P&F Industries
Annual Report 2015

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KP&F INDUSTRIES INC - PFINFiled: March 30, 2016 (period: December 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2015or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5332P&F INDUSTRIES, INC.(Exact name of registrant as specified in its charter) Delaware22-1657413(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification Number) 445 Broadhollow Road, Suite 100, Melville, New York11747(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (631) 694-9800 Securities registered pursuant to Section 12(b) of the Act: (Title of each class) (Name of each exchange on which registered)Class A Common Stock, $1.00 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x 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 of1934 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 filingrequirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨Accelerated filer ¨Non-accelerated filer ¨Smaller reporting company x (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value of the registrant’s Class A Common Stock held by non-affiliates of the registrant, based on the last sale price on June 30,2015 (the last business day of the registrant’s most recently completed second fiscal quarter), was approximately $20,418,000 As of March 25, 2016 there were 3,592,870 shares of the registrant’s Class A Common Stock outstanding. Documents Incorporated by Reference Part III of this Annual Report on Form 10-K incorporates by reference information from the registrant’s definitive Proxy Statement for its 2016Annual Meeting of Stockholders. Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 TABLE OF CONTENTS PagePART I 4Item 1.Business4Item 1A.Risk Factors7Item 1B.Unresolved Staff Comments10Item 2.Properties10Item 3.Legal Proceedings10Item 4.Mine Safety Disclosures10PART II 11Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities11Item 6.Selected Financial Data11Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations12Item 7A.Quantitative and Qualitative Disclosures About Market Risk25Item 8.Financial Statements and Supplementary Data26Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure54Item 9A.Controls and Procedures54Item 9B.Other Information55PART III 56Item 10.Directors, Executive Officers and Corporate Governance56Item 11.Executive Compensation56Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters56Item 13.Certain Relationships and Related Transactions, and Director Independence56Item 14.Principal Accounting Fees and Services56PART IV 57Item 15.Exhibits and Financial Statement Schedules57 Signatures61 2 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FORWARD LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward looking statements within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 made by or on behalf of P&F Industries, Inc. andsubsidiaries (the “Company”). The Company and its representatives may, from time to time, make written or verbal forward looking statements, includingstatements contained in the Company’s filings with the Securities and Exchange Commission, such as this Annual Report on Form 10-K (“Report”), and in itsreports to stockholders. Any statements made in the Report that are not historical or current facts may be deemed to be forward looking statements. Generally,the inclusion of the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “would,” “could” and their opposites and similarexpressions identify statements that constitute forward looking statements within the meaning of the Reform Act. Any forward looking statements containedherein, including those related to the Company’s future performance, are based upon the Company’s historical performance and on current plans, estimatesand expectations. Such forward looking statements are subject to various risks and uncertainties, including those risk factors described in this Report, whichmay cause actual results to differ materially from the forward looking statements. You are therefore cautioned against relying on any forward lookingstatements. Forward looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly orrevise any forward looking statement, whether as a result of new information, future developments or otherwise. 3 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I ITEM 1. Business P&F Industries, Inc. (“P&F”) is a Delaware corporation incorporated on April 19, 1963. P&F and each of its subsidiaries are herein referred tocollectively as the “Company.” In addition, the words “we”, “our” and “us” refer to the Company. The Company operates in two primary lines of business, orsegments: (i) tools and other products (“Tools”) and (ii) hardware and accessories (“Hardware”). Tools The Company conducts its Tools business through a wholly-owned subsidiary, Continental Tool Group, Inc. (“Continental”), which in turncurrently operates through its wholly-owned subsidiaries, Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”) and Hy-Tech Machine, Inc.(“Hy-Tech”). During the third quarter of 2014, the Company acquired Exhaust Technologies Inc. (“ETI”), a developer and distributor of pneumatic tools,through a merger between a newly formed, wholly-owned subsidiary of Florida Pneumatic and ETI. Additionally, in the third quarter of 2014 FloridaPneumatic acquired all of the outstanding shares of Universal Air Tool Company Limited (“UAT”), a distributor of pneumatic tools located in HighWycombe, England. UAT markets pneumatic tools primarily to the automotive market sector in the United Kingdom and Ireland. This acquisition providesthe Company with direct entry into the European pneumatic tool market for the Company’s entire suite of air tool products. Both ETI and UAT are wholly-owned subsidiaries of Florida Pneumatic, and unless otherwise indicated, the operations and results of operations of Florida Pneumatic herein include ETIand UAT as of the respective dates such companies were acquired. Additionally, during the third quarter of 2014, the Company acquired substantially all theassets of Air Tool Service Company (“ATSCO”), through a wholly-owned subsidiary of Hy-Tech, and unless otherwise indicated, the operations and results ofoperations of Hy-Tech herein include ATSCO as of the date the business was acquired. Florida Pneumatic Florida Pneumatic imports and sells pneumatic hand tools, most of which are of its own design, primarily to the retail, industrial and automotivemarkets. This line of products includes sanders, grinders, drills, saws and impact wrenches. These tools are similar in appearance and function to electric handtools, but are powered by compressed air, rather than directly by electricity. Air tools, as they are more commonly referred to, generally are less expensive tooperate, offer better performance and weigh less than their electrical counterparts. Florida Pneumatic imports approximately seventy-five types of pneumatichand tools, most of which are sold at prices ranging from $50 to $1,000, under the names “Florida Pneumatic”, “Universal Tool,” AIRCAT or NITROCAT, aswell as under the trade names or trademarks of several private label customers. These products are sold to retailers, distributors, and private label customersthrough in-house sales personnel and manufacturers’ representatives. The AIRCAT and NITROCAT brand of pneumatic tools are sold primarily to theautomotive market. Users of Florida Pneumatic’s hand tools include industrial maintenance and production staffs, do-it-yourself mechanics, automobilemechanics and auto body personnel. During 2015, Florida Pneumatic purchased approximately 49% of its pneumatic tools from China, 50% from Taiwan and 1% from Japan andEurope. Florida Pneumatic performs final assembly on certain of its products at its factory in Jupiter, Florida. Florida Pneumatic also markets, through its Berkley Tool division (“Berkley”), a product line which includes pipe and bolt dies, pipe taps,wrenches, vises and stands, pipe and tubing cutting equipment, hydrostatic test pumps, and replacement electrical components for a widely-used brand ofpipe cutting and threading machines. Florida Pneumatic markets Berkley’s products through industrial distributors and contractors. Florida Pneumaticsources its Berkley product line from China and Israel, as well as domestic sources. Florida Pneumatic also assembles and markets a line of compressor airfilters, for which it imports components from Mexico. There are redundant supply sources for nearly all products purchased. The primary competitive factors in the industrial pneumatic tool market are quality, breadth and availability of products, customer service andtechnical support. The primary competitive factors in the retail pneumatic tool market are price, service and brand-name awareness. The primary competitivefactors in Berkley’s business are price and service. Florida Pneumatic’s products are sold off the shelf. Currently, Florida Pneumatic’s retail business is notseasonal. .4 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Hy-Tech Hy-Tech manufacturers and distributes its own line of industrial pneumatic tools and parts under the “ATP” brand. Under the ATP brand, Hy-Techproduces and sells over sixty types of pneumatic tools, which include impact wrenches, grinders, drills, and motors that are sold at prices ranging from $450to $28,000. Users of ATP parts and tools include refineries, chemical plants, power generation facilities, heavy construction enterprises, and oil and miningcompanies. Further, it also manufacturers tools to customer unique specifications. In addition, Hy-Tech manufactures an extensive line of pneumatic toolreplacement parts that are sold to original equipment manufacturers (“OEMs”), as well as competitively. It also manufactures and distributes high pressurestoppers for hydrostatic testing of fabricated pipe under the “Thaxton” brand name. It also produces a line of siphons under the “Eureka” name. Other than aline of sockets sold under the “OZAT” brand name that are imported from Israel, all Hy-Tech products are made in the United States of America. In August2014, a newly formed wholly-owned subsidiary of Hy-Tech, acquired substantially all of the assets comprising the business of ATSCO, an Ohio-basedcorporation engaged in the design, manufacture and distribution of pneumatic tools and parts. Following a transition period that lasted into middle of 2015,all ATSCO products are now manufactured in Hy-Tech’s primary facility located in Cranberry, PA. Hy-Tech products are sold through its in-house sales force as well as manufacturer representatives. Hy-Tech’s products are sold off the shelf and alsoare produced to customer’s specifications. The business is not seasonal but may be subject to periodic schedule changes in refineries, power generation and chemical plants. The primarycompetitive factors in the industrial pneumatic tool market are quality, breadth and availability of products, customer service and technical support. Hy-Tech sources its raw materials from various well-established distributors throughout the United States. There are redundant sources for allmaterials. Hardware We conduct our Hardware business through a wholly-owned subsidiary, Countrywide Hardware, Inc. (“Countrywide”). Countrywide conducts itsbusiness operations through its wholly-owned subsidiary, Nationwide Industries, Inc. (“Nationwide”). Nationwide Nationwide is a developer, importer, and manufacturer of fencing hardware, patio products, and door and window accessories including rollers,hinges, window operators, sash locks, custom zinc castings and door closers. Nationwide’s products are sold through in-house sales personnel andindependent manufacturers’ representatives to distributors, dealers, retailers and OEM customers. End users of Nationwide’s products include contractors,home builders, pool and patio enclosure contractors, plumbers, OEM/private label customers and general consumers. Nationwide currently out-sources themanufacturing of approximately 98% of its product with several overseas factories located in China and Taiwan, while retaining design, quality control, andpatent and trademark control. There are redundant supply sources for most products. Nationwide manufactures approximately 2% of its products soldincluding rollers, hinges and pool enclosure products at its facility in Tampa, Florida. Nationwide also provides value-add services for the entire product linewith local packaging, kitting, rework and fabrication operations performed in its Tampa location. Nationwide’s sales are moderately seasonal, with revenues typically increasing with home construction and remodeling activity, which generallyoccurs during the spring and summer months. The majority of Nationwide’s products are sold off the shelf. The primary competitive factors affectingNationwide are quality, breadth of products and availability of products, customer service and technical support. Nationwide was sold by the Company effective February 11, 2016. See NOTE 12- SUBSEQUENT EVENTS in the accompanying Notes toConsolidated Financial Statements for discussion relating to such sale and related matters. 5 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Patents, Trademarks and Other Intellectual Property The Company holds several patents, trademarks, and copyrights of various durations, and it believes that it holds or licenses all of the patent,trademark, copyright, and other intellectual property rights necessary to conduct our business. The Company relies upon patents, copyrights, trademarks, andtrade secret laws to establish and maintain our proprietary rights in many of our products. There can be no assurance that any of its patents, trademarks orother intellectual property rights will not be challenged, invalidated, or circumvented, or that any rights granted thereunder will provide competitiveadvantages to it. In addition, there can be no assurance that patents will be issued from pending patent applications filed by the Company, or that claimsallowed on any future patents will be sufficiently broad to protect our technology or designs. Further, the laws of some foreign countries may not permit theprotection of our proprietary rights to the same extent as do the laws of the United States. Customers Within our Tools group we have two customers that in 2015 accounted for 8.6% and 21.0%, respectively of the Company’s revenue. In 2014, thesetwo customers accounted for 12.2% and 23.1% of the Company’s revenue. There is no customer in our Hardware group that accounted for 10% or more of theCompany’s 2015 or 2014 revenue. Information Available on the Company’s Website Additional information regarding the Company and its products is available on the Company’s website at www.pfina.com. In addition, theCompany’s (i) charters for the Audit, of the Lead Director, Compensation, Corporate Governance and Nominating, and Strategic Planning and RiskAssessment Committees of the company’s Board of Directors; and (ii) Code of Business Conduct and Ethics are available on the Company’s website. P&F isnot including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. P&F’s AnnualReports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements on Schedule 14A and Current Reports on Form 8-K, as well as any amendments tothose reports, are made available to the public at no charge, other than an investor’s own internet access charges, through the “SEC Filings” section of theCompany’s website. The Company makes such material available on its website as soon as reasonably practicable after it electronically files such materialwith, or furnishes it to, the Securities and Exchange Commission (“SEC”). Copies of any materials the Company files with the SEC can also be obtained freeof charge through the SEC’s website at www.sec.gov. The SEC’s Public Reference Room can be contacted at 100 F Street, N.E., Washington, D.C. 20549, orby calling 1-800-732-0330. The information on the Company’s website is not, and should not be considered, part of this Annual Report on Form 10-K and isnot incorporated by reference to this report. Employees The Company employed 164 full-time employees as of December 31, 2015. At various times during the year our operating units may employseasonal or part-time help, as necessary. None of the Company’s employees are represented by a union. 6 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 1A. Risk Factors A wide range of factors could materially affect our performance. In addition to the factors affecting specific business operations identified inconnection with the description of these operations and the financial results elsewhere in this report, the following factors, among others, could adverselyaffect our business, including our results of operations or financial position: •Exposure to fluctuations in energy prices. Fluctuations in energy prices, including crude oil and gas prices, could negatively impact theactivities of those of our customers involved in extracting, refining or exploring crude oil and gas, resulting in a corresponding adverse effect onthe demand for the products that they purchase from us. Prices for oil and gas are subject to large fluctuations in response to relatively minorchanges in the supply of, and demand for, oil and gas, market uncertainty and a variety of other economic factors that are beyond our control.Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by theOrganization of the Petroleum Exporting Countries (OPEC), have contributed, and are likely to continue to contribute, to price and volumevolatility. Crude oil prices have declined significantly in the past year. We believe this in large part due to increasing global supply of oil dueto factors such as weakening demand from slowing economic growth in Europe and Asia and trends towards increased fuel-efficiency. Theresulting negative shift in demand of our products by our customers has negatively impacted us, and could in the future have a material adverseeffect on our business, results of operations or financial position. •Debt and debt service requirements. The amount of our debt from time to time could have important consequences. For example, it could:increase our vulnerability to general adverse economic and industry conditions; limit our ability to fund future capital expenditures, workingcapital and other general corporate requirements and limit our flexibility in planning for, or reacting to, changes in our business. •Borrowing and compliance with covenants under our credit facility. Our credit facility contains affirmative and negative covenants includingfinancial covenants, and default provisions. A breach of any of these covenants could result in a default under our credit agreement. Upon theoccurrence of an event of default under our current credit agreement, the lenders could elect to declare all amounts outstanding to beimmediately due and payable and terminate all commitments to extend further credit. If the lenders were to accelerate the repayment ofborrowings, to the extent we have significant outstanding borrowings at said time, we may not have sufficient assets to repay our asset basedcredit facility and our other indebtedness. Also, should there be an event of default, or a need to obtain waivers following an event of default, wemay be subject to higher borrowing costs and/or more restrictive covenants in future periods. Further, the amount available for borrowing underour asset-based revolving loan facility is subject to a borrowing base, which is determined taking into account, among other things, ouraccounts receivable, inventory and machinery and equipment. Fluctuations in our borrowing base impact our ability to borrow funds pursuantto the revolving loan facility. •Significant volatility and disruption in the global capital and credit markets. Volatility in the global capital and credit markets has in recentyears resulted in a tightening of business credit and liquidity, a contraction of consumer credit, business failures, increased unemployment anddeclines in consumer confidence and spending. If global economic and financial market conditions deteriorate or remain weak for an extendedperiod of time, it could have a material adverse effect on our financial condition and results of operations. In particular, lower consumerspending may result in reduced demand and orders for certain of our products, order cancellations, lower revenues, increased inventories, andlower gross margins. Further, if our customers experience difficulty obtaining financing in the capital and credit markets to purchase ourproducts, this could result in further reduced orders for our products, order cancellations, inability of customers to timely meet their paymentobligations to us, extended payment terms, higher accounts receivable, reduced cash flows, greater expense associated with collection effortsand increased bad debt expense; and a severe financial difficulty experienced by our customers may cause them to become insolvent or ceasebusiness operations. •The strength of the retail economy in the United States and abroad. Our business is subject to economic conditions in major markets in whichwe operate, including recession, inflation, deflation, general weakness in retail, industrial, and housing markets, as well as the exposure toliabilities under anti-corruption laws in various countries, such as the U.S. Foreign Corrupt Practices Act, currency instability, transportationdelays or interruptions, sovereign debt uncertainties and difficulties in enforcement of contract and intellectual property rights, as well asnatural disasters. The strength of such markets is a function of many factors beyond our control, including interest rates, employment levels,availability of credit and consumer confidence. •Supply chain disruptions. Any difficulty or inability on the part of manufacturers of our products or other participants in our supply chain inobtaining sufficient financing to purchase raw materials or to finance general working capital needs or their inability to obtain raw materials dueto shortages or other factors, may result in delays or non-delivery of shipments of our products. Additionally, material increases in raw materialcommodity prices could further adversely affect our results of operations and financial position. Our foreign suppliers may encounterinterruption in their ability to continue to provide us with products on a short-term or long-term basis. Although we believe that there areredundant sources available and maintain multiple sources for most of our products, there may be costs and delays associated with securing suchsources and there can be no assurance that such sources would provide the same quality of product at similar prices. 7 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. •Our ability to maintain mutually beneficial relationships with key customers. We have several key customers, two of which collectivelyaccounted for approximately 29.6% of our 2015 consolidated revenue. Loss of key customers or a material negative change in our relationshipswith our key customers (including as a result of a negative change in the financial position of such key customers) could have a material adverseeffect on our business, results of operations or financial position. •Adverse changes in currency exchange rates A majority of our products are manufactured outside the United States, a portion of which arepurchased in the local currency. As a result, we are exposed to movements in the exchange rates of various currencies against the United Statesdollar which could have an adverse effect on our results of operations or financial position. We believe our most significant foreign currencyexposures are the Taiwan dollar (“TWD”) and the Chinese Renminbi (“RMB”). Purchases from Chinese sources are made in U.S. dollars(“USD”). However, if the RMB were to be revalued against the dollar, there could be a significant negative impact on the cost of our products.Further, the reporting currency for our consolidated financial statements is the USD. Certain of the company’s assets, liabilities, expenses andrevenues are denominated in currencies other than the USD. In preparing our Consolidated Financial Statements, those assets, liabilities,expenses and revenues are translated into USD at applicable exchange rates. Increases or decreases in exchange rates between the USD andother currencies affect the USD value of those items, as reflected in the Consolidated Financial Statements. Substantial fluctuations in the valueof the USD could have a significant impact on the company’s financial condition and results of operations. Additionally, cash generated innon-U.S. jurisdictions may be difficult to repatriate to the United States in a tax-efficient manner. •Impairment of long-lived assets and goodwill. The inability of certain of our subsidiaries to generate future cash flows sufficient to support therecorded amounts of goodwill, other intangible assets and other long-lived assets related to those subsidiaries could result in future impairmentcharges. •Unforeseen inventory adjustments or changes in purchasing patterns. We make purchasing decisions based upon a number of factorsincluding an assessment of market needs and preferences, manufacturing lead times and cash flow considerations. To the extent that ourassumptions result in inventory levels being too high or too low, there could be a material adverse effect on our business, results of operations orfinancial position. •Market acceptance of products. There can be no assurance that the market continues its acceptance of the products we introduced in recentyears or will accept new products (including the introduction of products into new geographic markets) introduced or scheduled forintroduction in 2016. There can also be no assurance that the level of sales generated from these new products or geographic markets relative toour expectations will materialize. •Competition. The markets in which we sell our products are highly competitive on the basis of price, quality, availability, post-sale service andbrand-name awareness. A number of competing companies are well-established manufacturers that compete on a global basis. •Price reductions. Price reductions taken by us in response to customer and competitive pressures, as well as price reductions or promotionalactions taken in order to drive demand, could have a material adverse effect on our business, results of operations or financial position. •Interest rates. Interest rate fluctuations and other capital market conditions could have a material adverse effect on our business, results ofoperations or financial position. •Litigation and insurance. The effects of litigation and product liability exposure, as well as other risks and uncertainties described from time totime in our filings with the Securities and Exchange Commission and our public announcements could have a material adverse effect on ourbusiness, results of operations or financial position. Further, while we maintain insurance policies to protect against most potential exposures,events may arise against which we may not be adequately insured. •Retention of key personnel. Our success depends to a significant extent upon the abilities and efforts of our key personnel. The loss of theservices of any of our key personnel or our inability to attract and retain qualified personnel in the future could have a material adverse effect onour business, results of operations or financial position. 8 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. •Acquisition of businesses. Part of our business strategy is to opportunistically acquire complementary businesses, which involve risks thatcould have a material adverse effect on our business, financial condition and results of operations. These risks include:·Loss of customers of the acquired businesses;·Inability to integrate successfully the acquired businesses’ operations;·Inability to coordinate management and integrate and retain employees of the acquired businesses;·Difficulties in implementing and maintaining consistent standards, controls, procedures, policies and information systems;·Failure to realize anticipated synergies, economies of scale or other anticipated benefits, or to maintain operating margins;·Strain on our personnel, systems and resources, and diversion of attention from other priorities;·Incurrence of additional debt and related interest expense;·Unforeseen or contingent liabilities of the acquired businesses; and·Large write-offs or write-downs, or the impairment of goodwill or other intangible assets. •Regulatory environment. We cannot anticipate the impact of changes in laws and regulations, including changes in accounting standards,taxation requirements, including tax rate changes, new tax laws and revised tax law interpretations, and environmental laws, in both domesticand foreign jurisdictions. Increased legislative and regulatory activity and burdens, and a more stringent manner in which they are applied,could significantly impact our business and the economy as a whole. For example, the Affordable Care Act (the “ACA”), which was adopted in2010 and is being phased in over several years, significantly affects the provision of both health care services and benefits in the United States;the ACA may impact our cost of providing our employees with health insurance and/or benefits, and may also impact various other aspects ofour business. The ACA did not have a material impact on our fiscal 2015 or prior financial results; however, we are continuing to assess theimpact of the ACA on our health care benefit costs. •The threat of terrorism and related political instability and economic uncertainty. The threat of potential terrorist attacks on the United Statesand throughout the world and political instability has created an atmosphere of economic uncertainty in the United States and in foreignmarkets. Our results may be impacted by the macroeconomic effects of those events. Also, a disruption in our supply chain as a result of terroristattacks or the threat thereof may significantly affect our business and its prospects. In addition, such events may also result in heighteneddomestic security and higher costs for importing and exporting shipments of components and finished goods. Any of these occurrences mayhave a material adverse effect on our financial position, cash flow or results in any reporting period. •Information technology system failures and attacks could harm our business. Our business is dependent on the efficient functioning of ourinformation technology systems and operations, which are vulnerable to damage or interruption from such factors as fires, natural disasters,telecommunications failures, computer viruses and worms, hacking, software defects, as well as human error. Despite our precautions, problemscould result in interruptions in services and materially and adversely affect our business, financial condition and results of operations. •Unforeseen events. We cannot anticipate the impact of unforeseen events, including but not limited to war and pandemic disease, on economicconditions and consumer confidence in our business. The risk factors described above are not intended to be all-inclusive. There can be no assurance that we have correctly identified and appropriatelyassessed all factors affecting our business or that the publicly available and other information with respect to these matters is complete and correct.Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may adversely impact us. Should any risks anduncertainties develop into actual events, these developments could have a material adverse effect on our business, results of operations or financial position.9 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 1B. Unresolved Staff Comments None. ITEM 2. Properties Florida Pneumatic owns a 72,000 square foot plant facility located in Jupiter, Florida. Its UAT subsidiary leases a 3,100 square foot facility from anon-affiliated lessor in High Wycombe, United Kingdom. This facility houses UAT’s warehouse / distribution, as well as its office needs. The lease expires in2019 and contains a five-year renewal clause. Hy-Tech owns a 51,000 square foot plant facility located in Cranberry Township, Pennsylvania and leases a 13,200 square foot facility located inPunxsutawney, Pennsylvania, which expires in 2021 and presently does not have a renewal clause. Countrywide owns a 56,250 square foot plant facility located in Tampa, Florida in which Nationwide conducts its business. Countrywide leasesapproximately 10,000 square feet of this facility to a non-affiliated tenant. Each facility described above either provides adequate space for the operations of the respective subsidiary for the foreseeable future or can bemodified or expanded to provide some additional space. The three owned properties described above are subject to mortgages and therefore pledged as collateral against the Company’s credit facility,which is discussed further in Management’s Discussion and Analysis – Liquidity and Capital Resources and Notes to Consolidated Financial Statements. The Company’s executive office of approximately 5,000 square feet is located in an office building in Melville, New York and is leased from a non-affiliated landlord. This lease expires in 2018, however, effective April 1, 2015, the Company can, at its option, terminate giving twelve months writtennotice. ITEM 3. Legal Proceedings From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing, we are not awareof any material legal proceedings to which we or any of our subsidiaries is a party or to which any of our property is subject, nor are we aware of any suchthreatened or pending litigation. ITEM 4. Mine Safety Disclosures None. 10 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A Common Stock trades on the Nasdaq Global Market under the symbol PFIN. The range of the high and low closing sales prices for ourClass A Common Stock during the last two years were as follows: 2015 High Low First Quarter $8.09 $6.83 Second Quarter 8.95 6.35 Third Quarter 11.18 8.45 Fourth Quarter 10.50 8.15 2014 High Low First Quarter $7.81 $7.00 Second Quarter 8.54 7.14 Third Quarter 8.29 7.31 Fourth Quarter 8.18 7.70 As of March 18, 2016, there were approximately 800 holders of record of our Class A Common Stock and the closing sale price of our stock asreported by the Nasdaq Global Market was $11.18. From our incorporation in 1963 through December 31, 2015, we declared no cash dividends on our Class A Common Stock. See NOTE 12-SUBSEQUENT EVENTS in the accompanying Notes to Consolidated Financial Statements for discussion relating to cash dividends declared subsequent toDecember 31, 2015. ITEM 6. Selected Financial Data Not required. 11 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT OVERVIEW Overview During the full-year 2015, our results of operations were impacted by a number of factors, some of which were: ·the positive impact on revenue and earnings provided by the three acquisitions completed during the third quarter of 2014; ·the on-going slow-down in oil and gas exploration and extraction, which continues to negatively impact our Tools segment; ·a decision by a Major customer of Hy-Tech to begin to manufacture internally certain air tools that were formerly manufactured by Hy-techcontributed to the reduction in Hy-Tech’s total revenue; ·the settlement of the contingent consideration with the former shareholders of UAT, resulting in non-taxable income of $126,000, and ·Nationwide’s continued benefit from increased activity in residential construction and the renovation and remodeling markets. KEY INDICATORS Economic Measures Much of our business is driven by the ebbs and flows of the general economic conditions in both the United States and, to a lesser extent,abroad. Our Tools segment focuses on a wide array of customer types including, but not limited to large retailers, aerospace, large and small resellers ofpneumatic tools and parts; and automotive related customers. The Tools segment tends to track the general economic conditions of the United States,industrial production and general retail sales. The key economic measures for our Hardware group are housing starts and remodeling spending activity. A key economic measure relevant to us is the cost of the raw materials in our products. Key materials include metals, especially various types of steeland aluminum. Also important is the value of the United States dollar (“USD”) in relation to the Taiwanese dollar (“TWD”), as we purchase a significantportion of our products from Taiwan. Purchases from Chinese sources are made in USDs. However, if the RMB, were to be revalued against the USD, therecould be a significant negative impact on the cost of our products. As the result of the UAT acquisition, we closely monitor the fluctuation in the GreatBritish Pound (“GBP”) to the USD, and the GBP to TWD, both of which can have an impact on the consolidated results. The cost and availability of a quality labor pool in the countries where products and components are manufactured, both overseas as well as in theUnited States, could materially affect our overall results. Operating Measures Key operating measures we use to manage our operating segments are: orders; shipments; development of new products; customer retention;inventory levels and productivity. These measures are recorded and monitored at various intervals, including daily, weekly and monthly. To the extent thesemeasures are relevant they are discussed in the detailed sections below for each operating segment. Financial Measures Key financial measures we use to evaluate the results of our business include: various revenue metrics; gross margin; selling, general andadministrative expenses; earnings before interest and taxes; operating cash flows and capital expenditures; return on sales; return on assets; days salesoutstanding and inventory turns. These measures are reviewed at monthly, quarterly and annual intervals and compared to historical periods as well asestablished objectives. To the extent that these measures are relevant, they are discussed in the detailed sections below for each operating segment. 12 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America(“GAAP”). Certain of these accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues andexpenses, and the related disclosure of contingent assets and liabilities, revenues and expenses. On an ongoing basis, we evaluate estimates, including thoserelated to bad debts, inventory reserves, goodwill and intangible assets, warranty reserves and taxes. We base our estimates on historical data and experience,when available, and on various other assumptions that are believed to be reasonable under the circumstances, the combined results of which form the basis formaking judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from theseestimates. Our critical accounting policies are further described below. In addition to the Company’s significant accounting policies described in Note 1 to the Consolidated Financial Statements, P&F considers thefollowing policies and estimates to be the most critical in understanding the judgments that are involved in the preparation of the Company’s consolidatedfinancial statements and the uncertainties that could impact the Company’s financial position, results of operations and cash flows. Revenue Recognition We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or title has passed to our customer or services havebeen provided, the sale price is fixed or determinable, and collectability is reasonably assured. We sell our goods on terms which transfer title and risk of lossat a specified location, typically shipping point, port of loading or port of discharge, depending on the final destination of the goods. Revenue recognitionfrom product sales occurs when all factors are met, including transfer of title and risk of loss, which occurs either upon shipment by us or upon receipt bycustomers at the location specified in the terms of sale. Other than standard product warranty provisions, our sales arrangements provide for no other post-shipment obligations. We do offer rebates and other sales incentives, promotional allowances or discounts, from time to time and for certain customers,typically related to customer purchase volume, all of which are fixed or determinable and are classified as a reduction of revenue and recorded at the time ofsale. We periodically evaluate whether an allowance for sales returns is necessary. Historically, we have experienced minimal sales returns. If we believe thereare material potential sales returns, we would provide the necessary provision against sales. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are customer obligations due under normal trade terms. We sell our products to retailers, distributors and OEMs involved in avariety of industries. We perform continuing credit evaluations of our customers’ financial condition, and although we generally do not require collateral,letters of credit may be required from customers in certain circumstances. Management reviews accounts receivable to determine if any receivables willpotentially be uncollectible. Factors considered in the determination include, among other factors, number of days an invoice is past due, customer historicaltrends, available credit ratings information, other financial data and the overall economic environment. Collection agencies may also be utilized ifmanagement so determines. We record an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible. We also may record asan additional allowance a certain percentage of aged accounts receivable, based on historical experience and our assessment of the general financialconditions affecting our customer base. If actual collection experience changes, revisions to the allowance may be required. We have a limited number ofcustomers with individually large amounts due at any given consolidated balance sheet date. Any unanticipated change in the creditworthiness of any ofthese customers could have a material effect on our results of operations in the period in which such changes or events occur. After all reasonable attempts tocollect an account receivable have failed, the amount of the receivable is written off against the allowance. Based on the information available, we believethat our allowance for doubtful accounts as of December 31, 2015 was adequate. However, actual write-offs might exceed the recorded allowance. Inventories Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method or the weighted average method. Inventory,which includes materials, labor, and manufacturing overhead costs, is recorded net of an allowance for obsolete or unmarketable inventory. Such allowance isbased upon both historical experience and management’s understanding of market conditions and forecasts of future product demand. In addition, all itemsin inventory in excess of one year’s usage are considered for inclusion in the calculation of inventory obsolescence. If the actual amount of obsolete orunmarketable inventory significantly exceeds the estimated allowance, our cost of sales, gross profit and net earnings would be significantly affected. 13 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Goodwill and Indefinite-Lived Intangible Assets In accordance and compliance with authoritative guidance issued by the Financial Accounting Standards Board (“FASB”), we test goodwill forimpairment on an annual basis as of the last day in November or more frequently if we believe indicators of impairment might exist. Goodwill is tested at alevel of reporting referred to as "the reporting unit." The Company's reporting units are Hy-Tech, Florida Pneumatic and Nationwide. An entity has the optionto first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is,a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances,an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-stepimpairment test is unnecessary. The first step used to identify potential impairment compares the calculated fair value of a reporting unit with its carryingamount. If the carrying amount of the reporting unit is less than its fair value, no impairment exists and the second step is not performed. If the carryingamount of a reporting unit exceeds its fair value, the entity is required to perform the second step of the goodwill impairment test to measure the amount ofthe impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit goodwill with the carryingamount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss isrecognized for the excess. The Company also tests indefinite-lived intangible assets, consisting of acquired trade names, for impairment at least annually asof the last day of November. The evaluation of goodwill and indefinite-lived intangible assets requires that management prepare estimates of future operatingresults for each of our operating units. These estimates are made with respect to future business conditions and estimated expected future cash flows todetermine estimated fair value. However, if, in the future, key drivers in our assumptions or estimates such as (i) a material decline in general economicconditions; (ii) competitive pressures on our revenue or our ability to maintain margins; (iii) significant price increases from our vendors that cannot bepassed through to our customers; and (iv) breakdowns in supply chain or other factors beyond our control occur, an impairment charge against our intangibleassets may be required. Impairment of Long-Lived Assets The Company reviews long-lived assets, including property, plant, and equipment and identifiable intangible assets, for impairment wheneverchanges in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, aloss is recognized for the difference. Factors which may cause an impairment of long-lived assets include significant changes in the manner of use of these assets, negative industry ormarket trends, a significant underperformance relative to historical or projected future operating results, or a likely sale or disposal of the asset before the endof its estimated useful life. If any of these factors exist, the Company is required to test the long-lived asset for recoverability and may be required torecognize an impairment charge for all or a portion of the asset's carrying value. Income Taxes We account for income taxes using the asset and liability approach. This approach requires the recognition of current tax assets or liabilities for theamounts refundable or payable on tax returns for the current year, as well as the recognition of deferred tax assets or liabilities for the expected future taxconsequences of temporary differences that can arise between (a) the amount of taxable income and pretax financial income for a year, such as from netoperating loss carryforwards and other tax credits, and (b) the tax bases of assets or liabilities and their reported amounts in the consolidated financialstatements. Deferred tax assets and liabilities are measured using enacted tax rates. The impact on deferred tax assets and liabilities of changes in tax rates andlaws, if any, is reflected in the consolidated financial statements in the period enacted. Further, we evaluate the likelihood of realizing benefit from ourdeferred tax assets by estimating future sources of taxable income and the impact of tax planning strategies. Deferred tax assets are reduced by a valuationallowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We file a consolidated Federal tax return. P&F and certain of its subsidiaries file combined tax returns in New York and Texas. All subsidiaries, otherthan UAT, file other state and local tax returns on a stand-alone basis. UAT files an income tax return with the taxing authorities in the United Kingdom. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while otherpositions are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of atax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely thannot that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offsetor aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefitthat is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with taxpositions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanyingconsolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest andpenalties associated with unrecognized tax benefits are classified as income taxes in the consolidated statements of income and comprehensive income. 14 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. RESULTS OF OPERATIONS2015 compared to 2014 REVENUE Unless otherwise discussed elsewhere in the Management’s Discussion and Analysis (“MD&A”) section, we believe that our relationships with ourkey customers remain satisfactory. In 2015, we have elected not to sell certain promotional-type products to Sears, which we did sell during 2014. Revenuefrom Sears is included in Florida Pneumatic’s Retail category. Hy-Tech’s shipments to its Major customer have significantly declined, resulting in part fromthis customer’s decision to source certain products from within. Other than the aforementioned, there were no major trends or uncertainties that had, or wecould reasonably expect could have, a material impact on our revenue. The three acquisitions that occurred during the third quarter of 2014 played asignificant role in our 2015 results of operations. Other than the ongoing weakness in oil and gas exploration and extraction, particularly in the United States,which is our primary market for Hy-Tech and to a lesser degree Florida Pneumatic’s Industrial sector, there was no unusual or infrequent event, transaction orany significant economic change that materially affected our results of operations. We believe the on-going slowdown in the global oil and gas extractionand exploration sector may likely negatively impact a portion of our 2016 results. The tables set forth below provide an analysis of our revenue for the three and twelve-month periods ended December 31, 2015 and 2014. Consolidated Three months ended December 31, 2015 2014 Variance Variance $ % Tools Florida Pneumatic $10,090,000 $10,280,000 $(190,000) (1.8)%Hy-Tech 3,681,000 4,085,000 (404,000) (9.9)Tools Total 13,771,000 14,365,000 (594,000) (4.1) Hardware Hardware Total 3,867,000 3,538,000 329,000 9.3 Consolidated $17,638,000 $17,903,000 $(265,000) (1.5) Year ended December 31, 2015 2014 Variance Variance $ % Tools Florida Pneumatic $44,076,000 $40,615,000 $3,461,000 8.5%Hy-Tech 16,236,000 15,499,000 737,000 4.8 Tools Total 60,312,000 56,114,000 4,198,000 7.5 Hardware Hardware Total 21,390,000 18,921,000 2,469,000 13.0 Consolidated $81,702,000 $75,035,000 $6,667,000 8.9 15 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Tools Florida Pneumatic Florida Pneumatic markets its air tool products to three primary sectors within the pneumatic tool market; retail, Industrial/catalog and theautomotive market. It also generates revenue from its Berkley products line, as well as a line of air filters and other OEM parts (“Other”). Three months ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % Retail customers $4,865,000 48.2% $5,188,000 50.5% $(323,000) (6.2)%Automotive 3,682,000 36.5 3,238,000 31.5 444,000 13.7 Industrial/catalog 1,325,000 13.1 1,556,000 15.1 (231,000) (14.8)Other 218,000 2.2 298,000 2.9 (80,000) (26.8)Total $10,090,000 100.0% $10,280,000 100.0% $(190,000) (1.8) Year Ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % Retail customers $24,217,000 54.9% $26,464,000 65.2% $(2,247,000) (8.5)%Automotive 12,805,000 29.1 6,515,000 16.0 6,290,000 96.5 Industrial/catalog 6,000,000 13.6 6,220,000 15.3 (220,000) (3.5)Other 1,054,000 2.4 1,416,000 3.5 (362,000) (25.6)Total $44,076,000 100.0% $40,615,000 100.0% $3,461,000 8.5 The net decline in Florida Pneumatic’s fourth quarter Retail revenue compared to the same period in the prior year was due primarily to itspreviously mentioned decision not to sell certain promotional-type products to Sears in 2015, resulting in a decline in revenue, partially offset by an increasein shipments to The Home Depot (“THD”). Primary factors contributing to the net increase in Florida Pneumatic’s Automotive revenue are new products,expanded domestic and international sales efforts and a slight increase in promotional revenue. Partially offsetting the increase in its AIRCAT productsrevenue, was a decline in UAT’s revenue. It should be noted that a portion of UAT’s revenue is derived from the sale of pneumatic air tools to customers thatoperate in the North Sea oil and gas sector, and a result of the weakness in the global oil and gas exploration sector, revenue from this particular portion ofUAT’s customer base declined, when comparing the fourth quarter of 2015 to the same period a year ago. We continue to encounter weakness in theIndustrial/catalog market, with the decline this quarter compared to the same period a year ago, occurring most notably in the aerospace and oil and gasexploration/production channels. We believe the weakness may continue into the latter portion of 2016. Florida Pneumatic’s Other revenue declined whencompared to the same period in 2014, primarily due to weakness in the power generation and oil and gas sectors may continue into the latter part of 2016. When comparing the full-year 2015 to 2014, the most significant factor contributing to Florida Pneumatic’s overall revenue increase is the result ofits two acquisitions made during the third quarter of 2014. As such, its 2015 Automotive revenue improved by nearly $6.3 million, when compared to theprior year. Further, when comparing the third and fourth quarters of 2015 to the same period in 2014, which are comparable time-frames post the acquisitions,revenue improved more than $770,000. As we intend to continue to release new products and continue our efforts to expand into new geographic regionsboth in the United States and Western Europe, we believe the growth in Automotive revenue should continue in 2016. With respect to Florida Pneumatic’sRetail revenue, as noted earlier, we elected not to sell certain promotional-type products to Sears in 2015, which we did sell to Sears during 2014. Thisdecision was the primary factor in the reduction in full-year 2015 Retail revenue, compared to 2014. Revenue from THD was essentially flat, whencomparing 2015 and 2014, as there was a decrease in promotional type products revenue of $1.4 million nearly offset by an increase in basic productsrevenue of $1.3 million. The 3.5% decline in full year Industrial/catalog revenue is due primarily to the down-turn in oil and gas exploration/productionchannels. Lastly, the decline in Florida Pneumatic’s Other revenue, year-over-year basis was due primarily to on-going weakness in the sectors in which itsBerkley pipe cutting products are sold, namely oil and gas and power generation. The acquisition of UAT, which is located in the United Kingdom, has provided Florida Pneumatic with an opportunity to expand its air tools intoEurope. As a result, we expect to begin marketing pneumatic tools into other select countries within the European Union in 2016. 16 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Hy-Tech Hy-Tech focuses primarily on the industrial sector of the pneumatic tools market. Hy-Tech manufactures and markets its own value-added line of airtools and parts, including the ATSCO product line, as well as distributes a complementary line of sockets, which in the aggregate are referred to as (“ATP”). Hy-Tech Machine products (“Hy-Tech Machine”) are primarily marketed to the mining, construction and industrial manufacturing sectors. Three months ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % ATP $2,835,000 77.0% $3,003,000 73.5% $(168,000) (5.6)%Hy-Tech Machine 312,000 8.5 432,000 10.6 (120,000) (27.8)Major customer 475,000 12.9 577,000 14.1 (102,000) (17.7)Other 59,000 1.6 73,000 1.8 (14,000) (19.2)Total $3,681,000 100.0% $4,085,000 100.0% $(404,000) (9.9) Year Ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % ATP $12,124,000 74.7% $11,133,000 71.8% $991,000 8.9%Hy-Tech Machine 1,889,000 11.6 1,560,000 10.1 329,000 21.1 Major customer 1,866,000 11.5 2,519,000 16.2 (653,000) (25.9)Other 357,000 2.2 287,000 1.9 70,000 24.4 Total $16,236,000 100.0% $15,499,000 100.0% $737,000 4.8 During the fourth quarter of 2015 Hy-Tech continued to be negatively impacted by weakness in the global oil and gas sector. We believe that thereduced levels of oil and gas exploration and extraction has, among other things, resulted in the decline in our sale of drilling motors and related parts andsockets during the fourth quarter. However, the decline in Hy-Tech’s ATP revenue was partially offset by an increase in sales of ATSCO products this quartercompared to the fourth quarter of 2014. The Hy-Tech Machine revenue declined this quarter compared to the same period a year ago, due primarily to lowerthan normal level of orders from its customers in the specialty manufacturing, mine safety and railroad markets. With respect to Hy-Tech’s Major customer,we believe their decision to source internally, certain pneumatic impact wrenches from their facilities, has contributed in part to the decline in revenue. With respect to the full year 2015, the increase in ATP revenue, compared to the full year 2014, is primarily attributable to ATSCO product sales,partially offset by declines in revenue of non-ATSCO tools and parts, drilling motors and parts, as well as sockets. As discussed earlier, we believe, amongother factors, that the reduction in oil and gas exploration and extraction has, throughout 2015, negatively impacted Hy-Tech’s overall revenue, mostnotably its ATP product line. According to information issued by Baker Hughes, a leading oil field services company, the total number of rotary rigsoperating in the United States is 698, down from 1,811, or a 61.5% decline from one year ago. Until such time when major exploration and related activitylevels return to recent historic levels, it is difficult to predict when this sector of the ATP category will improve. As such, Hy-Tech intends to continue topursue alternate markets and customers with added focus on its ATSCO products and other pneumatic tool markets. In line with the aforementioned, its Hy-Tech Machine’s 2015 revenue improved more than 21%, when compared to full-year 2104. Despite a weaker fourth quarter of 2015, this product categoryimproved its revenue this year compared to the prior year, due mainly to stronger demand from the markets and customers it serves. Lastly, revenue from Hy-Tech’s Major customer during full-year 2015 declined when compared to full-year 2014, as we believe this decline in revenue is due in part to their decisionto source internally, certain pneumatic impact wrenches. It is therefore likely this customer, in future reporting periods, may no longer merit specificdiscussion in our MD&A. 17 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Hardware Three months ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % Fence and gate hardware $2,931,000 75.8% $2,767,000 78.2% $164,000 5.9%OEM 526,000 13.6 411,000 11.6 115,000 28.0 Patio 410,000 10.6 360,000 10.2 50,000 13.9 Total $3,867,000 100.0% $3,538,000 100.0% $329,000 9.3% Year ended December 31, 2015 2014 Increase (decrease) Revenue Percent ofrevenue Revenue Percent ofrevenue $ % Fence and gate hardware $17,265,000 80.7% $15,551,000 82.2% $1,714,000 11.0%OEM 2,351,000 11.0 1,750,000 9.2 601,000 34.3 Patio 1,774,000 8.3 1,620,000 8.6 154,000 9.5 Total $21,390,000 100.0% $18,921,000 100.0% $2,469,000 13.0% Fence and gate hardware continued to be Nationwide’s primary product line, accounting for 75.8% of its fourth quarter of 2015 revenue. Key driversthat impact Nationwide’s revenue are: (i) housing starts and (ii) renovation and remodeling. The increase in Nationwide’s OEM products revenue is drivenprimarily by the addition of a new, lower margin customer that purchases pneumatic storm door closure kits. The increase in Patio revenue is due primarily toincreased activity in the sale of foreclosed home units occurring principally in Florida. As previously discussed, Nationwide’s growth is driven by, among other factors, the housing and remodeling markets. As such, its increase in totalrevenue during 2015, compared to 2014, is due primarily to an increase in both the number of housing starts and consumer spending in the remodeling andrenovation sectors. According to the U.S. Census Bureau data released in January 2016, relating to 2015 new privately-owned housing starts, were at aseasonally adjusted annual rate of 1,149,000, or 6.4% above the December 2014 rate of 1,080,000. We believe that Nationwide’s revenue growth was dueprimarily to its continued product development and expanded salesforce in the United States, with improved sales to overseas customers, as well. The 34.3%increase in its OEM product line revenue is primarily due to Nationwide obtaining a new, low margin customer that purchases pneumatic storm door closingkits. Patio revenue during the full-year 2015 increased when compared to the same period in 2014, due primarily to an improved home repair market in thesoutheastern portion of the United States and improved inventory / service levels. Nationwide was sold by the Company effective February 11, 2016. See NOTE 12- SUBSEQUENT EVENTS in the accompanying Notes toConsolidated Financial Statements for discussion relating to such sale and related matters. 18 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. GROSS MARGIN Consolidated Three months ended December 31, Increase (decrease) 2015 2014 Amount % Florida Pneumatic $3,616,000 $3,686,000 $(70,000) (1.9)%As percent of respective revenue 35.8% 35.9% (0.1)% pts Hy-Tech $1,106,000 $1,768,000 $(662,000) (37.4)As percent of respective revenue 30.0% 43.3% (13.3)% pts Total Tools $4,722,000 $5,454,000 $(732,000) (13.4)As percent of respective revenue 34.3% 38.0% (3.7)% pts Hardware $1,403,000 $1,261,000 $142,000 11.3 As percent of respective revenue 36.3% 35.6% 0.7% pts Consolidated $6,125,000 $6,715,000 $(590,000) (8.8)As percent of respective revenue 34.7% 37.5% (2.8)% pts Year Ended December 31, Increase (decrease) 2015 2014 Amount % Florida Pneumatic $15,675,000 $13,676,000 $1,999,000 14.6%As percent of respective revenue 35.6% 33.7% 1.9% pts Hy-Tech $6,007,000 $6,342,000 $(335,000) (5.3)As percent of respective revenue 37.0% 40.9% (3.9)% pts Tools $21,682,000 $20,018,000 $1,664,000 8.3 As percent of respective revenue 35.9% 35.7% 0.2% pts Hardware $8,246,000 $7,363,000 $883,000 12.0 As percent of respective revenue 38.6% 38.9% (0.3)% pts Consolidated $29,928,000 $27,381,000 $2,547,000 9.3 As percent of respective revenue 36.6% 36.5% 0.1% pts Tools Florida Pneumatic’s Gross margin for the fourth quarter 2015 was essentially the same as the fourth quarter of 2014. Significant factors contributing tothe decline in Hy-Tech’s fourth quarter 2015 gross margin compared to a year ago are: (i) lower machine hours, which negatively impacted its overheadabsorption, (ii) lower sales of its higher margin drilling motors and related parts, which was driven by the on-going weakness in the oil and gas explorationand extraction sector, and (iii) its decision to manufacture certain products, deliverable to a key customer, originally committed to by the former ATSCOcompany, which currently generate little to no gross margin. Hy-Tech is currently in the process of attempting to redesign these tools, such that any futuresale of these products should generate improved gross margins for these products. Florida Pneumatic’s 2015 gross margin improved 1.9 percentage points over the same period in the prior year due primarily to $6.3 million of higherAutomotive revenue, which generate slightly higher gross margins than Florida Pneumatic’s historical average. However, this improvement was somewhatoffset by slight gross margin declines in its Retail and Industrial/catalog product lines, due primarily to product and or customer mix. Similar to the fourthquarter of 2015, Hy-Tech’s overall 2015 gross margin declined, compared to 2014. The oil and gas sector, which has been in decline for most of 2015, had amaterial negative impact on Hy-Tech’s 2015 gross margin. We believe that due to the weakness in the oil and gas sector, Hy-Tech encountered a decline insales of its higher gross margin products such as drilling motors and related parts and accessories. As discussed above, its decision to produce certain productsfor a key customer has negatively affected its 2015 gross margins. As the manufacturing of the acquired ATSCO product line becomes more efficient, weanticipate that gross margins should improve, however, it is difficult to predict if or when the entire suite can be produced at gross margins similar to the grossmargin Hy-Tech had generated in prior years. 19 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Hardware Nationwide’s fourth quarter 2015 gross margin improved slightly, 0.7 percentage points, when compared to the same period a year ago. Fence andgate hardware generate the highest gross margins, followed by OEM, then Patio. Contributing factors to this improvement included among other things: (i) astrong product mix within its Fence and gate hardware line, notably an increase over the prior year sales of specialty products, which tend to generate highermargin. However, 2015 Fence and gate hardware gross margins were partially offset by pricing pressure throughout 2015 impacting its Patio product linegross margins, as well as its decision to service a new, low margin OEM customer. Significant factors contributing to Nationwide’s slight decline (0.3 percentage points) in its 2015 gross margins, compared to the same period in theprior year are new, lower gross margin OEM revenue and increased competitive pricing pressure. However, introduction of new products have partiallymitigated this pressure. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses (“SG&A”) include, among other things, all compensation plus employee benefits and related costs,administrative facilities, communications, variable costs, promotional expenses for our direct sales and marketing staff, legal, accounting and otherprofessional fees, as well as amortization and depreciation and general corporate overhead and engineering expenses. 2014 SG&A includes costs incurred inconnection with the three acquisitions consummated during that year. During the fourth quarter of 2015, our SG&A was $5,459,000 or 31.0% of revenue, down from $5,843,000, or 32.6% of revenue during the samethree-month period in 2014. Significant items contributing to this reduction include: (i) incremental variable costs and expenses, which include such thingsas commissions, warranty costs, freight out and advertising/promotional fees, decreased by $274,000 during the fourth quarter of 2015, compared to the sameperiod in the prior year, and (ii) compensation, which is comprised of base salaries and wages, accrued performance-based bonus incentives, associatedpayroll taxes and employee benefits declined $142,000, when comparing the fourth quarter of 2015 to the same period in the prior year. The primarycomponent of this reduction is lower consolidated performance-based bonus incentives for the three-month period ended December 31, 2015, compared tothe same period in 2014. In 2014, we recorded a benefit or reduction of $87,000, as we settled a matter with the U.S. Customs, which originated in 2012,whereas no such credit occurred in the fourth quarter of 2015. Our SG&A incurred for the full year 2015 was $23,969,000, or 29.3% of revenue, compared to $23,064,000, or 30.7% of revenue in 2014. Primarilythe result of the three acquisitions completed in 2014, our depreciation and amortization increased by $593,000 and our compensation expenses reflected anet increase of $433,000, with base salaries increasing, primarily due to the acquisitions partially offset by lower performance–based bonus incentives. Otherfactors include an increase in bad debt expenses of $156,000, due primarily to reduction adjustments made during the second quarter of 2014, which loweredour 2014 bad debt expense. Lastly, our professional fees and transaction expenses, in the aggregate declined $427,000, and our non-cash, stock-basedcompensation declined by $126,000. 20 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INTEREST The decrease in fourth quarter interest expense applicable to our short-term, or revolver borrowings is due primarily to the reduction of the revolverbalance, which in turn was due primarily to lower borrowings and greater cash flows, compared to the fourth quarter of 2014. With respect to the decline ofTerm loan interest, in connection with the ATSCO acquisition in August 2014, we borrowed $3,000,000 from our bank. This borrowing was to be repaid in36 consecutive monthly payments of $83,000, with an additional mandatory repayment each year equal to 50% of our Excess Cash Flow (as defined in theRestated Loan Agreement) for such year, if any. As the result of computing the Excess Cash Flow for the year 2014, in April 2015, we repaid the balance ofthis borrowing, which was approximately $2.4 million from funds available in our revolver. As a result, while there was Term loan interest expense incurredduring the fourth quarter of 2014, there was no Term loan interest expense in the fourth quarter of 2015. Additionally, included in our interest expense isamortization expense of debt financing costs. The average balance of short-term borrowings during the fourth quarter of 2015 was $10,883,000, compared to $15,072,000 during the same periodin 2014. The average balance of short-term borrowings during 2015 was $13,818,000, compared to $7,436,000 during 2014. The increase in interest incurred on our short-term borrowings during 2015, compared to 2014, is primarily due to the financing of the threeacquisitions completed during the third quarter of 2014. However, we believe it is likely that, subject to major increases in the LIBOR or Base Rates chargedby our bank or a major use of funds, interest expense incurred on our short-term borrowings should continue to decline. Interest expense incurred during 2015on our long-term borrowings declined due primarily to the settlement in full of the $3,000,000 term loan discussed above. Lastly, amortization expense ofdebt financing costs increased primarily due to an amendment to our Credit Facility with our bank, which was entered into in August of 2014 and in place forthe full year of 2015. See Liquidity and Capital Resources elsewhere in this Management’s Discussion and Analysis section for further information regarding our bankloans. Interest expense attributable to: Three months endedDecember 31, Increase (Decrease) 2015 2014 Amount % Short-term borrowings $65,000 $94,000 $(29,000) (30.9)%Term loans, including Capital Expenditure Term Loans 56,000 83,000 (27,000) (32.5)Amortization expense of debt financing costs 28,000 28,000 — — Total $149,000 $205,000 $(56,000) (27.3)% Interest expense attributable to: Year Ended December 31, Increase (Decrease) 2015 2014 Amount % Short-term borrowings $357,000 $172,000 $185,000 107.6%Term loans, including Capital Expenditure Term Loans 247,000 274,000 (27,000) (9.9)Amortization expense of debt financing costs 111,000 94,000 17,000 18.1 Total $715,000 $540,000 $175,000 32.4% 21 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. OTHER INCOME In connection with the UAT acquisition, there was the possibility that we could pay as additional consideration to the former shareholders of UAT (the“Sellers”) up to a maximum of £250,000 (“contingent consideration”), should UAT’s net earnings, during the period from date of acquisition, July 29, 2014through the first anniversary date, July 29, 2015, after adjusting for among other things, interest, taxes, depreciation and amortization (“adjusted net income”)exceed a minimum threshold. At the time of the acquisition we believed, based on a range of possible outcomes that it was more likely than not, that UATwould achieve the amount of adjusted net income that would entitle the Sellers to the maximum amount and, accordingly recorded in July 2014, a $425,000obligation as contingent consideration (£250,000 at the then foreign exchange rate). Based upon projected results, at June 30, 2015, we adjusted theestimated contingent consideration payable to the Sellers to $224,000. Subsequently, we and the Sellers have agreed that the contingent considerationpayable to the Sellers shall be £193,435, or approximately $299,000, which was paid to the Sellers in October 2015. As a result of finalizing the contingentconsideration payable to the Sellers we recognized $126,000 as Other income 2015. INCOME TAX EXPENSE The effective tax rates for the years ended December 31, 2015 and 2014, respectively, were 34.0% and 44.9%, respectively. The primary factorsaffecting the 2015 effective tax rate were nondeductible expenses, reversal of liability for contingent purchase price, and state income taxes. The primaryfactors affecting the 2014 effective tax rate were nondeductible expenses, reversal of liabilities of deconsolidated subsidiary and state income taxes. 22 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. LIQUIDITY AND CAPITAL RESOURCES Our cash flows from operations can be somewhat cyclical, with the greatest demand for cash typically in the first and third quarters. We monitor suchmetrics as days’ sales outstanding, inventory requirements, accounts payable and capital expenditures to project liquidity needs, as well as evaluate return onassets. Our primary sources of funds are operating cash flows and our Revolver Loan (“Revolver”) with our bank. We gauge our liquidity and financial stability by various measurements, some of which are shown in the following table: December 31, 2015 2014 Working capital $19,267,000 $13,927,000 Current ratio 2.09 to 1 1.59 to 1 Shareholders’ equity $43,642,000 $39,991,000 Credit Facility We entered into a Loan and Security Agreement in October 2010, as amended (“Credit Agreement”), with Capital One Business Credit Corp.,formerly known as Capital One Leverage Finance Corporation, as agent and lender (“COBC”). COBC’s rights and obligations as agent and lender weresubsequently assigned to, and assumed by, Capital One, National Association, and for the purposes of this Report the lender shall be referred to as “CapitalOne”. As of December 31, 2015, the Credit Agreement was to expire on December 19, 2017 (the “Maturity Date”). The Credit Agreement provides forRevolver borrowings, which are secured by our accounts receivable, mortgages on our real property located in Cranberry, PA, Jupiter, FL and Tampa,FL, inventory and equipment. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross-guaranteed bycertain other subsidiaries. Revolver borrowings bear interest at either LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the CreditAgreement (“Base Rate”), plus the Applicable Margin (the “Applicable Margin”), as defined in the Credit Agreement. The interest rate, either LIBOR or BaseRate, which is added to the Applicable Margin, is at our option and subject to limitations on the number of LIBOR borrowings. Contemporaneously with the ATSCO acquisition on August 13, 2014, we entered into an Amended and Restated Loan and Security Agreement (the“Restated Loan Agreement”) with Capital One. The Restated Loan Agreement, among other things, amended the Credit Agreement by: (1) increasing thetotal amount of the credit facility from $29,423,000 to $33,657,000, (2) increasing the Revolver from $20,000,000 to $22,000,000, (3) creating a new,$3,000,000 Term Loan, as defined in the Restated Loan Agreement (“Term Loan B”), and (4) re-designating as “Term Loan A”, the previously existingoutstanding Term Loan, which relates primarily to the Company’s real property. The balance of Revolver borrowings outstanding was $9,623,000 and $11,817,000 at December 31, 2015 and 2014, respectively. ApplicableMargins added to Revolver borrowings at LIBOR and the Base Rate were 2.00% and 1.25%, respectively, at December 31, 2015, and 2.25% and 1.25%,respectively, at December 31, 2014. The Restated Loan Agreement also provided for a $7,000,000 Term Loan A, which is secured by mortgages on the Real Property, accountsreceivable, inventory and equipment. The balance due on the Term Loan A at December 31, 2015 and 2014 was $6,160,000 and $6,440,000, respectively.Term Loan A is repaid approximately $23,000 each month, with the remaining balance due at the Maturity Date. Term Loan A borrowings incur interest atLIBOR or the Base Rate plus the Applicable Margins, which were 3.00% and 2.00%, respectively, at December 31, 2015 and 2014. The Restated Loan Agreement provided for a Term Loan B, pursuant to which we borrowed the maximum principal amount of $3,000,000, whichfunds were used in connection with the ATSCO acquisition. This Term Loan B was to be repaid in 36 consecutive monthly payments of $83,000, with anadditional mandatory repayment each year equal to 50% of the Company’s Excess Cash Flow (as defined in the Restated Loan Agreement) for such year, ifany. As the result of our determination of the Excess Cash Flow for the year ended December 31, 2014, in April 2015, we repaid $2,417,000, which was thebalance of the Term Loan B at March 31, 2015, with funds available from our Revolver. In accordance with the terms set forth in the Restated LoanAgreement, funds cannot be re-borrowed from this Term Loan B. Additionally, we borrowed $380,000 and $519,000 in March 2012 and September 2012, respectively, as loans primarily for machinery andequipment (“Capex Term Loans”). Currently, the maximum amount we can borrow as a Capex Term Loan is $2,123,000. As such, if necessary, we couldborrow an additional $1,224,000, under the terms of the current credit facility. Repayment of the two Capex Term Loans is based on sixty-monthamortization periods, resulting in repayments of approximately $6,000 and $9,000, respectively. Applicable Margins added to these Capex Term Loans atDecember 31, 2015 and 2014 were 3.0% and 2.0%, respectively, for borrowings at LIBOR and the Base Rate. Once repaid, funds cannot be re-borrowed fromthis portion of the Restated Loan Agreement. 23 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The aggregate amounts of long-term debt scheduled to mature in each of the years are, approximately as follows: 2016 $491,000 2017 6,000,000 $6,491,000 We are required to provide Capital One among other things, monthly financial statements, monthly borrowing base certificates and certificates ofcompliance with various financial covenants. We believe we are in compliance with all financial and non-financial covenants. As part of the Restated LoanAgreement, if an event of default occurs, the interest rate would increase by two percent per annum during the period of default, in addition to other remediesprovided to Capital One. At December 31, 2015, we had $14,898,000 of open purchase order commitments, compared to $15,637,000 at December 31, 2014. Other Information Effective February 11, 2016, contemporaneously with the sale of Nationwide, the Company entered into the Consent and Second Amendment to theAmended and Restated Loan and Security Agreement with its bank, Capital One. The sale of Nationwide provided sufficient funding to pay down all of itsobligations to Capital One. Further, the amended Credit Agreement, among other things: (i) reduced our credit facility to $10,600,000; (ii) reduced allapplicable margin rates, and (iii) lowered certain recurring fees. See NOTE 12 – SUBSEQUENT EVENTS, in the Notes to Consolidated Financial Statements,for further discussion. On March 8, 2016, our Board of Directors declared a special, one-time cash dividend of $0.50 per share payable on April 4, 2016, to stockholders ofrecord at the close of business on March 21, 2016. The total amount of this special dividend payment will be approximately $1.8 million based on the currentnumber of shares outstanding. Further, our Board of Directors also announced that it approved the initiation of a dividend policy under which we intend todeclare a cash dividend to our stockholders in the amount of $0.20 per share per annum, payable in equal quarterly installments. In conjunction therewith,our Board of Directors declared an initial quarterly cash dividend of $0.05 per share to stockholders of record at the close of business on March 31, 2016.This dividend is payable on April 14, 2016. Cash Flows Cash provided by operating activities for the years ended December 31, 2015 and 2014 was $6,573,000, and $8,716,000, respectively. At December 31, 2015, our net cash balance was $927,000, compared to $1,011,000 at December 31, 2014. As discussed above, with respect to dailycash flows, we operate under the terms and conditions of the Revolver. As a result, all domestic cash receipts are remitted to Capital One lock-boxes. Thus,cash on hand is primarily cash disbursements that have not yet cleared our operating accounts at Capital One, or funds residing in lock-boxes which have notyet been applied. We were able to reduce our total bank debt to $16,066,000 at December 31, 2015 from $21,387,000 at December 31, 2014. Theaforementioned resulted in our total debt to total book capitalization (total debt divided by total debt plus equity), percentage falling to 27.0% at December31, 2015, from to 34.9% at December 31, 2014. We anticipate being able to generate cash from operations during 2016. Capital spending during the year ended December 31, 2015 was $1,422,000, compared to $1,072,000 in 2014. Capital expenditures currentlyplanned for 2016 is approximately $1,600,000, which we expect will be financed through our Restated Loan Agreement and with repayments being madethrough cash flows. The major portion of these planned capital expenditures will be for computer numerical control (“CNC”) equipment to be used at Hy-Tech, with the balance for tooling required for new product development at other operating subsidiaries. Customer concentration Within our Tools segment we have two retail customers that accounted for 9.9% and 31.1%, respectively, at December 31, 2015, of our consolidatedaccounts receivable, compared to 17.7% and 25.6%, respectively, at December 31, 2014. To date, these customers, with minor exceptions, are current in theirpayments. Further, these two customers accounted for 8.6% and 21.0%, respectively, of our 2015 consolidated revenue, compared to 12.2% and 23.1%,respectively, in 2014. 24 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IMPACT OF INFLATION We believe that the effects of changing prices and inflation on our consolidated financial position and our results of operations are immaterial. ENVIRONMENTAL MATTERS Although it is difficult to identify precisely the portion of capital expenditures or other costs attributable to be in compliance with environmentallaws and regulations, we do not expect such expenditures or other costs to have a material adverse effect on our consolidated financial position and results ofoperations. AFFORDABLE CARE ACT The Affordable Care Act (the “ACA”), which was adopted in 2010 and is being phased in over several years, significantly affects the provision ofboth health care services and benefits in the United States. The ACA may impact our cost of providing our employees with health insurance and/or benefits,and may also impact various other aspects of our business. The ACA did not have a material impact on our fiscal 2015 and 2014 financial results. NEW ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Standards Refer to Note 1, "Summary of Accounting Policies", to our consolidated financial statements for a discussion of recent accounting standards andpronouncements. Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted would have a material effecton our consolidated financial statements. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk Not Required 25 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 8. Financial Statements and Supplementary Data P&F INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm27Consolidated Balance Sheets as of December 31, 2015 and 201428Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2015 and 201430Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2015 and 201431Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 201432Notes to Consolidated Financial Statements34 26 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors andShareholders of P&F Industries, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of P&F Industries, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the relatedconsolidated statements of income and comprehensive income, shareholders’ equity and cash flows for the years then ended. P&F Industries, Inc. andSubsidiaries’ management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal controlover financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of P&F Industries, Inc. andSubsidiaries as of December 31, 2015 and 2014 and the results of their operations and their cash flows for the years then ended in conformity with accountingprinciples generally accepted in the United States of America. /s/ CohnReznick LLPJericho, New YorkMarch 30, 2016 27 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31,2015 December 31,2014 ASSETS CURRENT ASSETS Cash $927,000 $1,011,000 Accounts receivable — net 9,722,000 9,547,000 Inventories – net 23,994,000 24,335,000 Deferred income taxes— net 1,131,000 1,149,000 Prepaid expenses and other current assets 1,124,000 1,529,000 TOTAL CURRENT ASSETS 36,898,000 37,571,000 PROPERTY AND EQUIPMENT Land 1,550,000 1,550,000 Buildings and improvements 7,746,000 7,683,000 Machinery and equipment 21,529,000 20,460,000 30,825,000 29,693,000 Less accumulated depreciation and amortization 20,585,000 19,101,000 NET PROPERTY AND EQUIPMENT 10,240,000 10,592,000 GOODWILL 12,027,000 11,980,000 OTHER INTANGIBLE ASSETS — net 11,110,000 12,437,000 OTHER ASSETS — net 303,000 514,000 TOTAL ASSETS $70,578,000 $73,094,000 The accompanying notes are an integral part of these consolidated financial statements. 28 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31,2015 December 31,2014 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Short-term borrowings $9,623,000 $11,817,000 Accounts payable 3,556,000 3,160,000 Accrued compensation and benefits 1,965,000 2,569,000 Accrued other liabilities 1,996,000 2,931,000 Current maturities of long-term debt 491,000 3,167,000 TOTAL CURRENT LIABILITIES 17,631,000 23,644,000 Long-term debt, less current maturities 6,000,000 6,493,000 Deferred tax liabilities – net 3,077,000 2,720,000 Other liabilities 228,000 246,000 TOTAL LIABILITIES 26,936,000 33,103,000 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY Preferred stock - $10 par; authorized - 2,000,000 shares; no shares issued — — Common stock: Class A - $1 par; authorized - 7,000,000 shares; issued - 4,170,000 at December 31, 2015 and 4,139,000 atDecember 31, 2014 4,170,000 4,139,000 Class B - $1 par; authorized - 2,000,000 shares; no shares issued — — Additional paid-in capital 12,884,000 12,695,000 Retained earnings 31,495,000 27,951,000 Treasury stock, at cost - 554,000 shares at December 31, 2015 and 2014 (4,566,000) (4,566,000)Accumulated other comprehensive loss (341,000) (228,000) TOTAL SHAREHOLDERS’ EQUITY 43,642,000 39,991,000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $70,578,000 $73,094,000 The accompanying notes are an integral part of these consolidated financial statements. 29 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Years ended December 31, 2015 2014 Net revenue $81,702,000 $75,035,000 Cost of sales 51,774,000 47,654,000 Gross profit 29,928,000 27,381,000 Selling, general and administrative expenses 23,969,000 23,064,000 Operating income 5,959,000 4,317,000 Other income (126,000) — Interest expense 715,000 540,000 Income before income taxes 5,370,000 3,777,000 Income tax expense 1,826,000 1,697,000 Net income $3,544,000 $2,080,000 Basic earnings per share $0.98 $0.56 Diluted earnings per share $0.94 $0.54 Weighted average common shares outstanding: Basic 3,607,000 3,706,000 Diluted 3,771,000 3,884,000 Net income $3,544,000 $2,080,000 Other comprehensive loss - foreign currency translation adjustment (113,000) (228,000)Total comprehensive income $3,431,000 $1,852,000 The accompanying notes are an integral part of these consolidated financial statements.30 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Class A CommonStock, $1 Par Additionalpaid-in Retained Treasury stock Accumulatedothercomprehensive Total Shares Amount capital earnings Shares Amount loss Balance, January 1, 2014 $38,730,000 4,038,000 $4,038,000 $11,798,000 $25,871,000 (344,000) $(2,977,000) $— Net income 2,080,000 — — — 2,080,000 — — — Exercise of stock options 745,000 98,000 98,000 653,000 — (1,000) (6,000) — Purchase of common stock (1,583,000) — — — — (209,000) (1,583,000) — Issuance of restricted common stock 27,000 3,000 3,000 24,000 — — — — Stock-based compensation 220,000 — — 220,000 — — — — Foreign currency translation adjustment (228,000) — — — — — — (228,000) Balance, December 31, 2014 39,991,000 4,139,000 4,139,000 12,695,000 27,951,000 (554,000) (4,566,000) (228,000) Net income 3,544,000 — — — 3,544,000 — — — Exercise of stock options 73,500 23,500 23,500 50,000 — — — — Issuance of restricted common stock 42,500 7,500 7,500 35,000 — — — — Stock-based compensation 86,000 — — 86,000 — — — — Tax benefit on stock-based compensation 18,000 — — 18,000 — — — — Foreign currency translation adjustment (113,000) — — — — — — (113,000) Balance, December 31, 2015 $43,642,000 4,170,000 $4,170,000 $12,884,000 $31,495,000 (554,000) $(4,566,000) $(341,000) The accompanying notes are an integral part of these consolidated financial statements. 31 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2015 2014 Cash Flows from Operating Activities Net income $3,544,000 $2,080,000 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash charges: Depreciation and amortization 1,720,000 1,551,000 Amortization of other intangible assets 1,295,000 718,000 Amortization of debt issue costs 111,000 94,000 Provision for/(recovery of) doubtful accounts 18,000 (90,000)Stock-based compensation 86,000 220,000 Restricted stock-based compensation 43,000 27,000 (Gain) loss on sale of fixed assets (2,000) 14,000 Deferred income taxes 382,000 1,458,000 Fair value reduction in contingent consideration (126,000) — Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (215,000) 1,233,000 Inventories 223,000 1,670,000 Prepaid expenses and other current assets 401,000 250,000 Other assets 101,000 79,000 Accounts payable 408,000 (318,000)Accrued compensation and benefits (595,000) 492,000 Accrued other liabilities (804,000) (746,000)Other liabilities (17,000) (16,000)Total adjustments 3,029,000 6,636,000 Net cash provided by operating activities 6,573,000 8,716,000 The accompanying notes are an integral part of these consolidated financial statements. 32 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2015 2014 Cash Flows from Investing Activities: Capital expenditures $(1,422,000) $(1,072,000)Proceeds from disposal of assets 48,000 15,000 Purchase of net assets Air Tool Service Company — (7,659,000)Purchase of Exhaust Technologies, Inc. — (10,377,000)Purchase of Universal Air Tool Company Limited, net of cash acquired of $14,000 — (1,792,000)Net cash used in investing activities (1,374,000) (20,885,000) Cash Flows from Financing Activities: Proceeds from exercise of stock options 73,000 745,000 Purchase of Class A common stock — (1,583,000)Proceeds from short-term borrowings 72,347,000 84,167,000 Repayments of short-term borrowings (74,541,000) (72,710,000)Proceeds from term loan — 3,000,000 Repayments of term loans (3,127,000) (793,000)Proceeds from notes payable — 66,000 Repayments of notes payable (39,000) (21,000)Bank financing costs — (44,000)Excess tax benefit on stock-based compensation 18,000 — Net cash (used in) provided by financing activities (5,269,000) 12,827,000 Effect of exchange rate changes on cash (14,000) (60,000)Net (decrease) increase in cash (84,000) 598,000 Cash at beginning of year 1,011,000 413,000 Cash at end of year $927,000 $1,011,000 Supplemental disclosures of cash flow information: Cash paid for: Interest $615,000 $415,000 Income taxes $1,626,000 $143,000 Supplemental disclosures of non-cash investing and financing activities: Exchange of fixed assets $64,000 — Contingent Consideration on Acquisition $— $425,000 The accompanying notes are an integral part of these consolidated financial statements. 33 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. P&F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2015 and 2014 NOTE 1—SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements contained herein include the accounts of P&F Industries, Inc. and its subsidiaries (“P&F” or the “Company”).All significant intercompany balances and transactions have been eliminated. Certain amounts in the financial statements have been reclassified to conformto classifications used in the current year. The Company The Company operates in two primary lines of business, or segments: (i) tools and other products (“Tools”) and (ii) hardware and accessories(“Hardware”). Tools The Company conducts its Tools business through a wholly-owned subsidiary, Continental Tool Group, Inc. (“Continental”), which in turncurrently operates through its wholly-owned subsidiaries, Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”) and Hy-Tech Machine, Inc.(“Hy-Tech”). During the third quarter of 2014, the Company acquired Exhaust Technologies Inc. (“ETI”), a developer and distributor of pneumatic tools,through a merger between a newly formed, wholly-owned subsidiary of Florida Pneumatic and ETI. Further, in July 2014, Florida Pneumatic acquired all ofthe outstanding shares of Universal Air Tool Company Limited (“UAT”), a distributor of pneumatic tools located in High Wycombe, England. UAT marketspneumatic tools to the automotive market sector primarily in the United Kingdom and Ireland. This acquisition provides the Company with direct entry intothe European pneumatic tool market for the Company’s entire suite of air tool products. Both ETI and UAT are wholly-owned subsidiaries of FloridaPneumatic, and unless otherwise indicated, the operations and results of operations of Florida Pneumatic herein include ETI and UAT as of the respectivedates such companies were acquired. Additionally, during the third quarter of 2014, the Company acquired substantially all the assets of Air Tool ServiceCompany (“ATSCO”), through a wholly-owned subsidiary of Hy-Tech, and unless otherwise indicated, the operations and results of operations of Hy-Techherein include ATSCO as of the date the business was acquired. Florida Pneumatic is engaged in the importation and sale of pneumatic hand tools, primarily for the retail, industrial and automotive markets, andthe importation and sale of compressor air filters. Florida Pneumatic also markets, through its Berkley Tool division (“Berkley”), a product line whichincludes pipe and bolt dies, pipe taps, wrenches, vises and stands, pipe and tubing cutting equipment, hydrostatic test pumps, and replacement electricalcomponents for a widely-used brand of pipe cutting and threading machines. Hy-Tech manufactures and distributes its own line of industrial pneumatic tools, such as impact wrenches, grinders, drills, and motors. Further, it alsomanufactures tools to customer specifications. Its customers include refineries, chemical plants, power generation facilities, heavy construction enterprises,and oil and mining companies. In addition, Hy-Tech manufactures an extensive line of pneumatic tool replacement parts that are sold to original equipmentmanufacturers (“OEMs”), and competitively. It also manufactures and distributes high pressure stoppers for hydrostatic testing fabricated pipe, gears,sprockets, splines and racks and produces a line of siphons. Hardware The Company conducts its Hardware business through a wholly-owned subsidiary, Countrywide Hardware, Inc. (“Countrywide”). Countrywideconducts its business operations through its wholly-owned subsidiary, Nationwide Industries, Inc. (“Nationwide”). Nationwide is an importer andmanufacturer of door, window and fencing hardware and accessories, including rollers, hinges, window operators, sash locks, custom zinc castings and doorclosers. Nationwide’s products are sold through in-house sales personnel and manufacturers’ representatives to distributors, retailers and OEM customers. Endusers of Nationwide’s products include contractors, home builders, pool and patio distributors, OEM/private label customers and general consumers. See NOTE 12- SUBSEQUENT EVENTS, for discussion relating to the sale of Nationwide. 34 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Basis of Financial Statement Presentation The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States(“GAAP”). Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the saleprice is fixed or determinable, and collectability is reasonably assured. The Company sells its goods on terms which transfer title and risk of loss at a specifiedlocation, typically shipping point, port of loading or port of discharge, depending on the final destination of the goods. Revenue recognition from productsales occurs when all factors are met, including transfer of title and risk of loss, which occurs either upon shipment by the Company or upon receipt bycustomers at the location specified in the terms of sale. Other than standard product warranty provisions, the Company’s sales arrangements provide for noother post-shipment obligations. The Company does offer rebates and other sales incentives, promotional allowances or discounts, from time to time and forcertain customers, typically related to customer purchase volume, all of which are fixed or determinable and are classified as a reduction of revenue andrecorded at the time of sale. The Company periodically evaluates whether an allowance for sales returns is necessary. Historically, the Company hasexperienced sales returns. If the Company concludes there are potential sales returns, the Company would provide any necessary provision against sales. Shipping and Handling Costs Expenses for shipping and handling costs are included in selling, general and administrative expenses, and totaled approximately $2,384,000 and$2,081,000, respectively, for the years ended December 31, 2015 and 2014. Cash and Cash Equivalents Cash and cash equivalents consist of cash held in bank demand deposits. The Company considers all highly liquid debt instruments with originalmaturities of three months or less to be cash equivalents. There were no cash equivalents at December 31, 2015 and 2014. Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, accounts payable and short-term debt approximatefair value as of December 31, 2015 and 2014 because of the relatively short-term maturity of these financial instruments. The carrying amounts reported forlong-term debt approximate fair value as of December 31, 2015 and 2014 because, in general, the interest rates underlying the instruments fluctuate withmarket rates. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are customer obligations due under normal trade terms. The Company sells its products to retailers, distributors and originalequipment manufacturers involved in a variety of industries. The Company performs continuing credit evaluations of its customers’ financial condition, andalthough the Company generally does not require collateral, letters of credit may be required from customers in certain circumstances. Management reviews accounts receivable to determine if any receivables will potentially be uncollectible. Factors considered in the determinationinclude, among other factors, number of days an invoice is past due, customer historical trends, available credit ratings information, other financial data andthe overall economic environment. Collection agencies may also be utilized if management so determines. The Company records an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible. TheCompany also records as an additional allowance a certain percentage of aged accounts receivable, based on historical experience and the Company’sassessment of the general financial conditions affecting its customer base. If actual collection experience changes, revisions to the allowance may berequired. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change inthe creditworthiness of any of these customers could have a material effect on the Company’s results of operations in the period in which such changes orevents occur. After all reasonable attempts to collect an account receivable have failed, the amount of the receivable is written off against the allowance.Based on the information available, the Company believes that its allowance for doubtful accounts as of December 31, 2015 is adequate. However, actualwrite-offs might exceed the recorded allowance. 35 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Concentrations of Credit Risk The Company places the majority of its cash with its primary bank, Capital One Bank, National Association (“Capital One”), which is insured by theFederal Deposit Insurance Corporation (“FDIC”). Significant concentrations of credit risk may arise from the Company’s cash maintained at Capital One, asfrom time to time cash balances may exceed the FDIC limits. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable. Within ourTools segment we have two customers that in the aggregate, as of December 31, 2015 and 2014, accounted for 41.0% and 43.3%, respectively, of ourconsolidated accounts receivable. To date, these customers, with few exceptions, are current in their payments. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, possible disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenue and expenses during the reporting period. On an on-going basis P&F evaluates its estimates, including those related to collectability of accountsreceivable, valuation of inventories, recoverability of goodwill and intangible assets and income taxes. The Company bases its estimates on historicalexperience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from those estimates underdifferent assumptions or conditions. Inventories Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method or the weighted average method. Theinventory balance, which includes raw materials, labor, and manufacturing overhead costs, is recorded net of an allowance for obsolete or unmarketableinventory. Such allowance is based upon both historical experience and management’s understanding of market conditions and forecasts of future productdemand. If the actual amount of obsolete or unmarketable inventory significantly exceeds the estimated allowance, the Company’s cost of sales, gross profitand net earnings would be significantly affected. Property and Equipment and Depreciation and Amortization Property and equipment are stated at cost less accumulated depreciation and amortization. Generally, the Company capitalizes items in excess of$1,000. Minor replacements and maintenance and repair items are charged to expense as incurred. Upon disposal or retirement of assets, the cost and relatedaccumulated depreciation are removed from the Company’s consolidated balance sheet. Depreciation of buildings and machinery and equipment is computed by using the straight-line method over the estimated useful lives of the assets.Buildings are depreciated over periods ranging from 27.5 to 31 years, and machinery and equipment is depreciated over periods ranging from 3 to 10 years.Leasehold improvements are amortized over the life of the lease or the useful life of the related asset, whichever is shorter. 36 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Long-Lived Assets In accordance with authoritative guidance issued by the Financial Accounting Standards Board (“FASB”), pertaining to the accounting for theimpairment or disposal of long-lived assets, property and equipment and purchased intangibles subject to amortization, are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s assessment ofrecoverability of property and equipment is performed on an entity level. Recoverability of assets to be held and used is measured by a comparison of thecarrying amount of such asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of such assetexceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceedsthe fair value of the asset. Acquisitions The Company accounts for acquired businesses using the purchase method of accounting, which requires that the assets acquired, liabilitiesassumed, and contingent consideration, if any, are recorded as of the date of the acquisition at their respective fair values. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred and that restructuring costs be expensed in periods subsequent to theacquisition date. Generally, the Company engages third party valuation appraisal firms to assist it in determining the fair values and useful lives of the assetsacquired and liabilities assumed. The Company records a preliminary purchase price allocation for its acquisitions and finalizes purchase price allocations asadditional information relative to the fair values of the assets acquired become known. Goodwill, Intangible and Long-Lived Assets Goodwill is carried at cost less any impairment charges. Goodwill and intangible assets with indefinite lives are not amortized but are subject to anannual test for impairment at the entity unit level (operating segment or one level below an operating segment) and between annual tests in certaincircumstances. In accordance with authoritative guidance issued by the FASB, the Company tests goodwill for impairment on an annual basis. This testoccurs in the fourth quarter or more frequently if the Company believes indicators of impairment exist. An entity has the option to first assess qualitativefactors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it isnot more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair value of the Company’s reportingunits with the reporting unit’s carrying amount, including goodwill. The Company generally determines the fair value of its reporting units using the incomeapproach methodology of valuation that includes the expected present value of future cash flows and the market valuation approach. If the carrying amountof a reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to determine the amount ofimpairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the reporting unit’s goodwill with the carryingamount of that goodwill. The measurement of goodwill subsequent to its initial recognition complies with the authoritative guidance issued by the FASB. Intangible assets other than goodwill and intangible assets with indefinite lives are carried at cost less accumulated amortization. Intangible assetsare generally amortized on a straight-line basis over their respective useful lives, generally three to twenty years. Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate ofundiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets andcertain identifiable intangible assets that management expects to hold and use is based on the amount by which the carrying value exceeds the fair value ofthe asset. Warranty Liability The Company offers certain warranties against product defects for periods ranging from one to three years. Certain products carry limited lifetimewarranties. The Company’s typical warranties require it to repair or replace the defective products during the warranty period at no cost to the customer. Atthe time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on revenueand historical experience. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. While theCompany believes that its estimated liability for product warranties is adequate and that the judgment applied is appropriate, the estimated liability for theproduct warranties could differ materially from future actual warranty costs. 37 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Income Taxes The Company accounts for income taxes using the asset and liability approach. This approach requires the recognition of current tax assets orliabilities for the amounts refundable or payable on tax returns for the current year, as well as the recognition of deferred tax assets or liabilities for theexpected future tax consequences of temporary differences that can arise between (a) the amount of taxable income and pretax financial income for a year,such as from net operating loss carryforwards and other tax credits, and (b) the tax bases of assets or liabilities and their reported amounts in the consolidatedfinancial statements. Deferred tax assets and liabilities are measured using enacted tax rates. The impact on deferred tax assets and liabilities of changes in taxrates and laws, if any, is reflected in the consolidated financial statements in the period enacted. Further, we evaluate the likelihood of realizing benefit fromour deferred tax assets by estimating future sources of taxable income and the impact of tax planning strategies. Deferred tax assets are reduced by a valuationallowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company files a consolidated Federal tax return. P&F and certain of its subsidiaries file combined tax returns in New York and Texas. Allsubsidiaries, other than UAT, file other state and local tax returns on a stand-alone basis. UAT files an income tax return to the taxing authorities in theUnited Kingdom. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while otherpositions are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of atax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely thannot that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offsetor aggregated with other positions. For tax positions that meet the more-likely-than-not recognition threshold, the tax benefit is measured as the largestamount that is judged to have a greater than 50 percent likelihood of being realized upon ultimate settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above, is reflected as a liability for unrecognizedtax benefits in the consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities uponexamination. Interest and penalties associated with unrecognized tax benefits are classified as income taxes in the consolidated statements of income andcomprehensive income. Advertising The Company expenses its costs of advertising in the period in which they are incurred. Advertising costs for the years ended December 31, 2015and 2014 were $1,239,000 and $1,642,000, respectively. Earnings Per Common Share Basic earnings per common share exclude any dilution. It is based upon the weighted average number of shares of common stock outstanding duringthe year. Diluted earnings per common share reflect the effect of shares of common stock issuable upon the exercise of stock options, unless the effect onearnings is anti-dilutive. Diluted earnings per common share is computed using the treasury stock method. Under this method, the aggregate number of shares of commonstock outstanding reflects the assumed use of proceeds from the hypothetical exercise of any outstanding options to purchase shares of the Company’s ClassA Common Stock. The average market value for the period is used as the assumed purchase price. The following table sets forth the computation of basic and diluted earnings per common share: Years Ended December 31, 2015 2014 Numerator: Numerator for basic and diluted income per common share: Net income $3,544,000 $2,080,000 Denominator: Denominator for basic income per share—weighted average common shares outstanding 3,607,000 3,706,000 Effect of dilutive securities: Stock options 164,000 178,000 Denominator for diluted income per share—adjusted weighted average common shares and assumedconversions 3,771,000 3,884,000 38 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. At December 31, 2015 and 2014 and during the years then ended, there were outstanding stock options whose exercise prices were higher than theaverage market values for the respective periods. These options are anti-dilutive and were excluded from the computation of diluted earnings per share duringthe years ended December 31, 2015 and 2014. The average anti-dilutive options outstanding for the years ended December 31, 2015 and 2014 were 134,000and 219,547, respectively. Share-Based Compensation In accordance with GAAP, the Company measures and recognizes compensation expense for all share-based payment awards based on estimated fairvalues. Share-based compensation expense is included in selling, general and administrative expense on the accompanying consolidated statements ofincome and comprehensive income. With respect to stock options, GAAP requires companies to estimate the fair value of share-based payment awards on the date of grant using anoption-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods inthe Company’s consolidated statement of income and comprehensive income. The Company records compensation expense ratably over the vesting periods.The Company estimates forfeitures at the time of grant and revises this estimate, if necessary, in subsequent periods if actual forfeitures differ from thoseestimates. The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards granted. As such, the Company’sdetermination of fair value of share-based payment awards is affected by the Company’s stock price as well as assumptions regarding a number of complexand subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, relevantinterest rates, and the expected term of the awards. With respect to any issuance of its common stock, the Company determines fair value per share as the closing price of its common stock on the dateof the grant of said shares. Foreign Currency Translation The assets and liabilities of international operations are translated at the exchange rates in effect at the balance sheet date. Revenue and expenseaccounts are translated at the monthly average exchange rates. Adjustments arising from the translation of the foreign currency financial statements of theCompany's international operations are reported as a component of "Accumulated other comprehensive loss" in the Company's consolidated balance sheets. For foreign currency remeasurement from each local currency into the appropriate functional currency, monetary assets and liabilities are remeasuredto functional currencies using current exchange rates in effect at the balance sheet date. Gains or losses from these remeasurements were not significant andhave been included in the Company’s consolidated statements of income and comprehensive income. Non-monetary assets and liabilities are recorded athistorical exchange rates, and the related remeasurement gains or losses are reported as a component of "Accumulated other comprehensive loss" in theCompany's consolidated balance sheets. New Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2016-02, Leases. This ASU is a comprehensive new leasesstandard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companiesto recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinctionbetween finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similarto the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annualperiods beginning after December 15, 2018, including interim periods within those fiscal years; earlier adoption is permitted. In the financial statements inwhich the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment toequity. Practical expedients are available for election as a package and if applied consistently to all leases. The Company is currently evaluating the impactof the adoption of this guidance on its consolidated financial condition, results of operations and cash flows. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. ASU 2015-17 is aimed at reducing complexityin accounting standards. Currently, GAAP requires the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrentasset or liability. This requires a jurisdiction-by-jurisdiction analysis based on the classification of the assets and liabilities to which the underlyingtemporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attribute is expected to be realized. Any valuationallowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. To simplify presentation,the new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balancesheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. 39 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction, companies are still prohibited fromoffsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The new guidance is effective in fiscal yearsbeginning after December 15, 2016, including interim periods within those years. Early adoption is permitted as of the beginning of an interim or annualreporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively by reclassifying thecomparative balance sheet. This ASU is expected to have no impact on the Company’s results of operations. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which defers by one yearthe mandatory effective date of its revenue recognition standard, and provides entities the option to adopt the standard as of the original effective date. Thenew standard is now effective for annual reporting periods beginning after December 15, 2017, which for us is January 1, 2018, and interim periods withinthose annual periods. Early adoption is now permitted, but not before the original effective date, which for us is January 1, 2017. We are currently evaluatingthe impact, if any, this new standard will have on our consolidated financial statements, when we will adopt the new standard, and the method of adoption. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 requires entities to measure most inventoriesat the lower of cost or net recognizable value, simplifying the current requirement that inventories be measured at the lower of cost or market. The ASU willnot apply to inventories that are measured using the last-in, first-out method or retail inventory method. The guidance will be effective prospectively forannual periods, and interim periods within those annual periods, that begin after December 15, 2016; earlier adoption is permitted. This guidance is notexpected to have a material impact on the Company's consolidated financial condition, results of operations or cash flows. The Company does not believe that any recently issued accounting standards, in addition to those referenced above, if adopted, would have amaterial effect on its consolidated financial statements. NOTE 2 – ACQUISITIONS Exhaust Technologies Inc. On July 1, 2014, the Company acquired ETI, a developer and distributor of pneumatic tools, through a merger between a newly formed wholly-owned subsidiary of Florida Pneumatic and ETI. ETI markets its AIRCAT and NITROCAT brand pneumatic tools primarily to the automotive market. ETI’sbusiness operates through Florida Pneumatic. The purchase price for this acquisition consisted of $10,377,000 in cash plus the assumption of certainpayables. Universal Air Tool Company Limited On July 29, 2014, the Company acquired all of the outstanding shares of UAT, a distributor of pneumatic tools. UAT, which is located in HighWycombe, England, markets pneumatic tools to the automotive market sector primarily in the United Kingdom and Ireland. The purchase price for thisacquisition consisted of approximately $1,947,000 in cash, net of a post-closing working capital adjustment. As part of this transaction, there was thepossibility that the Company could pay as additional consideration (“contingent consideration”), to the former shareholders of UAT (the “Sellers”) up to amaximum of £250,000 should UAT’s net earnings during the period from date of acquisition through the first anniversary date, July 29, 2015, after adjustingfor among other things, interest, taxes, depreciation and amortization (“adjusted net income”) exceed a minimum threshold. At the time of the acquisition, theCompany believed, based on a range of possible outcomes that it was more likely than not that UAT would achieve the amount of adjusted net income thatwould entitle the Sellers to the maximum amount, and accordingly recorded a $425,000 obligation as contingent consideration (£250,000 at the then foreignexchange rate). Based upon projected results, at June 30, 2015, the Company adjusted the estimated contingent consideration payable to the Sellers to$224,000. Subsequently, the Company and the Sellers agreed that the contingent consideration payable to the Sellers shall be £193,435, or approximately$299,000. As a result, the Company adjusted the contingent consideration payable to $299,000, and recognized $75,000 as Other Expense in the three-month period ended September 30, 2015. The $299,000 agreed upon amount was paid to the Sellers in October 2015. 40 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Air Tool Service Company On August 13, 2014, a newly formed wholly owned subsidiary of Hy-Tech, acquired substantially all of the assets comprising the business ofATSCO, an Ohio based corporation engaged in the design, manufacture and distribution of pneumatic tools and parts. The purchase price consisted ofapproximately $7,659,000 in cash and the assumption of certain liabilities, and is subject to a post-closing working capital adjustment. The Company is stillseeking to reach agreement with the seller of the ATSCO assets on the matter of the post-closing working capital adjustment, among other things. All three acquisitions are included as a part of the Company’s Tool segment. ETI and UAT have been integrated into the business operations ofFlorida Pneumatic, and ATSCO has been integrated into the business operations of Hy-Tech since their respective dates of acquisition. As such, it isimpracticable to determine the specific revenue and earnings directly attributable to any of the acquired businesses. In connection with these acquisitions, the Company recorded acquisition-related costs in selling, general and administrative expense, that totaledapproximately $764,000 for the year ended December 31, 2014. The following unaudited pro-forma combined financial information gives effect to the acquisition of ETI, UAT and ATSCO as if they wereconsummated January 1, 2014. This unaudited pro-forma financial information is presented for information purposes only, and is not intended to presentactual results that would have been attained had the acquisitions been completed as of January 1, 2014 (the beginning of the earliest period presented) or toproject potential operating results as of any future date or for any future periods. Twelve months endedDecember 31, 2014(Unaudited) Revenue $83,355,000 Net income $3,075,000 Earnings per share - basic $0.83 Earnings per share - diluted $0.79 NOTE 3—ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable—net consists of: December 31, 2015 December 31, 2014 Accounts receivable $9,886,000 $9,693,000 Allowance for doubtful accounts (164,000) (146,000) $9,722,000 $9,547,000 NOTE 4—INVENTORIES-NET Inventories consist of: December 31, 2015 December 31, 2014 Raw materials $2,128,000 $2,014,000 Work in process 1,395,000 1,433,000 Finished goods 20,471,000 20,888,000 $23,994,000 $24,335,000 41 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets with indefinite lives are tested annually or whenever events or circumstances indicate the carrying value ofthese assets may not be recoverable. In accordance with authoritative guidance issued by the FASB, the Company performed an annual impairment test ofgoodwill and indefinite-lived intangible assets during the fourth quarter based on conditions as of November 30, 2015. The impairment testing is performed in two steps: (i) The Company compares the fair value of a reporting unit with its carrying value, and (ii) if thereis impairment, the Company measures the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of thatgoodwill. The revised fair value of a reporting unit is allocated to the assets and liabilities of the business unit to arrive at an implied fair value of goodwill,based upon known facts and circumstances, as if the acquisition occurred at that time. In 2015, with respect to Florida Pneumatic and Hy-Tech, the Companydetermined the fair value using the income approach methodology of valuation, which considers the expected present value of future cash flows. As anintegral part of the valuation process the Company utilizes its latest cash flows forecasts for the next four fiscal years, and then applies projected minimalgrowth for all remaining years, based upon available statistical data and management’s estimates. The result of the Company’s Step one impairment test forboth Florida Pneumatic and Hy-Tech determined that the fair value of each reporting unit exceeded the carrying value and, as such, no impairment toGoodwill and other intangible assets was recorded in 2015. With respect to Nationwide, the Company performed a qualitative impairment analysis on itsgoodwill. The Company determined that Nationwide’s fair value exceeded its reported book value at November 30, 2015. As such, no impairment wasindicated and no further testing was required. The changes in the carrying amount of goodwill by segment for 2014 and 2015 are as follows: Consolidated Tools Hardware Balance, January 1, 2014 $5,150,000 $3,277,000 $1,873,000 Acquisition of ETI, UAT and ATSCO 6,845,000 6,845,000 — Currency translation adjustments (15,000) (15,000) — Balance December 31, 2014 11,980,000 10,107,000 1,873,000 Adjustment to Acquisition of ATSCO 62,000 62,000 — Currency translation adjustments (15,000) (15,000) — Balance, December 31, 2015 $12,027,000 $10,154,000 $1,873,000 Other intangible assets were as follows: December 31, 2015 December 31, 2014 Cost Accumulatedamortization Net bookvalue Cost Accumulatedamortization Net bookvalue Other intangible assets: Customer relationships(1) $13,185,000 $5,386,000 $7,799,000 $13,194,000 $4,551,000 $8,643,000 Trademarks and trade names(1) 2,015,000 — 2,015,000 2,035,000 — 2,035,000 Engineering drawings 410,000 159,000 251,000 410,000 120,000 290,000 Licensing 305,000 293,000 12,000 305,000 235,000 70,000 Non-compete agreements(1) 362,000 134,000 228,000 368,000 41,000 327,000 Patents 1,205,000 400,000 805,000 1,205,000 133,000 1,072,000 Totals $17,482,000 $6,372,000 $11,110,000 $17,517,000 $5,080,000 $12,437,000 (1)A portion of these intangibles are maintained in a foreign currency, and are therefore subject to foreign exchange rate fluctuations. As of December 31, 2015, the Company has no accumulated impairment losses. 42 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The weighted-average amortization periods (in years) related to other intangible assets are as follows: December 31, 2015 December 31, 2014 Customer relationships 10.0 10.9 Trademarks and trade names — — Engineering drawings 8.5 9.2 Licensing 0.3 1.2 Non-compete agreements 2.7 3.6 Patents 5.8 6.1 Amortization expense for intangible assets was approximately $1,295,000 and $718,000, respectively, for the years ended December 31, 2015 and2014. Amortization expense for each of the next five years and thereafter is estimated to be as follows 2016 $1,247,000 2017 1,115,000 2018 974,000 2019 940,000 2020 769,000 Thereafter 4,050,000 $9,095,000 There were no impairment charges recorded for the years ended December 31, 2015 and 2014. NOTE 6—DEBT SHORT-TERM The Company entered into a Loan and Security Agreement in October 2010, as amended (“Credit Agreement”), with Capital One Business CreditCorp., formerly known as Capital One Leverage Finance Corporation, as agent and lender (“COBC”). COBC’s rights and obligations as agent and lender weresubsequently assigned to, and assumed by Capital One, National Association, and for the purposes of this Report the lender and agent under the CreditAgreement and any amendments and/or restatements thereto shall be referred to as “Capital One”. As of December 31, 2015, the Credit Agreement was toexpire on December 19, 2017, (the “Maturity Date”). The Credit Agreement provides for a Revolver Loan (“Revolver”), borrowings under which are securedby the Company’s accounts receivable, mortgages on its real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”), inventory andequipment. P&F and certain of its subsidiaries are borrowers under the Credit Agreement, and their obligations are cross-guaranteed by certain othersubsidiaries. At the Company’s option, Revolver borrowings bear interest at either LIBOR (London InterBank Offered Rate) or the Base Rate, as defined inthe Credit Agreement (“Base Rate”), plus the Applicable Margin (the “Applicable Margin”), as defined in the Credit Agreement. The interest rate, eitherLIBOR or Base Rate, which is added to the Applicable Margin, is at the option of the Company, subject to limitations on the number of LIBOR borrowings. Contemporaneously with the ATSCO acquisition described in Note 2, the Company, on August 13, 2014, entered into an Amended and RestatedLoan and Security Agreement, (the “Restated Loan Agreement”), with Capital One. The Restated Loan Agreement, among other things, amended the CreditAgreement by: (1) increasing the total amount of the credit facility from $29,423,000 to $33,657,000, (2) increasing the Revolver from $20,000,000 to$22,000,000, (3) creating a new Term Loan, as defined in the Restated Loan Agreement (“Term Loan B”), and (4) re-designating as “Term Loan A”, thepreviously existing outstanding Term Loan, which relates primarily to the Company’s real property. In addition, the Restated Loan Agreement also resetcertain financial covenants. 43 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. At December 31, 2015 and 2014, the balance of Revolver borrowings outstanding was $9,623,000 and $11,817,000, respectively. ApplicableMargins added to Revolver borrowings at LIBOR and the Base Rate were 2.00% and 1.25%, respectively, at December 31, 2015 and were 2.25% and 1.25%,respectively, at December 31, 2014. LIBOR Base Rate Range of Applicable Margins added to Revolver borrowings during: 2015 2.00 points to2.50 points 1.00 points to1.50 points 2014 1.50 points to2.25 points 0.50 points to1.25 points The Company is required to provide Capital One with, among other things, monthly financial statements, monthly borrowing base certificates andcertificates of compliance with various financial covenants. The Company believes it is in compliance with all covenants under the Restated LoanAgreement. As part of the Restated Loan Agreement, if an event of default occurs, the interest rate would increase by two percent per annum during the periodof default, in addition to other remedies provided to Capital One. LONG-TERM The Restated Loan Agreement also provides for Term Loan A, which is secured by mortgages on the Real Property, accounts receivable, inventoryand equipment. Term Loan A borrowings can be at either LIBOR, or at the Base Rate, as defined in the Restated Loan Agreement, or a combination of thetwo plus the Applicable Margins, which for LIBOR borrowings at December 31, 2015 and 2014 was 3.0%. The Applicable Margins for borrowings at theBase rate was 2.0% at December 31, 2015 and 2014. Additionally, the Restated Loan Agreement provided for a Term Loan B, pursuant to which the Company borrowed the maximum principal amountof $3,000,000 in connection with the ATSCO acquisition. Term Loan B borrowings incurred interest at LIBOR or the Base Rate or a combination, plus theApplicable Margins. This Term Loan B was scheduled to be repaid in 36 consecutive monthly payments of $83,000, with additional mandatory repaymentseach year equal to 50% of the Company’s Excess Cash Flow (as defined in the Restated Loan Agreement) for such year, if any. As the result of the Company’sExcess Cash Flow for the year ended December 31, 2014, on April 2, 2015 the Company repaid $2,417,000, which was the balance of the Term Loan B, withfunds available from its Revolver. The Company borrowed $380,000 and $519,000 in March 2012 and September 2012, respectively, as loans primarily for machinery and equipment(“Capex Term Loans”). Applicable Margins added to these Capex Term Loans at December 31, 2015 and 2014 were 3.00% and 2.00%, for borrowings atLIBOR and the Base Rate, respectively. Long-term debt: December 31, 2015 December 31, 2014 Term Loan A - $23,000 payable monthly January 2013 through December 2017, balance due December 19,2017. $6,160,000 $6,440,000 Term Loan B - $83,000 payable monthly September 2014 through March 2015. — 2,667,000 Capex Term Loan - $6,000 payable monthly May 2012 through April 2017. 101,000 178,000 Capex Term Loan - $9,000 payable monthly October 2012 through September 2017. 182,000 285,000 Other 48,000 90,000 6,491,000 9,660,000 Less current maturities 491,000 3,167,000 $6,000,000 $6,493,000 The aggregate amounts of long-term debt scheduled to mature in each of the years ended December 31, are approximately as follows: 2016—$491,000 and 2017—$6,000,000. Interest expense on long-term debt was approximately $247,000 and $274,000, respectively, for the years ended December31, 2015 and 2014. Effective February 11, 2016, the Company entered into the Consent and Second Amendment to the Amended and Restated Loan and SecurityAgreement with Capital One. See NOTE 12 – SUBSEQUENT EVENTS for further discussion. 44 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 7—STOCK OPTIONS – STOCK COMPENSATION At the Annual Meeting of Stockholders held May 23, 2012 (the “Annual Meeting”), the Company’s stockholders approved the P&F Industries, Inc.2012 Stock Incentive Plan (the “2012 Plan”). The 2012 Plan authorizes the issuance, to employees, consultants and non-employee directors of nonqualifiedstock options, stock appreciation rights, restricted stock, performance shares, performance units, and other stock-based awards. In addition, employees areeligible to be granted incentive stock options under the 2012 Plan. The 2012 Plan is currently administered by the compensation committee of theCompany’s Board of Directors (the “Committee”). The aggregate number of shares of the Company’s Class A Common Stock (“Common Stock”) that may beissued under the 2012 Plan may not exceed 325,000 shares; provided, however, that any shares of Common Stock that are subject to a stock option, stockappreciation right or other stock-based award that is based on the appreciation in value of a share of Common Stock in excess of an amount equal to at leastthe fair market value of the Common Stock on the date such other stock-based award is granted (each an “Appreciation Award”) will be counted against thislimit as one share for every share granted. Any shares of restricted stock or shares of Common Stock that are subject to any other award other thanAppreciation Award will be counted against this limit as 1.5 shares for every share granted. The maximum number of shares of Common Stock with respect to which any award of stock options, stock appreciation rights or other AppreciationAward that may be granted under the 2012 Plan during any fiscal year to any eligible employee or consultant will be 100,000 shares per type of award. Themaximum number of shares of Common Stock subject to any award of performance shares for any performance period, other stock based awards that are notAppreciation Awards, or shares of restricted stock for which the grant of such award or the lapse of the relevant restriction period is subject to the attainmentof specified performance goals that may be granted under the 2012 Plan during any fiscal year to any eligible employee or consultant will be 65,000 sharesper type of award. The maximum number of shares of Common Stock for all such types of awards to any eligible employee or consultant will be 165,000shares during any fiscal year. There are no annual limits on the number of shares of Common Stock with respect to an award of restricted stock that is notsubject to the attainment of specified performance goals to eligible employees or consultants. The maximum value at grant of performance units which maybe granted under the 2012 Plan during any fiscal year will be $1,000,000. The maximum number of shares of Common Stock subject to any award which maybe granted under the 2012 Plan during any fiscal year of the Company to any non-employee director will be 35,000 shares. With respect to stock options, the Committee will determine the number of shares of Common Stock subject to each option, the term of each option,which may not exceed ten years (or five years in the case of an incentive stock option granted to a 10% stockholder), the exercise price, the vesting schedule(if any), and the other material terms of each option. No stock option may have an exercise price less than the fair market value of the Common Stock at thetime of grant (or, in the case of an incentive stock option granted to a 10% stockholder, 110% of fair market value). With respect to all other permissiblegrants under the 2012 Plan, the Committee will determine their terms and conditions, subject to the terms and conditions of the 2012 Plan. The 2012 Plan, which terminates in May 2022, is the successor to the Company’s 2002 Stock Incentive Plan (“Previous Plan”) – see below. Stockoption awards made under the Previous Plan will continue in effect and remain governed by the provisions of that plan. The Company’s Previous Plan authorized the issuance to employees and directors of options to purchase a maximum of 1,100,000 shares ofCommon Stock. These options had to be issued within ten years of the effective date of the Previous Plan and are exercisable for a ten year period from thedate of grant, at prices not less than 100% of the closing market value of the Common Stock on the date the option is granted. In the event options grantedcontained a vesting schedule over a period of years, the Company recognized compensation cost for these awards ratably over the service period. There were no Common Stock options granted in 2015 or 2014. 45 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following table contains information on the status of the Company’s stock options: NumberofShares WeightedAverageExercise Priceper share AggregateIntrinsicValue Outstanding, January 1, 2014 633,188 $6.76 Granted — — Exercised (97,688) 7.69 Expired (30,500) 7.99 Outstanding, December 31, 2014 505,000 6.51 Granted — — Exercised (23,500) 3.11 Expired (24,500) 16.50 Outstanding, December 31, 2015 457,000 $6.15 $1,431,000 Vested, December 31, 2015 433,160 $6.04 $1,416,000 All options that expired in 2015 and 2014 were issued under the Previous Plan. The following is a summary of changes in non-vested shares, all of which are expected to vest: December 31, 2015 2014 OptionShares WeightedAverageGrant-DateFair Value OptionShares WeightedAverageGrant-DateFair Value Non-vested shares, beginning of year 61,006 $6.14 121,500 $5.38 Granted — — — Vested (37,166) 5.76 (60,494) 4.62 Forfeited — — — Non-vested shares, end of year 23,840 $6.72 61,006 $6.14 Stock-based compensation expense recognized for the years ended December 31, 2015 and 2014 was approximately $86,000 and $220,000,respectively. The Company recognizes stock-based compensation cost over the requisite service period. However, the exercisability of the respective non-vested options, which are at predetermined dates, does not necessarily correspond to the periods in which straight-line amortization of compensationexpenses is recorded. 46 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following table summarizes information about stock options outstanding and exercisable at December 31, 2015: Options Outstanding Options Exercisable Numberoutstanding Weighted AverageRemainingContractualLife (Years) WeightedAverageExercisePrice Numberexercisable Weighted AverageRemainingContractualLife (Years) WeightedAverageExercise Price 85,500 1.5 $11.20 85,500 1.5 $11.20 170,000 2.5 $4.16 170,000 2.5 $4.16 32,500 5.0 $3.05 32,500 5.0 $3.05 55,500 5.4 $4.56 55,500 5.4 $4.56 2,000 6.4 $4.48 2,000 6.4 $4.48 40,000 6.5 $4.95 40,000 6.5 $4.95 71,500 7.3 $8.21 47,660 7.3 $8.21 457,000 4.0 $6.15 433,160 3.8 $6.04 Other Information As of December 31, 2015, the Company had approximately $16,000 of total unrecognized compensation cost related to non-vested awards grantedunder its share-based plans, which it expects to recognize over a weighted-average period of 0.29 years. At December 31, 2015 and 2014, there were 183,267 and 194,517 shares available for issuance under the 2012 Plan. At December 31, 2015, therewere outstanding 113,500 options issued under the 2012 Plan and 343,500 options outstanding issued under the Previous Plan. Restricted Stock The Company, in May 2015, granted 1,000 restricted shares of its common stock to each non-employee member of its Board of Directors, totaling5,000 restricted shares. The Company determined that the fair value of these shares was $8.63 per share, which was the closing price of the Company’sCommon Stock on the date of the grant. These shares cannot be traded earlier than the first anniversary of the grant date. As such, the Company is ratablyamortizing the total non-cash compensation expense of approximately $43,000 in its selling, general and administrative expenses through May 2016. The Company issued 2,500 restricted shares of its common stock to Joseph A. Molino, Jr., the Company’s Chief Financial Officer, in accordancewith an Employment Agreement dated April 2, 2015. The Company determined the fair value of these shares to be $6.86 per share, which was the closingprice of the Company’s Common Stock on the date of the grant. These shares shall vest as to 833 shares on April 2, 2016, 833 shares on April 2, 2017, and834 shares on April 2, 2018; provided, however, that 100% of the then unvested portion of the shares shall vest in the event of Mr. Molino’s death ortermination due to disability or upon a Change in Control (as defined in the 2012 Plan) The Company will ratably amortize the total non-cash value ofapproximately $17,000 as compensation expense in its selling, general and administrative expenses through April 2018. Pursuant to the 2012 Plan, the Company, in May 2014, granted 666 restricted shares of its common stock to each non-employee member of its Boardof Directors, totaling 3,330 restricted shares. The Company determined that the fair value of these shares was $7.43 per share, which was the closing price ofthe Company’s Common Stock on the date of the grant. These shares cannot be traded earlier than the first anniversary of the grant date. As such, theCompany is ratably amortizing the total non-cash compensation expense of approximately $25,000 in its selling, general and administrative expensesthrough May 2015. Treasury Stock On October 14, 2014, the Company acquired 208,325 shares of the Company’s Class A Common Stock from Timothy J. Stabosz in a privatelynegotiated transaction pursuant to a purchase agreement, at a purchase price of $7.60 per share, which was at a discount to the then market price of theCompany’s Common Stock, with an aggregate purchase price of approximately $1,583,000. The purchase agreement contains certain covenants, includingstandstill restrictions imposed on Mr. Stabosz with respect to shares of Common Stock for a three-year period. 47 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 8—INCOME TAXES Income tax expense in the consolidated statements of income and comprehensive income consists of: Years Ended December 31, 2015 2014 Current: Federal $1,293,000 $123,000 State and local 137,000 109,000 Foreign 14,000 7,000 Total current 1,444,000 239,000 Deferred: Federal 328,000 1,830,000 State and local 67,000 208,000 Reversal of State and Local Valuation Allowance — (574,000)Foreign (13,000) (6,000)Total deferred 382,000 1,458,000 Totals $1,826,000 $1,697,000 The Company has state net operating loss carryforwards of $7,500,000, which expire through 2033. Deferred tax assets (liabilities) consist of: December 31, 2015 2014 Deferred tax assets—current: Bad debt reserves $57,000 $52,000 Inventory reserves 1,084,000 1,066,000 Warranty and other reserves 183,000 220,000 1,324,000 1,338,000 Deferred tax (liabilities)—current: Prepaid expenses (193,000) (189,000)Net deferred tax assets—current $1,131,000 $1,149,000 Deferred tax assets—non-current Federal net operating loss $— $206,000 State net operating loss 143,000 208,000 Tax credits — 243,000 Stock-based compensation 531,000 521,000 Other 107,000 95,000 781,000 1,273,000 Deferred tax liabilities—non-current: Depreciation (1,005,000) (1,036,000)Intangibles (2,675,000) (2,864,000)Goodwill (178,000) (93,000) (3,858,000) (3,993,000)Net deferred tax liabilities—non-current $(3,077,000) $(2,720,000) The components of income before income taxes consisted of the following: Years ended December 31, 2015 2014 United State operations $5,220,000 $3,777,000 International operations 150,000 — Income before tax $5,370,000 $3,777,000 48 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. U.S. federal income taxes have not been provided on approximately $150,000 of undistributed earnings at the Company’s foreignsubsidiary at December 31, 2015, because it is the Company’s intent to keep the earnings permanently reinvested. A reconciliation of the Federal statutory rate to the total effective tax rate applicable to income from continuing operations is as follows: Years ended December 31, 2015 2014 Federal income tax computed at statutory rates 34.0% 34.0%(Decrease) increase in taxes resulting from: State and local taxes, net of Federal tax benefit 2.5 4.1 Change in valuation allowance — (10.0)Permanent differences - net (1.2) 5.1 Foreign rate differential (0.9) — Reversal of liabilities (1) — 11.3 Other (0.4) 0.4 Income tax expense 34.0% 44.9% (1)As the result of the expiration of various state statute of limitations pertaining to approximately $1.2 million of unpaid vendor invoicesbelonging to a previously deconsolidated subsidiary, for which claims for payment were not submitted, the Company was required to recognizea gain for income tax purposes for the year ended December 31, 2014. The Company follows the authoritative guidance issued by the FASB that pertains to the accounting for uncertain tax matters. A reconciliation ofthe beginning and ending amounts of unrecognized tax benefits is as follows: Balance January 1, 2014 $— Additions for tax positions related to current year acquisition 866,000 Interest accrual 14,000 Balance at January 1, 2015 880,000 Lapse of statute of limitations (469,000)Interest accrual 21,000 Balance December 31, 2015 $432,000 In connection with one of the acquisitions that occurred in 2014, the Company, in accordance with the ASC 740-10, recorded in Accruedliabilities an uncertain tax position of $432,000 on its Consolidated Balance Sheet as of December 31, 2015. The parties to such transaction enteredinto a tax exposure-related escrow agreement, which together with the indemnity obligations of the seller, the Company believes adequately coversthe entire potential exposure related to the uncertain tax position. As a result, such liability was offset by an indemnification asset recorded inPrepaid expenses and other current assets in the Consolidated Balance Sheet. The Company files a consolidated Federal tax return. The Company and certain of its subsidiaries file tax returns in various U.S. statejurisdictions. Its foreign subsidiary, UAT, files in the United Kingdom. With few exceptions, the years that remain subject to examination are theyears ended December 31, 2012 through December 31, 2014. During the prior year, the Company received notification from the Internal RevenueService of an examination for the year ended December 31, 2013. As of December 31, 2015, no significant preliminary audit findings were receivedby the Company and no reserves have been recorded. Interest and penalties, if any, related to income tax liabilities are included in income tax expense. 49 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 9—COMMITMENTS AND CONTINGENCIES (a) The Company maintains a contributory defined contribution plan that covers all eligible employees. All contributions to this plan arediscretionary. Amounts recognized as expense for contributions to this plan were $397,000 and $373,000 for the years ended December 31, 2015 and 2014,respectively. (b) At December 31, 2015 and 2014, the Company had open purchase order commitments totaling approximately $14,898,000 and $15,637,000,respectively. (c) From time to time, we may be a defendant or co-defendant in actions brought about in the ordinary course of conducting our business. We are notcurrently a defendant or co-defendant in any such action. (d) The Company leases certain facilities and equipment through 2021. Generally, the facility leases carry renewal provisions and require theCompany to pay maintenance costs. Rental payments may be adjusted for increases in taxes and insurance above specified amounts. Operating lease expensefor 2015 and 2014 was $418,000 and $360,000, respectively. Future minimum payments under non-cancelable operating leases with initial or remainingterms of more than one year as of December 31, 2015 were as follows: 2016 $358,000 2017 179,000 2018 149,000 2019 114,000 2020 92,000 Thereafter 6,000 $898,000 50 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 10—BUSINESS SEGMENTS The Company has organized its business into two reportable business segments: “Tools” and “Hardware”. The Company is organized around thesetwo distinct product segments, each of which has very different end users. For reporting purposes, Florida Pneumatic, and Hy-Tech are combined in the Toolssegment, with Nationwide being the sole entity reported in the Hardware segment. The Company evaluates segment performance based primarily on segmentoperating income. The accounting policies of each of the segments are the same as those described in Note 1. The following table presents financial information by segment for the years ended December 31, 2015 and 2014. Segment operating incomeexcludes general corporate expenses, interest expense and income taxes. Identifiable assets are those assets directly owned or utilized by the particularbusiness. Year ended December 31, 2015 Consolidated Tools Hardware Net revenues from unaffiliated customers $81,702,000 $60,312,000 $21,390,000 Segment operating income $11,270,000 $7,376,000 $3,894,000 General corporate expense (5,311,000) Other income 126,000 Interest expense (715,000) Income before income taxes $5,370,000 Segment assets $68,952,000 $58,694,000 $10,258,000 Corporate assets 1,626,000 Total assets $70,578,000 Long-lived assets, including $49,000 of corporate assets $33,377,000 $28,832,000 $4,496,000 Depreciation and amortization expense, including $16,000 of corporate expense $1,720,000 $1,455,000 $249,000 Amortization of other intangible assets expense $1,295,000 $1,237,000 $58,000 Year ended December 31, 2014 Consolidated Tools Hardware Net revenues from unaffiliated customers $75,035,000 $56,114,000 $18,921,000 Segment operating income $10,313,000 $6,715,000 $3,598,000 General corporate expense (5,996,000) Interest expense (540,000) Income before income taxes $3,777,000 Segment assets $71,394,000 $60,366,000 $11,028,000 Corporate assets 1,700,000 Total assets $73,094,000 Long-lived assets, including $51,000 of corporate assets $35,009,000 $30,326,000 $4,632,000 Depreciation and amortization expense, including $11,000 of corporate expense $1,551,000 $1,336,000 $204,000 Amortization of other intangible assets expense $718,000 $661,000 $57,000 There was no impairment charge recorded in 2015 or 2014. 51 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Revenue and long-lived assets by geographic region were as follows: Year ended December 31, 2015 2014 Revenue: North America $77,834,000 $72,881,000 Europe 2,989,000 1,563,000 All other 879,000 591,000 Total Revenue $81,702,000 $75,035,000 Long-Lived Assets: North America $32,320,000 $33,782,000 Europe 1,057,000 1,227,000 Total Long-Lived Assets $33,377,000 $35,009,000 NOTE 11—RELATED PARTY TRANSACTIONS The president of one of the Company’s subsidiaries is part owner of one of that subsidiary’s vendors. During the years ended December 31, 2015 and2014, the Company purchased approximately $690,000 and $964,000, respectively, of product from this vendor. At December 31, 2015 and 2014, theCompany had trade payables to this vendor of $63,000 and $103,000, respectively. Additionally, during 2015 and 2014, the Company recorded sales to thisvendor of $7,000 and $27,000, respectively. NOTE 12—SUBSEQUENT EVENTS On February 11, 2016 (the “Closing Date”), Countrywide, P&F, Nationwide and Argosy NWI Holdings, LLC, a Delaware limited liability company(“Argosy”), entered into a Stock Purchase and Redemption Agreement (the “Stock Purchase and Redemption Agreement”), pursuant to which, among otherthings, after giving effect to certain contributions and redemptions of Nationwide’s common shares, (“Nationwide Shares”) Argosy acquired all of theoutstanding Nationwide Shares from Countrywide (the “Acquisition”). The Acquisition was effective as of 11:59 p.m. on the Closing Date. Pursuant to the Stock Purchase and Redemption Agreement, the purchase price for the Nationwide Shares acquired in the Acquisition wasapproximately $22.2 million, before giving effect to: (i) an estimated working capital adjustment of approximately $877,000, which is subject to furtheradjustment post-closing, and (ii) an escrowed amount of $1,955,000. In addition, the Stock Purchase and Redemption Agreement provides that, under certaincircumstances, up to an additional $400,000 may be contributed into escrow by Countrywide. Effective as of the Closing Date, the Company and the president of Nationwide, entered into a purchase agreement (the “Purchase Agreement”),pursuant to which, among other things the Company acquired (i) 30,000 shares of the Company’s Common Stock at the aggregate purchase price of$254,940 and (ii) options to acquire 6,667 shares of the Company’s Common Stock at an aggregate price of $16,597. The Purchase Agreement containscertain covenants, including certain limited standstill restrictions imposed on the president of Nationwide with respect to shares of the Company’s CommonStock for a three-year period. The Purchase Agreement also contains customary representations and warranties. Contemporaneously with the Acquisition and the Repurchase, the Company entered into the Consent and Second Amendment to the Amended andRestated Loan and Security Agreement, effective as of February 11, 2016 (the “Amendment”), with Capital One. The Amendment amended the Restated LoanAgreement, dated as of August 13, 2014 (the “Loan Agreement”). The Amendment, among other things: (i) provided CONA’s consent to the transactionscontemplated by the Stock Purchase and Redemption Agreement and the Repurchase and (ii) amended the Restated Loan Agreement by: (a) reducing theaggregate Commitment (as defined in the Restated Loan Agreement) to $11,600,000; (b) reducing the Term Loan A to $100,000; (c) reducing the RevolverCommitment to $10,000,000 (less the new Term Loan A balance of $100,000); (d) reducing the Capex Loan Commitment to $1,600,000; (e) modifyingcertain financial covenants, interest rate margins and fee obligations; and (f) extending the expiration of the credit facility under the Restated LoanAgreement from December 19, 2017 to February 11, 2019. In connection with the Acquisition, effective as of the Closing Date, Countrywide, as landlord, and Nationwide, as tenant, entered into a new lease(the “Lease”) relating to the Tampa, Florida real property (the “Premises”). The Lease provides for, among other things, a seven-year term commencing on theClosing Date and an annual base rent of approximately $252,000 with annual escalations. The Lease also provides that the tenant will pay certain taxes andoperating expenses associated with the Premises. The Lease replaces the previous lease between Countrywide and Nationwide. 52 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Lastly, effective as on the Closing Date, Countrywide and Nationwide entered into an Option and Right of First Refusal Agreement relating to thePremises, pursuant to which Countrywide granted a purchase option to Nationwide relating to the Premises if such option is initiated within 60 daysfollowing the Closing Date, in addition to the right of first refusal relating to certain offers made by third parties during the five-year period following theClosing Date. The following unaudited pro-forma financial information gives effect to the sale of Nationwide as if it were consummated January 1, 2014. Thisunaudited pro-forma financial information is presented for information purposes only, and is not intended to present actual results that would have beenattained had the sale been completed as of January 1, 2014, (the beginning of the earliest period presented) or to project potential operating results as of anyfuture date or for any future periods. Year ended December 31, 2015 (Unaudited) 2014 (Unaudited) Net revenue $60,313,000 $56,114,000 Income before income taxes $2,681,000 $1,181,000 Income tax expense 822,000 1,023,000 Net income $1,859,000 $158,000 Earnings per share-basic $0.52 $0.04 Earnings per share-diluted $0.49 $0.04 During 2014, the Company was required to recognize a gain for tax purposes due to the expiration of various state statute of limitations pertainingto approximately $1,200,000 of unpaid vendor invoices belonging to a formerly deconsolidated subsidiary (see Note 8-INCOME TAXES). This reversal ofliabilities had a significant impact on the 2014 income tax expense rate being applied in the unaudited pro forma calculation above. On March 8, 2016, the Company’s Board of Directors announced that it declared a special, one-time cash dividend of $0.50 per share payable onApril 4, 2016, to stockholders of record at the close of business on March 21, 2016. The total amount of this special dividend payment will be approximately$1,800,000 based on the current number of shares outstanding. Further, the Company’s Board of Directors also announced that it approved the initiation of adividend policy under which the Company intends to declare a cash dividend to the Company’s stockholders in the amount of $0.20 per share per annum,payable in equal quarterly installments. In conjunction therewith, the Company’s Board of Directors declared an initial quarterly cash dividend of $0.05 pershare to stockholders of record at the close of business on March 31, 2016. This dividend is payable on April 14, 2016. 53 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. Item 9A. Controls and Procedures Evaluation of disclosure controls and procedures The Company's management, with the participation of the Company's CEO and CFO, evaluated, as of December 31, 2015, the effectiveness of theCompany's disclosure controls and procedures, which were designed to be effective at the reasonable assurance level. The term "disclosure controls andprocedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed toensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation,controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the ExchangeAct is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate toallow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated,can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefitrelationship of possible controls and procedures. Based on the evaluation of the Company's disclosure controls and procedures as of December 31, 2015, theCompany’s management, including its CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at the reasonableassurance level at that date. Management’s Report on Internal Control over Financial Reporting The Company’s Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRule 13a-15(f) and 15d-15(f) of the Exchange Act). This system is designed by, or under the supervision of, the Company’s principal executive officer andprincipal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financialstatements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements inaccordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with theauthorizations of our management and directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that couldhave a material effect on the consolidated financial statements. We carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectivenessof the design and operation of our internal control over financial reporting, as of December 31, 2015. Management based this assessment on criteria foreffective internal control over financial reporting described in “Internal Control—Integrated Framework 2013” issued by the Committee of SponsoringOrganizations of the Treadway Commission. Based on that evaluation, CEO and CFO concluded that our internal control over financial reporting waseffective at December 31, 2015. Because of its inherent limitations, internal controls may not prevent or detect misstatements. A control system, no matter how well designed andoperated, can only provide reasonable, not absolute, assurance that the control system’s objectives will be met. Also, projections of any evaluation ofeffectiveness as to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with policies and procedures may deteriorate. This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internalcontrol over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to therules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report. 54 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Changes in Internal Control over Financial Reporting There have been no significant changes in our internal control over financial reporting during the most recently completed quarter ended December31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None 55 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K is incorporated by reference to the Company’sdefinitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in May 2016, to be filed with the Securities andExchange Commission within 120 days following the end of the Company’s year ended December 31, 2015. Item 11. Executive Compensation See Item 10. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters See Item 10. Item 13. Certain Relationships and Related Transactions, and Director Independence See Item 10. Item 14. Principal Accounting Fees and Services See Item 10. 56 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IV Item 15. Exhibits and Financial Statement Schedules Pagea)List of Financial Statements, Financial Statement Schedules, and Exhibits (1)List of Financial Statements The consolidated financial statements of the Company and its subsidiaries are included in Item 8 of Part II of this report.26 (2)All schedules for which provision is made in the applicable accounting regulations of the Commission are not required under therelated instructions or are inapplicable and, therefore, have been omitted.28 (3)List of Exhibits57 The following exhibits are either included in this report or incorporated herein by reference as indicated below: Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of July 1, 2014, by and among Florida Pneumatic Manufacturing Corporation, Flying TigerAcquisition Corp., Exhaust Technologies, Inc. and the Shareholders and Shareholders’ Representatives as named therein (Incorporated byreference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated July 1, 2014). 2.2 Sale and Purchase Agreement, dated as of July 29, 2014, by and among Florida Pneumatic Manufacturing Corporation, the Shareholders asnamed therein, and Universal Air Tool Company Limited (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report onForm 8-K dated July 29, 2014). 2.3 Asset Purchase Agreement dated as of August 13, 2014, by and among ATSCO Holdings Corp., Hy-Tech Machine, Inc., Air Tool ServiceCompany and the Shareholder named therein (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K datedAugust 13, 2014). 2.4 Stock Purchase and Redemption Agreement, dated as of February 11, 2016, by and among Countrywide Hardware, Inc., Argosy NWIHoldings, LLC, the Registrant and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report onForm 8-K dated February 11, 2016). 3.1 Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form10-K for the fiscal year ended December 31, 2004). 3.2 By-laws of the Registrant (as amended on January 14, 2013) (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended December 31, 2012). 10.1 Loan and Security Agreement, dated as of October 25, 2010, among the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech,Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., GreenManufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One Leverage FinanceCorporation, as agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 25, 2010). 10.2 Revolver Note, dated October 25, 2010, executed by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech, Machine, Inc.and Nationwide Industries, Inc. in favor of Capital One Leverage Finance Corporation, as agent, in the original principal amount of$15,910,000 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K dated October 25, 2010). 10.3 Term Loan Note, dated October 25, 2010, executed by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech, Machine, Inc.and Nationwide Industries, Inc. in favor of Capital One Leverage Finance Corporation, as agent, in the original principal amount of$6,090,000 (Incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K dated October 25, 2010). 10.4 Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of October 25, 2010, made byCountrywide Hardware, Inc. in favor of Capital One Leverage Finance Corporation, as agent (Incorporated by reference to Exhibit 10.10 tothe Registrant’s Current Report on Form 8-K dated October 25, 2010). 57 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit Number Description of Exhibit 10.5 Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of October 25, 2010, made by FloridaPneumatic Manufacturing Corporation. in favor of Capital One Leverage Finance Corporation, as agent (Incorporated by reference to Exhibit10.11 to the Registrant’s Current Report on Form 8-K dated October 25, 2010). 10.6 Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of October 25, 2010, made by Hy-TechMachine, Inc.. in favor of Capital One Leverage Finance Corporation, as agent (Incorporated by reference to Exhibit 10.12 to the Registrant’sCurrent Report on Form 8-K dated October 25, 2010). 10.7 First Amendment to Loan and Security Agreement, dated as of September 21, 2011, among the Registrant, Florida Pneumatic ManufacturingCorporation, Hy-Tech, Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., EmbassyIndustries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital OneLeverage Finance Corporation, as agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K datedSeptember 21, 2011). 10.8 Second Amendment to Loan and Security Agreement, dated as of November 21, 2011, among the Registrant, Florida PneumaticManufacturing Corporation, Hy-Tech, Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc.,Embassy Industries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., andCapital One Leverage Finance Corporation, as agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 21, 2011). 10.9 Capex Term Note, dated November 21, 2011, executed by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech, Machine,Inc. and Nationwide Industries, Inc. in favor of Capital One Leverage Finance Corporation, as agent, in the principal amount of up to$2,500,000 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 21, 2011). 10.10 Third Amendment to Loan and Security Agreement, dated as of December 19, 2012, among the Registrant, Florida Pneumatic ManufacturingCorporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., EmbassyIndustries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital OneLeverage Finance Corporation, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-Kdated December 19, 2012). 10.11 Fourth Amendment to Loan and Security Agreement, dated as of May 22, 2013, among the Registrant, Florida Pneumatic ManufacturingCorporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., EmbassyIndustries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital OneLeverage Finance Corporation, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form10-Q for the quarter ended June 30, 2013). 10.12 Amended and Restated Revolver Note, dated December 19, 2012, executed by Registrant, Florida Pneumatic Manufacturing Corporation,Hy-Tech Machine, Inc. and Nationwide industries, Inc. in favor of Capital One Leverage Finance Corporation in the original principalamount of $20,000,000 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 19, 2012). 10.13 Amended and Restated Term Loan Note, dated December 19, 2012, executed by Registrant, Florida Pneumatic Manufacturing Corporation,Hy-Tech Machine, Inc. and Nationwide industries, Inc. in favor of Capital One Leverage Finance Corporation in the original principalamount of $7,000,000 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated December 19, 2012). 10.14 First Amendment to Open-End Mortgage, Security Agreement, Assignment of Leases and Rents and Financing Statement dated as ofDecember 19, 2012, made by Hy-Tech Machine, Inc. in favor of Capital One Leverage Finance Corporation, as agent (Incorporated byreference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated December 19, 2012). 58 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit Number Description of Exhibit 10.15 Second Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of December 19,2012, made by Countrywide Hardware, Inc. in favor of Capital One Leverage Finance Corporation, as agent (Incorporated by reference toExhibit 10.5 to the Registrant’s Current Report on Form 8-K dated December 19, 2012). 10.16 Second Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of December 19,2012, made by Florida Pneumatic Manufacturing Corporation in favor of Capital One Leverage Finance Corporation, as agent (Incorporatedby reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated December 19, 2012). 10.17 Fifth Amendment to Loan and Security Agreement, dated as of July 1, 2014, among the Registrant, Florida Pneumatic ManufacturingCorporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., EmbassyIndustries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital OneBusiness Credit Corporation, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-Kdated July 1, 2014). 10.18 Sixth Amendment to the Loan Agreement, dated as of July 29, 2014, by and among the Registrant, Florida Pneumatic ManufacturingCorporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., Continental Tool Group, Inc., Countrywide Hardware, Inc., EmbassyIndustries, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital OneBusiness Credit Corporation, as lender and agent (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-Kdated July 29, 2014). 10.19 Amended and Restated Loan and Security Agreement dated as of August 13, 2014, by and among the Registrant, Florida PneumaticManufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp., Continental Tool Group, Inc.,Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc., Pacific Stair Products, Inc.,WILP Holdings, Inc., Woodmark International, L.P., and Capital One Business Credit Corporation, as lender and agent (Incorporated byreference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 13, 2014). 10.20 Second Amended and Restated Revolver Note dated as of August 13, 2014 by the Registrant, Florida Pneumatic Manufacturing Corporation,Hy-Tech Machine, Inc., Nationwide Industries, Inc. and ATSCO Holdings Corp., in favor of and Capital One Business Credit Corporation(Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 13, 2014). 10.21 Tranche A Term Loan Note dated as of August 13, 2014 by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine,Inc., Nationwide Industries, Inc. and ATSCO Holdings Corp in favor of and Capital One Business Credit Corporation (Incorporated byreference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated August 13, 2014). 10.22 Tranche B Term Loan Note dated as of August 13, 2014 by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine,Inc., Nationwide Industries, Inc. and ATSCO Holdings Corp in favor of and Capital One Business Credit Corporation (Incorporated byreference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated August 13, 2014). 10.23 Amended and Restated Capex Loan Note dated as of August 13, 2014 by the Registrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc. and ATSCO Holdings Corp in favor of and Capital One Business Credit Corporation.(Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated August 13, 2014). 10.24 Purchase Agreement, dated as of October 14, 2014, by and between the Registrant and Timothy J. Stabosz (Incorporated by reference toExhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 14, 2014). 10.25 Waiver and Amendment No. 1 to the Amended and Restated Loan and Security Agreement, dated as of October 14, 2014, by and among theRegistrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp,Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc.,Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P., and Capital One Business Credit Corporation, as lender andagent (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated October 14, 2014). 10.26 Purchase Agreement, dated as of February 11, 2016, by and between the Registrant and Christopher J. Kliefoth (Incorporated by reference toExhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 11, 2016). 10.27 Consent and Second Amendment to Amended and Restated Loan and Security Agreement, dated as of February 11, 2016, by and among theRegistrant, Florida Pneumatic Manufacturing Corporation, Hy-Tech Machine, Inc., Nationwide Industries, Inc., ATSCO Holdings Corp,Continental Tool Group, Inc., Countrywide Hardware, Inc., Embassy Industries, Inc., Exhaust Technologies, Inc., Green Manufacturing, Inc.,Pacific Stair Products, Inc., WILP Holdings, Inc., Woodmark International, L.P, Lender and Agent, and Capital One, National Association, aslender and agent (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 11, 2016). 10.28 Lease, dated as of February 11, 2016, between the Registrant and Nationwide Industries, Inc. (Incorporated by reference to Exhibit 10.3 to theRegistrant’s Current Report on Form 8-K dated February 11, 2016). 10.29 Option and Right of First Refusal Agreement, dated as of February 11, 2016, between the Registrant and Nationwide Industries, Inc.(Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated February 11, 2016). 10.30 *Executive Employment Agreement, dated as of January 1, 2012, between the Registrant and Richard A. Horowitz (Incorporated by referenceto Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 29, 2011). Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.59 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit Number Description of Exhibit10.31 *Executive Employment Agreement, dated as of January 1, 2015, between the Registrant and Richard A. Horowitz (Incorporated by referenceto Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 5, 2015). 10.32 *2002 Stock Incentive Plan of the Registrant (Incorporated by reference to Exhibit 4.7 to the Registrant’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2002). 10.33 *2012 Stock Incentive Plan of the Registrant (Incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement withrespect to the Registrant’s 2012 Annual Meeting of Stockholders). 10.34 *Amended and Restated Executive 162(m) Bonus Plan of the Registrant effective as of May 25, 2011 (Incorporated by reference to AppendixA to the Registrant’s Definitive Proxy Statement with respect to the Registrant’s 2011 Annual Meeting of Stockholders). 10.35 *Amended and Restated Executive 162(m) Bonus Plan of the Registrant effective as of May 20, 2015 (Incorporated by reference to AppendixA to the Registrant’s Definitive Proxy Statement with respect to the Registrant’s 2015 Annual Meeting of Stockholders). 10.36 *Severance Agreement between the Registrant and Joseph A. Molino, Jr., effective as of June 22, 2012 (Incorporated by reference to Exhibit10.1 to the Registrant’s Current Report on Form 8-K dated June 22, 2012). 10.37 *Executive Employment Agreement, dated as of January 1, 2015, between the Registrant and Joseph A. Molino, Jr. (Incorporated by referenceto Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 2, 2015). 21 Subsidiaries of the Registrant (Filed herein). 23.1 Consent of Independent Registered Public Accounting Firm (Filed herein). 31.1 Certification of Richard A. Horowitz, Principal Executive Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of2002 (Filed herein). 31.2 Certification of Joseph A. Molino, Jr., Principal Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of2002 (Filed herein). 32.1 Certification of Richard A. Horowitz, Principal Executive Officer of the Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herein). 32.2 Certification of Joseph A. Molino, Jr., Principal Financial Officer of the Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herein). 101 ** XBRL Interactive Data Certain instruments defining the rights of holders of the long-term debt securities of the Registrant may be omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant agrees to furnish supplemental copies of these instruments to the Commission uponrequest. * Management contract or a compensatory plan or arrangement required to be filed as an exhibit. ** Attached as Exhibit 101 to this Annual Report on Form 10-K are the following, each formatted in Extensible Business Reporting Language(“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements ofShareholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements. A copy of any of the foregoing exhibits to this Annual Report on Form 10-K may be obtained, upon payment of the Registrant’s reasonableexpenses in furnishing such exhibit, by writing to P&F Industries, Inc., 445 Broadhollow Road, Suite 100, Melville New York 11747, Attention: CorporateSecretary. 60 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. P&F INDUSTRIES, INC.(Registrant) By:/s/ Richard A. Horowitz By:/s/ Joseph A. Molino, Jr. Richard A. Horowitz Joseph A. Molino, Jr. Chairman of the Board Vice President President Principal Financial and Principal Executive Officer Accounting Officer Date: March 30, 2016 Date: March 30, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the date indicated. Name Title Date /s/ Richard A. Horowitz Director March 30, 2016Richard A. Horowitz /s/ Jeffrey D. Franklin Director March 30, 2016Jeffrey D. Franklin /s/ Howard Brod Brownstein Director March 30, 2016Howard Brod Brownstein /s/ Kenneth M. Scheriff Director March 30, 2016Kenneth M. Scheriff /s/ Mitchell A. Solomon Director March 30, 2016Mitchell A. Solomon /s/ Richard Randall Director March 30, 2016Richard Randall 61 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 21 P&F INDUSTRIES, INC. SUBSIDIARIES OF THE REGISTRANTAS OF DECEMBER 31, 2015 Continental Tool Group, Inc., a Delaware Corporation Hy-Tech Machine, Inc., a Delaware CorporationATSCO Holdings Corp., a Delaware Corporation Florida Pneumatic Manufacturing Corporation, a Florida CorporationD/b/a Universal ToolD/b/a PipemasterD/b/a Berkley ToolExhaust Technologies, Inc., a Delaware corporationUniversal Air Tool Company Limited, a Company incorporated in England and Whales Countrywide Hardware, Inc., a Delaware Corporation Nationwide Industries, Inc., a Florida Corporation Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries are omitted because, considered in the aggregate, they would not constitutea significant subsidiary as of December 31, 2015. Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Forms S-8 (File No. 333-22047 and File No. 333-90562) of P&F Industries, Inc. of our report datedMarch 30, 2016 on our audits of the consolidated financial statements of P&F Industries, Inc. and Subsidiaries as of December 31, 2015 and 2014, and for theyears then ended included in the 2015 Annual Report of P&F Industries, Inc. on Form 10-K. /s/ CohnReznick LLPJericho, New YorkMarch 30, 2016 Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.1 P&F INDUSTRIES, INC.CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard A. Horowitz, certify that: 1.I have reviewed this annual report on Form 10-K of P&F Industries, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ RICHARD A. HOROWITZ Richard A. HorowitzDate: March 30, 2016Principal Executive Officer Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.2 P&F INDUSTRIES, INC.CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Joseph A. Molino, Jr., certify that: 1.I have reviewed this annual report on Form 10-K of P&F Industries, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ JOSEPH A. MOLINO, JR. Joseph A. Molino, Jr.Date: March 30, 2016Principal Financial Officer Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 P&F INDUSTRIES, INC.CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 10-K of P&F Industries, Inc. (the “Company”) for the year ended December 31, 2015, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), the undersigned, Richard A. Horowitz, Principal Executive Officer of the Company,hereby certifies, pursuant to 18 U.S.C. §1350, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ RICHARD A. HOROWITZ Richard A. HorowitzDate: March 30, 2016Principal Executive Officer Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.2 P&F INDUSTRIES, INC.CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 10-K of P&F Industries, Inc. (the “Company”) for the year ended December 31, 2015, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), the undersigned, Joseph A. Molino, Jr., Principal Financial Officer of the Company,hereby certifies, pursuant to 18 U.S.C. §1350, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ JOSEPH A. MOLINO, JR. Joseph A. Molino, Jr.Date: March 30, 2016Principal Financial Officer Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: P&F INDUSTRIES INC, 10-K, March 30, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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