UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2019~~2020

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

For the transition period from ___________ to ______________

Commission File No. 000-30185

AMERINAC HOLDING CORP.

(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware		20-4763096
(State or Other Jurisdiction ofIncorporation or Organization)		(IRS EmployerIdentification No.)
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

5936 State Route 159

Chillicothe, OH 45601

(Address of Principal Executive Offices)

(614) 836-1050

(Issuer’s Telephone Number, including Area Code)

_________________________________________________

(Former Name or Former Address, if Changed Since Last Report)

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 every Interactive Data File required to be submitted 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 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.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 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☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

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

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

Number of shares outstanding of the registrant’s common stock, as of ~~November~~May 814, ~~2019~~2020: ~~313~~311,636

TABLE OF CONTENTS

		Page
PART IFINANCIAL INFORMATION
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	2933
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3236
Item 4.	Controls and Procedures	3336
PART IIOTHER INFORMATION
PART II OTHER INFORMATION
Item 6.	Exhibits	3437
	Signatures	3538

2 Table of Contents

Item 1. Financial Statements

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

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.

	September 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	93,346		$	360,283
Accounts receivable (net of allowance for doubtful accounts of $78,753 as of September 30, 2019 and December 31, 2018.)		4,683,030			3,801,166
Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of September 30, 2019 and December 31, 2018.)		6,738,003			5,580,942
Other current assets		214,837			230,985
Total current assets		11,729,216			9,973,376
Property, land and equipment - net		6,057,611			6,125,183
Other assets:
Customer lists - net of amortization		1,558,833			1,708,084
Right-of-use asset		1,151,482			-
Deferred tax asset		-			358,686
Goodwill		54,993			54,993
Other		65,593			51,917
Total other assets		2,830,901			2,173,680
Total	$	20,617,728		$	18,272,239
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit, net	$	3,065,707		$	1,092,058
Accounts payable and accrued expenses		3,861,944			3,275,011
Notes payable, net- short term		600,000			600,000
Finance leases payable - short term		51,051			43,435
Operating leases payable - short term		252,323			-
Income taxes payable		402,802			14,351
Total current liabilities		8,233,827			5,024,855
Long-term liabilities:
Notes payable, net		3,672,250			4,069,990
Finance leases payable - net of current portion		92,285			113,358
Operating leases payable - net of current portion		942,852			-
Deferred tax liability		249,814			-
Total long-term liabilities		4,957,201			4,183,348
Total liabilities		13,191,028			9,208,203
Commitments and contingencies
Redeemable non-controlling interest		-			757,778
Stockholders' equity:
Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at September 30, 2019 and December 31, 2018, respectively.		313			313
Additional paid-in capital		14,141,377			16,383,599
Accumulated deficit		(6,714,990	)		(8,077,654	)
Total stockholders' equity		7,426,700			8,306,258
Total liabilities and stockholders' equity	$	20,617,728		$	18,272,239

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

Table of Contents

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

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.

	FOR THE NINE MONTHS						FOR THE THREE MONTHS
	ENDED SEPTEMBER 30,						ENDED SEPTEMBER 30,
	2019			2018			2019			2018
Net revenue	$	34,690,265		$	32,986,071		$	10,627,938		$	10,972,390
Cost of goods sold		27,946,737			26,743,807			8,777,288			8,852,352
Gross profit		6,743,528			6,242,264			1,850,650			2,120,038
Operating expenses:
General and administrative expenses		3,747,801			3,136,605			1,078,375			1,077,456
Professional and consulting fees		259,014			294,065			68,310			79,123
Total operating expenses		4,006,815			3,430,670			1,146,685			1,156,579
Income before other (expense) income		2,736,713			2,811,594			703,965			963,459
Other (expense) income:
Interest		(377,098	)		(1,036,934	)		(136,668	)		(308,009	)
Other income		-			84,882			-			(203,714	)
Total other (expense) income		(377,098	)		(952,052	)		(136,668	)		(511,723	)
Income before provision for income taxes		2,359,615			1,859,542			567,297			451,736
Income tax expense		(996,951	)		(103,751	)		(535,431	)		27,806
Net income		1,362,664			1,755,791			31,866			479,542
Non-controlling interest share of net income		-			453,215			(313,951	)		88,922
Net income attributable to Amerinac Holding Corp. shareholders	$	1,362,664		$	1,302,576		$	345,817		$	390,620
Basic and diluted earnings per share applicable to common stockholders:
Earnings per share	$	4.34		$	4.38		$	1.10		$	1.31
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.

Table of Contents

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

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.

	Common Stock				AdditionalPaid-in			Accumulated
	Shares		Amount		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		-		-		-			1,302,576			1,302,576
Balance, September 30, 2018		297,386	$	297	$	15,733,615		$	(8,801,146	)	$	6,932,766
Balance, January 1, 2019		313,636	$	313	$	16,383,599		$	(8,077,654	)	$	8,306,258
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-			1,362,664			1,362,664
Purchase of minority interest		-		-		(2,242,222	)		-			(2,242,222	)
Balance, September 30, 2019		313,636	$	313	$	14,141,377		$	(6,714,990	)	$	7,426,700

THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

	Common Stock				AdditionalPaid-in			Accumulated
	Shares		Amount		Capital			(Deficit)			Total
Balance, July 1, 2018		297,386	$	297	$	15,733,615		$	(9,191,766	)	$	6,542,146
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-			390,620			390,620
Balance, September 30, 2018		297,386	$	297	$	15,733,615		$	(8,801,146	)	$	6,932,766
Balance, July 1, 2019		313,636	$	313	$	16,383,599		$	(7,060,807	)	$	9,323,105
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-			345,817			345,817
Purchase of minority interest		-		-		(2,242,222	)		-			(2,242,222	)
Balance, September 30, 2019		313,636	$	313	$	14,141,377		$	(6,714,990	)	$	7,426,700

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

Table of Contents

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

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.

	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,362,664		$	1,755,791
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		617,067			564,136
Amortization of deferred financing fees		54,056			103,405
Non-cash lease expense		135,286			-
Deferred income taxes		608,500			-
Net loss on debt extinguishment		-			69,722
Inventory reserve		7,000			(130,260	)
Changes in assets and liabilities:
Increase in accounts receivable		(881,864	)		(1,960,537	)
Increase in inventory		(1,164,061	)		(1,414,714	)
Decrease in operating leases payable		(91,593	)		-
Decrease in other current assets		16,148			261,445
Increase in other assets		(13,676	)		-
Increase in income taxes payable		388,451			102,205
Increase in accounts payable and accrued expenses		586,933			1,989,730
Net cash provided by operating activities		1,624,911			1,340,923
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from escrow receivable from sale		-			500,000
Purchase of minority interest		(3,000,000	)		-
Purchase of property and equipment		(377,701	)		(145,135	)
Net cash (used in) provided by investing activities		(3,377,701	)		354,865
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on line of credit		1,973,649			1,375,302
Payments on notes payable		(450,000	)		-
Proceeds from notes payable		-			4,790,955
Payments on finance leases		(37,796	)		(11,283	)
Payments on notes payable - related party		-			(7,886,201	)
Net cash provided by (used in) financing activities		1,485,853			(1,731,227	)
DECREASE IN CASH		(266,937	)		(35,439	)
CASH - BEGINNING OF PERIOD		360,283			348,398
CASH - END OF PERIOD	$	93,346		$	312,959
Cash paid during the period for:
Interest	$	317,145		$	1,030,076
Income taxes	$	-		$	1,546
Non-cash financing activities:
Operating lease asset obtained in exchange for operating lease obligation	$	1,277,143		$	-
Acquisition of equipment through finance lease	$	26,450		$	178,593

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

Table of Contents

AMERINAC HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~MARCH 3031, ~~2019~~2020

(UNAUDITED)

1. SUMMARY OF BUSINESS

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 wholly-owned manufacturing subsidiary, Prime Metals Acquisition LLC, a Delaware limited liability company (“PMAL”)., ~~Creative~~its ~~Assembly~~wholly-owned ismanufacturing asubsidiary, ~~value~~USAC ~~added~~Ross ~~distributor~~LLC of(“USAC ~~proprietary~~Ross”) and ~~specialty~~its ~~fasteners~~wholly-owned ~~primarily~~manufacturing ~~serving~~subsidiary, USAC WA LLC (“USAC WA”). USAC Ross and USAC WA were formed as wholly-owned single member limited liability companies by the ~~heavy~~Company ~~truck,~~on ~~automotive,~~March ~~transportation~~3, 2020 and ~~infrastructure~~had ~~industries~~no operations prior to the March 20, 2020 acquisition discussed in Note 4.

Creative Assembly is a 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.

COVID-19

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.

Table of Contents

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:

	·	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.

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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Consolidated Financial Statements

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 ~~nine~~three months ended ~~September~~March 3031, ~~2019~~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 2630, ~~2019~~2020.

78 Table of Contents

Principles of Consolidation and Basis of Presentation

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

Earnings Per Share

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 September 30, 2019 and 2018.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities 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~~purchase ofprice ~~redeemable~~allocation ~~non-controlling~~contained ~~interest~~in Note 4.

Cash and Cash Equivalents

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 and Allowance for Doubtful Accounts

Accounts receivable are recorded 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 ~~September~~March 3031, ~~2019~~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.~~

8Unbilled ~~Table of Contents~~Services

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

Table of Contents

Inventory

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 ~~September~~March 3031, ~~2019~~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 ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, the inventory reserve for Creative Assembly was $7586,~~160 and $68,160, respectively~~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 ~~September~~March 3031, ~~2019~~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 ~~September~~March 3031, ~~2019~~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.

The Company’s inventory consists of the following:

	September 30,2019			December 31,2018
	March 31, 2020			December 31, 2019
Raw Materials	$	2,509,491		$	2,133,311
Raw materials	$	3,319,660		$	2,407,962
Finished Goods		4,386,521			3,598,640
Work in progress		1,616,982			206,067
Reserves		(158,009	)		(151,009	)
Finished goods		6,078,819			4,611,578
Total	$	6,738,003		$	5,580,942
Reserves		(169,060	)		(169,060	)
Total	$	10,846,401		$	7,056,547

910 Table of Contents

Property, Land and Equipment

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:

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

____________

** Shorter of life or lease term.

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.

Concentration of Credit Risk

At September 30, 2019, AMG-Vanadium, Eastham Forge, PACCAR, Remelt Sources, Inc. and Drive Automotive receivables were 17.5%, 13.9%, 13.7%, 13.1% and 11.1% 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 nine-month period ending September 30, 2019, Remelt Sources, Inc., AMG-Vanadium, and PACCAR accounted for 20.1%, 17.4%, and 16.6% of sales, respectively. For the three-month period ending September 30, 2019, Remelt Sources, Inc., AMG-Vanadium and PACCAR accounted for 19.5%, 18.6% and 18.2% of sales, respectively. For the nine-month period ending September 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 18.2%, 16.1%, 15.6%, 14.0% and 12.5% of sales, respectively. For the three-month period ending September 30, 2018, Ametek, Remelt Sources, Inc., PACCAR, AMG-Vanadium and Universal Stainless & Alloy Products accounted for 18.3%, 15.6%, 14.6%, 14.1% and 11.0% of sales, respectively.

Concentration of Suppliers

For the nine-month period ending September 30, 2019, no supplier represented more than 10% of purchases. For the three-month period ending September 30, 2019, AVK represented 10.1% of purchases. For the nine-month period ending September 30, 2018, no supplier represented more than 10% of purchases. For the three-month period ending September 30, 2018, no supplier represented more than 10% of purchases. At September 30, 2019, AVK represented approximately 15.8% of accounts payable. At December 31, 2018, AVK represented approximately 11.8% of accounts payable.

10 Table of Contents

Fair Value Measurements

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:

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).

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.

Fair Value of Financial Instruments

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.

Income Taxes

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 ~~September~~March 3031, ~~2019~~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 September 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 September 30, 2019 and December 31, 2018.

Table of Contents

Revenue Recognition

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, 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 ~~did~~recorded ~~not~~deferred ~~record~~revenue ~~any~~of ~~deferred~~$59,990 ~~revenue~~and $0 as of ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, respectively.

Redeemable Non-controlling Interest

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 (see Note 7).

Table of Contents

~~Recently~~Fair ~~Adopted~~Value ~~Authoritative Pronouncements~~Measurements

In ~~February~~accordance ~~2016,~~with the ~~Financial~~authoritative ~~Accounting~~guidance ~~Standards~~for ~~Board~~fair ~~(“FASB”)~~value ~~established~~measurements ~~Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize leases on-balance sheet~~ and ~~disclose~~the ~~key~~fair ~~information~~value ~~about~~election ~~leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient~~ for ~~Transition~~financial toassets ~~Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases;~~ and ~~ASU~~financial ~~No. 2018-11~~liabilities, ~~Targeted Improvements. The new standard establishes~~ a ~~right-of-use~~fair ~~model~~value ~~(“ROU”)~~measurement ~~that~~is ~~requires~~determined abased ~~lessee to recognize a ROU asset and lease liability~~ on the ~~balance~~assumptions ~~sheet~~that ~~for all leases with~~ a ~~term~~market ~~longer~~participant ~~than~~would 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~~pricing ~~financial statements as its date of initial application. If~~ an ~~entity~~asset ~~chooses~~or ~~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~~liability. ~~The~~A ~~entity~~three-tiered ~~must~~hierarchy 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 was ~~not~~established ~~updated~~that ~~and~~draws ~~the disclosures required under the new standard were not provided for dates and periods before January 1, 2019. The new standard provides~~ a ~~number~~distinction ofbetween ~~optional~~market ~~practical~~participant ~~expedients~~assumptions 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.~~following:

Ini) ~~June~~observable ~~2018,~~inputs ~~the~~such ~~FASB,~~as ~~issued~~quoted ~~ASU~~prices ~~No.~~in ~~2018-07~~active tomarkets ~~simplify~~(Level ~~the~~1) ~~accounting~~ii) ~~for~~inputs ~~share-based~~other ~~payments~~than toquoted ~~nonemployees~~prices byin ~~aligning~~active itmarkets ~~with~~that ~~the~~are ~~accounting~~observable ~~for~~either ~~share-based~~directly ~~payments~~or toindirectly ~~employees,~~(Level ~~with~~2) ~~certain~~iii) ~~exceptions.~~unobservable ~~The~~inputs ~~new~~that ~~guidance~~require ~~expands~~ the ~~scope~~Company ~~of ASC 718~~ to ~~include~~use ~~share-based~~present ~~payments~~value ~~granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations~~ and ~~supersedes~~other ~~the~~valuation ~~guidance~~techniques 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 which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the ~~Company’s~~determination ~~financial~~of ~~position~~fair ~~and~~value ~~results~~(Level ~~of operations~~3).

Fair Value of Financial Instruments

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.

Stock Based Compensation

The Company accounts for stock-based awards to recipients in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, to be measured and recognized in the unaudited condensed consolidated financial statements based on a grant date fair value over the requisite service period.

Long-Lived Assets Impairment

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not 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 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 no impairment on the long-lived assets for its operating entities.

Table of Contents

Goodwill and Intangible Assets

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.

Earnings Per Share

Recently Adopted Authoritative Pronouncements

Recent Accounting Pronouncements

In ~~May~~June ~~2019~~2016, the FASB issued ASU ~~2019-05, which is an update to ASU Update No.~~ 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 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 ~~2019~~2016-0513 is effective for ~~the~~“public ~~Company~~business entities,” as defined, that are SEC filers for ~~annual~~fiscal years and for interim ~~reporting~~ periods within those fiscal years beginning ~~July~~after 1December 15, ~~2020~~2022. The Company is currently evaluating the impact of this new standard on its ~~unaudited condensed~~ consolidated financial statements and related disclosures.

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 on testing dates after January 1, 2017. The Company does not expect the adoption of this standard to have a significant impact on its financial position and results of operations.

No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

3. PROPERTY, LAND AND EQUIPMENT

The Company’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 $467,817 and $414,886 for the nine months ended September 30, 2019 and 2018. Depreciation expense was $159,389 and $208,724 for the three months ended September 30, 2019 and 2018.

	September 30,2019			December 31,2018
Land, buildings and improvements	$	3,419,779		$	3,419,779
Equipment		3,864,075			3,463,829
Total		7,283,854			6,883,608
Less accumulated depreciation		(1,226,243	)		(758,425	)
Net property, land and equipment	$	6,057,611		$	6,125,183

As described in Note 7, the Company has $7,507,001 in debt secured against the property, land and equipment.

Table of Contents

4In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ~~ACCOUNTS~~This ~~PAYABLE~~ASU ~~AND~~simplifies ~~ACCRUED~~accounting ~~EXPENSES~~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.

~~Accounts~~3. ~~payable and accrued expenses consists of the following as of September 30, 2019 and December 31, 2018:~~CONCENTRATIONS

	September 30,2019		December 31,2018
Accounts payable	$	3,287,407	$	3,060,269
Interest		43,494		35,805
Salaries and bonus		524,366		116,930
Other		6,677		62,007
	$	3,861,944	$	3,275,011

Concentration of Credit Risk

5At March 31, 2020, Remelt Sources, Inc., ~~GOODWILL~~AMG-Vanadium ~~AND~~and ~~INTANGIBLE~~Drive ~~ASSETS~~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.

Table of Contents

Concentration of Suppliers

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.

4. ACQUISITION AND BUSINESS COMBINATION

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 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.

The following summarizes the preliminary purchase price allocation:

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

Table of Contents

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.

	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

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 net income before taxes of $60,289 that was included in the Company’s unaudited condensed consolidated statements of income, which consisted of approximately $560,462 in revenues, $440,122 in cost of goods sold and $60,051 in expenses.

5. PROPERTY, LAND AND EQUIPMENT

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 $159,293 and $152,099 for the three months ended March 31, 2020 and 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.

Table of Contents

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.

	March 31, 2020			December 31, 2019

Land, buildings and improvements	$	8,282,199		$	3,419,779
Equipment		6,313,048			3,974,047
Total		14,595,247			7,393,826
Less accumulated depreciation		(1,590,759	)		(1,388,982	)
Net property, land and equipment	$	13,004,488		$	6,004,844

As described in Note 10, the Company has $12,951,205 in debt secured against the property, land and equipment.

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

	March 31, 2020		December 31, 2019
Accounts payable	$	5,463,063	$	2,839,425
Interest		99,008		40,455
Salaries and bonus		898,620		357,976
Other		123,734		46,000
	$	6,584,425	$	3,283,856

7. GOODWILL AND INTANGIBLE ASSETS

Information regarding our acquired intangible assets was as follows:

Customer lists		$	1,990,000
Goodwill		$	54,993

The customer lists are estimated to have a useful life of 10 years. As of ~~September~~March 3031, 2020 and December 31, 2019, the value, net of amortization, of the customer list was $1,~~558~~459,~~833~~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 $~~149,250 for each of the nine months ended September 30, 2019 and 2018 and $~~49,750 for each of the three months ended ~~September~~March 3031, ~~2019~~2020 and ~~2018~~2019.

6.18 ~~LEASES~~Table of Contents

8. LEASES

Operating Leases

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 will result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.

15Most ~~Table~~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 ~~Contents~~lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception, 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.

~~Most~~Leases ~~real~~recorded ~~estate~~on ~~leases include one or more options to renew, with renewal terms that generally can extend~~ the ~~lease~~unaudited ~~term~~condensed ~~for~~consolidated anbalance ~~additional~~sheet ~~four~~consist ~~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.following:

Leases recorded on the balance sheet consist of the following:

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

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

Leases	Classification on the Balance Sheet	September 30,2019
Assets
Operating lease ROU assets	Right-of-use asset	$	1,151,482
Finance lease ROU assets	Property, land and equipment, net	$	150,966
Liabilities
Current
Operating	Operating leases payable – short term	$	252,323
Finance	Finance leases payable – short term	$	51,051
Noncurrent
Operating	Operating leases payable – net of current portion	$	942,852
Finance	Finance leases payable – net of current portion	$	92,285

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 ~~September~~March 3031, ~~2019~~2020 are:

	September 30,2019
	March 31, 2020
Weighted average remaining lease term	5247.35 months
Weighted average discount rate		5.6362	%

1619 Table of Contents

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 September 30,2019		Nine Months Ended September 30,2019
	Three Months Ended March 31, 2020		Three Months ended March 31, 2019
Operating lease cost:
Operating lease cost	$	75,~~335~~765	$	~~164~~18,~~767~~608
Finance lease cost:
Amortization of ROU assets		167,~~347~~556		376,~~796~~682
Interest expense		1,~~869~~769		51,~~519~~891
Total lease cost	$	9385,~~551~~090	$	~~208~~27,~~082~~181

Supplemental disclosures of cash flow information related to leases for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 and 2019 were as follows:

Cash paid for operating lease obligations was $~~136~~78,~~455~~279 and $19,250 for the three months ended March 31, 2020 and 2019, respectively. Operating lease asset obtained for operating lease obligation was $1251,~~277~~735 during the three months ended March 31,~~143~~ 2019.

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 ~~September~~March 3031, ~~2019~~2020:

October 1, 2019 through December 31, 2019	$	78,279
April 1, 2020 through December 31, 2020	$	234,836
2020		313,115
2021		313,115
2022		287,448
2023		236,115
2024		118,058
Total undiscounted future minimum lease payments		1,~~346~~189,~~130~~572
Less: Imputed interest		~~150~~118,~~955~~766
Present value of operating lease obligations	$	1,~~195~~070,~~175~~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. Lease expense was $164,767 for the nine months ended September 30, 2019. Lease expense was $75,335 for the three months ended September 30, 2019. Lease expense for the nine months ended September 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.

1720 Table of Contents

Finance ~~and Capital~~ Leases

The below chart shows our obligations under finance ~~and capital~~ leases:

	Finance LeasesSeptember 30,2019		Capital LeasesDecember 31,2018
	Finance Leases March 31, 2020		Finance Leases December 31, 2019
Obligations under finance and capital leases	$	~~143~~126,~~336~~609	$	~~156~~128,~~793~~876
Less: current portion		5157,~~051~~137		4349,~~435~~662
Long-term portion	$	9269,~~285~~472	$	~~113~~79,~~358~~214

Future minimum repayments

The table below presents the future minimum repayments of finance lease obligations for the Company as of ~~September~~March 3031, ~~2019~~2020:

Years ending December 31,	Finance lease ~~obligationsas~~obligations ~~ofSeptember~~as 30of March 31,~~2019~~ 2020
2019 (remaining three months)	$	14,543
2020 (remaining nine months)	$	51,553
2020		54,983
2021		53,661
2021		53,663
2022		26,178
2022		26,180
2023		2,789
2023		2,790
Total future minimum repayments inclusive of interest		134,181
Total future minimum repayments inclusive of interest		152,159
Interest		7,572
Interest		8,823
Total principal repayments	$	126,609
Total principal repayments	$	143,336

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~~Finance ~~leaseobligations~~lease obligations as ~~ofDecember~~of December 31,~~2018~~ 2019
2019	$	50,199
2020	$	54,981
2020		50,199
2021		53,661
2021		48,878
2022		26,178
2022		21,396
2023		2,786
Total future minimum repayments inclusive of interest		~~170~~137,~~672~~606
Interest		138,~~879~~730
Total principal repayments	$	~~156~~128,~~793~~876

18The ~~Table~~Company’s weighted average remaining lease term and weighted average discount rate for finance leases as of ~~Contents~~March 31, 2020 are:

The Company’s weighted average remaining lease term and weighted average discount rate for finance leases as of September 30, 2019 are:

March 31,

2020

Weighted average remaining lease term

28 months

Weighted average discount rate

5.00

	September 30,2019
Weighted average remaining lease term	33.5 months
Weighted average discount rate		4.98	%

Table of Contents

79. ~~LONG-TERM~~COMMITMENTS ~~DEBT~~ AND ~~LINE OF CREDIT~~CONTINGENCIES

~~Summit~~Employment ~~Bridge Loans~~Agreements

On ~~August,~~November 1710, 2017, ~~PMAL~~John ~~purchased~~Wachter ~~substantially~~was ~~all~~appointed ofChief ~~the~~Executive ~~assets~~Officer of ~~Prime~~the ~~Metals for $9~~Company.6 ~~million~~In inconnection ~~cash.~~with Tohis ~~finance~~appointment, the ~~purchase~~Company ofand ~~the~~Mr. ~~assets,~~Wachter ~~PMAL~~ entered into a ~~credit~~written employment agreement (the “~~Credit~~Wachter Employment Agreement”) ~~with~~for ~~SummitBridge~~an ~~National~~initial ~~Investments~~three-year Vterm, ~~LLC (“Summit”) pursuant to~~ which ~~Summit~~provides ~~made~~for ~~loans~~the tofollowing ~~PMAL:~~compensation ~~(1)~~terms afor ~~Term~~Mr. ~~Loan~~Wachter. inPursuant to the ~~amount~~Wachter ofEmployment $4Agreement, Mr.5 ~~million~~Wachter ~~(“Summit~~will ~~Term~~receive ~~Loan A”) and (2)~~ a ~~Term~~base ~~Loan~~salary ~~in the amount~~ of $~~3.5~~100,000 ~~million~~per ~~(“Summit~~year, ~~Term~~subject ~~Loan~~to ~~B”) (collectively~~increase, ~~the~~but ~~“Summit~~not ~~Loans”). In addition~~decrease, inat ~~consideration for Summit making~~ the ~~loans,~~discretion ~~PMAL issued membership interests representing 25% ownership~~ of ~~PMAL~~the toBoard. anMr. ~~affiliate~~Wachter ofis ~~Summit,~~eligible ~~SBN~~for Va ~~PMA~~cash ~~LLC~~and ~~(“SBN”)~~stock ~~(the~~bonus ~~“SBN~~equal ~~Membership~~to ~~Interests”).~~ten ~~Pursuant~~ to ~~the~~twenty ~~terms~~percent of the ~~Summit~~Company’s ~~Loans~~pre-tax ~~and~~profits ~~because~~over ~~PMAL~~established ~~repaid the Summit Loans within thirty~~pre-~~six~~tax ~~(36)~~targets, ~~months~~at of the ~~origination~~end of ~~the~~each ~~Summit~~respective ~~Loans,~~annual ~~the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018~~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.

Table of Contents

Litigation

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.

10. LONG-TERM DEBT AND LINES OF CREDIT

Summit Bridge PMAL Loans

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.

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.

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.

1923 Table of Contents

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 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. 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 from SBN for a purchase price of $3,000,000 cash. SBN also waived its share of income for all of 2019, and therefore, the Company transferred the $313,951 of income previously allocated to SBN to the shareholders of Amerinac Holding Corp. during the three months ended September 30, 2019. In addition, the Company adjusted additional paid-in capital downward by $2,242,222 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~~Effective ~~following~~July ~~table~~1, ~~shows~~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 ~~the~~$757,778 ~~non-controlling~~from ~~interests~~SBN ~~(“NCI”)~~for a purchase price of $3,000,000 cash. SBN also waived its share of income for ~~the~~all ~~nine~~of 2019. The Company adjusted additional paid-~~month~~in ~~period~~capital ~~ended~~downward ~~September~~by 30$1,547,133, ~~2019:~~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.

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
Purchase of NCI on July 1, 2019		(757,778	)
Transfer of PMAL Income allocated to SBN to Amerinac Holding Corp.		(313,951	)
Value of NCI at September 30, 2019	$	0

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~~-month~~ ~~period~~months ended March ~~ending September 30~~31, 2019:

Value of NCI at June 30, 2019	$	1,071,729
Value of NCI at January 1, 2019	$	757,778
Purchase of NCI on July 1, 2019		(757,778	)
PMAL income from January 1, 2019 to March 31, 2019 attributable to NCI		169,293
Transfer of PMAL Income allocated to SBN to Amerinac Holding Corp.		(313,951	)
Value of NCI at March 31, 2019		927,071
Value of NCI at September 30, 2019	$	0
Transfer of PMAL income allocated to SBN to Amerinac Holding Corp.		(169,293	)
Adjusted value of NCI at March 31, 2019	$	757,778

The following table shows the change in the value of the NCI for the nine-month period ending of September 30, 2018:

Value of NCI at January 1, 2018	$	453,377
PMAL Income from January 1, 2018 to September 30, 2018 attributable to NCI		453,215
Reduction in NCI on September 30, 2018		(185,834	)
Value of NCI at September 30, 2018	$	720,758

20 Table of Contents

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

Value of NCI at June 30, 2018	$	817,670
PMAL Income from July 1, 2018 to September 30, 2018 attributable to NCI		88,922
Reduction in NCI on September 30, 2018		(185,834	)
Value of NCI at September 30, 2018	$	720,758

PMAL Berkshire Loans

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 $3.31 million on ~~September~~March 3031, ~~2019~~2020 of which the Company had drawn $1708,~~882,147~~700.

Table of Contents

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. On August 16, 2019, the PMAL 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 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 54.3685% at ~~September~~March 3031, ~~2019~~2020. Berkshire Term Loan A and Berkshire Term Loan B bear interest at ICE LIBOR rate plus 4.25%, which was 65.3685% at ~~September~~March 3031, ~~2019~~2020.

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.

21The ~~Table~~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 ~~Contents~~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.

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. On December 31, 2019, the tangible net worth requirement will increase to $4.1 million pursuant to the amendment executed on August 16, 2019. 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 September 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~~25 ~~table~~Table ~~below represents the future minimum repayments~~ of ~~Berkshire Term Loan A and Berkshire Term Loan B as of September 30, 2019.~~Contents

Years ending December 31,	Term Loans Minimum Amortization
2019 (remaining three months)	$	150,000
2020		600,000
2021		3,650,000
Total		4,400,000
Unamortized debt and financing cost		127,750
Total (net of unamortized debt and financing cost)	$	4,272,250

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 September 30, 2019, the principal balance of Term Loan A was $3,000,000 and the principal balance of Term Loan B was $1,400,000. 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 $127,750 and $180,010 at September 30, 2019 and December 31, 2018, respectively. For the three and nine months ended September 30, 2019, the Company amortized $17,420 and $52,260, respectively in debt financing cost.

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

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.

CAS Berkshire Loan

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 $3.2 million on ~~September~~March 3031, ~~2019~~2020 of which the Company had drawn $1,~~224~~760,~~854~~386. This amount is reflected net of an unamortized discount of $4137,~~294~~344 on the Company’s unaudited condensed consolidated balance sheet. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020, the Company amortized $12,~~795~~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 54.116% at ~~September~~March 3031, ~~2019~~2020.

22 Table of Contents

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~~26 ~~CAS~~Table 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 $1.0 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 September 30, 2019, the Company was in compliance will all covenants under the CAS Loan and Security Agreement.Contents

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, CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, CAS shall maintain a tangible net worth of no less than $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.

8.SummitBridge ~~COMMITMENTS~~USAC ~~AND CONTINGENCIES~~Loans

~~Litigation~~To finance the purchase of the USAC Assets, on March 20, 2020, USAC Ross and USAC WA entered into a Loan and Security Agreement (the “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 ~~Company~~USAC isTerm ~~subject~~Loan tohas ~~the~~a ~~possibility~~maturity date of ~~claims~~March ~~and~~20, ~~lawsuits~~2022. ~~arising~~The inUSAC ~~the~~Term ~~normal~~Loan ~~course~~will ofbegin ~~business.~~amortizing Inon the ~~opinion~~thirteenth of(13) ~~management,~~month ~~the~~following ~~Company~~March ~~liability~~20, if2020 ~~any,~~(the ~~under~~“Effective ~~existing~~Date”) ~~claims,~~pursuant ~~asserted~~to ora ~~unasserted,~~seven ~~would~~(7) ~~not~~year ~~have~~amortization aschedule ~~material~~with ~~adverse~~the ~~effect~~balance due on the ~~Company’s~~maturity ~~unaudited~~date. ~~condensed~~The ~~consolidated~~USAC ~~financial~~Term ~~position~~Loan oris ~~results~~secured against all of ~~operations~~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.

~~Employment~~The ~~Agreements~~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.

OnThe ~~November~~Company ~~10,~~has ~~2017,~~guaranteed ~~John~~payment ~~Wachter was appointed Chief Executive Officer~~ of the ~~Company.~~USAC InTerm ~~connection~~Loan ~~with~~pursuant ~~his~~to ~~appointment, the Company and Mr. Wachter entered into~~ a ~~written~~guaranty ~~employment~~ agreement ~~(the~~made ~~“Wachter~~by ~~Employment Agreement”) for an initial three-year term, which provides for~~ the ~~following~~Company ~~compensation~~as ~~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~~Effective ~~of the Board~~Date. ~~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.~~

2327 Table of Contents

InThe ~~addition,~~USAC ~~the~~Loan ~~Wachter~~and ~~Employment~~Security Agreement also ~~provides~~contains ~~for~~customary ~~certain~~covenants, ~~payments~~representations and ~~benefits~~warranties inof the ~~event~~parties, ofincluding, aamong ~~termination~~others of(1) ~~his~~the ~~employment~~grant ~~under~~by ~~specific~~USAC ~~circumstances.~~Ross ~~If,~~and ~~during~~USAC ~~the~~WA ~~term~~to ofSummitBridge ~~the~~VI ~~Wachter~~of ~~Employment~~a ~~Agreement,~~security ~~his~~interest ~~employment~~on isall ~~terminated~~of by the ~~Company~~assets ~~other~~of ~~than~~USAC ~~for~~Ross ~~“cause,”~~and byUSAC ~~Mr.~~WA, ~~Wachter~~and ~~for~~(2) ~~“good~~an ~~reason”~~unconditional ~~(each~~and asirrevocable ~~defined~~guaranty inby the ~~Wachter~~Company ~~Employment~~of ~~Agreement)~~the orperformance by ~~failure~~USAC byRoss ~~either~~and ~~party~~USAC toWA ~~renew~~of the ~~Wachter~~obligations ~~Employment~~under the USAC Loan and Security Agreement. ~~after~~In ~~expiration~~addition, ofuntil all amounts under the ~~employment~~USAC ~~term,~~Term heLoan ~~would~~are bepaid ~~entitled~~in tofull, ~~(1)~~USAC aRoss ~~lump~~and ~~sum~~USAC ~~payment~~WA ~~equal~~have agreed to ~~two~~comply ~~times~~with ~~his~~certain ~~base~~financial ~~salary~~covenants atcommencing with the ~~rate~~fiscal inquarter ~~effect~~ending ~~immediately~~June ~~prior~~30, to2020 ~~the~~that ~~termination~~require ~~date,~~USAC Ross and ~~(2)~~USAC ~~any~~WA ~~unpaid~~to ~~portion~~meet ofpre-established ~~any~~financial ~~cash~~ratios. Debt ~~bonus~~issuance costs ~~for~~were ~~the~~approximately ~~annual~~$61,000, ~~period~~which ~~preceding~~was ~~the~~recorded ~~annual~~as ~~period~~debt indiscount ~~which~~and ~~such~~will ~~termination~~amortized ~~occurs~~over ~~that~~the ~~was~~life ~~earned~~of ~~but~~the ~~not paid~~loan.

OnDebt ~~November~~Assumed 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. Acquisition

InPursuant ~~addition,~~to the ~~Golden~~March ~~Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If~~20, ~~during~~2020 ~~the term of the Golden Employment Agreement~~transaction, ~~his~~USAC ~~employment~~Ross isand ~~terminated~~USAC byWA ~~the~~assumed ~~Company~~certain ~~other~~secured ~~than~~equipment ~~for~~loans ~~“cause,” by Mr. Golden for “good reason” (each as defined~~ in the ~~Golden~~aggregate ~~Employment~~amount ~~Agreement) or by failure by either party to renew the Golden Employment Agreement after expiration~~ of ~~the employment term~~$230, 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 paid007.

~~The~~LIBOR 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.Rate

~~The~~To ~~Company~~the ~~will~~extent ~~fund~~that the ~~annual~~PMAL ~~corporate~~Loan ~~bonus~~and ~~pool~~Security ~~with~~Agreement noand ~~more~~the ~~than~~CAS ~~20%~~Loan ofand ~~the~~Security ~~excess,~~Agreement ifextend ~~any~~beyond 2021, of the ~~Company’s~~interest ~~yearly~~rates ~~earnings~~for ~~before~~these ~~taxes~~obligations ~~minus~~might abe ~~threshold~~subject ~~amount.~~to ~~For~~change ~~2019,~~based ~~the~~on ~~threshold~~recent ~~amount~~regulatory ~~will be $1,750,000~~changes.

~~Pursuant~~LIBOR, to the ~~Executive~~London ~~Bonus~~Interbank ~~Plan~~Offered Rate, ~~awards~~is ~~are~~the ~~paid~~basic ~~out~~rate of interest used in alending ~~mix~~transactions ofbetween ~~cash~~banks ~~and~~on ~~equity,~~the ~~with~~London nointerbank ~~less~~market ~~than~~and ~~60%~~is ofwidely ~~corporate~~used ~~bonus~~as ~~pool~~a toreference befor insetting the ~~form~~interest ofrate ~~newly~~on ~~issued~~loans ~~restricted~~globally. ~~common~~The ~~stock,~~interest ~~subject~~rates tofor borrowings under the ~~discretion~~PMAL ofLoan ~~the~~and ~~Compensation~~Security ~~Committee~~Agreement ofand the ~~Board.~~CAS ~~All~~Loan ~~awards~~and ~~will~~Security beAgreement ~~subject~~are tobased ~~threshold~~on ~~performance~~the ~~and~~ICE ~~high-water~~LIBOR ~~marks~~rate.

24On ~~Table~~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 ~~Contents~~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.

~~As of December, 31, 2018, the Company had accrued $103,000 in bonus for Mssrs~~11. ~~Wachter~~SEGMENT ~~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.~~RESULTS

~~For~~The ~~the nine months ended September 30, 2019, the~~ Company ~~accrued~~manages anits ~~additional~~operations ~~$200,000~~in ~~for~~three ~~bonuses.~~business Atsegments ~~September~~which ~~30,~~are ~~2019,~~defined ~~the~~as ~~Company had accrued $200,000 for bonuses to executives.~~ follows:

In· ~~addition,~~The ~~the~~ Company’s ~~issued~~Creative ~~625~~Assembly ~~shares~~subsidiary, towhich ~~both~~includes ~~Mr.~~all ~~Lamb~~distribution ~~and~~of ~~Mr.~~proprietary ~~Garruto~~and atspecialty ~~the~~fasteners ~~conclusion~~primarily ofserving ~~their~~the ~~first~~heavy ~~year~~truck, ofautomotive, ~~service~~transportation, onand ~~the~~infrastructure ~~Board~~industries. of· ~~Directors~~The onCompany’s ~~December~~PMAL 31subsidiary, ~~2018~~which ~~pursuant~~includes toall ~~their~~our ~~independent~~manufacturing ~~director~~of ~~agreements~~specialty ingot, ~~valued~~electrode atproducts, ~~$25~~shot products,~~000~~ ~~each.~~and Onmaster ~~December~~alloys ~~21,~~in ~~2018,~~addition ~~Mssrs.~~to ~~Lamb~~toll ~~and~~conversion ~~Garruto~~melting ~~were~~services. ~~re-elected~~· toThe ~~the~~Company’s ~~Board~~USAC ~~for~~Ross anand ~~additional~~USAC ~~1-year~~WA ~~term.~~subsidiaries, Atwhich ~~the~~include ~~end~~all our manufacturing of ~~the~~precision ~~2019~~aluminum ~~term~~castings, ~~they~~as ~~will~~well ~~each~~as ~~receive~~in-house ~~$25~~heat treating,~~000~~ inmachining, ~~stock~~powder coating and non-destructive testing.

9.28 ~~SEGMENT~~Table ~~RESULTS~~of Contents

~~The~~Segment ~~Company~~information ~~manages~~for ~~its~~the ~~operations~~three inmonths ~~two~~ended ~~business~~March ~~segments~~31, ~~which~~2020 ~~are~~is ~~defined~~ as follows:

· 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.

	Creative Assembly			PMAL		USAC
Net revenue	$	2,907,813		$	7,838,167	$	560,462

Cost of goods sold		2,447,468			6,421,425		440,122

Gross profit		460,345			1,416,742		120,340

Operating expenses:
General and administrative expenses		495,320			558,730		33,090
Professional and consulting fees		25,894			69,072		26,961
Total operating expenses		521,214			627,802		60,051

Income before other income (expense)	$	(60,869	)	$	788,940	$	60,289

Segment information for the nine months ended September 30, 2019 is as follows:

	CAS		PMAL
Net revenue	$	12,751,909	$	21,938,356
Cost of goods sold		10,449,862		17,496,875
Gross profit		2,302,047		4,441,481
Operating expenses:
General and administrative expenses		1,353,878		2,026,957
Professional and consulting fees		61,039		168,120
Total operating expenses		1,414,917		2,195,077
Income before other income (expense)	$	887,130	$	2,246,404

Below is the Segment reconciliation to total net income

Income from segments above	$	3788,~~133,534~~360
Non-allocated expenses
Non-allocated income (expense)
Interest expense		(377,098	)
Interest expense - net		(137,286	)
General and administrative expenses		(~~366~~147,~~966~~636	)
Professional and consulting fees		(2923,~~855~~092	)
Total non-allocated expenses		(773,919	)
Other income – purchase gain		3,818,686
Income before provision for income taxes	$	2,359,615
Total non-allocated income		3,510,672
Income before provision for income taxes	$	4,299,032

25Segment ~~Table~~information offor ~~Contents~~the three months ended March 31, 2019 is as follows:

Segment information for the three months ended September 30, 2019 is as follows:

	Creative Assembly		PMAL
Net Revenue	$	4,317,829	$	8,187,139

Cost of goods sold		3,515,256		6,401,121

Gross profit		802,573		1,786,018

Operating expenses:
General and administrative expenses		466,445		728,735
Professional and consulting fees		12,367		89,202
Total operating expenses		478,812		817,937

Income before other income (expense)	$	323,761	$	968,081

	CAS		PMAL
Net revenue	$	4,257,862	$	6,370,076
Cost of goods sold		3,464,840		5,312,448
Gross profit		793,022		1,057,628
Operating expenses:
General and administrative expenses		395,205		583,931
Professional and consulting fees		22,113		37,134
Total operating expenses		417,318		621,065
Income before other income (expense)	$	375,704	$	436,563

Table of Contents

Below is the Segment reconciliation to total net income

Income from segments above	$	~~812~~1,~~267~~291,842
Non-allocated expenses
Interest expense		(136,668	)
Interest expense - net		(121,795	)
General and administrative expenses		(99135,~~239~~481	)
Professional and consulting fees		(9,063	)
Other income		(7,998	)
Total non-allocated expenses		(244,970	)
Total		(265,274	)
Income before provision for income taxes	$	~~567~~1,~~297~~026,568

Segment information for the nine months ended September 30, 2018 is as follows:

	CAS		PMAL
Net Revenue	$	8,312,577	$	24,673,494
Cost of goods sold		6,547,851		20,195,956
Gross profit		1,764,726		4,477,538
Operating expenses:
General and administrative expenses		1,271,145		1,577,183
Professional and consulting fees		54,427		154,251
Total operating expenses		1,325,572		1,731,434
Income before other income (expense)	$	439,154	$	2,746,104

26 Table of Contents

Below is the Segment reconciliation to total net income

Income from segments above	$	3,185,258
Non-allocated expenses
Interest expense		(1,036,934	)
General and administrative expenses		(373,664	)
Other income (expense)		84,882
Total non-allocated expenses		(1,325,716	)
Income before provision for income taxes	$	1,859,542

Segment information for the three months ended September 30, 2018 is as follows:

	CAS		PMAL
Net Revenue	$	3,113,042	$	7,859,348
Cost of goods sold		2,447,111		6,405,241
Gross profit		665,931		1,454,107
Operating expenses:
General and administrative expenses		420,522		558,271
Professional and consulting fees		13,750		49,667
Total operating expenses		434,272		607,938
Income before other income (expense)	$	231,659	$	846,169

Below is the Segment reconciliation to total net income

Income from segments above	$	1,077,828
Non-allocated expenses
Interest expense - net		(308,009	)
General and administrative expenses		(114,369	)
Other income		(203,714	)
Total		(626,092	)
Income before provision for income taxes	$	451,736

Segment asset information for the Company is as follows:

	September 30, 2019		December 31,2018
	March 31, 2020		December 31, 2019
PMAL assets	$	1413,~~060~~674,~~079~~719	$	1214,~~982~~615,~~588~~627
CAS assets		6,~~417~~076,~~972~~392		45,~~526~~498,~~530~~560
Corporate assets		139,677		763,121
USAC assets		13,082,867		-
Total assets	$	20,617,728	$	18,272,239
Corporate assets		119,674		461,363
Total assets	$	32,953,652	$	20,575,550

2712. ~~Table~~INCOME ~~of Contents~~TAXES

~~10.~~Income ~~INCOME~~taxes ~~TAXES~~are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due.

~~Income~~Tax ~~taxes~~information ~~are provided~~ for the ~~tax~~three-months ~~effects~~ended ofMarch ~~transactions~~30, ~~reported~~2020 ~~in the unaudited condensed consolidated financial statements~~ and ~~consist~~2019 ~~of taxes currently due. For 2018, our current effective tax rate~~ is ~~lower~~as ~~than the Federal and state effect rate primarily to the release of a portion of the valuation allowance.~~ follows:

Tax information for the nine-months ended September 30, 2019 and 2018 is as follows:

	For the three months ended March 31,
	2020		2019

Current income tax
Federal	$	-	$	-
State		92,249		72,448
Total current income tax	$	92,249	$	72,448

Deferred income tax
Federal	$	879,354	$	179,769
State		130,987		10,249
Total deferred income tax	$	1,010,341	$	190,018

Total income tax expense	$	1,102,590	$	262,466

	For the nine monthsended September 30,
	2019		2018
Current income tax
Federal	$	66,985	$	-
State		321,466		103,751
City		-		-
Total current income tax	$	388,451	$	103,751
Deferred income tax
Federal	$	438,120	$	-
State		170,380		-
City		-		-
Total deferred income tax	$	608,500	$	-
Total income tax expense	$	996,951	$	103,751

Table of Contents

The Company’s deferred tax assets and liability relates mainly to a temporary timing difference in long-term assets and net operating loss carryforwards. 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 that should have been recorded in the Company’s unaudited condensed consolidated financial statements for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 or ~~2018~~2019. Additionally, there were no interest or penalties outstanding as of or for each of the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 and ~~2018~~2019.

The federal and state tax returns for the years ending December 31, 2016, 2017 and 2018 have been filed, but are still open to examination. Federal and state tax returns for the year ending December 31, 2019 have not been filed.

2813. ~~Table~~RELATED ~~of Contents~~PARTIES

Board and Executive Compensation

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 (the “2017 Equity Plan”). The 2017 Equity Plan provides for an aggregate of 100,000 shares of common stock to be available for awards. 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 Board is currently evaluating extending the Executive Bonus Plan to cover 2020 and 2021.

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 was $1,750,000. The Board is currently evaluating the threshold amounts for 2020 and 2021.

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 March 31, 2020 and December 31, 2019, the Company had accrued at total of $283,000 in bonus for Mssrs. Wachter and Golden, of which $193,000 was for bonuses earned in 2019.

In return for their service during the 2019 term, Messrs. Lamb and Garruto are each set to receive $25,000 in stock during 2020, which has been accrued for as of March 31, 2020. On December 27, 2019, Mssrs. Lamb and Garruto were re-elected to the Board for an additional 1-year term under the same terms.

Table of Contents

14. SUBSEQUENT EVENTS

Paycheck Protection Program

On April 23, 2020, CAS entered into a promissory note with Berkshire Bank, which provides for a loan in the amount of $227,800 (the “CAS PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CAS PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The CAS PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the CAS PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. CAS intends to use the entire CAS PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company can provide no assurance that the loan will be forgiven despite the best efforts of the Company.

On April 21, 2020, PMAL entered into a Promissory Note with Berkshire Bank, which provides for a loan in the amount of $1,074,700 (the “PMAL PPP Loan”) pursuant to the CARES Act. The PMAL PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PMAL PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the PMAL PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. PMAL intends to use the entire PMAL PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company can provide no assurance that the loan will be forgiven despite the best efforts of the Company.

On April 23, 2020, USAC Ross entered into a promissory note with Berkshire Bank, which provides for a loan in the amount of $984,100 (the “USAC Ross PPP Loan”) pursuant to the CARES Act. The USAC Ross PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The USAC Ross PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the USAC Ross PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. USAC Ross intends to use the entire USAC Ross PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company can provide no assurance that the loan will be forgiven despite the best efforts of the Company.

On April 22, 2020, USAC WA entered into a promissory note with Berkshire Bank, which provides for a loan in the amount of $796,400 (the “USAC WA PPP Loan”) pursuant to the CARES Act. The USAC WA PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The USAC WA PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the USAC WA PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. USAC WA intends to use the entire USAC WA PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company can provide no assurance that the loan will be forgiven despite the best efforts of the Company.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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.

General

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 ~~nine~~three months ended ~~September~~March 3031, ~~2019~~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.

2933 Table of Contents

Plan of Operation and Discussion of Operations

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~~Creative ~~Company~~Assembly’s supplier base.

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

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

Through its 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.

AtThrough ~~September~~its ~~30,~~USAC ~~2019,~~Ross ~~AMG-Vanadium,~~LLC ~~Eastham~~and ~~Forge,~~USAC ~~PACCAR~~WA LLC (collectively, ~~Remelt~~“USAC”) ~~Sources~~segments, ~~Inc~~the Company manufactures precision aluminum castings. ~~and~~USAC ~~Drive~~offers ~~Automotive~~multiple ~~receivables~~casting ~~were~~processes ~~17.5%,~~as ~~13.9%~~well as in-house heat treating, ~~13.7%~~machining, ~~13.1%~~powder coating and 11non-destructive testing.1% ofThe ~~total~~products ~~receivables,~~are ~~respectively.~~used Atin ~~December 31~~defense, ~~2018~~aerospace, ~~Remelt~~heavy ~~Sources~~truck, ~~Inc~~marine and commercial applications., ~~AMG~~USAC Ross and USAC WA were formed as wholly-~~Vanadium,~~owned ~~PACCAR~~single member limited liability companies by the Company on March 3, 2020 and ~~Universal~~had ~~Stainless~~no &operations ~~Alloy~~prior ~~Products~~to ~~receivables~~the ~~were~~March 20~~.9%~~, ~~15.0%,~~2020 ~~14.0%,~~acquisition ~~and~~discussed ~~13.0%~~in ofNote ~~total~~4 ~~receivables,~~to ~~respectively~~the unaudited condensed consolidated financial statements.

~~For~~34 ~~the~~Table ~~nine-month period ending September 30, 2019, Remelt Sources, Inc., AMG-Vanadium, and PACCAR accounted for 20.1%, 17.4%, and 16.6%~~ of sales, respectively. For the three-month period ending September 30, 2019, Remelt Sources, Inc., AMG-Vanadium and PACCAR accounted for 19.5%, 18.6% and 18.2% of sales, respectively. For the nine-month period ending September 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 18.2%, 16.1%, 15.6%, 14.0% and 12.5% of sales, respectively. For the three-month period ending September 30, 2018, Ametek, Remelt Sources, Inc., PACCAR, AMG-Vanadium and Universal Stainless & Alloy Products accounted for 18.3%, 15.6%, 14.6%, 14.1% and 11.0% of sales, respectively.Contents

30At ~~Table~~March 31, 2020, Remelt Sources, Inc., AMG-Vanadium and Drive Automotive receivables were 20.8%, 10.3%, and 10.0% of ~~Contents~~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 ~~nine~~three-month period ending ~~September~~March 3031, ~~2019~~2020, noRemelt ~~supplier~~Sources, ~~represented more than 10% of purchases~~Inc., ~~For the three~~AMG-~~month~~Vanadium, ~~period~~and ~~ending~~PACCAR ~~September~~accounted 30for 28.0%, ~~2019~~18.0%, ~~AVK~~and ~~represented 10~~12.13% of ~~purchases~~sales, respectively. For the ~~nine~~three-month period ending ~~September~~March 3031, ~~2018~~2019, noRemelt ~~supplier~~Sources, ~~represented more than 10% of purchases~~Inc., ~~For the three~~AMG-~~month~~Vanadium, ~~period~~PACCAR ~~ending~~and ~~September~~Universal ~~30,~~Stainless ~~2018,~~& noAlloy ~~supplier~~Products ~~represented~~accounted ~~more~~for ~~than 10~~19.0%, ~~of purchases~~18. ~~At September 30~~1%, ~~2019, AVK represented approximately~~ 15.85% ofand ~~accounts payable~~13. ~~At December 31, 2018, AVK represented approximately 11.8~~1% of ~~accounts~~sales, ~~payable~~respectively.

~~Results~~For ~~from~~the ~~Operations~~three-month ~~for~~period ~~nine~~ending ~~months~~March 31, 2020, no supplier represented more than 10% of purchases. For the three-month period ending ~~September~~March 3031, 2019, vsno ~~September~~supplier 30represented more than 10% of purchases. At March 31, ~~2018~~2020, no supplier represented more than 10% of accounts payable. At December 31, 2019, AVK represented approximately 11.9% of accounts payable.

~~The~~Results ~~Company’s revenues increased 5.2% or $1,704,194 for the nine months ended September 30, 2019 to $34,690,265~~ from ~~$32,986,071~~Operations 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 $21,938,356 in revenue for ~~the~~three ~~nine~~ months ~~ended~~ending ~~September~~March 3031, ~~2019.~~2020 ~~PMAL~~vs ~~revenue~~March ~~was down $2~~31,~~735,138~~ ~~or 11.1% for the nine months ended September 30,~~ 2019 versus September 30, 2018 as we eliminated low margin business and increased tolling operations as a percentage of revenue. Tolling revenue naturally has a lower revenue and corresponding lower cost of goods as the Company does not purchase the metal. Our distribution subsidiary was up $4,439,332 or 53.4% in revenue for the nine months ended September 30, 2019 versus September 30, 2018 due to the pick-up in existing customer activity and the addition of new customers.

The Company’s ~~gross~~revenues ~~profit~~decreased ~~increased approximately 8~~9.06% or $~~501~~1,~~264~~198,526 for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 to $611,~~743~~306,~~528~~442 from $612,~~242~~504,~~264~~968 in the comparable period last year. ~~From~~PMAL ~~time~~had to$7,838,167 ~~time~~in revenue for the ~~Company~~three ~~will~~months ~~experience~~ended ~~margin~~March ~~mix~~31, ~~that~~2020. ~~will~~PMAL ~~lead~~revenue towas ~~temporarily~~down ~~higher~~$348,972 or ~~lower gross profit~~4.3% ~~For~~for the ~~nine~~three months ended ~~September~~March 3031, 2020 versus March 31, 2019, ~~gross~~primarily ~~profit~~due atto ~~our~~a ~~distribution~~slowdown ~~subsidiary~~in ~~increased~~March 2020 caused by the COVID-19 pandemic. Creative Assembly was down $~~537~~1,~~321~~410,016 or ~~approximately 30~~32.47% ~~versus~~in ~~2018~~revenue ~~year~~for tothe ~~date.~~three Atmonths ~~our~~ended ~~manufacturing~~March ~~subsidiary~~31, ~~our~~2020 ~~gross~~versus ~~profit~~March ~~contribution~~31, ~~accounted~~2019 ~~for~~due ~~approximately~~to ~~65.9%~~a ofshutdown by the ~~Company’s~~largest ~~total~~customers ~~gross~~in ~~profit~~March ~~and~~2020 ~~has~~in aresponse ~~margin~~to the COVID-19 pandemic. USAC had revenue of ~~approximately~~$560,462 for the period between March 20, 2020 and March 31, 2020.~~2%.~~

The Company’s ~~total~~gross ~~operating~~profit ~~expenses~~decreased ~~increased~~approximately 1622.8% or $~~576~~591,~~145~~164 for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020 to $41,~~006~~997,~~815~~427 from $32,~~430~~588,~~670~~591 in the comparable period last year. ~~primarily~~For the three months ended March 31, 2020, gross profit at Creative Assembly decreased by $342,228 or approximately 42.6% versus the comparable period last year due to ~~increasing~~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 ~~Company~~comparable period last year due to a decrease in sales caused by the COVID-19 pandemic.

The Company’s ~~accounts~~total ~~receivable~~operating ~~have~~expenses ~~increased~~decreased by4.2% ~~$881,864~~or to $460,~~683,030~~433 atfor ~~September~~the ~~30,~~three ~~2019~~months ~~from~~ending ~~$3,801,166~~March ~~at December~~ 31, ~~2018;~~2020 ~~this difference is due~~ to ~~mainly to an increase in sales. The Company’s inventory increased by~~ $1,~~157~~379,~~061~~795 from ~~December 31~~$1, ~~2018 to September 30~~440, ~~2019 due to normal variations in delivery schedules and to support increased sales~~228. The Company has increased inventory to support increased sales at its distribution subsidiary. Going forward, the Company expects to see relatively stable inventory levels in both subsidiaries in the short to medium term.

31 Table of Contents

Results from Operations for three months ending September 30, 2019 vs September 30, 2018

The Company’s revenues decreased 3.1% or $344,452 for the three months ended September 30, 2019 to $10,627,938 from $10,972,390 in the comparable period last year. PMAL, our sole manufacturing subsidiary, had $6,370,076 in revenue for the three months ended September 30, 2019. PMAL revenue was down $1,489,272 or 18.9% for the three months ended September 30, 2019 versus September 30, 2018, primarily due to an increase in tolling heats versus primary heats. Our distribution subsidiary was up approximately $1,144,820 or 36.8% in revenue for the three months ended September 30, 2019 versus September 30, 2018 due to the pick-up in existing customer activity and the addition of new customers.

The Company’s gross profit decreased approximately 12.7% or $269,388 for the three months ended September 30, 2019 to $1,850,650 from $2,120,038 in the comparable period last year. For the three months ended September 30, 2019, gross profit at our distribution subsidiary increased by $127,091 or approximately 19.1% versus the comparable period last year due to increased sales. For the three months ended September 30, 2019, gross profit at our manufacturing subsidiary decreased by $396,479 or approximately 27.3% versus the comparable period last year due to a worse margin mix with our customer base due to marginal tolling heats.

The Company’s total operating expenses decreased 0.9% or $9,894 for the three months ending September 30, 2019 to $1,146,685 from $1,156,579 from in the comparable period last year.

Liquidity

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 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 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.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

32 Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

(A) Disclosure Controls and Procedures

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 ~~September~~March 3031, ~~2019~~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 material weaknesses are as follows:

· We did not perform an effective risk assessment or monitor internal controls over financial reporting. · A lack of sufficient resources and an insufficient level of monitoring and oversight, which restricted the Company’s ability to gather, analyze and report information relative to the financial statement assertions in a timely manner, including insufficient documentation and review of selection of generally accepted accounting principles. · The limited size of the accounting department makes it impractical to achieve an appropriate level of segregation of duties. Specifically, due to lack of personnel, effective controls were not designed and implemented to ensure accounting functions were properly segregated. · Due to a lack of adequate staffing within the finance department and adequate staffing within operational departments that provide information to the finance department, we did not establish and maintain effective controls over certain of our period-end financial close and reporting processes. Specifically, effective controls were not designed and implemented to ensure that journal entries were properly prepared with sufficient support or documentation or were reviewed and approved to ensure the accuracy and completeness of the journal entries recorded.

The Company ~~may~~expects ~~add~~improvements ~~additional~~to ~~personnel~~be made in 2020 as the Company grows in size given recent acquisitions and ~~procedures,~~the ~~which~~Company weis ~~believe~~able ~~will~~to ~~remedy~~dedicate ~~these~~more ~~weaknesses~~resources into ~~disclosure~~the ~~controls~~financial and ~~procedures~~accounting infunction. The ~~future~~Company ~~periods~~plans to further remdiate the material weaknesses 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.

Changes in Internal Control Over Financial Reporting

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.

3336 Table of Contents

PART II

OTHER INFORMATION

ITEM 6. EXHIBITS

The following exhibits are included herein:

Exhibit No.		Exhibit
10.1		Purchase and Sale Agreement between SummitBridge National Investments VI LLC, ABTV, in its Capacity as Court-Appointed Receiver Ordered by the Court of Common Pleas of Chester County, Pennsylvania and USAC Ross LLC and USAC WA LLC, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 26, 2020
10.2		Loan and Security Agreement by and among USAC Ross LLC, USAC WA LLC and SummitBridge National Investments VI LLC, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on March 26, 2020
31.1		Certification of Chief Executive Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2		Certification of Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1		Certification of Chief Executive Officer and of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
32.2		Certification of Chief Financial Officer of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
101		XBRL Interactive Data Files

3437 Table of Contents

SIGNATURES

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.

	AMERINAC HOLDING CORP.
Dated: November 13, 2019		/s/ John Wachter
Dated: May 15, 2020		/s/ John Wachter
		John Wachter
		Chief Executive Officer

3538 Table of Contents

EXHIBIT INDEX

ExhibitNumber		Description
Exhibit Number		Description
31.1		Certification of Chief Executive Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2		Certification of Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1		Certification of Chief Executive Officer of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
32.2		Certification of Chief Financial Officer of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
101		XBRL Interactive Data Files

3639

Filing Compare · Amerinac Holding Corp.