<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    ---------
                                    FORM 10-Q
                                    ---------

              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 1 - 5332


                             P & F INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)


                DELAWARE                               22-1657413
        (State of incorporation)         (I.R.S. Employer Identification Number)


 300 SMITH STREET, FARMINGDALE, NEW YORK                 11735
(Address of principal executive offices)               (Zip Code)


       Registrant's telephone number, including area code: (516) 694-1800

                                 ---------------

      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, and (2) has been subject to such filing
requirements for the past 90 days.
YES |X|  NO |_|


      As of November 10, 1999, there were outstanding 3,504,945 shares of the
Registrant's Class A Common Stock, par value $1.00 per share.
<PAGE>

                             P & F INDUSTRIES, INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999


                                TABLE OF CONTENTS

                                                                         PAGE
PART I                                                                   ----

Item 1.     Financial Statements

              Consolidated Balance Sheets as of
                September 30, 1999 and December 31, 1998                1 - 2

              Consolidated Statements of Income for
                the three months and nine months ended
                September 30, 1999 and 1998                                 3

              Consolidated Statement of Shareholders' Equity
                for the nine months ended September 30, 1999                4

              Consolidated Statements of Cash Flows for the
                nine months ended September 30, 1999 and 1998           5 - 6

              Notes to Consolidated Financial Statements               7 - 12

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                     13 - 18

Item 3.     Quantitative and Qualitative Disclosures About
              Market Risk                                                  19

PART II

Item 1.     Legal Proceedings                                              20

Item 2.     Changes in Securities and Use of Proceeds                      20

Item 3.     Defaults Upon Senior Securities                                20

Item 4.     Submission of Matters to a Vote of Security Holders            20

Item 5.     Other Information                                              20

Item 6.     Exhibits and Reports on Form 8-K                               20


SIGNATURES                                                                 21

EXHIBIT INDEX                                                              22


                                        i
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                     =======================================

<TABLE>
<CAPTION>
                                          SEPTEMBER 30,  DECEMBER 31,
                                              1999           1998
                                          ------------   ------------
<S>                                       <C>            <C>
   ASSETS
   ------
CURRENT:
  Cash                                    $    593,308   $  2,280,788
  Accounts receivable, less allowance
    for possible losses of $494,461
    in 1999 and $498,669 in 1998            14,194,026      8,542,204
  Inventories                               26,454,559     17,021,475
  Deferred income taxes                        507,000        507,000
  Prepaid expenses and other assets            883,928        586,913
                                          ------------   ------------
      TOTAL CURRENT ASSETS                  42,632,821     28,938,380
                                          ------------   ------------

PROPERTY AND EQUIPMENT:
  Land                                       1,182,939      1,182,939
  Buildings and improvements                 5,882,280      5,773,608
  Machinery and equipment                   11,262,717      9,724,919
                                          ------------   ------------
                                            18,327,936     16,681,466
  Less accumulated depreciation
    and amortization                         7,049,293      6,052,899
                                          ------------   ------------
      NET PROPERTY AND EQUIPMENT            11,278,643     10,628,567
                                          ------------   ------------

GOODWILL, net of accumulated
  amortization of $1,419,922 in
  1999 and $1,190,040 in 1998                8,045,037      8,274,918

OTHER ASSETS                                   203,902        236,614
                                          ------------   ------------
      TOTAL ASSETS                        $ 62,160,403   $ 48,078,479
                                          ============   ============
</TABLE>


                                        1
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                   (CONTINUED)
                     =======================================

<TABLE>
<CAPTION>
                                          SEPTEMBER 30,  DECEMBER 31,
                                              1999           1998
                                          ------------   ------------
<S>                                       <C>            <C>
   LIABILITIES AND SHAREHOLDERS' EQUITY
   ------------------------------------
CURRENT LIABILITIES:
  Short-term borrowings                   $ 12,500,000   $  3,500,000
  Accounts payable                           8,800,171      4,844,403
  Accruals:
    Compensation                             2,017,601      1,944,960
    Other                                    2,307,973      2,130,026
  Current maturities of long-term debt         944,980        524,974
                                          ------------   ------------
      TOTAL CURRENT LIABILITIES             26,570,725     12,944,363

LONG-TERM DEBT, less current maturities      7,670,228     10,193,064

DEFERRED INCOME TAXES                          491,000        491,000
                                          ------------   ------------
                                            34,731,953     23,628,427
                                          ------------   ------------

SHAREHOLDERS' EQUITY:
  Common stock:
    Class A - $1 par; shares authorized
      7,000,000; outstanding 3,504,945
      and 3,239,345                          3,504,945      3,239,345
    Class B - $1 par; shares authorized
      2,000,000                                     --             --
  Additional paid-in capital                 8,282,602      8,020,677
  Retained earnings                         16,139,403     13,190,030
  Treasury stock,
    at cost (49,235 shares)                   (498,500)            --
                                          ------------   ------------
      TOTAL SHAREHOLDERS' EQUITY            27,428,450     24,450,052
                                          ------------   ------------
      TOTAL LIABILITIES AND
        SHAREHOLDERS' EQUITY              $ 62,160,403   $ 48,078,479
                                          ============   ============
</TABLE>


                                        2
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                     =======================================

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED           NINE MONTHS ENDED
                                              SEPTEMBER 30,               SEPTEMBER 30,
                                           ------------------          ------------------
                                           1999          1998          1999          1998
                                       ------------  ------------  ------------  ------------
<S>                                    <C>           <C>           <C>           <C>
REVENUES:
  Net sales                            $ 20,219,270  $ 13,915,613  $ 54,983,995  $ 38,223,141
  Other                                     139,109       203,076       574,809       434,044
                                       ------------  ------------  ------------  ------------
                                         20,358,379    14,118,689    55,558,804    38,657,185
                                       ------------  ------------  ------------  ------------

COSTS AND EXPENSES:
  Cost of sales                          14,027,734     8,757,041    38,232,924    23,783,501
  Selling, administrative and general     3,987,012     3,241,260    11,603,179     9,739,591
  Interest - net                            371,691       160,669       973,328       404,496
                                       ------------  ------------  ------------  ------------
                                         18,386,437    12,158,970    50,809,431    33,927,588
                                       ------------  ------------  ------------  ------------

INCOME BEFORE TAXES ON INCOME             1,971,942     1,959,719     4,749,373     4,729,597

TAXES ON INCOME                             738,000       739,000     1,800,000     1,778,000
                                       ------------  ------------  ------------  ------------

NET INCOME                             $  1,233,942  $  1,220,719  $  2,949,373  $  2,951,597
                                       ============  ============  ============  ============

Weighted average common
  shares outstanding:
    Basic                                 3,455,208     3,240,469     3,340,868     3,197,301

    Diluted                               3,718,914     3,723,588     3,727,195     3,688,497


Earnings per share of common stock:
  Basic                                       $ .35         $ .38         $ .88         $ .92

  Diluted                                     $ .33         $ .33         $ .79         $ .80
</TABLE>


                                        3
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
                 ==============================================

<TABLE>
<CAPTION>
                                              ADDITIONAL
                                   COMMON       PAID-IN     RETAINED    TREASURY
                                    STOCK       CAPITAL     EARNINGS      STOCK
                                -----------  -----------  ------------  ---------
<S>                             <C>          <C>          <C>           <C>
Balance, January 1, 1999        $ 3,239,345  $ 8,020,677  $ 13,190,030  $      --

Net income for the nine months
  ended September 30, 1999               --           --     2,949,373         --

Exercise of stock options,
  265,600 shares                    265,600      261,925            --         --

Common stock received on
  exercise of stock options,
  49,235 shares                          --           --            --   (498,500)
                                -----------  -----------  ------------  ---------
Balance, September 30, 1999     $ 3,504,945  $ 8,282,602  $ 16,139,403 ($ 498,500)
                                ===========  ===========  ============  =========
</TABLE>


                                        4
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                     =======================================

<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED
                                                 SEPTEMBER 30,
                                              ------------------
                                              1999          1998
                                          ------------  ------------
<S>                                       <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                              $  2,949,373  $  2,951,597
                                          ------------  ------------

  Adjustments to reconcile net income
    to net cash provided by (used in)
    operating activities:
      Depreciation and amortization          1,236,266       648,825
      Provision for losses on
        accounts receivable                      4,481        16,690
  Decrease (increase):
    Accounts receivable                     (5,656,303)     (283,525)
    Inventories                             (9,433,084)   (4,787,856)
    Prepaid expenses and other assets         (297,015)     (189,297)
    Other assets                                22,721           158
  Increase (decrease):
    Accounts payable                         3,955,768       541,949
    Accruals and other                         250,588       725,158
                                          ------------  ------------
      Total adjustments                     (9,916,578)   (3,327,898)
                                          ------------  ------------
        Net cash used in
          operating activities              (6,967,205)     (376,301)
                                          ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                      (1,646,470)     (750,451)
  Purchase of Green Manufacturing, Inc.             --   (10,693,286)
                                          ------------  ------------
        Net cash used in
          investing activities              (1,646,470)  (11,443,737)
                                          ------------  ------------
</TABLE>


                                        5
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)
                                   (UNAUDITED)
                     =======================================

<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED
                                                 SEPTEMBER 30,
                                              ------------------
                                              1999          1998
                                          ------------  ------------
<S>                                       <C>           <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from short-term borrowings       10,500,000    16,053,023
  Repayments of short-term borrowings       (1,500,000)  (13,703,672)
  Proceeds from acquisition loan                    --    10,000,000
  Proceeds from mortgage refinancing         1,800,000            --
  Principal payments on long-term debt      (3,902,830)     (156,931)
  Proceeds from exercise of stock options       29,025       228 938
  Redemption of subordinated debentures             --    (1,369,200)
                                          ------------  ------------
        Net cash provided by
          financing activities               6,926,195    11,052,158
                                          ------------  ------------


NET (DECREASE) INCREASE IN CASH             (1,687,480)     (767,880)

CASH AT BEGINNING OF PERIOD                  2,280,788     2,092,244
                                          ------------  ------------

CASH AT END OF PERIOD                     $    593,308  $  1,324,364
                                          ============  ============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
    Cash paid during the period for:

      Income taxes                        $  1,625,300  $  1,700,876
                                          ============  ============


      Interest                            $  1,010,770  $    413,362
                                          ============  ============
</TABLE>

    The Company received 49,235 shares of common stock in connection
with the exercise of stock options by an officer of the Company. The
value of these shares was recorded at $498,500.


                                        6
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

      P & F Industries, Inc. (the "Company") conducts its business operations
through three wholly-owned subsidiaries. Embassy Industries, Inc. ("Embassy") is
engaged in the manufacture and sale of baseboard heating products and the
importation and sale of radiant heating systems. Embassy also imports a line of
door and window hardware items through its Franklin division. Florida Pneumatic
Manufacturing Corporation ("Florida Pneumatic") is engaged in the importation,
manufacture and sale of pneumatic hand tools, primarily for the industrial and
retail markets, and the importation and sale of compressor air filters. Florida
Pneumatic also markets, through its Berkley Tool division, a line of pipe
cutting and threading tools, wrenches and replacement electrical components for
a widely used brand of pipe cutting and threading machines. Green Manufacturing,
Inc. ("Green") is engaged primarily in the manufacture, development and sale of
heavy-duty welded custom designed hydraulic cylinders. Green also manufactures a
line of access equipment for the petro-chemical industry and a line of post hole
digging equipment for the agricultural industry.

      The consolidated financial statements contained herein include the
accounts of P & F Industries, Inc. and its subsidiaries. All significant
intercompany balances and transactions have been eliminated.

      The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the rules and regulations of the Securities and
Exchange Commission regarding interim financial reporting. Accordingly, these
interim financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the Company, the unaudited consolidated financial
statements include all adjustments necessary for a fair statement of the results
for the interim periods presented. All such adjustments are of a normal
recurring nature. Results for interim periods are not necessarily indicative of
results to be expected for a full year, since the operations of some of the
Company's subsidiaries are seasonal in nature.

      The consolidated balance sheet information for December 31, 1998 was
derived from the audited financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. These interim
financial statements should be read in conjunction with that report.


                                        7
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED)

      In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.


NOTE 2 - INVENTORIES

      Major classes of inventory were as follows:

<TABLE>
<CAPTION>
                                    SEPTEMBER 30,   DECEMBER 31,
                                        1999            1998
                                    ------------    ------------
<S>                                 <C>             <C>
       Finished goods               $ 20,624,514    $ 13,141,218
       Work in process                 1,211,869         435,453
       Raw materials and supplies      4,618,176       3,444,804
                                    ------------    ------------
                                    $ 26,454,559    $ 17,021,475
                                    ============    ============
</TABLE>


NOTE 3 - CAPITAL STOCK TRANSACTIONS

      On June 1, 1999, an officer of the Company surrendered 49,235 shares of
Class A Common Stock, with a fair value of $498,500, in connection with the
exercise of stock options for 250,000 shares of Class A Common Stock.


NOTE 4 - ACQUISITION

      On September 16, 1998, the Company acquired certain assets, and assumed
certain liabilities, of Green Manufacturing, Inc., an Ohio corporation and a
manufacturer of custom-engineered hydraulic cylinders, prefabricated stairways
and platforms and tractor-mounted post hole diggers. The purchase price for the
acquisition was $10,500,000 in cash, $10,000,000 of which was provided by an
acquisition loan made pursuant to a Credit Agreement, dated as of July 23, 1998,
as amended, between the Company and European American Bank (the "Credit
Agreement"). The balance of $500,000 was provided by working capital funds. The
purchase price of $10,500,000 included $50,000 in consideration of a covenant
not to compete.


                                        8
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 4 - ACQUISITION (CONTINUED)

      As part of the acquisition, the Company also assumed the outstanding
balance of $1,095,000 on an Economic Development Revenue Bond issued by Wood
County, Ohio.

      The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the accompanying consolidated financial statements
include the results of operations of the acquired company only from the date of
acquisition. The excess of acquisition costs over the fair value of net assets
acquired is included in the accompanying balance sheets as "Goodwill". Also
included in "Goodwill" are costs totalling $448,163 incurred in connection with
this acquisition.

      The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company and Green Manufacturing, Inc., as
though the acquisition had been made January 1, 1998. The pro forma amounts give
effect to appropriate adjustments for amortization of goodwill and other
intangible assets, interest expense and income taxes. The pro forma amounts
presented are not necessarily indicative of future operating results.

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                                  SEPTEMBER 30,
                                            -------------------------
                                                1999          1998
                                            -----------   -----------
<S>                                         <C>           <C>
   Revenues                                 $55,558,804   $52,573,656
                                            ===========   ===========

   Net income                               $ 2,949,373   $ 3,069,380
                                            ===========   ===========

   Earnings per share of common stock
     from continuing operations:
       Basic                                      $ .88         $ .96
                                                  =====         =====

       Diluted                                    $ .79         $ .83
                                                  =====         =====
</TABLE>


                                        9
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 5 - SEGMENTS OF BUSINESS

      The following tables present financial information by segment for the
periods ended September 30, 1999 and 1998. Segment profit excludes general
corporate expenses, interest expense and income taxes. There were no
intersegment revenues.

<TABLE>
<CAPTION>
                                  PNEUMATIC
                                  TOOLS AND
NINE MONTHS ENDED         CON-     RELATED   HYDRAULIC   HEATING
 SEPTEMBER 30, 1999    SOLIDATED  EQUIPMENT  CYLINDERS  EQUIPMENT  HARDWARE
-------------------    ---------  ---------  ---------  ---------  --------
   (In thousands)
<S>                    <C>        <C>        <C>        <C>        <C>
 Revenues from
   external customers  $  55,559  $  29,016  $  15,295  $   6,841  $ 4,407
                       =========  =========  =========  =========  =======

 Segment profit        $   7,982  $   6,501  $     729  $     303  $   449
                       =========  =========  =========  =========  =======

<CAPTION>
                                  PNEUMATIC
                                  TOOLS AND
NINE MONTHS ENDED         CON-     RELATED   HYDRAULIC   HEATING
 SEPTEMBER 30, 1998    SOLIDATED  EQUIPMENT  CYLINDERS  EQUIPMENT  HARDWARE
-------------------    ---------  ---------  ---------  ---------  --------
   (In thousands)
<S>                    <C>        <C>        <C>        <C>        <C>
 Revenues from
   external customers  $  38,657  $  27,932  $   1,044  $   6,511  $ 3,170
                       =========  =========  =========  =========  =======

 Segment profit        $   7,128  $   6,461  $     100  $     259  $   308
                       =========  =========  =========  =========  =======

<CAPTION>
                                  PNEUMATIC
                                  TOOLS AND
THREE MONTHS ENDED        CON-     RELATED   HYDRAULIC   HEATING
 SEPTEMBER 30, 1999    SOLIDATED  EQUIPMENT  CYLINDERS  EQUIPMENT  HARDWARE
-------------------    ---------  ---------  ---------  ---------  --------
   (In thousands)
<S>                    <C>        <C>        <C>        <C>        <C>
 Revenues from
   external customers  $  20,359  $  10,856  $   4,980  $   2,894  $ 1,629
                       =========  =========  =========  =========  =======

 Segment profit        $   3,155  $   2,652  $     126  $     235  $   142
                       =========  =========  =========  =========  =======
</TABLE>


                                       10
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 5 - SEGMENTS OF BUSINESS (CONTINUED)

<TABLE>
<CAPTION>
                                  PNEUMATIC
                                  TOOLS AND
THREE MONTHS ENDED        CON-     RELATED   HYDRAULIC   HEATING
 SEPTEMBER 30, 1998    SOLIDATED  EQUIPMENT  CYLINDERS  EQUIPMENT  HARDWARE
-------------------    ---------  ---------  ---------  ---------  --------
   (In thousands)
<S>                    <C>        <C>        <C>        <C>        <C>
 Revenues from
   external customers  $  14,119  $   9,426  $   1,044  $   2,588  $ 1,061
                       =========  =========  =========  =========  =======

 Segment profit        $   2,672  $   2,291  $     100  $     182  $    99
                       =========  =========  =========  =========  =======
</TABLE>

      The reconciliation of combined operating profits for reportable segments
to consolidated income before income taxes is as follows:

<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED
                                                 SEPTEMBER 30,
                                            -----------------------
                                               1999         1998
                                            ----------   ----------
<S>                                         <C>          <C>
   Total profit for reportable segments     $7,981,890   $7,128,266

   General corporate expenses               (2,259,189)  (1,994,173)

   Interest expense                           (973,328)    (404,496)
                                            ----------   ----------

   Income before income taxes               $4,749,373   $4,729,597
                                            ==========   ==========

<CAPTION>
                                              THREE MONTHS ENDED
                                                 SEPTEMBER 30,
                                            -----------------------
                                               1999         1998
                                            ----------   ----------
<S>                                         <C>          <C>
   Total profit for reportable segments     $3,154,893   $2,672,746

   General corporate expenses                 (811,260)    (552,358)

   Interest expense                           (371,691)    (160,669)
                                            ----------   ----------

   Income before income taxes               $1,971,942   $1,959,719
                                            ==========   ==========
</TABLE>


                                       11
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ==========================================

NOTE 6 - EARNINGS PER SHARE

      The following table sets forth the computation of basic and diluted
earnings per common share:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED        NINE MONTHS ENDED
                                            SEPTEMBER 30,             SEPTEMBER 30,
                                         -------------------       -------------------
                                          1999         1998         1999         1998
                                      -----------  -----------  -----------  -----------
<S>                                   <C>          <C>          <C>          <C>
  Numerator:
    Numerator for basic and diluted
      earnings per common share -
      income available to common
      shareholders                    $ 1,233,942  $ 1,220,719  $ 2,949,373  $ 2,951,597
                                      ===========  ===========  ===========  ===========

  Denominator:
    Denominator for basic earnings
      per share - weighted average
      common shares outstanding         3,455,208    3,240,469    3,340,868    3,197,301

    Effect of dilutive securities:
      Common stock options                263,706      483,119      386,327      491,196
                                      -----------  -----------  -----------  -----------
    Denominator for diluted earnings
      per share - adjusted weighted
      average common shares and
      assumed conversions               3,718,914    3,723,588    3,727,195    3,688,497
                                      ===========  ===========  ===========  ===========


  Earnings per common share:
    Basic                                   $ .35        $ .38        $ .88        $ .92
                                            =====        =====        =====        =====

    Diluted                                 $ .33        $ .33        $ .79        $ .80
                                            =====        =====        =====        =====
</TABLE>


                                       12
<PAGE>

                     P & F INDUSTRIES, INC. AND SUBSIDIARIES
                     =======================================

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

THIRD QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH THIRD QUARTER ENDED
SEPTEMBER 30, 1998

      Consolidated revenues increased 44.2%, from $14,118,689 to $20,358,379,
due primarily to the acquisition of Green, which had revenues of $4,979,176 from
hydraulic cylinders and other equipment in the third quarter of 1999, compared
to $1,044,506 in 1998, for the period from September 16, 1998 to September 30,
1998.

      Revenues from pneumatic tools and related equipment increased 15.2%, from
$9,425,651 to $10,856,349, due primarily to a special promotional sale totalling
approximately $1,000,000 shipped to a large customer during the third quarter of
1999. Revenues from heating equipment increased 11.8%, from $2,587,738 to
$2,894,313, due to strong sales of the standard baseboard product and
significant growth in sales of the radiant line. Revenues from hardware
increased 53.5%, from $1,061,230 to $1,628,541, due primarily to sales to a
significant customer obtained in the fourth quarter of 1998. The selling prices
of selected heating products were reduced in order to stimulate sales growth.
Selling prices of hardware products were virtually unchanged, with the exception
of one significant region where discounting was undertaken to maintain
competitiveness.

      Consolidated gross profit, as a percentage of revenues, decreased from
38.0% to 31.1%, due primarily to the lower overall gross profits from hydraulic
cylinders and other equipment. Gross profit from pneumatic tools and related
equipment decreased from 42.1% to 40.4%, due to a decrease in the value of the
U.S. dollar as compared to the Japanese yen, which raised the cost of imported
product. This was partially offset by a more profitable product mix. Gross
profit from hydraulic cylinders and other equipment decreased from 20.1% to
11.5%, due to decreased productivity of direct labor and an unfavorable product
mix. The gross profit margins for hydraulic cylinders and other equipment for
1998 represent the results of operations for only the period from September 16,
1998, the date of the acquisition of Green, to September 30, 1998 and are not
indicative of the results of operations for an entire quarter. Gross profit from
heating equipment decreased from 34.5% to 34.1%, due to the reduction in selling
prices noted above. Gross profit from hardware decreased from 27.8% to 23.9%,
due to the price adjustments noted above, as well as to significant discounting
on initial orders to new stores of a large customer.

      Consolidated selling, administrative and general expenses increased 23.0%,
from $3,241,260 to $3,987,012. These expenses, however, decreased as a
percentage of revenues, from 23.0% to 19.6%, due to the increased revenues and
the reversal of an accrual of $200,000 related to two lawsuits that were settled
for less than the reserved amount.


                                       13
<PAGE>

THIRD QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH THIRD QUARTER ENDED
SEPTEMBER 30, 1998 (CONTINUED)

      Interest expense increased 131.3%, from $160,669 to $371,691, due
primarily to an increase in borrowings to support an inventory buildup related
to the addition of a significant new customer that began shipping in the fourth
quarter of 1999 and to a slowing of sales to a significant current customer. The
increase in interest expense is also attributable to the interest on the debt
related to the acquisition of Green, which was outstanding for the entire
quarter in 1999, but for only approximately two weeks in 1998.

      Effective tax rates for the quarters ended September 30, 1999 and 1998
were 37.4% and 37.7%, respectively.


NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998

      Consolidated revenues increased 43.7%, from $38,657,185 to $55,558,804,
due primarily to the acquisition of Green, which had revenues of $15,294,416
from hydraulic cylinders and other equipment for the nine months ended September
30, 1999, compared to $1,044,506 in 1998, for the period from September 16, 1998
to September 30, 1998.

      Revenues from pneumatic tools and related equipment increased 3.9%, from
$27,931,943 to $29,016,350, due to increases in sales of most product lines.
Revenues from heating equipment increased 5.1%, from $6,510,595 to $6,841,390,
due to an overall increase in sales of the standard baseboard product. Revenues
from hardware increased 39.0%, from $3,170,141 to $4,406,648, due primarily to
the addition of a significant customer in the fourth quarter of 1998. The
selling prices of selected heating products were reduced in order to stimulate
sales growth. Selling prices of hardware products were virtually unchanged, with
the exception of one significant region where discounting was undertaken to
maintain competitiveness.

      Consolidated gross profit, as a percentage of revenues, decreased from
38.5% to 31.2%, due primarily to the lower overall gross profits from hydraulic
cylinders and other equipment. Gross profit from pneumatic tools and related
equipment decreased from 41.4% to 40.3%, due to a decrease in the value of the
U.S. dollar as compared to the Japanese yen, which raised the cost of imported
product. Gross profit from hydraulic cylinders and other equipment decreased
from 20.1% to 13.7%, due to decreased productivity of direct labor and an
unfavorable product mix. The gross profit margins for hydraulic cylinders and
other equipment for 1998 represent the results of operations for only the period
from September 16, 1998, the date of the acquisition of Green, to September 30,
1998 and are not indicative of the results of operations for an entire nine
month period. Gross profit from heating equipment increased from 34.3% to 34.5%,
due to a more profitable product mix and improved efficiencies of manufacturing
operations. Gross profit from hardware decreased from 27.2% to 26.3%, due to the
price adjustments noted above, as well as to significant discounting on initial
orders to new stores of a large customer.


                                       14
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998 (CONTINUED)

      Consolidated selling, administrative and general expenses increased 19.1%,
from $9,739,591 to $11,603,179, but decreased as a percentage of revenues, from
25.2% to 20.9%, due primarily to the increased revenues.

      Interest expense increased 140.6%, from $404,496 to $973,328, due
primarily to an increase in borrowings to support an inventory buildup related
to the addition of a significant new customer that began shipping in fourth
quarter of 1999 and to a slowing of sales to a significant current customer. The
increase in interest expense is also attributable to the interest on the debt
related to the acquisition of Green, which was outstanding for the entire nine
months in 1999, but for only approximately two weeks in 1998.

      Effective tax rates for the quarters ended September 30, 1999 and 1998
were 37.9% and 37.6%, respectively.


LIQUIDITY AND CAPITAL RESOURCES

      The Company gauges its liquidity and financial stability by the
measurements shown in the following table (dollar amounts in thousands):

<TABLE>
<CAPTION>
                           SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
                               1999            1998           1998
                           -------------   ------------   -------------
<S>                          <C>             <C>            <C>
    Working Capital          $  16,062       $  15,994      $  19,566
    Current Ratio            1.60 to 1       2.24 to 1      2.48 to 1
    Shareholders' Equity     $  27,428       $  24,450      $  23,301
</TABLE>

      During the nine months ended September 30, 1999, gross accounts receivable
increased approximately $5,648,000 and inventories increased approximately
$9,433,000. The increase in accounts receivable was primarily concentrated at
Florida Pneumatic and was the result of three factors. First, unusually heavy
collections at the end of 1998 lowered the balance at December 31, 1998 by
approximately $2,000,000 from normal. Second, sales increased approximately
$945,000. Finally, sales were more concentrated at the end of the period in
1999. The increase in inventories was primarily the result of a large inventory
buildup to support sales to a significant new customer which began shipping in
the fourth quarter of 1999. An unanticipated slow-down in sales to a major
current customer and a general increase in overall sales also contributed to the
increase. Short-term borrowings and accounts payable, combined, increased
approximately $12,956,000 as a result of the increase in inventories discussed
above. Management believes that the inventory is fully saleable and that the the
increase in inventories is only temporary.


                                       15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

      On July 26, 1999, the Company renewed its Credit Agreement, which provides
the Company with various credit facilities, including revolving credit loans,
term loans for acquisitions and a foreign exchange line. The revolving credit
loan facility provides a total of $12,000,000, with various sublimits, for
direct borrowings, letters of credit, bankers' acceptances and equipment loans.
This commitment also includes a step-up period through January 31, 2000, during
which borrowings may increase to $17,000,000 to support the inventory buildup
related to a significant new customer. At September 30, 1999, there were direct
borrowings totalling $12,500,000 outstanding against this facility. There was
also a commitment at September 30, 1999 of approximately $487,000 for open
letters of credit.

      The term loan facility provides a commitment of $15,000,000 to finance
acquisitions subject to the lending bank's approval. As noted below, $10,000,000
of this facility was used to help finance the acquisition of Green and there was
$4,000,000 still outstanding against this facility at September 30, 1999. This
commitment also includes a step-up period through January 31, 2000, during which
borrowings may increase to $18,000,000 to support any potential acquisitions.
There was also a standby letter of credit totalling approximately $968,000
outstanding against this facility at September 30, 1999. This standby letter of
credit was used to secure the Economic Development Revenue Bond assumed as part
of the acquisition of Green.

      The foreign exchange line provides for the availability of up to
$10,000,000 in foreign currency forward contracts. These contracts fix the
exchange rate on future purchases of Japanese yen needed for payments to foreign
suppliers. The total amount of foreign currency forward contracts outstanding at
September 30, 1999 was approximately $2,588,000.

      The Credit Agreement is subject to annual review by the lending bank.
Under the Credit Agreement, the Company is required to adhere to certain
financial covenants. At September 30, 1999, and for the nine months then ended,
the Company satisfied all of these covenants.

      On September 16, 1998, the Company acquired certain assets and liabilities
of Green Manufacturing, Inc. for $10,500,000, including the assumption of
$1,095,000 of an outstanding Economic Development Revenue Bond issued by Wood
County, Ohio. The acquisition was financed with $500,000 in working capital
funds and a $10,000,000 7-year term loan under the Credit Agreement. As of
September 30, 1999, $6,000,000 of the loan had been repaid. This loan bears
interest at LIBOR plus 175 basis points. Principal payments begin on October 1,
1999 and are due in 72 equal monthly installments totalling $4,000,000, the
balance outstanding on October 1, 1999. The 30 day LIBOR at September 30, 1999
was approximately 5.4%. The Economic Development Revenue Bond was issued on
November 16, 1994 and provides for annual retirement payments each November 1,
over a 10-year period. The Bond bears interest at variable rates. The interest
rate at September 30, 1999 was approximately 4.0%. At September 30, 1999, the
balance outstanding on the Bond was $955,000.


                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

      The Company, through Florida Pneumatic, imports a significant amount of
its purchases from Japan, with payment due in Japanese yen. As a result, the
Company is subject to the effects of foreign currency exchange fluctuations. The
Company uses a variety of techniques to mitigate any adverse effects from these
fluctuations, including increasing its selling prices, obtaining price
reductions from its overseas suppliers, using alternative supplier sources and
entering into foreign currency forward contracts. See "Item 3, Quantitative and
Qualitative Disclosures About Market Risk."

      Capital spending for the nine months ended September 30, 1999 was
approximately $1,646,000. The total amount was provided from working capital.
Capital expenditures for the rest of 1999 are expected to total approximately
$200,000, some of which may be financed under the Credit Agreement. Included in
the expected total for the rest of 1999 are capital expenditures relating to new
products, expansion of existing product lines and replacement of old equipment.

      The Company continues to conduct an acquisition search. The funds for an
acquisition will be provided by working capital and existing credit facilities,
including the $15,000,000 credit facility for acquisitions referred to above.

      The Company believes that cash on hand, cash generated by future
operations and cash available through its credit facilities will be sufficient
to allow the Company to support its capital expenditure program and to meet its
general working capital needs.


YEAR 2000

      The Year 2000 (Y2K) issue is the result of computer programs being written
for, or microprocessors using, two digits (rather than four) to define the
applicable year. Company computer programs that have date-sensitive software may
recognize a date using 00 as the year 1900 rather than the year 2000, which
could result in system failures or miscalculations. The Company is currently
working to mitigate the Y2K issue and has established processes for assessing
the risks and associated costs.

      The Company categorizes its Y2K efforts as follows: hardware, software,
embedded processors, vendors and customers. Progress in assessing and
remediating information technology systems (hardware and software) and
non-information technology systems (embedded processors) continues to be tracked
in phases including assessment, identification of non-compliant systems,
remediation, testing and verification. Hardware, software and embedded
processors have been assessed and remediation is in progress. The Company's Y2K
project is progressing and a large portion of its internal remediation work was
completed at September 30, 1999. The Company is using internal and external
resources to remediate and test its systems.


                                       17
<PAGE>

YEAR 2000 (CONTINUED)

      The Company has initiated communications with significant vendors and
customers to coordinate the Y2K issue and is in the process of determining the
Company's vulnerability if these companies fail to remediate their Y2K issues.
There can be no guarantee that the systems of other companies will be timely
remediated or that other companies' failure to remediate Y2K issues would not
have a material adverse effect on the Company. The Company continues to develop
contingency plans to mitigate risks associated with the Y2K issue.

      Costs incurred to date in addressing the Y2K issue have been expensed as
incurred and are not material. Based on current information, the total cost to
remediate and test the Company's systems is not expected to be material.

      The Company presently believes that, with remediation, Y2K risks can be
mitigated. Although the Company is not currently aware of any material internal
operational or financial Y2K related issues, the Company cannot provide
assurances that the computer systems, products, services or other systems upon
which the Company depends will be Y2K ready on schedule, that the costs of its
Y2K program will not become material or that the Company's contingency plans
will be adequate. The Company is currently unable to evaluate accurately the
magnitude, if any, of the Y2K related issues arising from the Company s vendors
and customers. If any such risks (either with respect to the Company or its
vendors or customers) materialize, the Company could experience serious
consequences to its business which could have material adverse effects on the
Company's financial condition, results of operations and liquidity.


NEW ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 is effective for transactions
entered into after January 1, 2000 and requires that all derivative instruments
be recorded on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of the hedge
transaction and the type of hedge transaction. The ineffective portion of all
hedges will be recognized in earnings. The Company is in the process of
reviewing SFAS 133 to determine what impact, if any, the adoption of SFAS 133
will have on its results of operations and its financial position. Based on
current market conditions, the Company does not believe that the impact will be
material.


                                       18
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to market risks, which include changes in U.S. and
international exchange rates, the prices of certain commodities and currency
rates as measured against the U.S. dollar and each other. The Company attempts
to reduce the risks related to foreign currency fluctuation by utilizing
financial instruments.

      The value of the U.S. dollar affects the Company's financial results.
Changes in exchange rates may positively or negatively affect the Company's
gross margins and operating expenses. The Company engages in hedging programs
aimed at limiting, in part, the impact of currency fluctuations. Using primarily
forward exchange contracts, the Company hedges some of those transactions that,
when remeasured according to generally accepted accounting principles, impact
the income statement. Factors that could impact the effectiveness of the
Company's programs include volatility of the currency markets and availability
of hedging instruments. All currency contracts that are entered into by the
Company are components of hedging programs and are entered into for the sole
purpose of hedging an existing or anticipated currency exposure, not for
speculation. The Company does not buy or sell financial instruments for trading
purposes. Although the Company maintains these programs to reduce the impact of
changes in currency exchange rates, when the U.S. dollar sustains a weakening
exchange rate against currencies in which the Company incurs costs, the
Company's costs are adversely affected. At September 30, 1999, the Company held
open hedge forward contracts to deliver approximately $2,588,000 of Japanese
Yen. The potential loss in value of the Company's net investment in foreign
currency forward contracts resulting from a hypothetical 10 percent adverse
change in foreign currency exchange rates at September 30, 1999 is approximately
$288,000.


                                       19
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

            The Registrant is not a party to any litigation that is expected to
            have a material adverse effect on its business.

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

            None.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

            None.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None.

ITEM 5.     OTHER INFORMATION

            None.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits

                  See "Exhibit Index" immediately following the signature page.


            (b)   Reports on Form 8-K

                  No reports on Form 8-K were filed by the Registrant during the
                  quarter ended September 30, 1999.


                                       20
<PAGE>

                                   SIGNATURES

           Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                 P & F INDUSTRIES, INC.
                                 (Registrant)


                                 By    /s/ Joseph A. Molino, Jr.
                                    -------------------------------
                                         Joseph A. Molino, Jr.
                                            Vice President
Dated: November 10, 1999               (Principal Financial Officer)


                                       21
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
NO.
---

3.1   Restated Certificate of Incorporation of the Registrant (Incorporated by
      reference to Exhibit 3A to the Registrant's Registration Statement on Form
      S-8 filed on September 20, 1989).

3.2   Amended By-laws of the Registrant.

4.1   Rights Agreement, dated as of August 23, 1994, between the Registrant and
      American Stock Transfer & Trust Company, as Rights Agent (Incorporated by
      reference to Exhibit 1 to the Registrant's Registration Statement on Form
      8-A dated August 24, 1994).

4.2   Amendment to Rights Agreement, dated as of April 11, 1997, between the
      Registrant and American Stock Transfer & Trust Company, as Rights Agent
      (Incorporated by reference to Exhibit 4.1 to the Registrant's Current
      Report on Form 8-K dated April 11, 1997).

4.3   Credit Agreement, dated as of July 23, 1998, by and among the Registrant,
      Florida Pneumatic Manufacturing Corporation, a Florida corporation,
      Embassy Industries, Inc., a New York corporation, and European American
      Bank, a New York banking corporation (Incorporated by reference to Exhibit
      4.3 to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 1998).

4.4   Amendment No. 1 to Credit Agreement, dated as of September 16, 1998, by
      and among the Registrant, Florida Pneumatic Manufacturing Corporation, a
      Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
      Bank, a New York banking corporation (Incorporated by reference to Exhibit
      4.4 to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 1998).

4.5   Amendment No. 2 to Credit Agreement, dated as of July 28, 1999, by and
      among the Registrant, Florida Pneumatic Manufacturing Corporation, a
      Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
      Bank, a New York banking corporation. (Incorporated by reference to
      Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1999).

4.6   Certain instruments defining the rights of holders of the long-term debt
      securities of the Registrant are omitted pursuant to Section
      (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant agrees to
      furnish supplementally copies of these instruments to the Commission upon
      request.

27    Financial Data Schedules (submitted to the Securities and Exchange
      Commission in electronic format).


                                       22