10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

or

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

For the transition period from ___________ to ______________

Commission File No. 000-30185

AMERINAC HOLDING CORP.

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

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

5936 State Route 159

Chillicothe, OH 45601

(Address of Principal Executive Offices)

(614) 836-1050

(Issuer’s Telephone Number, including Area Code)

________________________________________________

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

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

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

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

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

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

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

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

Number of shares outstanding of the registrant’s common stock, as of August 9, 2019: 313,636

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements – (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
PART II OTHER INFORMATION
Item 6.	Exhibits	31
	Signatures	32

Item 1. Financial Statements

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	265,264		$	360,283
Accounts receivable (net of allowance for doubtful accounts of  $78,753 as of June 30, 2019 and December 31, 2018.)		5,721,417			3,801,166
Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of June 30, 2019 and December 31, 2018.)		5,836,154			5,580,942
Other current assets		283,321			230,985
Total current assets		12,106,156			9,973,376
Property, land and equipment - net		6,051,989			6,125,183
Other assets:
Customer lists - net of amortization		1,608,583			1,708,084
Right-of-use asset		1,208,613			-
Deferred tax asset		-			358,686
Goodwill		54,993			54,993
Other		71,593			51,917
Total other assets		2,943,782			2,173,680
Total	$	21,101,927		$	18,272,239
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	745,431		$	1,092,058
Accounts payable and accrued expenses		4,026,018			3,275,011
Notes payable, net- short term		600,000			600,000
Finance leases payable - short term		45,688			43,435
Operating leases payable - short term		254,845			-
Deferred revenue		23,247			-
Income taxes payable		110,144			14,351
Total current liabilities		5,805,373			5,024,855
Long-term liabilities:
Notes payable, net of current portion		3,804,830			4,069,990
Finance leases payable - net of current portion		89,656			113,358
Operating leases payable - net of current portion		1,000,193			-
Deferred tax liability		7,041			-
Total long-term liabilities		4,901,720			4,183,348
Total liabilities		10,707,093			9,208,203
Commitments and contingencies
Redeemable non-controlling interest		1,071,729			757,778
Stockholders' equity:
Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at June 30, 2019 and December 31, 2018, respectively.		313			313
Additional paid-in capital		16,383,599			16,383,599
Accumulated deficit		(7,060,807	)		(8,077,654	)
Total stockholders' equity		9,323,105			8,306,258
Total liabilities and stockholders' equity	$	21,101,927		$	18,272,239

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

3

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	FOR THE SIX MONTHS						FOR THE THREE MONTHS
	ENDED JUNE 30,						ENDED JUNE 30,
	2019			2018			2019			2018
Net revenue	$	24,062,327		$	22,013,681		$	11,557,359		$	11,310,897
Cost of goods sold		19,169,449			17,891,455			9,253,072			9,475,915
Gross profit		4,892,878			4,122,226			2,304,287			1,834,982
Operating expenses:
General and administrative expenses		2,669,426			2,059,149			1,338,765			1,061,479
Professional and consulting fees		190,704			214,942			81,137			36,835
Total operating expenses		2,860,130			2,274,091			1,419,902			1,098,314
Income before other (expense) income		2,032,748			1,848,135			884,385			736,668
Other (expense) income:
Interest		(240,430	)		(728,925	)		(118,635	)		(363,774	)
Other income		-			288,596			-			278,244
Total other (expense) income		(240,430	)		(440,329	)		(118,635	)		(85,530	)
Income before provision for income taxes		1,792,318			1,407,806			765,750			651,138
Income tax expense		(461,520	)		(131,557	)		(199,054	)		(131,557	)
Net income		1,330,798			1,276,249			566,696			519,581
Non-controlling interest share of net income		313,951			364,293			144,658			166,556
Net income attributable to Amerinac Holding
Corp. shareholders	$	1,016,847		$	911,956		$	422,038		$	353,025
Basic and diluted earnings per share applicable to common stockholders:
Earnings per share	$	3.24		$	3.07		$	1.35		$	1.19
Weighted average shares outstanding:
Basic and diluted		313,636			297,386			313,636			297,386

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

4

 

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
	Common Stock				Additional		Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total
Balance, January 1, 2018		297,386	$	297	$	15,733,615	$	(10,103,722	)	$	5,630,190
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		911,956			911,956
Balance, June 30, 2018		297,386	$	297	$	15,733,615	$	(9,191,766	)	$	6,542,146
Balance, January 1, 2019		313,636	$	313	$	16,383,599	$	(8,077,654	)	$	8,306,258
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		1,016,847			1,016,847
Balance, June 30, 2019		313,636	$	313	$	16,383,599	$	(7,060,807	)	$	9,323,105
THREE MONTHS ENDED JUNE 30, 2019 AND 2018
	Common Stock				Additional			Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total
Balance, April 1, 2018		297,386	$	297	$	15,733,615	$	(9,544,791	)	$	6,189,121
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		353,025			353,025
Balance, June 30, 2018		297,386	$	297	$	15,733,615	$	(9,191,766	)	$	6,542,146
Balance, April 1, 2019		313,636	$	313	$	16,383,599	$	(7,482,845	)	$	8,901,067
Net income attributable to Amerinac
Holding Corp. shareholders		-		-		-		422,038			422,038
Balance, June 30, 2019		313,636	$	313	$	16,383,599	$	(7,060,807	)	$	9,323,105

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

5

AMERINAC HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
CASH FLOWS FROM OPERATING ACTIVITIES	2019			2018
Net income	$	1,330,798		$	1,276,249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		407,055			372,328
Amortization of deferred financing fees		34,840			66,666
Non-cash lease expense		78,152			-
Deferred income taxes		365,727			-
Inventory reserve		7,000			-
Changes in assets and liabilities:
Increase in accounts receivable		(1,920,251	)		(1,355,635	)
Increase in inventory		(262,212	)		(71,663	)
Decrease in operating leases payable		(31,727	)		-
(Increase) decrease in other current assets		(52,336	)		244,535
Increase in other assets		(19,676	)		-
Increase in deferred revenue		23,247			-
Increase in income taxes payable		95,793			131,557
Increase in accounts payable and accrued expenses		751,007			125,372
Net cash provided by operating activities		807,417			789,409
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from escrow receivable from sale		-			500,000
Purchase of property and equipment		(234,360	)		(97,536	)
Net cash (used) provided in investing activities		(234,360	)		402,464
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on line of credit		(346,627	)		-
Payments on notes payable		(300,000	)		-
Payments on finance leases		(21,449	)		(873	)
Payments on notes payable - related party		-			(242,526	)
Net cash used in financing activities		(668,076	)		(243,399	)
(DECREASE) INCREASE IN CASH		(95,019	)		948,474
CASH - BEGINNING OF PERIOD		360,283			348,398
CASH - END OF PERIOD	$	265,264		$	1,296,872
Cash paid during the period for:
Interest	$	241,305		$	669,232
Non-cash financing activities:
Operating lease asset obtained in exchange for operating lease obligation	$	1,277,143		$	-
Acquisition of equipment through finance lease	$	-		$	162,903

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

6

AMERINAC HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2019

(UNAUDITED)

1. SUMMARY OF BUSINESS

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

The Company’s operations are carried out through its wholly-owned distribution subsidiary Creative Assembly Systems, Inc (“Creative Assembly”) and its majority-owned subsidiary, Prime Metals Acquisition LLC, a Delaware limited liability company (“PMAL”). Creative Assembly is a value added distributor of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Consolidated Financial Statements

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

7

 

Principles of Consolidation and Basis of Presentation

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

Earnings Per Share

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

Use of Estimates

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Inventory

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

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

8

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

The Company’s inventory consists of the following:

	June 30, 2019			December 31, 2018
Raw Materials	$	2,168,422		$	2,133,311
Finished Goods		3,825,741			3,598,640
Reserves		(158,009	)		(151,009	)
Total	$	5,836,154		$	5,580,942

Property, Land and Equipment

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

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

** Shorter of life or lease term.

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

Concentration of Credit Risk

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

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

Concentration of Suppliers

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

9

 

Fair Value Measurements

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

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

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

Fair Value of Financial Instruments

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

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

Income Taxes

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

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

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

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

10

 

Revenue Recognition

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

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

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

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

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

Redeemable Non-controlling Interest

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

11

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

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

The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBN’s PMAL equity ownership. This amount, plus SBN’s pro rata net income allocation is reflected before stockholders’ equity as Redeemable Non-Controlling interest. The redeemable non-controlling interest was reduced for the reduction in membership interests from 25% to 20% in 2018, as noted above. SBN’s pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests.

Recently Adopted Authoritative Pronouncements

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

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In June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the Company’s financial position and results of operations.

Recent Accounting Pronouncements

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

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

3. PROPERTY, LAND AND EQUIPMENT

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

	June 30, 2019			December 31, 2018
Land, buildings and improvements	$	3,419,779		$	3,419,779
Equipment		3,698,189			3,463,829
Total		7,117,968			6,883,608
Less accumulated depreciation		(1,065,979	)		(758,425	)
Net property, land and equipment	$	6,051,989		$	6,125,183

As described in Note 7, the Company has $5,295,431 in notes secured against the property, land and equipment.

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4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

	June 30, 2019		December 31, 2018
Accounts payable	$	3,478,306	$	3,060,269
Interest		33,192		35,805
Salaries and bonus		495,000		116,930
Other		19,520		62,007
	$	4,026,018	$	3,275,011

5. GOODWILL AND INTANGIBLE ASSETS

Information regarding our acquired intangible assets was as follows:

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

The customer lists are estimated to have a useful life of 10 years. As of June 30, 2019, the value, net of amortization, of the customer list was $1,608,583.

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

6. LEASES

Operating Leases

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

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

Leases recorded on the balance sheet consist of the following:

Leases	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease ROU assets	Right-of-use asset	$	1,208,613
Finance lease ROU assets	Property, land and equipment, net	$	150,966
Liabilities
Current
Operating	Operating leases payable – short term	$	254,845
Finance	Finance leases payable – short term	$	45,688
Noncurrent
Operating	Operating leases payable – net of current portion	$	1,000,193
Finance	Finance leases payable – net of current portion	$	89,656

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

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

	June 30, 2019
Weighted average remaining lease term	55.3 months
Weighted average discount rate		5.63	%

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

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost:
Operating lease cost	$	51,927	$	89,432
Finance lease cost:
Amortization of ROU assets		8,227		21,449
Interest expense		1,759		3,650
Total lease cost	$	61,913	$	114,531

Supplemental disclosures of cash flow information related to leases for the six months ended June 30, 2019 were as follows:

Cash paid for operating lease obligations was $52,633. Operating lease asset obtained for operating lease obligation was $1,277,143.

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

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

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

Finance and Capital Leases

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

	Finance Leases June 30, 2019		Capital Leases December 31, 2018
Obligations under finance and capital leases	$	135,344	$	156,793
Less: current portion		45,688		43,435
Long-term portion	$	89,656	$	113,358

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Future minimum repayments

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

Years ending December 31,	Finance lease obligations as of June 30, 2019
2019 (remaining six months)	$	25,098
2020		50,200
2021		48,880
2022		21,397
Total future minimum repayments inclusive of interest		145,575
Interest		10,231
Total principal repayments	$	135,344

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

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

Years ending December 31,	Capital lease obligations as of December 31, 2018
2019	$	50,199
2020		50,199
2021		48,878
2022		21,396
Total future minimum repayments inclusive of interest		170,672
Interest		13,879
Total principal repayments	$	156,793

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

	June 30, 2019
Weighted average remaining lease term	35 months
Weighted average discount rate		4.93	%

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7. LONG-TERM DEBT AND LINE OF CREDIT

Summit Bridge Loans

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Berkshire Loans

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

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

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

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

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

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

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

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

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

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

8. COMMITMENTS AND CONTINGENCIES

Litigation

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

Employment Agreements

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

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

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

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

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

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

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

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

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

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

9. SEGMENT RESULTS

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

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

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

Segment information for the six months ended June 30, 2019 is as follows:

	CAS		PMAL
Net revenue	$	8,494,047	$	15,568,280
Cost of goods sold		6,985,022		12,184,427
Gross profit		1,509,025		3,383,853
Operating expenses:
General and administrative expenses		958,673		1,443,026
Professional and consulting fees		38,926		130,986
Total operating expenses		997,599		1,574,012
Income before other income (expense)	$	511,426	$	1,809,841

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Below is the Segment reconciliation to total net income

Income from segments above	$	2,321,267
Non-allocated expenses
Interest expense		(240,430	)
General and administrative expenses		(267,727	)
Professional and consulting fees		(20,792	)
Total non-allocated expenses		(528,949	)
Income before provision for income taxes	$	1,792,318

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

	CAS		PMAL
Net revenue	$	4,176,218	$	7,381,141
Cost of goods sold		3,469,766		5,783,306
Gross profit		706,452		1,597,835
Operating expenses:
General and administrative expenses		492,228		714,291
Professional and consulting fees		26,559		41,784
Total operating expenses		518,787		756,075
Income before other income (expense)	$	187,665	$	841,760

Below is the Segment reconciliation to total net income

Income from segments above	$	1,029,425
Non-allocated expenses
Interest expense		(118,635	)
General and administrative expenses		(132,246	)
Professional and consulting fees		(12,794	)
Total non-allocated expenses		(263,675	)
Income before provision for income taxes	$	765,750

Segment information for the six months ended June 30, 2018 is as follows:

	CAS		PMAL
Net Revenue	$	5,199,535	$	16,814,146
Cost of goods sold		4,100,740		13,790,715
Gross profit		1,098,795		3,023,431
Operating expenses:
General and administrative expenses		850,623		1,018,912
Professional and consulting fees		40,677		104,584
Total operating expenses		891,300		1,123,496
Income before other income (expense)	$	207,495	$	1,899,935

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Below is the Segment reconciliation to total net income

Income from segments above	$	2,107,430
Non-allocated expenses
Interest expense		(728,925	)
General and administrative expenses		(259,295	)
Other income (expense)		288,596
Total non-allocated expenses		(699,624	)
Income before	$	1,407,806
provision for income taxes

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

	CAS		PMAL
Net Revenue	$	2,719,570	$	8,591,327
Cost of goods sold		2,131,684		7,344,231
Gross profit		587,886		1,247,096
Operating expenses:
General and administrative expenses		466,970		508,256
Professional and consulting fees		16,697		(16,314	)
Total operating expenses		483,667		491,942
Income before other income (expense)	$	104,219	$	755,154

Below is the Segment reconciliation to total net income

Income from segments above	$	859,373
Non-allocated expenses
Interest expense - net		(363,774	)
General and administrative expenses		(86,253	)
Professional and consulting fees		(36,452	)
Other income		278,244
Total		(171,783	)
Income before provision for income taxes	$	651,138

Segment asset information for the Company is as follows:

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

24

 

10. INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due. For 2018, our current effective tax rate is lower than the Federal and state effect rate primarily to the release of a portion of the valuation allowance.

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

	For the six months ended June 30,
	2019		2018
Current income tax
Federal	$	-	$	-
State		95,793		131,557
City		-		-
Total current income tax	$	95,793	$	131,557
Deferred income tax
Federal	$	329,154	$	-
State		36,573		-
City		-		-
Total deferred income tax	$	365,727	$	-
Total income tax expense	$	461,520	$	131,557

The Company’s deferred tax assets and liability relates mainly to a temporary timing difference in long-term assets. There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded in the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2019 or 2018. Additionally, there were no interest or penalties outstanding as of or for each of the six months ended June 30, 2019 and 2018.

The federal and state tax returns for the years ending December 31, 2015, 2016, and 2017 have been filed, but are still open to examination. Federal and state tax returns for the year ending December 31, 2018 have not been filed.

25

11. SUBSEQUENT EVENTS

On July 15, 2019, CAS entered into a Loan and Security Agreement (the “CAS Loan and Security Agreement”) with Berkshire Bank establishing a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the “CAS Revolving Loan”). Borrowings under the CAS Revolving Loan may be used to finance working capital and other general corporate purposes.

Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%.

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

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

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

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

Effective July 1, 2019, the Company and SBN entered into a Membership Interest Redemption Agreement (the “Redemption Agreement”) pursuant to which the Company will purchase the remaining SBN Membership Interests from SBN for a purchase price of $3,000,000.

26

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

FORWARD-LOOKING STATEMENTS

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

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

General

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

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

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

27

 

Plan of Operation and Discussion of Operations

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

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

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

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

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

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

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

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

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

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

28

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

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

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

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

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

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

The Company’s revenues increased 2.2% or $246,462 for the three months ended June 30, 2019 to $11,557,359 from $11,310,897 in the comparable period last year. PMAL, our sole manufacturing subsidiary, had $7,381,141 in revenue for the three months ended June 30, 2019. PMAL revenue was down $1,210,186 or 14.1% for the three months ended June 30, 2019 versus June 30, 2018. Our distribution subsidiary was up approximately $1,456,648 or 53.6% in revenue for the three months ended June 30, 2019 versus June 30, 2018 due to the pick-up in existing customer activity and the addition of new customers.

The Company’s gross profit increased approximately 25.6% or $469,305 for the three months ended June 30, 2019 to $2,304,287 from $1,834,982 in the comparable period last year. For the three months ended June 30, 2019, gross profit at our distribution subsidiary increased by $118,566 or approximately 20.2% versus the comparable period last year. For the three months ended June 30, 2019, gross profit at our manufacturing subsidiary increased by $350,739 or approximately 28.1% versus the comparable period last year due to better margin mix with our customer base.

The Company’s total operating expenses increased 29.3% or $321,588 for the three months June 30, 2019 to $1,419,902 from $1,098,314 from in the comparable period last year primarily due to increasing sales at the Company and in anticipation of increased sales.

Liquidity

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

The Company believes it can expand its business with its present staff numbers. The Company’s PMAL subsidiary has the ability to borrow under its revolving credit facility with Berkshire Bank. In addition, the Company’s CAS subsidiary can utilize borrowings under its new revolving credit facility with Berkshire Bank entered into on July 15, 2019 in an aggregate principal amount of up to $6.0 million to finance an increase in working capital in order to increase the size of the business.

29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

(A) Disclosure Controls and Procedures

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

The material weaknesses are as follows:

· A lack of sufficient resources and an insufficient level of monitoring and oversight, which restricted the Company’s ability to gather, analyze and report information relative to the financial statement assertions in a timely manner, including insufficient documentation and review of selection of generally accepted accounting principles.

· The limited size of the accounting department makes it impractical to achieve an appropriate level of segregation of duties. Specifically, due to lack of personnel, effective controls were not designed and implemented to ensure accounting functions were properly segregated.

· Due to a lack of adequate staffing within the finance department and adequate staffing within operational departments that provide information to the finance department, we did not establish and maintain effective controls over certain of our period-end financial close and reporting processes. Specifically, effective controls were not designed and implemented to ensure that journal entries were properly prepared with sufficient support or documentation or were reviewed and approved to ensure the accuracy and completeness of the journal entries recorded.

The Company may add additional personnel and procedures, which we believe will remedy these weaknesses in disclosure controls and procedures in future periods. However, there are no assurances we will be able to devote the necessary capital to hire the additional personnel and institute the additional systems, policies and procedures to the level necessary. In that event, there are no assurances that the material weaknesses described above will be timely remediated or not result in errors in our consolidated financial statements in future periods.

Changes in Internal Control Over Financial Reporting

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

30

PART II

OTHER INFORMATION

ITEM 6. EXHIBITS

The following exhibits are included herein:

Exhibit No.	Exhibit
31.1	Certification of Chief Executive Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer and of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
32.2	Certification of Chief Financial Officer of the Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended
101	XBRL Interactive Data Files

31

SIGNATURES

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

	AMERINAC HOLDING CORP.
Dated: August 14, 2019		/s/ John Wachter
		John Wachter
		Chief Executive Officer

32

EXHIBIT INDEX

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

33

EX-31.1

EXHIBIT 31.1

Certification

I, John Wachter, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Amerinac Holding Corp. (the “Company”);
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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
d.	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.

Date: August 14, 2019	By:	/s/ John Wachter
		John Wachter
		Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

Certification

I, William J. Golden, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Amerinac Holding Corp. (the “Company”);
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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
d.	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.

Date: August 14, 2019	By:	/s/ William J. Golden
		William J. Golden
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certifications Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. Section 1350)

In connection with the Quarterly Report (the “Report”) of Amerinac Holding Corp. (the “Company”) on Form 10-Q for the period ending June 30, 2019, as filed with the Securities and Exchange Commission, John Wachter, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:

(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 the Company.

Date: August 14, 2019	By:	/s/ John Wachter
		John Wachter
		Chief Executive Officer and President

EX-32.2

EXHIBIT 32.2

Certifications Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. Section 1350)

In connection with the Quarterly Report (the “Report”) of Amerinac Holding Corp. (the “Company”) on Form 10-Q for the period ending June 30, 2019, as filed with the Securities and Exchange Commission, William J. Golden, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:

(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 the Company.

Date: August 14, 2019	By:	/s/ William J. Golden
		William J. Golden
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 09, 2019
Document And Entity Information
Entity Registrant Name	Amerinac Holding Corp.
Entity Central Index Key	0000936446
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2019
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Entity Common Stock Shares Outstanding		313,636

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash	$ 265,264	$ 360,283
Accounts receivable (net of allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018.)	78,753	3,801,166
Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of June 30, 2019 and December 31, 2018.)	5,836,154	5,580,942
Other current assets	283,321	230,985
Total current assets	12,106,156	9,973,376
Property, land and equipment - net	6,051,989	6,125,183
Other assets:
Customer lists - net of amortization	1,608,583	1,708,084
Right-of-use asset	1,208,613
Deferred tax asset		358,686
Goodwill	54,993	54,993
Other	71,593	51,917
Total other assets	2,943,782	2,173,680
Total	21,101,927	18,272,239
Current liabilities:
Line of credit	745,431	1,092,058
Accounts payable and accrued expenses	4,026,018	3,275,011
Notes payable, net- short term	600,000	600,000
Finance leases payable - short term	45,688	43,435
Operating leases payable - short term	254,845
Deferred revenue	23,247
Income taxes payable	110,144	14,351
Total current liabilities	5,805,373	5,024,855
Long-term liabilities:
Notes payable, net of current portion	3,804,830	4,069,990
Finance leases payable - net of current portion	89,656	113,358
Operating leases payable - net of current portion	1,000,193
Deferred tax liability	7,041
Total long-term liabilities	4,901,720	4,183,348
Total liabilities	10,707,093	9,208,203
Commitments and contingencies
Redeemable non-controlling interest	1,071,729	757,778
Stockholders' equity:
Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at June 30, 2019 and December 31, 2018, respectively.	313	313
Additional paid-in capital	16,383,599	16,383,599
Accumulated deficit	(7,060,807)	(8,077,654)
Total stockholders' equity		8,306,258
Total liabilities and stockholders' equity	$ 21,101,927	$ 18,272,239

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Stockholders' equity
Common stock, par value	$ .001	$ .001
Common stock, shares authorized	1,500,000	1,500,000
Common stock, shares issued	313,636	313,636
Common stock, shares outstanding	30	30
Current assets
Allowance For Doubtful Debtors	$ 78,753	$ 78,753
Reserve for Obsolence	$ 158,009	$ 151,009

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Net revenue	$ 4,176,218	$ 11,310,897	$ 8,494,047	$ 22,013,681
Cost of goods sold	9,253,072	9,475,915	19,169,449	17,891,455
Gross profit	2,304,287	1,834,982	1,509,025	4,122,226
Operating expenses:
General and administrative expenses	1,338,765	1,061,479	958,673	2,059,149
Professional and consulting fees	81,137	36,835	38,926	214,942
Total operating expenses	1,419,902	1,098,314	997,599	2,274,091
Income before other (expense) income	884,385	736,668	511,426	1,848,135
Other (expense) income:
Interest	(118,635)	(363,774)		(728,925)
Other income		278,244		288,596
Total other (expense) income	(118,635)	(85,530)	(240,430)	(440,329)
Income before provision for income taxes	765,750	651,138	1,792,318	1,407,806
Income tax expense	(199,054)	(131,557)	461,520	131,557
Net income	566,696	519,581	1,330,798	1,276,249
Non-controlling interest share of net income	144,658	166,556	313,951	364,293
Net income attributable to Amerinac Holding Corp. shareholders	$ 422,038	$ 353,025	$ 1,016,847	$ 911,956
Basic and diluted earnings per share applicable to common stockholders:
Earnings per share	$ 1.35	$ 1.19	$ 3.24	$ 3.07
Weighted average shares outstanding:
Basic and diluted	313,636	297,386	313,636	297,386

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) - USD ($)	Total	Common Stock Shares	Additional Paid-in Capital	Accumulated Deficit
Beginning Balance, shares at Jan. 01, 2018		297,386
Beginning Balance, amount at Jan. 01, 2018	$ 5,630,190	$ 297	$ 15,733,615	$ (10,103,722)
Net income attributable to Amerinac, amount
Holding Corp. shareholders, amount	911,956			911,956
Ending Balance, shares at Jun. 30, 2018		297,386
Ending Balance, amount at Jun. 30, 2018	6,542,146	$ 297	15,733,615	(9,191,766)
Beginning Balance, shares at Apr. 01, 2018		297,386
Beginning Balance, amount at Apr. 01, 2018	6,189,121	$ 297	15,733,615	(9,544,791)
Net income attributable to Amerinac, amount
Holding Corp. shareholders, amount	353,025			353,025
Ending Balance, shares at Jun. 30, 2018		297,386
Ending Balance, amount at Jun. 30, 2018	6,542,146	$ 297	15,733,615	(9,191,766)
Beginning Balance, shares at Jan. 01, 2019		313,636
Beginning Balance, amount at Jan. 01, 2019	8,306,258	$ 313	16,383,599	(8,077,654)
Net income attributable to Amerinac, amount
Holding Corp. shareholders, amount	$ 1,016,847			1,016,847
Ending Balance, shares at Jun. 30, 2019	313,636	313,636
Ending Balance, amount at Jun. 30, 2019		$ 313	16,383,599	(7,060,807)
Beginning Balance, shares at Apr. 01, 2019		313,636
Beginning Balance, amount at Apr. 01, 2019	8,901,067	$ 313	16,383,599	(7,482,845)
Net income attributable to Amerinac, amount
Holding Corp. shareholders, amount	$ 422,038			422,038
Ending Balance, shares at Jun. 30, 2019	313,636	313,636
Ending Balance, amount at Jun. 30, 2019		$ 313	$ 16,383,599	$ (7,060,807)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 1,330,798	$ 1,276,249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	407,055	372,328
Amortization of deferred financing fees	34,840	66,666
Non-cash lease expense	78,152
Deferred income taxes	365,727
Inventory reserve	7,000
Changes in assets and liabilities:
Increase in accounts receivable	(1,920,251)	(1,355,635)
Increase in inventory	(262,212)	(71,663)
Decrease in operating leases payable	(31,727)
(Increase) decrease in other current assets	(52,336)	244,535
Increase in other assets	(19,676)
Increase in deferred revenue	23,247
Increase in income taxes payable	95,793	131,557
Increase in accounts payable and accrued expenses	751,007	125,372
Net cash provided by operating activities	807,417	789,409
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from escrow receivable from sale		500,000
Purchase of property and equipment	(234,360)	(97,536)
Net cash (used) provided in investing activities	(234,360)	402,464
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on line of credit	(346,627)
Payments on notes payable	(300,000)
Payments on finance leases	(21,449)	(873)
Payments on notes payable - related party		(242,526)
Net cash used in financing activities	(668,076)	(243,399)
(DECREASE) INCREASE IN CASH	(95,019)	948,474
CASH - BEGINNING OF PERIOD	360,283	348,398
CASH - END OF PERIOD	265,264	1,296,872
Cash paid during the period for:
Interest	241,305	669,232
Non-cash financing activities:
Operating lease asset obtained in exchange for operating lease obligation	89,432
Acquisition of equipment through finance lease		$ 162,903

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SUMMARY OF BUSINESS

6 Months Ended

Jun. 30, 2019

SUMMARY OF BUSINESS

1. SUMMARY OF BUSINESS

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

The Companys operations are carried out through its wholly-owned distribution subsidiary Creative Assembly Systems, Inc (Creative Assembly) and its majority-owned subsidiary, Prime Metals Acquisition LLC, a Delaware limited liability company (PMAL). Creative Assembly is a value added distributor of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries.

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Consolidated Financial Statements

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

Principles of Consolidation and Basis of Presentation

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

Earnings Per Share

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

Use of Estimates

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Inventory

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

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

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

The Companys inventory consists of the following:

	June 30, 2019			December 31, 2018
Raw Materials	$	2,168,422		$	2,133,311
Finished Goods		3,825,741			3,598,640
Reserves		(158,009	)		(151,009	)
Total	$	5,836,154		$	5,580,942

Property, Land and Equipment

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

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

** Shorter of life or lease term.

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

Concentration of Credit Risk

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

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

Concentration of Suppliers

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

Fair Value Measurements

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

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

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

Fair Value of Financial Instruments

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

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

Income Taxes

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

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

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

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

Revenue Recognition

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

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

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

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

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

Redeemable Non-controlling Interest

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

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

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

The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBNs PMAL equity ownership. This amount, plus SBNs pro rata net income allocation is reflected before stockholders equity as Redeemable Non-Controlling interest. The redeemable non-controlling interest was reduced for the reduction in membership interests from 25% to 20% in 2018, as noted above. SBNs pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests.

Recently Adopted Authoritative Pronouncements

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

In June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entitys own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the Companys financial position and results of operations.

Recent Accounting Pronouncements

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

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

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PROPERTY, LAND AND EQUIPMENT

6 Months Ended

Jun. 30, 2019

PROPERTY, LAND AND EQUIPMENT

3. PROPERTY, LAND AND EQUIPMENT

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

	June 30, 2019			December 31, 2018
Land, buildings and improvements	$	3,419,779		$	3,419,779
Equipment		3,698,189			3,463,829
Total		7,117,968			6,883,608
Less accumulated depreciation		(1,065,979	)		(758,425	)
Net property, land and equipment	$	6,051,989		$	6,125,183

As described in Note 7, the Company has $5,295,431 in notes secured against the property, land and equipment.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2019

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

	June 30, 2019		December 31, 2018
Accounts payable	$	3,478,306	$	3,060,269
Interest		33,192		35,805
Salaries and bonus		495,000		116,930
Other		19,520		62,007
	$	4,026,018	$	3,275,011

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2019

GOODWILL AND INTANGIBLE ASSETS

5. GOODWILL AND INTANGIBLE ASSETS

Information regarding our acquired intangible assets was as follows:

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

The customer lists are estimated to have a useful life of 10 years. As of June 30, 2019, the value, net of amortization, of the customer list was $1,608,583.

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

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LEASES

6 Months Ended

Jun. 30, 2019

LEASES

6. LEASES

Operating Leases

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

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

Leases recorded on the balance sheet consist of the following:

Leases	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease ROU assets	Right-of-use asset	$	1,208,613
Finance lease ROU assets	Property, land and equipment, net	$	150,966
Liabilities
Current
Operating	Operating leases payable short term	$	254,845
Finance	Finance leases payable short term	$	45,688
Noncurrent
Operating	Operating leases payable net of current portion	$	1,000,193
Finance	Finance leases payable net of current portion	$	89,656

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

The Companys weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are:

	June 30, 2019
Weighted average remaining lease term	55.3 months
Weighted average discount rate		5.63	%

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

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost:
Operating lease cost	$	51,927	$	89,432
Finance lease cost:
Amortization of ROU assets		8,227		21,449
Interest expense		1,759		3,650
Total lease cost	$	61,913	$	114,531

Supplemental disclosures of cash flow information related to leases for the six months ended June 30, 2019 were as follows:

Cash paid for operating lease obligations was $52,633. Operating lease asset obtained for operating lease obligation was $1,277,143.

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

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

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

Finance and Capital Leases

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

	Finance Leases June 30, 2019		Capital Leases December 31, 2018
Obligations under finance and capital leases	$	135,344	$	156,793
Less: current portion		45,688		43,435
Long-term portion	$	89,656	$	113,358

 Future minimum repayments

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

Years ending December 31,	Finance lease obligations as of June 30, 2019
2019 (remaining six months)	$	25,098
2020		50,200
2021		48,880
2022		21,397
Total future minimum repayments inclusive of interest		145,575
Interest		10,231
Total principal repayments	$	135,344

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

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

Years ending December 31,	Capital lease obligations as of December 31, 2018
2019	$	50,199
2020		50,199
2021		48,878
2022		21,396
Total future minimum repayments inclusive of interest		170,672
Interest		13,879
Total principal repayments	$	156,793

The Companys weighted average remaining lease term and weighted average discount rate for finance leases as of June 30, 2019 are:

	June 30, 2019
Weighted average remaining lease term	35 months
Weighted average discount rate		4.93	%

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LONG-TERM DEBT AND LINE OF CREDIT

6 Months Ended

Jun. 30, 2019

LONG-TERM DEBT AND LINE OF CREDIT

7. LONG-TERM DEBT AND LINE OF CREDIT

Summit Bridge Loans

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 Berkshire Loans

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

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

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

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

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

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

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

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

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

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

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2019

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

Litigation

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

Employment Agreements

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

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

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

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

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

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

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

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

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

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

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SEGMENT RESULTS

6 Months Ended

Jun. 30, 2019

SEGMENT RESULTS

9. SEGMENT RESULTS

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

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

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

Segment information for the six months ended June 30, 2019 is as follows:

	CAS		PMAL
Net revenue	$	8,494,047	$	15,568,280
Cost of goods sold		6,985,022		12,184,427
Gross profit		1,509,025		3,383,853
Operating expenses:
General and administrative expenses		958,673		1,443,026
Professional and consulting fees		38,926		130,986
Total operating expenses		997,599		1,574,012
Income before other income (expense)	$	511,426	$	1,809,841

 Below is the Segment reconciliation to total net income

Income from segments above	$	2,321,267
Non-allocated expenses
Interest expense		(240,430	)
General and administrative expenses		(267,727	)
Professional and consulting fees		(20,792	)
Total non-allocated expenses		(528,949	)
Income before provision for income taxes	$	1,792,318

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

	CAS		PMAL
Net revenue	$	4,176,218	$	7,381,141
Cost of goods sold		3,469,766		5,783,306
Gross profit		706,452		1,597,835
Operating expenses:
General and administrative expenses		492,228		714,291
Professional and consulting fees		26,559		41,784
Total operating expenses		518,787		756,075
Income before other income (expense)	$	187,665	$	841,760

Below is the Segment reconciliation to total net income

Income from segments above	$	1,029,425
Non-allocated expenses
Interest expense		(118,635	)
General and administrative expenses		(132,246	)
Professional and consulting fees		(12,794	)
Total non-allocated expenses		(263,675	)
Income before provision for income taxes	$	765,750

Segment information for the six months ended June 30, 2018 is as follows:

	CAS		PMAL
Net Revenue	$	5,199,535	$	16,814,146
Cost of goods sold		4,100,740		13,790,715
Gross profit		1,098,795		3,023,431
Operating expenses:
General and administrative expenses		850,623		1,018,912
Professional and consulting fees		40,677		104,584
Total operating expenses		891,300		1,123,496
Income before other income (expense)	$	207,495	$	1,899,935

 Below is the Segment reconciliation to total net income

Income from segments above	$	2,107,430
Non-allocated expenses
Interest expense		(728,925	)
General and administrative expenses		(259,295	)
Other income (expense)		288,596
Total non-allocated expenses		(699,624	)
Income before	$	1,407,806
provision for income taxes

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

	CAS		PMAL
Net Revenue	$	2,719,570	$	8,591,327
Cost of goods sold		2,131,684		7,344,231
Gross profit		587,886		1,247,096
Operating expenses:
General and administrative expenses		466,970		508,256
Professional and consulting fees		16,697		(16,314	)
Total operating expenses		483,667		491,942
Income before other income (expense)	$	104,219	$	755,154

Below is the Segment reconciliation to total net income

Income from segments above	$	859,373
Non-allocated expenses
Interest expense - net		(363,774	)
General and administrative expenses		(86,253	)
Professional and consulting fees		(36,452	)
Other income		278,244
Total		(171,783	)
Income before provision for income taxes	$	651,138

Segment asset information for the Company is as follows:

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

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INCOME TAXES

6 Months Ended

Jun. 30, 2019

INCOME TAXES

10. INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due. For 2018, our current effective tax rate is lower than the Federal and state effect rate primarily to the release of a portion of the valuation allowance.

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

	For the six months ended June 30,
	2019		2018
Current income tax
Federal	$	-	$	-
State		95,793		131,557
City		-		-
Total current income tax	$	95,793	$	131,557
Deferred income tax
Federal	$	329,154	$	-
State		36,573		-
City		-		-
Total deferred income tax	$	365,727	$	-
Total income tax expense	$	461,520	$	131,557

The Companys deferred tax assets and liability relates mainly to a temporary timing difference in long-term assets. There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded in the Companys unaudited condensed consolidated financial statements for the six months ended June 30, 2019 or 2018. Additionally, there were no interest or penalties outstanding as of or for each of the six months ended June 30, 2019 and 2018.

The federal and state tax returns for the years ending December 31, 2015, 2016, and 2017 have been filed, but are still open to examination. Federal and state tax returns for the year ending December 31, 2018 have not been filed.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2019

SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS

On July 15, 2019, CAS entered into a Loan and Security Agreement (the CAS Loan and Security Agreement) with Berkshire Bank establishing a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the CAS Revolving Loan). Borrowings under the CAS Revolving Loan may be used to finance working capital and other general corporate purposes.

Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%.

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

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

The CAS Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement covenant. Under the cash flow coverage covenant, commencing with the fiscal quarter ending September 30, 2019, CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, commencing with the fiscal quarter ending December 31, 2019, CAS shall maintain a tangible net worth of no less than $1.5 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of CASs prior years undistributed net income.

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

Effective July 1, 2019, the Company and SBN entered into a Membership Interest Redemption Agreement (the Redemption Agreement) pursuant to which the Company will purchase the remaining SBN Membership Interests from SBN for a purchase price of $3,000,000.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Interim Consolidated Financial Statements

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

Principles of Consolidation and Basis of Presentation

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

Earnings Per Share

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

Use of Estimates

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Inventory

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

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

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

The Companys inventory consists of the following:

	June 30, 2019			December 31, 2018
Raw Materials	$	2,168,422		$	2,133,311
Finished Goods		3,825,741			3,598,640
Reserves		(158,009	)		(151,009	)
Total	$	5,836,154		$	5,580,942

Property, Land and Equipment

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

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

** Shorter of life or lease term.

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

Concentration of Credit Risk

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

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

Concentration of Suppliers

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

Fair Value Measurements

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

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

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

Fair Value of Financial Instruments

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

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

Income Taxes

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

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

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

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

Revenue Recognition

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

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

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

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

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

Redeemable Non-Controlling Interest

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

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

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

The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBNs PMAL equity ownership. This amount, plus SBNs pro rata net income allocation is reflected before stockholders equity as Redeemable Non-Controlling interest. The redeemable non-controlling interest was reduced for the reduction in membership interests from 25% to 20% in 2018, as noted above. SBNs pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests.

Recently Adopted Authoritative Pronouncements

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

In June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entitys own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the Companys financial position and results of operations.

Recent Accounting Pronouncements

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

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

Summary of inventory

	June 30, 2019			December 31, 2018
Raw Materials	$	2,168,422		$	2,133,311
Finished Goods		3,825,741			3,598,640
Reserves		(158,009	)		(151,009	)
Total	$	5,836,154		$	5,580,942

Estimated useful lives of the assets

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

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PROPERTY, LAND AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2019

PROPERTY, LAND AND EQUIPMENT (Tables)

Property, Land and Equipment

	June 30, 2019			December 31, 2018
Land, buildings and improvements	$	3,419,779		$	3,419,779
Equipment		3,698,189			3,463,829
Total		7,117,968			6,883,608
Less accumulated depreciation		(1,065,979	)		(758,425	)
Net property, land and equipment	$	6,051,989		$	6,125,183

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2019

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

Accounts Payable And Accrued Expenses

	June 30, 2019		December 31, 2018
Accounts payable	$	3,478,306	$	3,060,269
Interest		33,192		35,805
Salaries and bonus		495,000		116,930
Other		19,520		62,007
	$	4,026,018	$	3,275,011

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2019

GOODWILL AND INTANGIBLE ASSETS (Tables)

GOODWILL AND INTANGIBLE ASSETS

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

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LEASES (Tables)

6 Months Ended

Jun. 30, 2019

LEASES

Schedule of operating leases recorded

Leases	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease ROU assets	Right-of-use asset	$	1,208,613
Finance lease ROU assets	Property, land and equipment, net	$	150,966
Liabilities
Current
Operating	Operating leases payable short term	$	254,845
Finance	Finance leases payable short term	$	45,688
Noncurrent
Operating	Operating leases payable net of current portion	$	1,000,193
Finance	Finance leases payable net of current portion	$	89,656

Schedule of weighted average discount rate for operating leases

	June 30, 2019
Weighted average remaining lease term	55.3 months
Weighted average discount rate		5.63	%

Schedule of lease expense

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost:
Operating lease cost	$	51,927	$	89,432
Finance lease cost:
Amortization of ROU assets		8,227		21,449
Interest expense		1,759		3,650
Total lease cost	$	61,913	$	114,531

Schedule of future minimum rental payments for operating leases

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

Schedule of finance and Capital Leases

	Finance Leases June 30, 2019		Capital Leases December 31, 2018
Obligations under finance and capital leases	$	135,344	$	156,793
Less: current portion		45,688		43,435
Long-term portion	$	89,656	$	113,358

Schedule of future minimum repayments of finance lease obligations

Years ending December 31,	Finance lease obligations as of June 30, 2019
2019 (remaining six months)	$	25,098
2020		50,200
2021		48,880
2022		21,397
Total future minimum repayments inclusive of interest		145,575
Interest		10,231
Total principal repayments	$	135,344

Schedule of future minimum repayments of capital lease obligations

Years ending December 31,	Capital lease obligations as of December 31, 2018
2019	$	50,199
2020		50,199
2021		48,878
2022		21,396
Total future minimum repayments inclusive of interest		170,672
Interest		13,879
Total principal repayments	$	156,793

Schedule of weighted average discount rate for finance leases

	June 30, 2019
Weighted average remaining lease term	35 months
Weighted average discount rate		4.93	%

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LONG-TERM DEBT AND LINE OF CREDIT (Tables)

6 Months Ended

Jun. 30, 2019

LONG-TERM DEBT AND LINE OF CREDIT (Tables)

Schedule of of the non-controlling interests

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

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

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

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

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

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

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

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

Repayments of Berkshire Terms Loan A and Berkshire Term Loan B

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

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SEGMENT RESULTS (Tables)

6 Months Ended

Jun. 30, 2019

SEGMENT RESULTS (Tables)

Schedule of Segment Information

Segment information for the six months ended June 30, 2019 is as follows:

	CAS		PMAL
Net revenue	$	8,494,047	$	15,568,280
Cost of goods sold		6,985,022		12,184,427
Gross profit		1,509,025		3,383,853
Operating expenses:
General and administrative expenses		958,673		1,443,026
Professional and consulting fees		38,926		130,986
Total operating expenses		997,599		1,574,012
Income before other income (expense)	$	511,426	$	1,809,841

 Below is the Segment reconciliation to total net income

Income from segments above	$	2,321,267
Non-allocated expenses
Interest expense		(240,430	)
General and administrative expenses		(267,727	)
Professional and consulting fees		(20,792	)
Total non-allocated expenses		(528,949	)
Income before provision for income taxes	$	1,792,318

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

	CAS		PMAL
Net revenue	$	4,176,218	$	7,381,141
Cost of goods sold		3,469,766		5,783,306
Gross profit		706,452		1,597,835
Operating expenses:
General and administrative expenses		492,228		714,291
Professional and consulting fees		26,559		41,784
Total operating expenses		518,787		756,075
Income before other income (expense)	$	187,665	$	841,760

Below is the Segment reconciliation to total net income

Income from segments above	$	1,029,425
Non-allocated expenses
Interest expense		(118,635	)
General and administrative expenses		(132,246	)
Professional and consulting fees		(12,794	)
Total non-allocated expenses		(263,675	)
Income before provision for income taxes	$	765,750

Segment information for the six months ended June 30, 2018 is as follows:

	CAS		PMAL
Net Revenue	$	5,199,535	$	16,814,146
Cost of goods sold		4,100,740		13,790,715
Gross profit		1,098,795		3,023,431
Operating expenses:
General and administrative expenses		850,623		1,018,912
Professional and consulting fees		40,677		104,584
Total operating expenses		891,300		1,123,496
Income before other income (expense)	$	207,495	$	1,899,935

 Below is the Segment reconciliation to total net income

Income from segments above	$	2,107,430
Non-allocated expenses
Interest expense		(728,925	)
General and administrative expenses		(259,295	)
Other income (expense)		288,596
Total non-allocated expenses		(699,624	)
Income before	$	1,407,806
provision for income taxes

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

	CAS		PMAL
Net Revenue	$	2,719,570	$	8,591,327
Cost of goods sold		2,131,684		7,344,231
Gross profit		587,886		1,247,096
Operating expenses:
General and administrative expenses		466,970		508,256
Professional and consulting fees		16,697		(16,314	)
Total operating expenses		483,667		491,942
Income before other income (expense)	$	104,219	$	755,154

Below is the Segment reconciliation to total net income

Income from segments above	$	859,373
Non-allocated expenses
Interest expense - net		(363,774	)
General and administrative expenses		(86,253	)
Professional and consulting fees		(36,452	)
Other income		278,244
Total		(171,783	)
Income before provision for income taxes	$	651,138

Segment asset information for the Company is as follows:

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

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2019

INCOME TAXES (Tables)

Schedule of Components of income tax provision

	For the six months ended June 30,
	2019		2018
Current income tax
Federal	$	-	$	-
State		95,793		131,557
City		-		-
Total current income tax	$	95,793	$	131,557
Deferred income tax
Federal	$	329,154	$	-
State		36,573		-
City		-		-
Total deferred income tax	$	365,727	$	-
Total income tax expense	$	461,520	$	131,557

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Raw Materials	$ 2,168,422	$ 2,133,311
Finished Goods	3,825,741	3,598,640
Reserves	(158,009)	(151,009)
Total	$ 5,836,154	$ 5,580,942

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	6 Months Ended
	Jun. 30, 2019
Leasehold improvements
Estimated useful lives of the assets	5 years
Furniture and fixtures
Estimated useful lives of the assets	7 years
Equipment and other | Minimum [Member]
Estimated useful lives of the assets	3 years
Equipment and other | Maximum [Member]
Estimated useful lives of the assets	10 years
Building [Member]
Estimated useful lives of the assets	30 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Aug. 31, 2018	Jun. 30, 2019	Mar. 31, 2019	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Aug. 17, 2017
Redeemable non-controlling interest equity value		$ 400,000			$ 400,000
Statutory federal corporate tax rate, description					December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018.
Allowance for doubtful accounts		$ 78,753			$ 78,753		$ 78,753
AMG-Vanadium [Member]
Concentration of credit risk, total sales		15.70%		21.10%	17.00%	19.50%
Outstanding accounts receivable					10.20%		15.00%
Remelt Sources, Inc. [Member]
Concentration of credit risk, total sales		21.80%		18.70%	20.30%	16.40%
Outstanding accounts receivable					17.80%		20.90%
PACCAR [Member]
Concentration of credit risk, total sales		16.20%		14.20%	15.60%	15.10%
Outstanding accounts receivable					11.20%		14.00%
Universal Stainless & Alloy Products [Member]
Concentration of credit risk, total sales		10.80%		14.10%	12.00%	13.70%
Outstanding accounts receivable					13.40%		13.10%
Ametek [Member]
Concentration of credit risk, total sales				11.40%		12.50%
PMAL [Member]
Inventory reserve		$ 82,849			$ 82,849		$ 82,849
Repurchase of Stock, value								$ 9,600,000
Equity investment ownership percentage								25.00%
Creative Assembly [Member]
Inventory reserve		$ 75,160		$ 68,160	$ 75,160		$ 68,160
AVK [Member]
Outstanding accounts payable percentage					14.00%		11.80%
Maximum [Member]
Product distribution percentage				10.00%	10.00%
Summit Bridge Loans [Member]
Repayment of related party debt description			The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.		The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.
Summit Bridge Loans [Member] | SBN [Member]
Description for pro-rata net income allocation	SBN's pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests

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PROPERTY, LAND AND EQUIPMENT (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
PROPERTY, LAND AND EQUIPMENT (Details)
Land , buildings and improvements	$ 3,419,779	$ 3,419,779
Equipment	3,698,189	3,463,829
Total	7,117,968	6,883,608
Less accumulated depreciation	(1,065,979)	(758,425)
Net property, land and equipment	$ 6,051,989	$ 6,125,183

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PROPERTY, LAND AND EQUIPMENT (Details Narrative)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) ft²	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) ft²	Jun. 30, 2018 USD ($)
Company area | ft²	220,000		220,000
Depreciation expense	$ 155,455	$ 70,696	$ 307,554	$ 206,162
Property, Plant and Equipment [Member]
Proceeds on notes payable - related party			$ 5,295,431

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details)
Accounts payable	$ 3,478,306	$ 3,060,269
Interest	33,192	35,805
Salaries and bonus	495,000	116,930
Other	19,520	62,007
Accounts payable and accrued expenses	$ 4,026,018	$ 3,275,011

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GOODWILL AND INTANGIBLE ASSETS (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
GOODWILL AND INTANGIBLE ASSETS (Details)
Customer lists	$ 1,990,000
Goodwill	$ 54,993

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GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
GOODWILL AND INTANGIBLE ASSETS (Details Narrative)
Customer list estimated useful life			10 years
Customer list value, net of amortization	$ 1,608,583		$ 1,608,583
Amortization expense description			Amortization expense for the years ended December 31, 2019 through 2023 will be $199,000 per year. The Company will continue to expense $199,000 annually until 2027.
2019	199,000		$ 199,000
2020	199,000		199,000
2021	199,000		199,000
2022	199,000		199,000
2023 and thereafter till 2027	199,000		199,000
Amortization of goodwill and intangible assets	$ 99,501	$ 49,751	$ 99,501	$ 49,751

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LEASES (Details) - USD ($)	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
LEASES (Details)
Right-of-use asset	$ 1,208,613
Property, land and equipment, net	150,966
Current
Operating leases payable - short term	156,558	$ 254,845
Finance leases payable - short term	45,688
Noncurrent
Operating leases payable - net of current portion	1,000,193
Finance leases payable - net of current portion	$ 89,656

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LEASES (Details 1)	Jun. 30, 2019	Mar. 31, 2019
LEASES (Details 1)
Weighted average remaining lease term	4 years	3 years 6 months
Weighted average discount rate

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LEASES (Details 2) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Operating lease cost:
Operating lease cost	$ 51,927	$ 89,432
Finance lease cost:
Amortization of ROU assets	8,227	21,449
Interest expense	1,759	3,650
Total lease cost	$ 61,913	$ 114,531

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LEASES (Details 3) - USD ($)	Jun. 30, 2019	Mar. 31, 2019
July 1, 2019 through December 31, 2019	$ 156,558	$ 254,845
Operating Leases [Member]
July 1, 2019 through December 31, 2019	156,558
2020	313,115
2021	118,058
2022	287,448
2023	236,115
2024	118,058
Total undiscounted future minimum lease payments	1,424,408
Less: Imputed interest	169,370
Present value of operating lease obligations	$ 1,255,038

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LEASES (Details 4) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Less: current portion	$ 45,688
Long-term portion	89,656
Finance Leases [Member]
Obligations under finance and capital leases	135,344
Less: current portion	45,688
Long-term portion	89,656
Capital Leases [Member]
Obligations under finance and capital leases		$ 156,793
Less: current portion		43,435
Long-term portion		$ 113,358

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LEASES (Details 5) - USD ($)	Jun. 30, 2019	Mar. 31, 2019
July 1, 2019 through December 31, 2019	$ 156,558	$ 254,845
Finance Lease Obligations [Member]
July 1, 2019 through December 31, 2019		25,098
2020		50,200
2021		48,880
2022		21,397
Total future minimum repayments inclusive of interest		145,573
Interest		10,231
Total Principal Repayments		$ 135,344

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LEASES (Details 6) - Capital Lease Obligations [Member]	Dec. 31, 2018 USD ($)
2019	$ 50,199
2020	50,199
2021	48,878
2022	21,396
Total future minimum repayments inclusive of interest	170,672
Interest	13,879
Total principal repayments	$ 156,793

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LEASES (Details 7)	Jun. 30, 2019	Mar. 31, 2019
Weighted average remaining lease term	4 years	3 years 6 months
Finance and Capital Leases [Member]
Weighted average remaining lease term		3 years 2 months
Weighted average discount rate		4.93%

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LEASES (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2018	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Increase in operating leases payable		$ (15,763)
Operating lease asset obtained in exchange for operating lease obligation		1,277,143
2019 (remaining six months)		254,845
July 1, 2019 through December 31, 2019		156,558	$ 254,845
Texas Facility [Member]
July 1, 2019 through December 31, 2019		57,618
2020		236,115
2021		115,236
2022		115,236
2023		115,236
2024		57,618
Totaling leases		576,180
Lease expense		14,133
Ohio Facility [Member]
July 1, 2019 through December 31, 2019		77,000
2020		77,000
2021		77,000
2022		57,750
Totaling leases		243,833
Lease expense	$ 29,208

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LONG-TERM DEBT AND LINE OF CREDIT (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
LONG-TERM DEBT AND LINE OF CREDIT (Details)
Value of NCI at Beginning	$ 927,071	$ 651,114	$ 757,778
PMAL Income attributable to NCI	144,658	$ 166,556	313,951	$ 364,293
Value of NCI at Ending	$ 1,071,729		$ 1,071,729

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LONG-TERM DEBT AND LINE OF CREDIT (Detail 3 ) - USD ($)	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
July 1, 2019 through December 31, 2019	$ 156,558	$ 254,845
Total	21,101,927		$ 18,272,239
Term Loan A & B[Member]
July 1, 2019 through December 31, 2019	300,000
2020	600,000
2021	3,650,000
Total	4,550,000
Unamortized debt and financing cost	145,170
Total (net of unamortized debt and financing cost)	$ 4,404,830

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LONG-TERM DEBT AND LINE OF CREDIT (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended	6 Months Ended
	Aug. 31, 2018	Aug. 17, 2017	Mar. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Repayment of summit loans by PMAL
SBN's PMAL equity ownership, amount at acquisition				$ 1,071,729	$ 757,778
Summit Bridge Loans [Member]
Repayment of related party debt, description			The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.	The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018.
Summit Bridge Loans [Member] | PMAL [Member]
SBN's PMAL equity ownership, amount at acquisition		$ 400,000
Purchase price of Prime Metals		$ 9,600,000
Summit Bridge Loans [Member] | SBN [Member]
Description for pro-rata net income allocation	SBN's pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests
Loan and Security Agreement [Member]
Repayment of summit loans by PMAL	$ 7,678,814
Description for cash flow coverage ratio under agreement	PMAL shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00
Description for tangible net worth under agreement	PMAL shall maintain a tangible net worth of no less than $3.1 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of PMAL’s prior year’s undistributed net income.
Loan and Security Agreement [Member] | Berkshire Bank [Member]
Interest rate description			Borrowings under the Berkshire Revolving Loan bear interest at a rate equal to the Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (“ICE LIBOR”) rate plus 3.25%, which was 5.74% at March 31, 2019.
Unamortized fees				$ 162,591	180,010
Credit facility, amount borrowed amount				504,534
Loan and Security Agreement [Member] | Berkshire Bank [Member] | Revolving Credit Facility [Member]
Credit facility, amount borrowed amount				504,534
Credit facility, maximum borrowing capacity	$ 6,000,000			2,900,000
Loan and Security Agreement [Member] | Berkshire Term Loan B [Member]
Credit facility, maximum borrowing capacity	$ 1,500,000
Maturity date description	Berkshire Term Loan B has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date.
Debt instrument periodic payments	$ 8,334
Frequency of periodic payments	Monthly
Loan and Security Agreement [Member] | Berkshire Term Loan A [Member]
Credit facility, maximum borrowing capacity	$ 3,500,000
Maturity date description	Berkshire Term Loan A has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date.
Debt instrument periodic payments	$ 41,667
Frequency of periodic payments	Monthly
Loan and Security Agreement [Member] | Berkshire Term Loan A and B [Member]
Interest rate description			Berkshire Term Loan A and Berkshire Term Loan B bear interest at ICE LIBOR rate plus 4.25%, which was 6.69% at June 30, 2019.
Term Loan A [Member]
Term loan principal balance				3,125,000	$ 3,375,000
Term Loan A [Member] | Summit Bridge Loans [Member] | PMAL [Member]
Interest rate description		Summit Term Loan A accrued each month at either 17.5% interest per annum (with 12.5% payable monthly and 5.0% accruing to the outstanding balance of Term Loan A, payable at maturity) or 17.0% interest per annum, payable monthly.
Maturity date		Aug. 17, 2020
Term Loan B [Member]
Term loan principal balance				$ 1,425,000
Term Loan B [Member] | Summit Bridge Loans [Member] | PMAL [Member]
Interest rate description		Summit Term Loan B accrued each month at either 17.5% interest per annum (with 14.0% payable monthly and 3.5% accruing to the outstanding balance of Term Loan B, payable at maturity) or 17.0% interest per annum, payable monthly.
Maturity date		Aug. 17, 2020

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COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)		6 Months Ended
	Nov. 10, 2017	Jun. 30, 2019	Dec. 31, 2018
Common stock shares issued value		$ 313	$ 313
Accrued bonus		177,000
Additional accrued bonuses		$ 177,000
Common stock shares issued		313,636	313,636
Independent Director Agreements [Member] | Mr. Garruto [Member]
Common stock shares issued value			$ 25,000
Common stock shares issued			625
Board members compensation		$ 25,000
Independent Director Agreements [Member] | Mr. Lamb [Member]
Common stock shares issued value			$ 25,000
Common stock shares issued			625
Board members compensation		25,000
Employment Agreements [Member]
Threshold amounts		$ 1,750,000
Employment Agreements [Member] | Mssrs. Wachter and Golden [Member]
Accrued bonus			$ 103,000
Employment Agreements [Member] | Mr. Wachter [Member]
Base salary	$ 100,000
Employment Agreements [Member] | Mr. Golden [Member]
Base salary	$ 100,000
Executive Bonus Plan [Member]
Bonus plan description		The Executive Bonus Plan, awards are paid out in a mix of cash and equity, with no less than 60% of corporate bonus pool to be in the form of newly issued restricted common stock, subject to the discretion of the Compensation Committee of the Board.
Corporate Bonus Pool [Member]
Bonus plan description		The Company will fund the annual corporate bonus pool with no more than 20% of the excess, if any, of the Company’s yearly earnings before taxes minus a threshold. amount

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SEGMENT RESULTS (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Revenue	$ 4,176,218	$ 11,310,897		$ 8,494,047	$ 22,013,681
Cost of goods sold	9,253,072	9,475,915		19,169,449	17,891,455
Gross profit	2,304,287	1,834,982		1,509,025	4,122,226
Operating expenses:
General and administrative expenses	1,338,765	1,061,479		958,673	2,059,149
Professional and consulting fees	81,137	36,835		38,926	214,942
Total operating expenses	1,419,902	1,098,314		997,599	2,274,091
Income before other income (expense)	884,385	736,668		511,426	1,848,135
Non-allocated expenses
Interest expense	(118,635)	$ (363,774)			(728,925)
Creative Assembly [Member]
Net Revenue	4,176,218		$ 2,719,570	8,494,047	5,199,535
Cost of goods sold	3,469,766		2,131,684	6,985,022	4,100,740
Gross profit	706,452		587,886	1,509,025	1,098,795
Operating expenses:
General and administrative expenses	466,970		381,219	958,673	850,623
Professional and consulting fees	16,697		23,710	38,926	40,677
Total operating expenses	483,667		404,929	997,599	891,300
Income before other income (expense)	104,219		105,980	511,426	207,495
PMAL [Member]
Net Revenue	8,591,327		8,222,819	15,568,280	16,814,146
Cost of goods sold	7,344,231		6,446,484	12,184,427	13,790,715
Gross profit	1,247,096		1,776,335	3,383,853	3,023,431
Operating expenses:
General and administrative expenses	508,256		510,656	1,443,026	1,018,912
Professional and consulting fees	(16,314)		120,898	130,986	104,584
Total operating expenses	491,942		631,554	1,574,012	1,123,496
Income before other income (expense)	755,154		1,144,781	1,809,841	1,899,936
Segment Reconciliation [Member]
Operating expenses:
Income from segments above	859,373		859,373	2,321,267	2,107,430
Non-allocated expenses
Interest expense	(363,774)		(363,774)	(240,430)	(728,925)
General and administrative expenses	(86,253)		(86,253)	(267,727)	(259,295)
Other income (expense)			278,224
Professional and consulting fees	(12,794)		(36,452)	(20,792)	288,596
Total non-allocated expenses	(263,675)		(171,783)	(528,949)	(699,624)
Income from continuing operations before provision for income taxes	$ 765,750		$ 651,138	$ 1,792,318	$ 1,407,806

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SEGMENT RESULTS (Details 1) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Total	$ 21,101,927	$ 18,272,239
Creative Assembly [Member]
Total	6,789,307	4,526,530
PMAL [Member]
Total	14,221,255	12,982,588
Corporate [Member]
Total	$ 91,365	$ 763,121

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INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Current income tax
Federal
State			95,793	131,557
City
Total Current income tax			95,793	131,557
Deferred income tax
Federal			329,154
State			36,573
City
Total deferred income tax			365,727
Total income tax expense	$ (199,054)	$ (131,557)	$ 461,520	$ 131,557

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SUBSEQUENT EVENTS (Detail Narrative) - Subsequent Event [Member] - Loan and securities agreement [Member] - USD ($)	1 Months Ended	6 Months Ended
	Jul. 15, 2019	Jun. 30, 2019
Revolving loan principal amount	$ 6,000,000
Interest rate description	Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%.
CAS Loan Security Agreement		The CAS Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement covenant. Under the cash flow coverage covenant, commencing with the fiscal quarter ending September 30, 2019, CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, commencing with the fiscal quarter ending December 31, 2019, CAS shall maintain a tangible net worth of no less than $1.5 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of CAS’s prior years undistributed net income.