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, 2019 occur, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

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





General

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

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

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






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Plan of Operation and Discussion of Operations

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

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

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

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

Creative Assembly sells its products pursuant to written purchase orders from its customers. All products are shipped from Creative Assembly's warehouses via common carrier.

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

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

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






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

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

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


Results from Operations for three months ending March 31, 2020 vs March 31, 2019

The Company's revenues decreased 9.6% or $1,198,526 for the three months ended March 31, 2020 to $11,306,442 from $12,504,968 in the comparable period last year. PMAL had $7,838,167 in revenue for the three months ended March 31, 2020. PMAL revenue was down $348,972 or 4.3% for the three months ended March 31, 2020 versus March 31, 2019, primarily due to a slowdown in March 2020 caused by the COVID-19 pandemic. Creative Assembly was down $1,410,016 or 32.7% in revenue for the three months ended March 31, 2020 versus March 31, 2019 due to a shutdown by the largest customers in March 2020 in response to the COVID-19 pandemic. USAC had revenue of $560,462 for the period between March 20, 2020 and March 31, 2020.

The Company's gross profit decreased approximately 22.8% or $591,164 for the three months ended March 31, 2020 to $1,997,427 from $2,588,591 in the comparable period last year. For the three months ended March 31, 2020, gross profit at Creative Assembly decreased by $342,228 or approximately 42.6% versus the comparable period last year due to decreased sales caused by the COVID-19 pandemic. For the three months ended March 31, 2020, gross profit at PMAL decreased by $369,276 or approximately 20.7% versus the comparable period last year due to a decrease in sales caused by the COVID-19 pandemic.

The Company's total operating expenses decreased 4.2% or $60,433 for the three months ending March 31, 2020 to $1,379,795 from $1,440,228.





Liquidity

The Company believes that it can meet its financial obligations for a period of 12 months from the date of this report at its presently contemplated operating levels.

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






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