x ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

¨ ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x ☒ No ¨☐

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

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. N/A

Number of shares outstanding of the registrant’s common stock, as of ~~August 9, 2019: 313,636~~May 14, 2020: 311,636

AMERINAC HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

June 30,

December 31,

2019

2018

ASSETS

Current assets:

Cash

$ 265,264

$ 360,283

Accounts receivable (net of allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018.)

5,721,417

3,801,166

Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of June 30, 2019 and December 31, 2018.)

5,836,154

5,580,942

Other current assets

283,321

230,985

Total current assets

12,106,156

9,973,376

Property, land and equipment - net

6,051,989

6,125,183

Other assets:

Customer lists - net of amortization

1,608,583

1,708,084

Right-of-use asset

1,208,613

-

Deferred tax asset

-

358,686

Goodwill

54,993

54,993

Other

71,593

51,917

Total other assets

2,943,782

2,173,680

Total

$ 21,101,927

$ 18,272,239

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Line of credit

$ 745,431

$ 1,092,058

Accounts payable and accrued expenses

4,026,018

3,275,011

Notes payable, net- short term

600,000

600,000

Finance leases payable - short term

45,688

43,435

Operating leases payable - short term

254,845

-

Deferred revenue

23,247

-

Income taxes payable

110,144

14,351

Total current liabilities

5,805,373

5,024,855

Long-term liabilities:

Notes payable, net of current portion

3,804,830

4,069,990

Finance leases payable - net of current portion

89,656

113,358

Operating leases payable - net of current portion

1,000,193

-

Deferred tax liability

7,041

-

Total long-term liabilities

4,901,720

4,183,348

Total liabilities

10,707,093

9,208,203

Commitments and contingencies

Redeemable non-controlling interest

1,071,729

757,778

Stockholders' equity:

Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at June 30, 2019 and December 31, 2018, respectively.

313

313

Additional paid-in capital

16,383,599

16,383,599

Accumulated deficit

(7,060,807 )

(8,077,654 )

Total stockholders' equity

9,323,105

8,306,258

Total liabilities and stockholders' equity

$ 21,101,927

$ 18,272,239

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

FOR THE SIX MONTHS

FOR THE THREE MONTHS

ENDED JUNE 30,

ENDED JUNE 30,

2019

2018

2019

2018

Net revenue

$ 24,062,327

$ 22,013,681

$ 11,557,359

$ 11,310,897

Cost of goods sold

19,169,449

17,891,455

9,253,072

9,475,915

Gross profit

4,892,878

4,122,226

2,304,287

1,834,982

Operating expenses:

General and administrative expenses

2,669,426

2,059,149

1,338,765

1,061,479

Professional and consulting fees

190,704

214,942

81,137

36,835

Total operating expenses

2,860,130

2,274,091

1,419,902

1,098,314

Income before other (expense) income

2,032,748

1,848,135

884,385

736,668

Other (expense) income:

Interest

(240,430 )

(728,925 )

(118,635 )

(363,774 )
Other income

-

288,596

-

278,244

Total other (expense) income

(240,430 )

(440,329 )

(118,635 )

(85,530 )

Income before provision for income taxes

1,792,318

1,407,806

765,750

651,138

Income tax expense

(461,520 )

(131,557 )

(199,054 )

(131,557 )

Net income

1,330,798

1,276,249

566,696

519,581

Non-controlling interest share of net income

313,951

364,293

144,658

166,556

Net income attributable to Amerinac Holding

Corp. shareholders

$ 1,016,847

$ 911,956

$ 422,038

$ 353,025

Basic and diluted earnings per share applicable to common stockholders:

Earnings per share

$ 3.24

$ 3.07

$ 1.35

$ 1.19

Weighted average shares outstanding:

Basic and diluted

313,636

297,386

313,636

297,386

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
SIX MONTHS ENDED JUNE 30, 2019 AND 2018

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balance, January 1, 2018

297,386

$ 297

$ 15,733,615

$ (10,103,722 )

$ 5,630,190

Net income attributable to Amerinac

Holding Corp. shareholders

-

-

-

911,956

911,956

Balance, June 30, 2018

297,386

$ 297

$ 15,733,615

$ (9,191,766 )

$ 6,542,146

Balance, January 1, 2019

313,636

$ 313

$ 16,383,599

$ (8,077,654 )

$ 8,306,258

Net income attributable to Amerinac

Holding Corp. shareholders

-

-

-

1,016,847

1,016,847

Balance, June 30, 2019

313,636

$ 313

$ 16,383,599

$ (7,060,807 )

$ 9,323,105

THREE MONTHS ENDED JUNE 30, 2019 AND 2018

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balance, April 1, 2018

297,386

$ 297

$ 15,733,615

$ (9,544,791 )

$ 6,189,121

Net income attributable to Amerinac

Holding Corp. shareholders

-

-

-

353,025

353,025

Balance, June 30, 2018

297,386

$ 297

$ 15,733,615

$ (9,191,766 )

$ 6,542,146

Balance, April 1, 2019

313,636

$ 313

$ 16,383,599

$ (7,482,845 )

$ 8,901,067

Net income attributable to Amerinac

Holding Corp. shareholders

-

-

-

422,038

422,038

Balance, June 30, 2019

313,636

$ 313

$ 16,383,599

$ (7,060,807 )

$ 9,323,105

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED JUNE 30, 2019 AND 2018

CASH FLOWS FROM OPERATING ACTIVITIES

2019

2018

Net income

$ 1,330,798

$ 1,276,249

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

407,055

372,328

Amortization of deferred financing fees

34,840

66,666

Non-cash lease expense

78,152

-

Deferred income taxes

365,727

-

Inventory reserve

7,000

-

Changes in assets and liabilities:

Increase in accounts receivable

(1,920,251 )

(1,355,635 )
Increase in inventory

(262,212 )

(71,663 )
Decrease in operating leases payable

(31,727 )

-

(Increase) decrease in other current assets

(52,336 )

244,535

Increase in other assets

(19,676 )

-

Increase in deferred revenue

23,247

-

Increase in income taxes payable

95,793

131,557

Increase in accounts payable and accrued expenses

751,007

125,372

Net cash provided by operating activities

807,417

789,409

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from escrow receivable from sale

-

500,000

Purchase of property and equipment

(234,360 )

(97,536 )
Net cash (used) provided in investing activities

(234,360 )

402,464

CASH FLOWS FROM FINANCING ACTIVITIES

Net payments on line of credit

(346,627 )

-

Payments on notes payable

(300,000 )

-

Payments on finance leases

(21,449 )

(873 )
Payments on notes payable - related party

-

(242,526 )
Net cash used in financing activities

(668,076 )

(243,399 )

(DECREASE) INCREASE IN CASH

(95,019 )

948,474

CASH - BEGINNING OF PERIOD

360,283

348,398

CASH - END OF PERIOD

$ 265,264

$ 1,296,872

Cash paid during the period for:

Interest

$ 241,305

$ 669,232

Non-cash financing activities:

Operating lease asset obtained in exchange for operating lease obligation

$ 1,277,143

$ -

Acquisition of equipment through finance lease

$ -

$ 162,903

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

Amerinac Holding Corp. and Subsidiaries (the “Company”) distributes high-quality, predominantly domestically-manufactured, technically complex, nut and bolt products ~~and a proprietary locking washer product~~ that are for industrial and commercial applications that require a high level of certified and assured quality. ~~Additionally, the~~The Company manufactures specialty stainless steel, and related products for steel mills, steel forging operations, and various metal fabrication facilities. The Company is also engaged in the manufacture of precision aluminum castings.

The Company’s operations are carried out through its wholly-owned distribution subsidiary Creative Assembly Systems, Inc (“Creative Assembly”) ~~and~~, its ~~majority-owned~~wholly-owned manufacturing subsidiary, Prime Metals Acquisition LLC, a Delaware limited liability company (“PMAL”), its wholly-owned manufacturing subsidiary, USAC Ross LLC (“USAC Ross”) and its wholly-owned manufacturing subsidiary, USAC WA LLC (“USAC WA”). USAC Ross and USAC WA were formed as wholly-owned single member limited liability companies by the Company on March 3, 2020 and had no operations prior to the March 20, 2020 acquisition discussed in Note 4.

Creative Assembly is a ~~value added~~value-added distributor of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries.

PMAL manufactures specialty ingot and electrode products which are supplied for investment castings, forging, ring rolling, and plate production. PMAL also manufactures shot products and master alloys which are sold to other melt shops, and provides manufacturing support services. The flexible manufacturing operations at PMAL enable the Company to offer a wide range of product grades in customer specific order quantities. The primary grade types include stainless steels, tool steels, nickel-based grades, cobalt based grades and some nonferrous alloys. The Company also offers toll conversion melting services.

USAC Ross and USAC WA (collectively, “USAC”) are precision aluminum castings manufacturers. USAC offers multiple casting processes as well as in-house heat treating, machining, powder coating and non-destructive testing. The products are used in defense, aerospace, heavy truck, marine and commercial applications.

In March 2020, President Donald Trump declared the coronavirus disease 2019 (“COVID-19”) pandemic as a national public health emergency. COVID-19 is the disease caused by a novel strain of a coronavirus that originated from Wuhan, China in November 2019. Several of the Company’s customers have reduced or shutdown production in response to COVID-19. This has temporarily affected the Company’s sales. As of the date of this report, the Company has not experienced any long-term disruptions with suppliers. As noted below, the Company applied for and received loans under the Cares Act to aid with the financial impact of COVID-19.

To augment an expected decline in operating cash flows caused by the reduced sales caused by the COVID-19 pandemic, the Company instituted the following measures:

On or about April 23, 2020, the Company’s operating subsidiaries received approval and funding of approximately $3 million under the Paycheck Protection Program of the CARES Act. These funds have enabled the Company to continue to employ a large percentage of its workforce.

As of the release of this report, the Company does not know the extent and duration of the impact of COVID-19 on its businesses due to the uncertainty about the spread of the virus and when the Company’s customers will restart full production.

The Company considers the COVID-19 pandemic as a triggering event in the assessment of recoverability of the goodwill, intangibles and long-lived tangible assets for its operating entities. The Company evaluated and assessed that while the COVID-19 pandemic will affect short and medium term sales numbers, it is not expected to affect the value of its intangibles and long-lived tangible assets. The Company will continue to evaluate the situation on an ongoing basis.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in the Company’s opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, ~~2018~~2019 included in the Company’s Annual Report on Form 10-K filed on March ~~26, 2019.~~30, 2020.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly ~~and majority~~ owned subsidiaries. All inter-company accounts have been eliminated.

Basic earnings per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. Basic earnings per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. There were no dilutive shares as of June 30, 2019 and 2018.

The preparation of the unaudited condensed consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates relate to the useful lives and impairment considerations of long-lived and intangible assets, reserves for inventory and accounts receivable, going concern considerations, discount rates in connection with right-of-use assets and estimates related to the ~~valuation of redeemable non-controlling interest.~~purchase price allocation contained in Note 4.

For purposes of the unaudited condensed consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. From time to time, cash balances may exceed the federal deposit insurance limits.

Accounts receivable are recorded ~~net of reserves for sales returns and allowances and~~ net of provisions for doubtful accounts. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable. The amount of the allowance is based on an analysis of the Company’s prior collection experience, customer credit worthiness, and current economic trends. Based on management’s review of accounts receivable, the Company ~~carries~~carried an allowance for doubtful accounts of $78,753 as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The Company determines receivables to be past due based on the payment terms of original invoices. Interest is not typically charged on past due receivables. Accounts are written off against the allowance when deemed uncollectable. ~~Interest is not typically charged on past due receivables.~~

The Company recognizes revenue on its tolling services as those services are performed. Unbilled services represent the revenue recognized but not yet invoiced.

For the Company’s distribution subsidiary, Creative Assembly, inventories consist only of finished goods and are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon the age of the respective part and the knowledge of future demand of inventory on hand as well as other market conditions and events. Management believes that the longer a part sits on the shelf the higher the likelihood that it will not sell in the future. This belief is not unique to the fastener industry. While management constantly assesses viability of a part within the customer base, it also believes that a reserve should be carried to reflect product that is aging out, as opposed to product that management identified based on a specific event. As of ~~June 30, 2019,~~March 31, 2020, the Company had more than 4,000 unique part numbers on hand that had carrying value. Management believes that the two methods, specific identification and reserve based on age, to analyzing inventory will reflect the appropriate balance sheet value. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the inventory reserve for Creative Assembly was ~~$75,160 and $68,160, respectively.~~$86,211.

For the Company’s manufacturing subsidiary, PMAL, management believes volatility in the broader metal markets will have an impact on all aspects of raw material, work in process, and finished goods inventory. Management actively seeks to minimize inventory working capital, and increase inventory turns to eliminate any impacts from market fluctuations. As of ~~June 30, 2019,~~March 31, 2020, the Company’s manufacturing subsidiary had more than 500 unique metal chemistries it produced, but keeps minimal finished inventory on hand.

For PMAL, inventories are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well other market conditions and events. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the inventory reserve for PMAL was $82,849.

For USAC, management believes volatility in the aluminum markets will have an impact on all aspects of raw material, work in process, and finished goods inventory. Management actively seeks to minimize inventory working capital, and increase inventory turns to eliminate any impacts from market fluctuations.

For USAC, inventories are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well other market conditions and events. As of March 31, 2020, the combined inventory reserve for USAC Ross and USAC WA was $0 as the inventory was acquired at fair value as part of the March 20, 2020 acquisition discussed in Note 4.

	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019

Raw Materials	$	2,168,422		$	2,133,311
Finished Goods		3,825,741			3,598,640
Raw materials							$	3,319,660		$	2,407,962
Work in progress								1,616,982			206,067
Finished goods								6,078,819			4,611,578
Reserves		(158,009	)		(151,009	)		(169,060	)		(169,060	)

Total	$	5,836,154		$	5,580,942		$	10,846,401		$	7,056,547

Property, land and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation and amortization using the straight-line method over the estimated useful lives of the assets acquired as follows:

The carrying amount of all long-lived assets is evaluated when an indicator of impairment exists to determine whether adjustment to the useful life or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets.

At June 30, 2019, Remelt Sources, Inc., Universal Stainless & Alloy Products, PACCAR, Eastham Forge and Drive Automotive receivables were 17.8%, 13.4%, 11.9%, 11.2% and 10.2% of total receivables, respectively. At December 31, 2018, Remelt Sources, Inc., AMG-Vanadium, PACCAR, and Universal Stainless & Alloy Products receivables were 20.9%, 15.0%, 14.0%, and 13.0% of total receivables, respectively.

For the six-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 20.3%, 17.0%, 15.6%, and 12.0% of sales, respectively. For the three-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.8%, 15.7%, 16.2%, and 10.8% of sales, respectively. For the six-month period ending June 30, 2018, Remelt Sources, Inc., AMG-Vanadium, Ametek, PACCAR and Universal Stainless & Alloy Products accounted for 19.5%, 16.4%, 15.1%, 13.7% and 12.5% of sales, respectively. For the three-month period ending June 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.1%, 18.7%, 14.2%, 14.1% and 11.4% of sales, respectively.

For the six-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the six-month period ending June 30, 2018, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2018, no supplier represented more than 10% of purchases. At June 30, 2019, AVK represented approximately 16.9% of accounts payable. At December 31, 2018, AVK represented approximately 11.8% of accounts payable.

In accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following:

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of the financial instruments.

~~The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms.~~

The Company provides for income taxes under Accounting Standards Codification (“ASC”) Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment.

ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

ASC Topic 740-10 clarifies the accounting for uncertainty in income tax positions, as defined. It requires, among other matters, that the Company recognize in our unaudited condensed consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company analyzes the filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As of ~~June 30, 2019,~~March 31, 2020, the Company did not record any unrecognized tax benefits. The Company’s policy, if it had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively.

The Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. Under the guidance of ASC 740, “Income Taxes”, the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented by the new legislation. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act have not been completed as of June 30, 2019 and December 31, 2018 and, therefore, considers its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to be complete as of June 30, 2019 and December 31, 2018.

The Company accounts for revenue recognition in accordance with ASC Topic 606 (“ASC 606”). The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes; (1) Identifying contracts with customers, (2) Identifying performance obligations within those contracts, (3) Determining the transaction price, (4) Allocating the transaction price to the performance obligations in the contract, which may include an estimate of variable consideration, and (5) Recognizing revenue when or as each performance obligation is satisfied.

Revenue primarily consists of sales of fasteners, specialty ingot products, ~~and~~ master alloys products, metal processing and tolling ~~services.~~services, and specialty aluminum cast parts. We generate our revenue primarily from the sale of finished products and tolling services to customers, therefore, the significant majority of our contracts are short-term in nature and have a single performance obligation to deliver products or services, in which our performance obligation is satisfied when control of the product is transferred to the customer or the service is performed. Some contracts contain a combination of product sales and services which are distinct and accounted for as separate performance obligations. Our performance obligations for services are satisfied when the services are rendered within the arranged service period. Tolling revenue is recognized when the tolling service is completed.

Revenue is recognized when control transfers to our customers via shipment of products or delivery of services. Shipping and handling costs are considered fulfillment activities and as such are not accounted for as separate performance obligations. We measure revenue as the amount of consideration we expect to be entitled to receive in exchange for those goods or services, net of any variable considerations (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components if the good or service is transferred and payment is received within one year.

We estimate product returns based on historical experience and record them on a gross basis. Substantially all of Creative Assembly customer returns relate to products that are returned under warranty obligations underwritten by manufacturers. Substantially all of PMAL and USAC customer returns relate to products which do not meet customer requirements and are replaced by the Company.

We occasionally receive advance payments to secure product to be delivered in future periods. These advance payments are recorded as deferred revenue, and revenue is recognized as our performance obligations are satisfied throughout the term of the applicable contract. We may also purchase metal on our customer’s behalf, sell the unprocessed metal to our customer, and then process and ship the material, charging a processing fee at the time of shipment. For these specific non-tolling arrangements in which we purchase metal for a customer, a single performance obligation exists, and as a result, amounts invoiced to our customers for the metal purchased on their behalf is recorded as deferred revenue until the metal is processed and shipped. The Company recorded deferred revenue of ~~$23,247~~$59,990 and $0 as of ~~June 30, 2019. The Company did not record any deferred revenue as of~~March 31, 2020 and December 31, ~~2018.~~2019, respectively.

Non-controlling interests that are not subject to redemption rights are classified in permanent equity. Redeemable non-controlling interests are classified outside of permanent equity on the unaudited condensed consolidated balance sheets.

On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals for $9.6 million in cash. To finance the purchase of the assets, PMAL entered into a credit agreement (the “Credit Agreement”) with SummitBridge National Investments V LLC (“Summit”) pursuant to which Summit made loans to PMAL: (1) a Term Loan in the amount of $4.5 million (“Summit Term Loan A”) and (2) a Term Loan in the amount of $3.5 million (“Summit Term Loan B”) (collectively, the “Summit Loans”). In addition, in consideration for Summit making the loans, PMAL issued membership interests representing 25% ownership of PMAL to an affiliate of Summit, SBN V PMA LLC (“SBN”) (the “SBN Membership Interests”). Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.

PMAL has granted SBN a put right under the operating agreement for PMAL for the SBN Membership Interests. On August 31, 2018, the operating agreement for PMAL was amended to provide that on the earlier of November 30, 2021 or the date of a change in control of PMAL, SBN has the right but not the obligation to require PMAL to repurchase all of the SBN Membership Interests at market equity value (“Market Equity Value”). Market Equity Value shall be equal to the higher of (i) value of PMAL implied by a sale, (ii) 4.5 x EBITDA for the trailing twelve months plus cash, less all outstanding funded indebtedness or (iii) fair market value as determined by mutual agreement between PMAL and SBN, or failing that by an independent firm mutually agreed to. SBN has granted PMAL a call right under the operating agreement for PMAL for the SBN Membership Interests. On August 17, 2021, PMAL has the right but not the obligation to require SBN to sell all of the SBN Membership Interests at Market Equity Value.

In February 2016, the Financial Accounting Standards Board (“FASB”) established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elects the ‘package of practical expedients’, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. Under this elected package of practical expedients, the Company does not separate non-lease components from the lease component. Therefore, all lease and non-lease components are combined and accounted for as a single lease component. On adoption, the Company recognized additional operating lease liabilities of approximately $251,000 with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

In ~~June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it~~accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following:

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, accounts payable, accrued liabilities, unbilled receivables and deferred revenue approximate fair value because of the immediate or short-term maturity of the financial instruments.

The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms.

The Company accounts for stock-based awards to recipients in accordance with applicable accounting ~~for~~principles, which requires compensation expense related to share-based ~~payments~~transactions, to ~~employees, with certain exceptions. The new guidance expands~~be measured and recognized in the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for whichunaudited condensed consolidated financial statements ~~have~~based on a grant date fair value over the requisite service period.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not ~~been issued, but not before~~be recoverable. When it becomes apparent that indicators such as a significant decrease in the market value of the long-lived asset group or if material differences between operating results and the Company’s forecasted expectations occur, then an ~~entity adopts ASC 606. This~~impairment analysis is performed.

If indicators arise, an initial determination of recoverability is performed based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition compared with the carrying value. If the carrying value of the asset group exceeds the undiscounted cash flows, a measurement of an impairment loss for long-lived assets is performed. The impairment charge is the excess of the carrying value of the asset group over the fair value, as determined utilizing appropriate valuation techniques. The Company considers the COVID-19 pandemic as a triggering event in the assessment of recoverability of the goodwill, intangibles, long-lived intangibles and long-lived tangible assets for its operating entities. As of March 31, 2020, the Company concluded that there was ~~adopted on January 1, 2019 and did not have a material impact~~no impairment on the ~~Company’s financial position and results of operations.~~long-lived assets for its operating entities.

We make estimates, assumptions, and judgments when valuing goodwill and other intangible assets such as customer lists in connection with the initial purchase price allocation of any acquired operations, as well as when evaluating the recoverability of our goodwill and other intangible assets on an ongoing basis. These estimates are based upon a number of factors, including historical experience, market conditions, and information obtained from the management of any acquired operations. Critical estimates in valuing certain intangible assets include, but are not limited to, historical and projected attrition rates, discount rates, anticipated growth in revenue from the acquired customers and acquired technology, and the expected use of the acquired assets. These factors are also considered in determining the useful life of acquired intangible assets. The amounts and useful lives assigned to identified intangible assets impact the amount and timing of future amortization expense. As of March 31, 2020, the Company concluded that there was no impairment on the goodwill and intangibles for its operating entities.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions intended to simplify the test for goodwill impairment. The standard ~~is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed~~was adopted on ~~testing dates after~~ January 1, ~~2017. The Company does~~2020 and did not ~~expect the adoption of this standard to~~ have a ~~significant~~material impact on ~~its~~the Company’s financial position and results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. In May 2019, the FASB issued ASU 2019-05, which is an update to ASU 2016-13, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting ~~pronouncements~~for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision useful information. The guidance in ASU 2016-13 is effective for “public business entities,” as defined, that are SEC filers for fiscal years and for interim periods within those fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU simplifies accounting for income taxes by removing the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation, (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments, and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also improves financial statement preparers’ application of income tax related guidance for franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. The ASU is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted for public business entities for periods for which financial statements have not been issued. An entity that elects early adoption in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption should adopt all the amendments in the same period. The Company is still evaluating the impact of this ASU on the Company’s consolidated financial statements.

At March 31, 2020, Remelt Sources, Inc., AMG-Vanadium and Drive Automotive receivables were 20.8%, 10.3%, and 10.0% of total receivables, respectively. At December 31, 2019, Remelt Sources, Inc., Universal Stainless & Alloy Products, AMG-Vanadium, PACCAR, and Eastham Forge receivables were 19.8%, 16.2%, 14.9%, 13.3% and 11.7% of total receivables, respectively.

For the three-month period ending March 31, 2020, Remelt Sources, Inc., AMG-Vanadium, and PACCAR accounted for 28.0%, 18.0%, and 12.3% of sales, respectively. For the three-month period ending March 31, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 19.0%, 18.1%, 15.5% and 13.1% of sales, respectively.

For the three-month period ending March 31, 2020, no supplier represented more than 10% of purchases. For the three-month period ending March 31, 2019, no supplier represented more than 10% of purchases. At March 31, 2020, no supplier represented more than 10% of accounts payable. At December 31, 2019, AVK represented approximately 11.9% of accounts payable.

On March 20, 2020, the Company, USAC Ross and USAC WA entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) by and among SummitBridge National Investments VI LLC (“SummitBridge VI”) and ABTV, in its capacity as court-appointed receiver ordered by the Court of Common Pleas of Chester County, Pennsylvania on March 6, 2020 in the Matter of SummitBridge National Investments VI LLC v. Advanced Metals Group, LLC et al., Case No. 2020-02461-MJ. USAC Ross and USAC WA were formed as wholly-owned single member limited liability companies by the Company on March 3, 2020 and had ~~or are expected~~no operations prior to this transaction. Pursuant to the Purchase and Sale Agreement, USAC Ross purchased all the personal property of Advanced Metals Group, LLC, Advanced Aluminum Castings, LLC, Advanced Iron Castings, LLC, Ross Aluminum Castings, LLC, US Castings, LLC, PFRE Properties, LLC, BFRE Properties, LLC, Oberdorfer, LLC, Mabry Acquisition Company Ltd., MFRE Properties Ltd., USCRE Properties, LLC and RCRE, LLC (collectively, the “Debtors”) located in the State of Ohio, in addition to real property owned by RCRE, LLC in the State of Ohio. Pursuant to the Purchase and Sale Agreement, USAC WA purchased all of the personal property of the Debtors located in the State of Washington, in addition to real property owned by USCRE, Properties, LLC in the State Washington. The purchase price paid by USAC Ross and USAC WA was $6,167,000.

The acquisition was accounted for as a business combination. The assets and liabilities of USAC Ross and USAC WA (collectively, the “USAC Assets”) were recorded at their estimated respective fair values as of the closing date of the acquisition, and the following table summarizes these values based on the balance sheet at March 20, 2020. Upon completion of an independent purchase price allocation and valuation, the allocation will be adjusted accordingly.

Debt issuance costs were approximately $61,000, which was recorded as debt discount and will amortized over the life of the loan.

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisition occurred on January 1, 2019, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the three months ended March 31, 2020 and March 31, 2019 as if the acquisition had occurred on January 1, 2019.

The Company’s unaudited condensed consolidated financial statements for the three months ending March 31, 2020 include the actual results of USAC Ross and USAC WA since the date of the acquisition, March 20, 2020. The three months ended March 31, 2020, pro forma results above include three months of pro forma results for USAC Ross and USAC WA. For the period between March 20, 2020 and March 31, 2020, the USAC Ross and USAC WA operations had a ~~material impact on~~net income before taxes of $60,289 that was included in the Company’s unaudited condensed consolidated ~~financial statements.~~statements of income, which consisted of approximately $560,462 in revenues, $440,122 in cost of goods sold and $60,051 in expenses.

~~The Company’s~~PMAL’s 220,000 square foot facility is located at 101 Innovation Drive, Homer City, PA. The facility is located on approximately 38 acres and was purchased in 2007. The facility houses the manufacturing operations of PMAL. Depreciation expense was ~~$307,554~~$159,293 and ~~$206,162 for the six months ended June 30, 2019 and 2018. Depreciation expense was $155,455 and $70,696~~$152,099 for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

USAC Ross’ 175,000 square foot facility is located at 815 Oak Avenue, Sidney, OH. The facility is located on approximately 7 acres and was purchased in 2020. The facility houses the manufacturing operations of USAC Ross. Depreciation expense was $15,662 for the period from March 20, 2020 to March 31, 2020.

USAC WA’s 88,000 square foot facility is located at 14531 Shamel Street, Entiat, WA. The facility is located on approximately 5 acres and was purchased in 2020. The facility houses the manufacturing operations of USAC WA. Depreciation expense was $16,624 for the period from March 20, 2020 to March 31, 2020.

As described in Note 7,10, the Company has ~~$5,295,431~~$12,951,205 in ~~notes~~debt secured against the property, land and equipment.

Accounts payable and accrued expenses consists of the following as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Accounts payable	$	3,478,306	$	3,060,269	$	5,463,063	$	2,839,425
Interest		33,192		35,805		99,008		40,455
Salaries and bonus		495,000		116,930		898,620		357,976
Other		19,520		62,007		123,734		46,000
	$	4,026,018	$	3,275,011	$	6,584,425	$	3,283,856

The customer lists are estimated to have a useful life of 10 years. As of ~~June 30,~~March 31, 2020 and December 31, 2019, the value, net of amortization, of the customer list was ~~$1,608,583.~~$1,459,333 and $1,509,083, respectively.

Amortization expense for the years ended December 31, ~~2019~~2020 through ~~2023~~2027 will be $199,000 per year. ~~The Company will continue to expense $199,000 annually until 2027.~~ Amortization expense was ~~$99,501 for each of the six months ended June 30, 2019 and 2018 and $49,751~~$49,750 for each of the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option ~~which~~will result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.

Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional four to five years. The exercise of lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception, and ~~on an ongoing basis, and~~ includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.

Leases recorded on the unaudited condensed consolidated balance sheet consist of the following:



Leases	Classification on the Balance Sheet	June 30, 2019		Classification on the Balance Sheet	March 31, 2020		December 31, 2019

Assets
Operating lease ROU assets	Right-of-use asset	$	1,208,613	Right-of-use asset	$	1,032,140	$	1,092,253
Finance lease ROU assets	Property, land and equipment, net	$	150,966	Property, land and equipment, net	$	157,991	$	153,307
Liabilities
Current
Operating	Operating leases payable – short term	$	254,845	Operating leases payable – short term	$	259,595	$	255,533
Finance	Finance leases payable – short term	$	45,688	Finance leases payable – short term	$	57,137	$	49,662
Noncurrent
Operating	Operating leases payable – net of current portion	$	1,000,193	Operating leases payable – net of current portion	$	811,211	$	877,899
Finance	Finance leases payable – net of current portion	$	89,656	Finance leases payable – net of current portion	$	69,472	$	79,214

The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of ~~June 30, 2019~~March 31, 2020 are:

The components of lease expense, included in general and administrative expenses and interest expense on the unaudited condensed consolidated statements of income, are as follows:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		Three Months Ended March 31, 2020		Three Months ended March 31, 2019

Operating lease cost:
Operating lease cost	$	51,927	$	89,432	$	75,765	$	18,608
Finance lease cost:
Amortization of ROU assets		8,227		21,449		7,556		6,682
Interest expense		1,759		3,650		1,769		1,891
Total lease cost	$	61,913	$	114,531	$	85,090	$	27,181

Supplemental disclosures of cash flow information related to leases for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 were as follows:

Cash paid for operating lease obligations was ~~$52,633.~~$78,279 and $19,250 for the three months ended March 31, 2020 and 2019, respectively. Operating lease asset obtained for operating lease obligation was ~~$1,277,143.~~

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheets as of ~~June 30, 2019:~~March 31, 2020:

July 1, 2019 through December 31, 2019	$	156,558
2020		313,115
April 1, 2020 through December 31, 2020			$	234,836
2021		313,115		313,115
2022		287,448		287,448
2023		236,115		236,115
2024		118,058		118,058
Total undiscounted future minimum lease payments		1,424,408		1,189,572
Less: Imputed interest		169,370		118,766
Present value of operating lease obligations	$	1,255,038	$	1,070,806

The Company has two leased facilities, which are office, manufacturing and warehouse space. In some cases the Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Under the elected package of practical expedients, the Company does not separate non-lease components from the lease component. Therefore, all lease and non-lease components are combined and accounted for as single lease component. The lease on our facility in Texas expired in February 2019. In May 2019, we entered into a new lease for a new Texas facility that commenced on May 1, 2019 and recorded a right of use asset and corresponding lease liability in the second quarter of 2019. This Texas facility lease calls for payments until expiration in 2024 totaling $576,180. The annual payments are $57,618 for the year 2019, $236,115 for each of the years 2020, 2021, 2022 and 2023 and $57,618 for the year 2024. Our Ohio facility calls for lease payments until expiration totaling $243,833. The annual payments are $77,000 for each of the years 2019, 2020 and 2021 and $57,750 for 2022. Lease expense was $54,883 for the six months ended June 30, 2018. Lease expense was $29,208 for the three months ended June 30, 2018. Lease expense for the six months ended June 30, 2019 includes $14,133 related to month to month lease expense in the Texas facility prior to commencement of the new agreement on May 1, 2019 as noted above.

	Finance Leases June 30, 2019		Capital Leases December 31, 2018		Finance Leases March 31, 2020		Finance Leases December 31, 2019
Obligations under finance and capital leases	$	135,344	$	156,793	$	126,609	$	128,876
Less: current portion		45,688		43,435		57,137		49,662
Long-term portion	$	89,656	$	113,358	$	69,472	$	79,214

The table below presents the future minimum repayments of finance lease obligations for the Company as of ~~June 30, 2019:~~March 31, 2020:

Years ending December 31,	Finance lease obligations as of June 30, 2019		Finance lease obligations as of March 31, 2020
2019 (remaining six months)	$	25,098
2020		50,200
2020 (remaining nine months)			$	51,553
2021		48,880		53,661
2022		21,397		26,178
2023				2,789
Total future minimum repayments inclusive of interest		145,575		134,181
Interest		10,231		7,572
Total principal repayments	$	135,344	$	126,609

The Company entered into a finance lease for a forklift effective July 1, 2019. The lease runs for 49 months with an interest rate of 5.5% and a monthly payment of $399. Total payments will equal $19,534.

The table below presents the future minimum repayments of ~~capital~~finance lease obligations for the Company as of December 31, ~~2018:~~2019:

Years ending December 31,	Capital lease obligations as of December 31, 2018		Finance lease obligations as of December 31, 2019
2019	$	50,199
2020		50,199	$	54,981
2021		48,878		53,661
2022		21,396		26,178
2023				2,786
Total future minimum repayments inclusive of interest		170,672		137,606
Interest		13,879		8,730
Total principal repayments	$	156,793	$	128,876

The Company’s weighted average remaining lease term and weighted average discount rate for finance leases as of ~~June 30, 2019~~March 31, 2020 are:

On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals for $9.6 million in cash. To finance the purchase of the assets, on August 17, 2017, PMAL entered into the Credit Agreement with Summit pursuant to which made the Summit Loans to PMAL: (1) Summit Term Loan A and (2) Summit Term Loan B. In addition, in consideration for Summit making the Summit Loans, PMAL issued to SBN, the SBN Membership Interests. On August 31, 2018, PMAL fully repaid the Summit Loans.

Summit Term Loan A accrued each month at either 17.5% interest per annum (with 12.5% payable monthly and 5.0% accruing to the outstanding balance of Term Loan A, payable at maturity) or 17.0% interest per annum, payable monthly. Summit Term Loan A had a Maturity date of August 17, 2020. Summit Term Loan A was secured against all of the assets of PMAL.

Summit Term Loan B accrued each month at either 17.5% interest per annum (with 14.0% payable monthly and 3.5% accruing to the outstanding balance of Term Loan B, payable at maturity) or 17.0% interest per annum, payable monthly. Term Loan B had a Maturity date of August 17, 2020. Summit Term Loan B was secured against all of the assets of PMAL.

~~The Company guaranteed payment of the Summit Loans pursuant to a Guaranty Agreement made by the Company as of August 17, 2017.~~

The Credit Agreement also contained customary covenants, representations and warranties of the parties, including, among others (1) the grant by PMAL to Summit of a security interest on all of the assets of PMAL, (2) a pledge with respect to the equity interests in PMAL owned by the Company, and (3) an unconditional and irrevocable guaranty by the Company of the performance by PMAL of the obligations under the Credit Agreement. In addition, until all amounts under the Summit Loans were paid in full, PMAL agreed to comply with certain financial covenants that required PMAL to meet pre-established financial ratios.

The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBN’s PMAL equity ownership. This amount, plus SBN’s pro rata net income allocation is reflected before stockholders’ equity as Redeemable Non-Controlling interest. Due to the SBN Membership Interests, Summit is considered a related party of the Company for the purposes of these unaudited condensed consolidated financial statements. Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. SBN’s pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests.

~~The following table shows the value of the non-controlling interests (“NCI”) for the six-month period ending June 30, 2019:~~

~~The following table shows the value of the non-controlling interests (“NCI”) for the three-month period ending June 30, 2019:~~

~~The following table shows the change in the value of the NCI for the six-month period ending of June 30, 2018:~~

~~The following table shows the value of the non-controlling interests (“NCI”) for the three-month period ending June 30, 2018:~~

On August 31, 2018, PMAL entered into a Loan and Security Agreement (the “PMAL Loan and Security Agreement”) with Berkshire Bank (“Berkshire Bank”) establishing: 1) a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the “Berkshire Revolving Loan”), 2) a term loan in the amount of $3.5 million (“Berkshire Term Loan A”) and 3) a term loan in the amount of $1.5 million (“Berkshire Term Loan B”). Borrowings under the Berkshire Revolving Loan may be used to finance working capital and other general corporate purposes. The Berkshire Revolving Loan had a borrowing base of approximately $3.3 million on June 30, 2019 of which the Company had drawn $745,431.

~~On August 31, 2018, pursuant to the PMAL Loan and Security Agreement, PMAL used an amount of $7,678,814 under the Loan and Security Agreement to fully repay the Summit Loans.~~

Borrowings under the Berkshire Revolving Loan bear interest at a rate equal to the Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (“ICE LIBOR”) rate plus 3.25%, which was 5.69% at June 30, 2019. Berkshire Term Loan A and Berkshire Term Loan B bear interest at ICE LIBOR rate plus 4.25%, which was 6.69% at June 30, 2019.

The outstanding principal amount of any borrowings under the Berkshire Revolving Loan will be due and payable on August 21, 2021, subject to an earlier maturity date upon an event of default (the “Revolving Credit Maturity Date”). Berkshire Term Loan A has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. Berkshire Term Loan B has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. The principal balance of Berkshire Term Loan A shall be paid in equal monthly installments of $41,667 commencing on October 1, 2018. Any unpaid principal and interest shall be due on the maturity date. The principal balance of Berkshire Term Loan B shall be paid in equal monthly installments of $8,334 commencing on October 1, 2018. Any unpaid principal and interest shall be due on the maturity date.

The PMAL Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates.

The PMAL Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement. Under the cash flow coverage covenant, PMAL shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, PMAL shall maintain a tangible net worth of no less than $3.1 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of PMAL’s prior year’s undistributed net income. As of June 30, 2019, PMAL was in compliance with the covenants contained within the PMAL Loan and Security Agreement.

The obligations of PMAL under the PMAL Loan and Security Agreement are secured by liens and security interests on all assets of PMAL. Amerinac is a secured guarantor of the PMAL Loan and Security Agreement, and has pledged its equity in PMAL.

~~The table below represents the future minimum repayments of Berkshire Term Loan A and Berkshire Term Loan B as of June 30, 2019.~~

As of June 30, 2019, the principal balance of Term Loan A was $3,125,000 and the principal balance of Term Loan B was $1,425,000. As of December 31, 2018, the principal balance of Term Loan A was $3,375,000 and the principal balance of Term Loan B was $1,475,000. The total amount of unamortized debt financing cost was $145,170 and $180,010 at June 30, 2019 and December 31, 2018, respectively.

The Company is subject to the possibility of claims and lawsuits arising in the normal course of business. In the opinion of management, the Company liability, if any, under existing claims, asserted or unasserted, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

On November 10, 2017, John Wachter was appointed Chief Executive Officer of the Company. In connection with his appointment, the Company and Mr. Wachter entered into a written employment agreement (the “Wachter Employment Agreement”) for an initial three-year term, which provides for the following compensation terms for Mr. Wachter. Pursuant to the Wachter Employment Agreement, Mr. Wachter will receive a base salary of $100,000 per year, subject to increase, but not decrease, at the discretion of the Board. Mr. Wachter is eligible for a cash and stock bonus equal to ten to twenty percent of the Company’s pre-tax profits over established pre-tax targets, at the end of each respective annual period.

In addition, the Wachter Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If, during the term of the Wachter Employment Agreement, his employment is terminated by the Company other than for “cause,” by Mr. Wachter for “good reason” (each as defined in the Wachter Employment Agreement) or by failure by either party to renew the Wachter Employment Agreement after expiration of the employment term, he would be entitled to (1) a lump sum payment equal to two times his base salary at the rate in effect immediately prior to the termination date, and (2) any unpaid portion of any cash bonus for the annual period preceding the annual period in which such termination occurs that was earned but not paid.

On November 10, 2017, William J. Golden was appointed Chief Financial Officer of the Company. Mr. Golden remains the Company’s General Counsel. In connection with his appointment, the Company and Mr. Golden entered into a written employment agreement (the “Golden Employment Agreement”) for an initial three-year term, which provides for the following compensation terms for Mr. Golden. Pursuant to the Golden Employment Agreement, Mr. Golden will receive a base salary of $100,000 per year, subject to increase, but not decrease, at the discretion of the Board. Mr. Golden is eligible for a cash and stock bonus equal to ten to twenty percent of the Company’s pre-tax profits over established pre-tax targets, at the end of each respective annual period.

In addition, the Golden Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If, during the term of the Golden Employment Agreement, his employment is terminated by the Company other than for “cause,” by Mr. Golden for “good reason” (each as defined in the Golden Employment Agreement) or by failure by either party to renew the Golden Employment Agreement after expiration of the employment term, he would be entitled to (1) a lump sum payment equal to two times his base salary at the rate in effect immediately prior to the termination date, and (2) any unpaid portion of any cash bonus for the annual period preceding the annual period in which such termination occurs that was earned but not paid.

The Compensation Committee adopted a 2017-2019 Amerinac Holding Corp. Executive Bonus Plan (the “Executive Bonus Plan”), which is subject to and governed by the terms of the 2017 Amerinac Holding Corp. 2017 Equity Incentive Plan. Certain key employees will participate in the Executive Bonus Plan. The Executive Bonus Plan is designed to (i) offer variable compensation primarily in equity of the Company if executives achieve annual target growth amounts and (ii) align the incentives of executives and shareholders.

The Company will fund the annual corporate bonus pool with no more than 20% of the excess, if any, of the Company’s yearly earnings before taxes minus a threshold amount. For 2019, the threshold amount will be $1,750,000.

Pursuant to the Executive Bonus Plan, awards are paid out in a mix of cash and equity, with no less than 60% of corporate bonus pool to be in the form of newly issued restricted common stock, subject to the discretion of the Compensation Committee of the Board. All awards will be subject to threshold performance and high-water marks.

As of December, 31, 2018, the Company had accrued $103,000 in bonus for Mssrs. Wachter and Golden. On March 25, 2019, the Board authorized the payment of these bonuses to be in cash and the bonuses were paid on April 12, 2019.

~~For the six months ended June 30, 2019, the Company accrued an additional $177,000 for bonuses. At June 30, 2019, the Company had accrued $177,000 for bonuses to executives.~~

In addition, the Company issued 625 shares to both Mr. Lamb and Mr. Garruto at the conclusion of their first year of service on the Board of Directors on December 31, 2018 pursuant to their independent director agreements, valued at $25,000 each. On December 21, 2018, Mssrs. Lamb and Garruto were re-elected to the Board for an additional 1-year term. At the end of the 2019 term, they will each receive $25,000 in stock.

~~The Company manages its operations in two business segments which are defined as follows:~~

~~Segment information~~The Company is subject to the possibility of claims and lawsuits arising in the normal course of business. In the opinion of management, the Company liability, if any, under existing claims, asserted or unasserted, would not have a material adverse effect on the Company’s unaudited condensed consolidated financial position or results of operations.

On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals & Alloys, Inc., a Delaware corporation, (“Prime Metals”) for $9.6 million in cash. To finance the purchase of the assets, PMAL entered into a credit agreement with SummitBridge National Investments V LLC (“Summit V”) pursuant to which Summit V made loans to PMAL: (1) a Term Loan in the amount of $4.5 million (“Summit Term Loan A”) and (2) a Term Loan in the amount of $3.5 million (“Summit Term Loan B”) (collectively, the “Summit Loans”). In addition, in consideration for Summit V making the loans, PMAL issued membership interests representing 25% ownership of PMAL to an affiliate of Summit V, SBN V PMA LLC (“SBN”) (the “SBN Membership Interests”). Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.

PMAL granted SBN a put right under the operating agreement for PMAL for the ~~three~~SBN Membership Interests. On August 31, 2018, the operating agreement for PMAL was amended to provide that on the earlier of November 30, 2021 or the date of a change in control of PMAL, SBN has the right but not the obligation to require PMAL to repurchase all of the SBN Membership Interests at market equity value (“Market Equity Value”). Market Equity Value shall be equal to the higher of (i) value of PMAL implied by a sale, (ii) 4.5 x EBITDA for the trailing twelve months ~~ended June 30, 2019 is~~plus cash, less all outstanding funded indebtedness or (iii) fair market value as ~~follows:~~determined by mutual agreement between PMAL and SBN, or failing that by an independent firm mutually agreed to. SBN has granted PMAL a call right under the operating agreement for PMAL for the SBN Membership Interests. On August 17, 2021, PMAL has the right but not the obligation to require SBN to sell all of the SBN Membership Interests at Market Equity Value.

The Company accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBN’s PMAL equity ownership. This amount, plus SBN’s pro rata net income allocation was reflected before stockholders’ equity as Redeemable Non-Controlling interest. Due to the SBN Membership Interests, Summit was considered a related party of the Company for the purposes of these unaudited condensed consolidated financial statements. Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. SBN’s pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests.

~~Segment information~~Effective July 1, 2019, the Company and SBN entered into a Membership Interest Redemption Agreement pursuant to which the Company purchased the remaining SBN Membership Interests with a carrying value of $757,778 from SBN for a purchase price of $3,000,000 cash. SBN also waived its share of income for all of 2019. The Company adjusted additional paid-in capital downward by $1,547,133, net of deferred taxes of $695,089, to reflect the difference between the purchase price and the balance sheet value of the non-controlling interests.

The Membership Interest Redemption Agreement contains a look-back provision that entitles SBN to receive additional compensation in the event the Company sells PMAL or its assets in a subsequent transaction within three hundred and sixty-five (365) days following the repurchase. Such additional compensation would be equal to the difference between what SBN received in the repurchase and what the SBN Membership Interests would be worth at the subsequent transaction date.

The following table shows the value of the non-controlling interests (“NCI”) for the three months ended ~~June 30, 2018 is as follows:~~March 31, 2019:

~~Below is the Segment reconciliation to total net income~~PMAL Berkshire Loans

~~Segment asset information for~~On August 31, 2018, PMAL entered into a Loan and Security Agreement (the “PMAL Loan and Security Agreement”) with Berkshire Bank (“Berkshire Bank”) establishing: 1) a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the “Berkshire Revolving Loan”), 2) a term loan in the amount of $3.5 million (“Berkshire Term Loan A”) and 3) a term loan in the amount of $1.5 million (“Berkshire Term Loan B”). Borrowings under the Berkshire Revolving Loan may be used to finance working capital and other general corporate purposes. The Berkshire Revolving Loan had a borrowing base of approximately $3.1 million on March 31, 2020 of which the Company ~~is as follows:~~had drawn $708,700.

~~Income taxes are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due. For~~On August 31, 2018, ~~our current effective tax rate is lower than the Federal and state effect rate primarily~~pursuant to the ~~release~~PMAL Loan and Security Agreement, PMAL used an amount of $7,678,814 under the Loan and Security Agreement to fully repay the Summit Loans. On August 16, 2019, the PMAL Loan and Security Agreement was amended to permit a ~~portion~~one-time cash distribution of $1.5 million which was used to partially fund the Company’s repurchase of the ~~valuation allowance.~~SBN Membership Interests.

~~Tax information for~~Borrowings under the ~~six-months ended June 30, 2019~~Berkshire Revolving Loan bear interest at a rate equal to the Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (“ICE LIBOR”) rate plus 3.25%, which was 4.85% at March 31, 2020. Berkshire Term Loan A and ~~2018 is as follows:~~

The Company’s deferred tax assets and liability relates mainly to a temporary timing difference in long-term assets. There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded in the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2019 or 2018. Additionally, there were noBerkshire Term Loan B bear interest ~~or penalties outstanding as of or for each of the six months ended June 30, 2019 and 2018.~~at ICE LIBOR rate plus 4.25%, which was 5.85% at March 31, 2020.

The ~~federal~~outstanding principal amount of any borrowings under the Berkshire Revolving Loan will be due and ~~state tax returns for~~payable on August 21, 2021, subject to an earlier maturity date upon an event of default (the “Revolving Credit Maturity Date”). Berkshire Term Loan A has a maturity date the ~~years ending December~~earlier of (i) August 31, ~~2015, 2016,~~2023 or (ii) the Revolving Credit Maturity Date. Berkshire Term Loan B has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. The principal balance of Berkshire Term Loan A shall be paid in equal monthly installments of $41,667 commencing on October 1, 2018. Any unpaid principal and ~~2017 have been filed, but are still open to examination. Federal~~interest shall be due on the maturity date. The principal balance of Berkshire Term Loan B shall be paid in equal monthly installments of $8,334 commencing on October 1, 2018. Any unpaid principal and ~~state tax returns for~~interest shall be due on the ~~year ending December 31, 2018 have not been filed.~~maturity date.

The PMAL Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement. Under the cash flow coverage covenant, PMAL shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, PMAL shall maintain a tangible net worth of no less than $4.1 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of PMAL’s prior year’s undistributed net income. As of March 31, 2020, PMAL was in compliance with the covenants contained within the PMAL Loan and Security Agreement.

~~11. SUBSEQUENT EVENTS~~The table below represents the future minimum repayments of Berkshire Term Loan A and Berkshire Term Loan B as of March 31, 2020.

As of March 31, 2020, the principal balance of Term Loan A was $2,750,000 and the principal balance of Term Loan B was $1,350,000. As of December 31, 2019, the principal balance of Term Loan A was $2,875,000 and the principal balance of Term Loan B was $1,375,000. The total amount of unamortized debt financing cost was $92,909 and $110,329 at March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020, the Company amortized $17,420 in debt financing cost.

On July 15, 2019, CAS entered into a Loan and Security Agreement (the “CAS Loan and Security Agreement”) with Berkshire Bank establishing a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the “CAS Revolving Loan”). Borrowings under the CAS Revolving Loan may be used to finance working capital and other general corporate purposes. The Berkshire Revolving Loan had a borrowing base of approximately $3 million on March 31, 2020 of which the Company had drawn $1,760,386. This amount is reflected net of an unamortized discount of $37,344 on the Company’s unaudited condensed consolidated balance sheet. For the three months ended March 31, 2020, the Company amortized $2,154 in debt financing cost.

On August 16, 2019, the CAS Loan and Security Agreement was amended to permit a one-time cash distribution of $1.5 million which was used to partially fund the Company’s repurchase of the SBN Membership Interests.

Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%., which was 4.6% at March 31, 2020.

The outstanding principal amount of any borrowings under the CAS Revolving Loan will be due and payable on July 15, 2022, subject to an earlier maturity date upon an event of default. Any unpaid principal and interest shall be due on the maturity date.

The CAS Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates.

The CAS Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement covenant. Under the cash flow coverage covenant, ~~commencing with the fiscal quarter ending September 30, 2019,~~ CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, ~~commencing with the fiscal quarter ending December 31, 2019,~~ CAS shall maintain a tangible net worth of no less than ~~$1.5 million.~~$1.0 million, as amended on August 16, 2019. The tangible net worth amount required shall increase annually on each June 30 by 50% of CAS’s prior years undistributed net income. As of March 31, 2020, the Company was in compliance will all covenants under the CAS Loan and Security Agreement.

The obligations of CAS under the CAS Loan and Security Agreement are secured by liens and security interests on all assets of CAS. The Company is a secured guarantor of the CAS Loan and Security Agreement, and has pledged its equity in CAS.

To finance the ~~Company~~purchase of the USAC Assets, on March 20, 2020, USAC Ross and ~~SBN~~USAC WA entered into a ~~Membership Interest Redemption~~Loan and Security Agreement (the ~~“Redemption~~“USAC Loan and Security Agreement”) with SummitBridge VI pursuant to which SummitBridge VI made a two year term loan in the amount of $6,167,000 to USAC Ross and USAC WA (the “USAC Term Loan”).

The USAC Term Loan has a maturity date of March 20, 2022. The USAC Term Loan will begin amortizing on the thirteenth (13) month following March 20, 2020 (the “Effective Date”) pursuant to ~~which~~a seven (7) year amortization schedule with the balance due on the maturity date. The USAC Term Loan is secured against all of the assets of USAC Ross and USAC WA. The USAC Term Loan may be prepaid in whole or in part at any time without any fee, charge or penalty.

The USAC Term Loan bears an interest rate of 9% interest per annum, payable monthly, beginning the first (1) month after the Effective Date. On the 16-month anniversary of the Effective Date, the interest rate on the USAC Term Loan will increase to 15% interest per annum, payable monthly. If the USAC Term Loan is prepaid in full on or before the nine (9) month anniversary of the Effective Date, the principal amount will be reduced by $500,000. If the USAC Term Loan is prepaid in full on or before the ten (10) month anniversary of the Effective Date, the principal amount will be reduced by $400,000. If the USAC Term Loan is prepaid in full on or before the eleven (11) month anniversary of the Effective Date, the principal amount will be reduced by $300,000. If the USAC Term Loan is prepaid in full before the twelve (12) month anniversary of the Effective Date, the principal amount will be reduced by $200,000. If the USAC Term Loan is prepaid in full on or before the sixteen (16) month anniversary of the Effective Date, the principal amount will be reduced by $100,000.

The Company has guaranteed payment of the USAC Term Loan pursuant to a guaranty agreement made by the Company ~~will purchase~~as of the ~~remaining SBN Membership Interests from SBN for a purchase price of $3,000,000.~~Effective Date.

The USAC Loan and Security Agreement also contains customary covenants, representations and warranties of the parties, including, among others (1) the grant by USAC Ross and USAC WA to SummitBridge VI of a security interest on all of the assets of USAC Ross and USAC WA, and (2) an unconditional and irrevocable guaranty by the Company of the performance by USAC Ross and USAC WA of the obligations under the USAC Loan and Security Agreement. In addition, until all amounts under the USAC Term Loan are paid in full, USAC Ross and USAC WA have agreed to comply with certain financial covenants commencing with the fiscal quarter ending June 30, 2020 that require USAC Ross and USAC WA to meet pre-established financial ratios. Debt issuance costs were approximately $61,000, which was recorded as debt discount and will amortized over the life of the loan.

Pursuant to the March 20, 2020 transaction, USAC Ross and USAC WA assumed certain secured equipment loans in the aggregate amount of $230,007.

To the extent that the PMAL Loan and Security Agreement and the CAS Loan and Security Agreement extend beyond 2021, the interest rates for these obligations might be subject to change based on recent regulatory changes.

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. The interest rates for borrowings under the PMAL Loan and Security Agreement and the CAS Loan and Security Agreement are based on the ICE LIBOR rate.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear at that time whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities. The future of LIBOR at this time is uncertain. If LIBOR ceases to exist, we may need to renegotiate any agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established, which may have an adverse effect on the Company.

The Company manages its operations in three business segments which are defined as follows:

Segment information for the three months ended March 31, 2020 is as follows:

This Form 10-Q contains “forward-looking statements” relating to Amerinac Holding Corp. (the “Company”) which represent the Company’s current expectations or beliefs including, but not limited to, statements concerning the Company’s operations, performance, financial condition and growth. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “anticipate”, “intend”, “could”, “estimate” or “continue” or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel, variability of quarterly results, and the ability of the Company to continue its growth strategy and the Company’s competition, certain of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, or any of the other risks set out under the caption “Risk Factors” in the Company’s 10-K report for the year ended December 31, ~~2018~~2019 occur, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements, and the notes thereto, included herein. The information contained below includes statements of the Company’s or management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion of forward-looking statements, see the information set forth in the Introductory Note to this Quarterly Report under the caption “Forward Looking Statements” which information is incorporated herein by reference.

The unaudited condensed consolidated interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual consolidated statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The results for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 may not be indicative of the results for the entire year.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained herein.

Through its Creative Assembly Systems, Inc. (“Creative Assembly”) segment, the Company distributes high-quality, predominantly domestically-manufactured, technically complex, nut and bolt products and a proprietary locking washer product that are used primarily for industrial/commercial applications that require a high level of certified and assured quality.

Creative Assembly is a value-added distributor of proprietary and specialty fasteners for production, primarily serving the heavy truck, automotive, appliance, and material handling industries.

The ~~Company~~Creative Assembly is a niche player in the North American fastener industry. The fastener distribution industry is highly fragmented with no single company holding a dominant position. The ~~Company~~Creative Assembly competes with numerous distributors who serve as authorized stocking distributors for the fastener manufacturers in ~~the Company’s~~Creative Assembly’s supplier base.

~~The Company~~Creative Assembly is a one-stop source for standard, self-locking, semi-special and special nuts, bolts and washers manufactured to several industrial specifications. ~~The Company~~Creative Assembly maintains an inventory of approximately 4,000 SKUs comprised of approximately 19 million parts of premium quality, brand name fastener products.

~~The Company~~Creative Assembly sells its products pursuant to written purchase orders from its customers. All products are shipped from ~~the Company’s~~Creative Assembly’s warehouses via common carrier.

Through its ~~PMAL~~Prime Metals Acquisition LLC (“PMAL”) segment, the Company is a manufacturer of specialty ingot and electrode products which are supplied for investment castings, forging, ring rolling, and plate production. The Company also manufactures shot products and master alloys which are sold to other melt shops, and provides manufacturing support services. The flexible manufacturing operations at PMAL enable the Company to offer a wide range of product grades in customer specific order quantities. The primary grade types include stainless steels, tool steels, nickel-based grades, cobalt based grades and some nonferrous alloys. The Company also offers toll conversion melting services.

The Company’s products are manufactured, by others, to exacting specifications and are made from materials that provide the strength and reliability required for their industrial applications.

Through its USAC Ross LLC and USAC WA LLC (collectively, “USAC”) segments, the Company manufactures precision aluminum castings. USAC offers multiple casting processes as well as in-house heat treating, machining, powder coating and non-destructive testing. The products are used in defense, aerospace, heavy truck, marine and commercial applications. USAC Ross and USAC WA were formed as wholly-owned single member limited liability companies by the Company on March 3, 2020 and had no operations prior to the March 20, 2020 acquisition discussed in Note 4 to the unaudited condensed consolidated financial statements.

At ~~June 30,~~March 31, 2020, Remelt Sources, Inc., AMG-Vanadium and Drive Automotive receivables were 20.8%, 10.3%, and 10.0% of total receivables, respectively. At December 31, 2019, Remelt Sources, Inc., Universal Stainless & Alloy Products, ~~PACCAR, Eastham Forge and Drive Automotive receivables were 17.8%, 13.4%, 11.9%, 11.2% and 10.2% of total receivables, respectively. At December 31, 2018, Remelt Sources, Inc.,~~ AMG-Vanadium, PACCAR, and ~~Universal Stainless & Alloy Products~~Eastham Forge receivables were ~~20.9%~~19.8%, ~~15.0%~~16.2%, ~~14.0%~~14.9%, 13.3% and ~~13.0%~~11.7% of total receivables, respectively.

For the ~~six-month~~three-month period ending ~~June 30,~~March 31, 2020, Remelt Sources, Inc., AMG-Vanadium, and PACCAR accounted for 28.0%, 18.0%, and 12.3% of sales, respectively. For the three-month period ending March 31, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for ~~20.3%~~19.0%, ~~17.0%~~18.1%, ~~15.6%,~~15.5% and 12.0% of sales, respectively. For the three-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.8%, 15.7%, 16.2%, and 10.8% of sales, respectively. For the six-month period ending June 30, 2018, Remelt Sources, Inc., AMG-Vanadium, Ametek, PACCAR and Universal Stainless & Alloy Products accounted for 19.5%, 16.4%, 15.1%, 13.7% and 12.5% of sales, respectively. For the three-month period ending June 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.1%, 18.7%, 14.2%, 14.1% and 11.4%13.1% of sales, respectively.

For the ~~six-month~~three-month period ending ~~June 30, 2019,~~March 31, 2020, no supplier represented more than 10% of purchases. For the three-month period ending ~~June 30,~~March 31, 2019, no supplier represented more than 10% of purchases. ~~For the six-month period ending June 30, 2018,~~At March 31, 2020, no supplier represented more than 10% of ~~purchases. For the three-month period ending June 30, 2018, no supplier represented more than 10% of purchases. At June 30, 2019, AVK represented approximately 16.9% of~~ accounts payable. At December 31, ~~2018,~~2019, AVK represented approximately ~~11.8%~~11.9% of accounts payable.

~~Results from Operations for six months ending June 30, 2019 vs June 30, 2018~~

The Company’s revenues increased 9.3% or $2,048,646 for the six months ended June 30, 2019 to $24,062,327 from $22,013,681 in the comparable period last year. The primary driver of the increase in sales was increased revenue at our distribution subsidiary. PMAL is our sole manufacturing subsidiary and had $15,568,280 in revenue for the six months ended June 30, 2019. PMAL revenue was down $1,245,866 or 7.4% for the six months ended June 30, 2019 versus June 30, 2018 as we eliminated low margin business. Our distribution subsidiary was up $3,294,512 or 63.4% in revenue for the six months ended June 30, 2019 versus June 30, 2018 due to the pick-up in existing customer activity and the addition of new customers.

The Company’s gross profit increased approximately 18.7% or $770,652 for the six months ended June 30, 2019 to $4,892,878 from $4,122,226 in the comparable period last year. From time to time the Company will experience margin mix that will lead to temporarily higher or lower gross profit. For the six months ended June 30, 2019, gross profit at our distribution subsidiary increased by $410,230 or approximately 37.3% versus 2018 year to date. At our manufacturing subsidiary, our gross profit contribution accounted for approximately 69.2% of the Company’s total gross profit and has a margin of approximately 21.7%.

The Company’s total operating expenses increased 25.8% or $586,039 for the six months ended June 30, 2019 to $2,860,130 from $2,274,091 in the comparable period last year primarily due to increasing sales at the Company.

The Company’s accounts receivable have increased by $1,920,251 to $5,721,417 at June 30, 2019 from $3,801,166 at December 31, 2018; this difference is due to mainly to an increase in sales. The Company’s inventory increased by $255,212 from December 31, 2018 to June 30, 2019 due to normal variations in delivery schedules and to support increased sales. The Company expects to see relatively stable inventory levels in both subsidiaries in the short to medium term.

Results from Operations for three months ending ~~June 30,~~March 31, 2020 vs March 31, 2019 ~~vs June 30, 2018~~

The Company’s revenues ~~increased 2.2%~~decreased 9.6% or ~~$246,462~~$1,198,526 for the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$11,557,359~~$11,306,442 from ~~$11,310,897~~$12,504,968 in the comparable period last year. PMAL ~~our sole manufacturing subsidiary,~~ had ~~$7,381,141~~$7,838,167 in revenue for the three months ended ~~June 30, 2019.~~March 31, 2020. PMAL revenue was down ~~$1,210,186~~$348,972 or ~~14.1%~~4.3% for the three months ended ~~June 30,~~March 31, 2020 versus March 31, 2019, ~~versus June 30, 2018. Our distribution subsidiary~~primarily due to a slowdown in March 2020 caused by the COVID-19 pandemic. Creative Assembly was ~~up approximately $1,456,648~~down $1,410,016 or ~~53.6%~~32.7% in revenue for the three months ended ~~June 30,~~March 31, 2020 versus March 31, 2019 ~~versus June 30, 2018~~ due to a shutdown by the ~~pick-up~~largest customers in ~~existing customer activity~~March 2020 in response to the COVID-19 pandemic. USAC had revenue of $560,462 for the period between March 20, 2020 and ~~the addition of new customers.~~March 31, 2020.

The Company’s gross profit ~~increased~~decreased approximately ~~25.6%~~22.8% or ~~$469,305~~$591,164 for the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$2,304,287~~$1,997,427 from ~~$1,834,982~~$2,588,591 in the comparable period last year. For the three months ended ~~June 30, 2019,~~March 31, 2020, gross profit at ~~our distribution subsidiary increased~~Creative Assembly decreased by ~~$118,566~~$342,228 or approximately ~~20.2% versus the comparable period last year. For the three months ended June 30, 2019, gross profit at our manufacturing subsidiary increased by $350,739 or approximately 28.1%~~42.6% versus the comparable period last year due to ~~better margin mix with our customer base.~~decreased sales caused by the COVID-19 pandemic. For the three months ended March 31, 2020, gross profit at PMAL decreased by $369,276 or approximately 20.7% versus the comparable period last year due to a decrease in sales caused by the COVID-19 pandemic.

The Company’s total operating expenses ~~increased 29.3%~~decreased 4.2% or ~~$321,588~~$60,433 for the three months ~~June 30, 2019~~ending March 31, 2020 to ~~$1,419,902~~$1,379,795 from ~~$1,098,314 from in the comparable period last year primarily due to increasing sales at the Company and in anticipation of increased sales.~~$1,440,228.

The Company believes that it can meet its financial obligations for a period of 12 months from the date of this report at its presently contemplated operating levels. The Company is presently seeking to expand its capital availability which will enable the Company to fully take advantage of sales opportunities presented to it which require the Company to make additional investments in inventory.

The Company believes it can expand its business with its present staff numbers. The Company’s PMAL subsidiary has the ability to borrow under its respective revolving credit facility with Berkshire Bank. In addition, the Company’s ~~CAS~~Creative Assembly subsidiary can utilize borrowings under its ~~new~~ revolving credit facility with Berkshire Bank entered into on July 15, 2019 in an aggregate principal amount of up to $6.0 million to finance an increase in working capital in order to increase the size of the business. As of March 31, 2020, the Company currently had approximately $3.6 million in total availability on its credit facilities with Berkshire Bank. In addition, the Company’s subsidiaries have received loans under the CARES Act in the aggregate amount of $3,083,000.

This item is not required for smaller reporting companies, and, if it were required, is not applicable to the Company’s present operations.

We carried out an evaluation with the participation of our principal executive officer and principal financial officer, required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at ~~June 30, 2019~~March 31, 2020 as to ensure that the information relating to our company required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures due to the existence of material weaknesses.

The Company ~~may add additional personnel~~expects improvements to be made in 2020 as the Company grows in size given recent acquisitions and ~~procedures, which we believe will remedy these~~the Company is able to dedicate more resources to the financial and accounting function. The Company plans to further remdiate the material weaknesses ~~in disclosure controls and procedures in future periods.~~identified above as its resources permit. However, there are no assurances we will be able to devote the necessary capital to hire the additional personnel and institute the additional systems, policies and procedures to the level necessary. In that event, there are no assurances that the material weaknesses described above will be timely remediated or not result in errors in our consolidated financial statements in future periods.

There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
				None

		Page
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements – (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Income	4

	Condensed Consolidated Statements of Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2733

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3036

Item 4.	Controls and Procedures	3036

PART II OTHER INFORMATION

Item 6.	Exhibits	3137

	Signatures	3238

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


	March 31,			December 31,
	2020			2019
ASSETS
Current assets:
Cash	$	821,681		$	57,419
Accounts receivable (net of allowance for doubtful accounts of $78,753 as of March 31, 2020 and December 31, 2019.)		4,959,424			3,804,699
Unbilled receivables		287,538			418,629
Inventories (net of reserve for obsolesence of $169,060 as of March 31, 2020 and December 31, 2019.)		10,846,401			7,056,547
Other current assets		422,061			155,037

Total current assets		17,337,105			11,492,331

Property, land and equipment - net		13,004,488			6,004,844

Other assets:
Customer lists - net of amortization		1,459,333			1,509,083
Right-of-use asset		1,032,140			1,092,253
Deferred tax asset		-			356,453
Goodwill		54,993			54,993
Other		65,593			65,593
Total other assets		2,612,059			3,078,375

Total	$	32,953,652		$	20,575,550

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Lines of credit	$	2,431,739		$	3,280,654
Accounts payable and accrued expenses		6,584,425			3,283,856
Notes payable, net - short term		650,441			600,000
Finance leases payable - short term		57,137			49,662
Deferred revenue		59,990			-
Operating leases payable - short term		259,595			255,533
Income taxes payable		187,361			164,554

Total current liabilities		10,230,688			7,634,259

Long-term liabilities:
Notes payable, net of current portion		9,677,444			3,539,671
Finance leases payable - net of current portion		69,472			79,214
Deferred tax liability		653,888			-
Operating leases payable - net of current portion		811,211			877,899
Total long-term liabilities		11,212,015			4,496,784

Total liabilities		21,442,703			12,131,043

Commitments and contingencies

Stockholders' equity:

Common stock, $.001 par value; 1,500,000 shares authorized, 311,636 and 313,636 issued and outstanding at March 31, 2020 and December 31, 2019, respectively.		311			313
Additional paid-in capital		14,706,468			14,836,466
Accumulated deficit		(3,195,830	)		(6,392,272	)

Total stockholders' equity		11,510,949			8,444,507

Total liabilities and stockholders' equity	$	32,953,652		$	20,575,550

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	THREE MONTHS ENDED
	March 31,
	2020			2019

Net revenue	$	11,306,442		$	12,504,968

Cost of goods sold		9,309,015			9,916,377

Gross profit		1,997,427			2,588,591

Operating expenses:
General and administrative expenses		1,234,776			1,330,661
Professional and consulting fees		145,019			109,567
Total operating expenses		1,379,795			1,440,228

Income before other income (expense)		617,632			1,148,363

Other income (expense):
Interest		(137,286	)		(121,795	)
Bargain purchase gain		3,818,686			-
Total other income (expense)		3,681,400			(121,795	)

Income before provision for income taxes		4,299,032			1,026,568

Income tax expense		(1,102,590	)		(262,466	)

Net income	$	3,196,442		$	764,102

Basic and diluted earnings per share applicable to common stockholders:
Earnings per share	$	10.24		$	2.43

Weighted average shares outstanding:
Basic and diluted		312,295			313,636

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
THREE MONTHS ENDED MARCH 31, 2020 AND 2019

							Additional
	Common Stock						Paid-in			Treasury Shares						Accumulated
	Shares			Amount			Capital			Shares			Amount			(Deficit)			Total

Balance, January 1, 2019		313,636		$	313		$	16,383,599			-		$	-		$	(8,077,654	)	$	8,306,258

Net income		-			-			-			-			-			764,102			764,102

Balance, March 31, 2019		313,636		$	313		$	16,383,599			-		$	-		$	(7,313,552	)	$	9,070,360

Balance, January 1, 2020		313,636		$	313		$	14,836,466			-		$	-		$	(6,392,272	)	$	8,444,507

Purchase of treasury shares		-			-			-			(2,000	)		(130,000	)		-			(130,000	)

Cancelled treasury shares		(2,000	)		(2	)		(129,998	)		2,000			130,000			-			-

Net income		-			-			-			-			-			3,196,442			3,196,442

Balance, March 31, 2020		311,636		$	311		$	14,706,468			-		$	-		$	(3,195,830	)	$	11,510,949

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Large Accelerated Filer	¨☐	Accelerated Filer	¨☐
Non-Accelerated Filer	x☒	Smaller Reporting Company	x☒
		Emerging Growth Company	¨☐

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30,			December 31,
	2019			2018
ASSETS

Current assets:
Cash	$	265,264		$	360,283
Accounts receivable (net of allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018.)		5,721,417			3,801,166
Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of June 30, 2019 and December 31, 2018.)		5,836,154			5,580,942
Other current assets		283,321			230,985

Total current assets		12,106,156			9,973,376

Property, land and equipment - net		6,051,989			6,125,183

Other assets:
Customer lists - net of amortization		1,608,583			1,708,084
Right-of-use asset		1,208,613			-
Deferred tax asset		-			358,686
Goodwill		54,993			54,993
Other		71,593			51,917
Total other assets		2,943,782			2,173,680

Total	$	21,101,927		$	18,272,239

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Line of credit	$	745,431		$	1,092,058
Accounts payable and accrued expenses		4,026,018			3,275,011
Notes payable, net- short term		600,000			600,000
Finance leases payable - short term		45,688			43,435
Operating leases payable - short term		254,845			-
Deferred revenue		23,247			-
Income taxes payable		110,144			14,351

Total current liabilities		5,805,373			5,024,855

Long-term liabilities:
Notes payable, net of current portion		3,804,830			4,069,990
Finance leases payable - net of current portion		89,656			113,358
Operating leases payable - net of current portion		1,000,193			-
Deferred tax liability		7,041			-
Total long-term liabilities		4,901,720			4,183,348

Total liabilities		10,707,093			9,208,203

Commitments and contingencies

Redeemable non-controlling interest		1,071,729			757,778
Stockholders' equity:
Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at June 30, 2019 and December 31, 2018, respectively.		313			313
Additional paid-in capital		16,383,599			16,383,599
Accumulated deficit		(7,060,807	)		(8,077,654	)

Total stockholders' equity		9,323,105			8,306,258

Total liabilities and stockholders' equity	$	21,101,927		$	18,272,239

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	FOR THE SIX MONTHS						FOR THE THREE MONTHS
	ENDED JUNE 30,						ENDED JUNE 30,
	2019			2018			2019			2018

Net revenue	$	24,062,327		$	22,013,681		$	11,557,359		$	11,310,897

Cost of goods sold		19,169,449			17,891,455			9,253,072			9,475,915

Gross profit		4,892,878			4,122,226			2,304,287			1,834,982

Operating expenses:
General and administrative expenses		2,669,426			2,059,149			1,338,765			1,061,479
Professional and consulting fees		190,704			214,942			81,137			36,835
Total operating expenses		2,860,130			2,274,091			1,419,902			1,098,314

Income before other (expense) income		2,032,748			1,848,135			884,385			736,668

Other (expense) income:
Interest		(240,430	)		(728,925	)		(118,635	)		(363,774	)
Other income		-			288,596			-			278,244
Total other (expense) income		(240,430	)		(440,329	)		(118,635	)		(85,530	)

Income before provision for income taxes		1,792,318			1,407,806			765,750			651,138

Income tax expense		(461,520	)		(131,557	)		(199,054	)		(131,557	)

Net income		1,330,798			1,276,249			566,696			519,581

Non-controlling interest share of net income		313,951			364,293			144,658			166,556

Net income attributable to Amerinac Holding
Corp. shareholders	$	1,016,847		$	911,956		$	422,038		$	353,025

Basic and diluted earnings per share applicable to common stockholders:
Earnings per share	$	3.24		$	3.07		$	1.35		$	1.19

Weighted average shares outstanding:
Basic and diluted		313,636			297,386			313,636			297,386

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
SIX MONTHS ENDED JUNE 30, 2019 AND 2018

	Common Stock				Additional		Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total

Balance, January 1, 2018		297,386	$	297	$	15,733,615	$	(10,103,722	)	$	5,630,190

Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		911,956			911,956

Balance, June 30, 2018		297,386	$	297	$	15,733,615	$	(9,191,766	)	$	6,542,146

Balance, January 1, 2019		313,636	$	313	$	16,383,599	$	(8,077,654	)	$	8,306,258

Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		1,016,847			1,016,847

Balance, June 30, 2019		313,636	$	313	$	16,383,599	$	(7,060,807	)	$	9,323,105

THREE MONTHS ENDED JUNE 30, 2019 AND 2018

	Common Stock				Additional			Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total

Balance, April 1, 2018		297,386	$	297	$	15,733,615	$	(9,544,791	)	$	6,189,121

Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		353,025			353,025

Balance, June 30, 2018		297,386	$	297	$	15,733,615	$	(9,191,766	)	$	6,542,146

Balance, April 1, 2019		313,636	$	313	$	16,383,599	$	(7,482,845	)	$	8,901,067

Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		422,038			422,038

Balance, June 30, 2019		313,636	$	313	$	16,383,599	$	(7,060,807	)	$	9,323,105

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, 2020 AND 2019

CASH FLOWS FROM OPERATING ACTIVITIES	2020			2019
Net income	$	3,196,442		$	764,102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		251,871			201,849
Amortization of deferred financing fees		19,917			17,420
Non-cash lease expense		60,113			15,334
Deferred income taxes		1,010,341			190,018
Bargain purchase gain		(3,818,686	)		-
Changes in assets and liabilities:
Increase in accounts receivable		110,200			(1,632,156	)
Decrease in unbilled receivables		131,091			-
(Increase) decrease in inventory		(140,350	)		7,412
(Increase) decrease in other current assets		(9,778	)		19,320
Decrease in operating leases payable		(62,626	)		(15,763	)
Increase in deferred revenue		59,990			-
Increase in income taxes payable		22,807			72,448
Increase in accounts payable and accrued expenses		1,083,740			1,121,708
Net cash provided by operating activities		1,915,072			761,692

CASH FLOWS FROM INVESTING ACTIVITIES
Receipt of cash through acquisition		177,553			-
Purchase of property and equipment		(118,472	)		(129,791	)
Net cash provided by (used in) investing activities		59,081			(129,791	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on lines of credit		(851,069	)		(587,524	)
Debt issuance costs		(61,670	)		-
Proceeds (payments) on notes payable		(150,000	)		(150,000	)
Purchase of treasury stock		(130,000	)		-
Payments on finance leases		(17,152	)		(10,279	)
Net cash used in financing activities		(1,209,891	)		(747,803	)

INCREASE (DECREASE) IN CASH		764,262			(115,902	)

CASH - BEGINNING OF PERIOD		57,419			360,283

CASH - END OF PERIOD	$	821,681		$	244,381

Cash paid during the period for:
Interest	$	122,440		$	106,384
Income taxes	$	67,584		$	-

Non-cash investing and financing activities:
Operating lease asset obtained in exchange for operating lease obligation	$	-		$	251,735
Note payable issued through acquisition in current year	$	6,167,000		$	-
Total assets acquired through acquisition	$	12,254,970		$	-
Debt assumed through acquisition	$	2,446,837		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	·	terminated several employees with the anticipation of rehiring these employees after the public health emergency has passed;

	·	reduced the number hours and overtime worked by hourly employees to compensate for declining sales;

	·	reduced current inventory purchases to compensate for the short-term reduction in sales;

	·	stopped paying salaries to Messrs. Wachter and Golden while accruing for payment of these salaries after the public health emergency has passed.

Leasehold improvements		5 years **
Furniture and fixtures		7 years
Equipment and other		3-10 years
Building		30 years

	i)	~~observable inputs such as quoted prices in active markets (Level 1)~~
	~~ii)~~	~~inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2)~~
	~~iii)~~	~~unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).~~

	i)	observable inputs such as quoted prices in active markets (Level 1)
	ii)	inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2)
	iii)	unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

Purchase price	$	6,167,000
Cash	$	177,553
Accounts receivable		1,265,270
Inventory		3,649,504
Prepaid expenses		257,246
Property, land and equipment		7,082,950
Accounts payable		(1,698,104	)
Accrued expenses		(518,726	)
Long-term debt		(230,007	)
Total net assets acquired	$	9,985,686
Bargain purchase gain	$	3,818,686

	Three Months Ended		Three Months Ended
Pro Forma	March 31, 2020		March 31, 2019
Net sales		14,657,251		17,455,895
Operating expenses		1,672,288		1,940,746
Income before taxes		3,935,887		1,140,221
Net income		2,833,297		877,755

	June 30, 2019			December 31, 2018

Land, buildings and improvements	$	3,419,779		$	3,419,779
Equipment		3,698,189			3,463,829
Total		7,117,968			6,883,608
Less accumulated depreciation		(1,065,979	)		(758,425	)
Net property, land and equipment	$	6,051,989		$	6,125,183

Value of NCI at December 31, 2018	$	757,778
PMAL Income from January 1, 2019 to June 30, 2019 attributable to NCI		313,951
Value of NCI at June 30, 2019	$	1,071,729

Value of NCI at March 31, 2019	$	927,071
PMAL Income from April 1, 2019 to June 30, 2019 attributable to NCI		144,658
Value of NCI at June 30, 2019	$	1,071,729

Value of NCI at December 31, 2017	$	453,377
PMAL Income from January 1, 2018 to June 30, 2018 attributable to NCI		364,293
Value of NCI at June 30, 2018	$	817,670

Value of NCI at March 31, 2018	$	651,114
PMAL Income from April 1, 2018 to June 30, 2018 attributable to NCI		166,556
Value of NCI at June 30, 2018	$	817,670

Years ending December 31,	Term Loans Minimum Amortization
2019 (remaining six months)	$	300,000
2020		600,000
2021		3,650,000
Total		4,550,000
Unamortized debt and financing cost		145,170
Total (net of unamortized debt and financing cost)	$	4,404,830

	·	The Company’s Creative Assembly subsidiary, which includes all distribution of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries.

	·	~~The Company’s PMAL subsidiary, which includes all our manufacturing of specialty ingot, electrode products, shot products, and master alloys in addition to toll conversion melting services.~~

	CAS		PMAL
Net revenue	$	8,494,047	$	15,568,280

Cost of goods sold		6,985,022		12,184,427

Gross profit		1,509,025		3,383,853

Operating expenses:
General and administrative expenses		958,673		1,443,026
Professional and consulting fees		38,926		130,986
Total operating expenses		997,599		1,574,012

Income before other income (expense)	$	511,426	$	1,809,841

Income from segments above	$	2,321,267

Non-allocated expenses

Interest expense		(240,430	)
General and administrative expenses		(267,727	)
Professional and consulting fees		(20,792	)
Total non-allocated expenses		(528,949	)

Income before provision for income taxes	$	1,792,318

	CAS		PMAL
Net revenue	$	4,176,218	$	7,381,141

Cost of goods sold		3,469,766		5,783,306

Gross profit		706,452		1,597,835

Operating expenses:
General and administrative expenses		492,228		714,291
Professional and consulting fees		26,559		41,784
Total operating expenses		518,787		756,075

Income before other income (expense)	$	187,665	$	841,760

Income from segments above	$	1,029,425

Non-allocated expenses

Interest expense		(118,635	)
General and administrative expenses		(132,246	)
Professional and consulting fees		(12,794	)
Total non-allocated expenses		(263,675	)

Income before provision for income taxes	$	765,750

	CAS		PMAL
Net Revenue	$	5,199,535	$	16,814,146

Cost of goods sold		4,100,740		13,790,715

Gross profit		1,098,795		3,023,431

Operating expenses:
General and administrative expenses		850,623		1,018,912
Professional and consulting fees		40,677		104,584
Total operating expenses		891,300		1,123,496

Income before other income (expense)	$	207,495	$	1,899,935

Income from segments above	$	2,107,430

Non-allocated expenses
Interest expense		(728,925	)
General and administrative expenses		(259,295	)
Other income (expense)		288,596
Total non-allocated expenses		(699,624	)

Income before	$	1,407,806
provision for income taxes


	CAS		PMAL
Net Revenue	$	2,719,570	$	8,591,327

Cost of goods sold		2,131,684		7,344,231

Gross profit		587,886		1,247,096

Operating expenses:
General and administrative expenses		466,970		508,256
Professional and consulting fees		16,697		(16,314	)
Total operating expenses		483,667		491,942

Income before other income (expense)	$	104,219	$	755,154

Value of NCI at January 1, 2019	$	757,778
PMAL income from January 1, 2019 to March 31, 2019 attributable to NCI		169,293
Value of NCI at March 31, 2019		927,071
Transfer of PMAL income allocated to SBN to Amerinac Holding Corp.		(169,293	)
Adjusted value of NCI at March 31, 2019	$	757,778

Income from segments above	$	859,373

Non-allocated expenses

Interest expense - net		(363,774	)
General and administrative expenses		(86,253	)
Professional and consulting fees		(36,452	)
Other income		278,244
Total		(171,783	)

Income before provision for income taxes	$	651,138

	June 30, 2019		December 31, 2018
PMAL assets	$	14,221,255	$	12,982,588
CAS assets		6,789,307		4,526,530
Corporate assets		91,365		763,121
Total assets	$	21,101,927	$	18,272,239

	For the six months ended June 30,
	2019		2018

Current income tax
Federal	$	-	$	-
State		95,793		131,557
City		-		-
Total current income tax	$	95,793	$	131,557

Deferred income tax
Federal	$	329,154	$	-
State		36,573		-
City		-		-
Total deferred income tax	$	365,727	$	-

Total income tax expense	$	461,520	$	131,557

Years ending December 31,	Term Loans Minimum Amortization
2020 (remaining nine months)	$	450,000
2021		3,650,000
Total		4,100,000
Unamortized debt and financing cost		(92,909	)
Total (net of unamortized debt and financing cost)	$	4,007,091