		50,000		26,000			124,000			164,000
Income (loss) from continuing operations before income taxes		171,000		(393,000	)		104,000			(8,462,000	)
Income tax expense (benefit)		166,000		(107,000	)		142,000			(2,872,000	)
Income (loss) from continuing operations		5,000		(286,000	)		(38,000	)		(5,590,000	)

Discontinued operations (Note 2)

Income from discontinued operations, net of tax of $-0- and $38,000 for the three and nine-month periods ended September 30, 2016, respectively.		—		—			—			72,000
Gain on sale of discontinued operations, net of tax benefit of $187,000 and $328,000 for the three and nine-month periods ended September 30, 2016, respectively.		—		187,000			—			12,358,000
Income from discontinued operations, net of tax		—		187,000			—			12,430,000

Net income (loss)	$	5,000	$	(99,000	)	$	(38,000	)	$	6,840,000

Basic (loss) earnings per share
Continuing operations	$	—	$	(0.08	)	$	(0.01	)	$	(1.55	)
Discontinued operations		—		0.05			—			3.45
Net (loss) income	$	—	$	(0.03	)	$	(0.01	)	$	1.90

Diluted (loss) earnings per share
Continuing operations	$	—	$	(0.08	)	$	(0.01	)	$	(1.55	)
Discontinued operations		—		0.05			—			3.45
Net (loss) income	$	—	$	(0.03	)	$	(0.01	)	$	1.90

Weighted average common shares outstanding:

Basic		3,617,000		3,598,000			3,609,000			3,598,000
Diluted		3,777,000		3,598,000			3,609,000			3,598,000

Net income (loss)	$	5,000	$	(99,000	)	$	(38,000	)	$	6,840,000
Other comprehensive income (loss) - foreign currency translation adjustment		71,000		(63,000	)		188,000			(299,000	)
Total comprehensive income (loss)	$	76,000	$	(162,000	)	$	150,000		$	6,541,000

				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, 2017	$	47,590,000			4,181,000		$	4,181,000	$	12,906,000	$	36,061,000			(584,000	)	$	(4,821,000	)	$	(737,000	)

Net loss		(38,000	)		—			—		—		(38,000	)		—			—			—

Restricted common stock compensation		30,000			5,000			5,000		25,000		—			—			—			—

Stock - based compensation		20,000			—			—		20,000		—			—			—			—

Exercise of stock options		62,000			17,000			17,000		45,000		—			—			—			—

Dividends		(542,000	)		—			—		—		(542,000	)		—			—			—

Purchase of Treasury stock		(89,000	)		—			—		—		—			(12,000	)		(89,000	)		—

Foreign currency translation adjustment		188,000			—			—		—		—			—			—			188,000
						��
Balance, September 30, 2017	$	47,221,000			4,203,000		$	4,203,000	$	12,996,000	$	35,481,000			(596,000	)	$	(4,910,000	)	$	(549,000	)

	Three months
	ended March 31,
	2021			2020
Net revenue	$	13,945,000		$	13,350,000
Cost of sales		9,309,000			8,868,000
Gross profit		4,636,000			4,482,000
Selling, general and administrative expenses		4,991,000			5,690,000
Operating loss		(355,000	)		(1,208,000	)
Interest expense		22,000			55,000
Loss before income tax		(377,000	)		(1,263,000	)
Income tax benefit		70,000			505,000
Net loss	$	(307,000	)	$	(758,000	)

Basic and diluted loss per share	$	(0.10	)	$	(0.24	)

Weighted average common shares outstanding:

Basic and diluted		3,169,000			3,144,000

Net loss	$	(307,000	)	$	(758,000	)
Other comprehensive income (loss) - foreign currency translation adjustment		15,000			(125,000	)
Total comprehensive loss	$	(292,000	)	$	(883,000	)

	As of March 31,2021
2021 (excluding the three months ended March 31, 2021)	$	654,000
2022		783,000
2023		670,000
2024		391,000
2025		182,000
Thereafter		867,000
Total operating lease payments		3,547,000
Less imputed interest		(385,000	)
Total operating lease liabilities	$	3,162,000

Weighted average remaining lease term		5.9 years
Weighted average discount rate		4.3	%

·	~~ASU No. 2015-14,~~~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~~~, which defers the effective date of the new guidance such that the new provisions will now be required for fiscal years, and interim periods within those years, beginning after December 15, 2017;~~
·	~~ASU No. 2016-08,~~~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations~~~~, which clarifies the implementation guidance on principal versus agent considerations (reporting revenue gross versus net);~~
·	~~ASU No. 2016-10,~~~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~~~, which clarifies the implementation guidance on identifying performance obligations and classifying licensing arrangements;~~
·	~~ASU No. 2016-12,~~~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~~~, which clarifies the implementation guidance in a number of other areas.~~

	Three months ended March 31,
	2021					2020					Increase (decrease)
	Revenue		Percent of revenue			Revenue		Percent of revenue			$			%
Automotive	$	4,102,000		37.6	%	$	3,232,000		32.2	%	$	870,000			26.9	%
Retail		3,790,000		34.8			2,990,000		29.8			800,000			26.8
Industrial		1,359,000		12.5			1,062,000		10.6			297,000			28.0
Aerospace		1,528,000		14.0			2,599,000		25.9			(1,071,000	)		(41.2	)
Other		122,000		1.1			147,000		1.5			(25,000	)		(17.0	)
Total	$	10,901,000		100.0	%	$	10,030,000		100.0	%	$	871,000			8.7	%

	January 1, 2016 through February 11, 2016

Revenue	$	1,830,000
Cost of goods sold		1,177,000
Gross margin		653,000
Selling and general and administrative expenses		483,000
Interest expense - net		60,000
Income before income taxes		110,000
Income taxes		38,000

Net income	$	72,000

	Total
Cash paid at closing	$	7,000,000
Less working capital adjustment		(155,000	)
Fair value of contingent consideration		692,000
Total estimated purchase price	$	7,537,000

Accounts receivable	$	789,000
Inventories		1,571,000
Other current assets		45,000

Land		131,000
Building		919,000
Machinery and equipment		1,196,000
Identifiable intangible assets:
Customer relationships		1,670,000
Trademarks and trade names		790,000
Non-compete agreements		17,000
Liabilities assumed		(125,000	)
Goodwill		534,000
Total estimated purchase price	$	7,537,000

~~Customer relationships~~		~~15 years~~
~~Trademarks and trade names~~		~~Indefinite~~
~~Non-compete agreements~~		~~4 years~~

	Three months ended			Nine months ended
	September 30,			September 30,
	2016			2017		2016
Revenue	$	16,400,000		$	45,835,000	$	50,092,000
Net (loss) income from continuing operations	$	(23,000	)	$	68,000	$	(5,002,000	)
(Loss) earnings per share – basic	$	(0.01	)	$	0.02	$	(1.39	)
(Loss) earnings per share – diluted	$	(0.01	)	$	0.02	$	(1.39	)

	Three months ended
	March 31,
	2021			2020
Numerator for basic and diluted loss per common share:
Net loss	$	(307,000	)	$	(758,000	)

Denominator for basic and diluted loss per share - weighted average common shares outstanding		3,169,000			3,144,000


Risk-free interest rate		2.07	%
Expected term (in years)		10	years
Volatility		87.16	%
Dividend yield		2.82	%
Weighted average fair value of options granted	$	4.41

	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 and vested, January 1, 2017		423,817		$	5.68		2.9	$	1,271,704
Outstanding, January 1, 2021											200,878	$	6.59		4.1	$	85,663
Granted		89,000			7.09						—
Exercised		(16,722	)		3.65						—
Forfeited		(6,793	)		7.86						—
Expired		(71,069	)		10.72						—
Outstanding, September 30, 2017		418,233		$	5.17		4.1	$	907,347

Vested, September 30, 2017		329,233		$	4.65		2.5	$	891,327
Outstanding, March 31, 2021											200,878	$	6.59		3.8	$	118,716
Vested, March 31, 2021											198,210	$	6.56		3.8	$	118,716

	Option Shares		Weighted Average Grant- Date Fair Value		Option shares			Weighted average grant- date fair value
Non-vested options, January 1, 2017		—	$	—
Non-vested options, January 1, 2021						5,334		$	4.60
Granted		89,000		4.41
Vested		—		—		(2,666	)		4.60
Forfeited		—		—		—
Non-vested options, September 30, 2017		89,000	$	4.41
Non-vested options, March 31, 2021						2,668		$	4.60

Balance, January 1, 2017	$	3,897,000
Acquisition of Jiffy Air Tool, Inc.		534,000
Currency translation adjustment		14,000
Balance, September 30, 2017	$	4,445,000

Balance, January 1, 2021	$	4,449,000
Currency translation adjustment		2,000
Balance, March 31, 2021	$	4,451,000

	(1)	A portion of these intangibles are maintained in a foreign currency and are therefore subject to foreign exchange rate fluctuations.
	~~(2)~~	These were previously considered an indefinite-lived intangible asset of Hy-Tech. However, as the result of a prior impairment, the Company began amortizing these intangible assets over a 15 year useful life.
	~~(3)~~	~~The $200,000 increase represents a patent acquired during the third quarter of 2017.~~

2021	$	472,000
2022		630,000
2023		626,000
2024		577,000
2025		548,000
Thereafter		1,029,000
	$	3,882,000

Three months ended September 30,				Nine months ended September 30,
2017		2016		2017		2016
$	181,000	$	217,000	$	620,000	$	803,000

2018	$	709,000
2019		686,000
2020		653,000
2021		638,000
2022		635,000
Thereafter		3,062,000
	$	6,383,000

	·•	~~Exposure~~Risks related to ~~fluctuations in energy prices;~~the global outbreak of COVID-19 and other public health crises;
	·•	~~Debt and debt service requirements;~~Risks associated with sourcing from overseas;
	·	~~Borrowing and compliance with covenants under our credit facility;~~
	·•	Disruption in the global capital and credit markets;
	·•	Importation delays;
	•	Customer concentration;
	•	Unforeseen inventory adjustments or changes in purchasing patterns;
	•	Market acceptance of products;
	•	Competition;
	•	Price reductions;
	•	Exposure to fluctuations in energy prices;
	•	The strength of the retail economy in the United States and abroad;
	·•	~~Supply chain disruptions;~~Risks associated with Brexit;
	·	~~Customer concentration;~~
	·•	Adverse changes in currency exchange rates;
	·•	Interest rates;
	•	Debt and debt service requirements;
	•	Borrowing and compliance with covenants under our credit facility;
	•	Impairment of long-lived assets and goodwill;
	·	~~Unforeseen inventory adjustments or changes in purchasing patterns;~~
	·	~~Market acceptance of products;~~
	·	~~Competition;~~
	·	~~Price reductions;~~
	·	~~Interest rates;~~
	·	~~Litigation and insurance;~~
	·•	Retention of key personnel;
	·•	Acquisition of businesses;
	·•	Regulatory environment;
	·•	Litigation and insurance;
	•	The threat of terrorism and related political instability and economic uncertainty; and
	·•	~~Information~~Business disruptions or other costs associated with information technology, cyber-attacks, system ~~failures and attacks,~~implementations, data privacy or catastrophic losses,

	Three months ended September 30,
					Increase
	2017		2016		$		%
Florida Pneumatic	$	12,295,000	$	11,702,000	$	593,000		5.1	%
Hy-Tech		3,487,000		2,931,000		556,000		19.0

Consolidated	$	15,782,000	$	14,633,000	$	1,149,000		7.9	%

	Nine months ended September 30,
					Decrease						Three months ended March 31,
	2017		2016		$			%							Increase (decrease)
											2021		2020		$			%
Florida Pneumatic	$	34,936,000	$	35,270,000	$	(334,000	)		(0.9	)%	$	10,901,000	$	10,030,000	$	871,000			8.7	%
Hy-Tech		9,421,000		9,499,000		(78,000	)		(0.8	)		3,044,000		3,320,000		(276,000	)		(8.3	)

Consolidated	$	44,357,000	$	44,769,000	$	(412,000	)		(0.9	)%	$	13,945,000	$	13,350,000	$	595,000			4.5	%

	Three months ended September 30,				Increase
	2017		2016		Amount		%
Interest expense attributable to:
Short-term borrowings	$	32,000	$	15,000	$	17,000		113.3	%
Term loans, including Capital Expenditure Term Loans		1,000		1,000		-		-
Amortization expense of debt issue costs		17,000		10,000		7,000		70.0

Total	$	50,000	$	26,000	$	24,000		92.3	%

	Nine months ended September 30,				Increase (decrease)						Three months ended March 31,				Increase (decrease)
	2017		2016		Amount			%			2021		2020		Amount			%
Interest expense attributable to:
Short-term borrowings	$	80,000	$	41,000	$	39,000			95.1	%	$	10,000	$	51,000	$	(41,000	)		(80.4	)%
Term loans, including Capital Expenditure Term Loans		2,000		5,000		(3,000	)		(60.0	)
PPP loan												8,000		—		8,000			100.0
Amortization expense of debt issue costs		42,000		118,000		(76,000	)		(64.4	)		4,000		4,000		—			—

Total	$	124,000	$	164,000	$	(40,000	)		(24.4	)%	$	22,000	$	55,000	$	(33,000	)		(60.0	)%

	September 30, 2017		December 31, 2016
Working Capital	$	24,490,000	$	28,373,000
Current Ratio		3.81 to 1		5.60 to 1
Shareholders’ Equity	$	47,221,000	$	47,590,000

							Maximum
							Number
					Total Number of		of shares
					Shares Purchased as		that May Yet
					Part of Publicly		Be Purchased
	Total Number of		Average Price		Announced Plan		Under the Plan
Period	Shares Purchased		Paid per Share		or Program		or Program (1)

July 1, 2017 - July 31, 2017		-		-		-		-
Aug., 1, 2017 – Aug., 31, 2017		1,505	$	6.32		1,505		98,495
Sept. 1, 2017 – Sept 30, 2017		10,860	$	7.26		10,860		87,635

		P&F INDUSTRIES, INC.
		(Registrant)

		/s/ JOSEPH A. MOLINO,~~JR.~~ Jr.
		Joseph A. Molino, Jr.
		Chief Financial Officer
Dated: ~~November 13, 2017~~May 17, 2021		(Principal Financial and Chief Accounting Officer)