NOTES PAYABLE

Convertible Notes Payable - Related Party

The Company is party to a Convertible Loan Agreement (as amended, “Convertible Loan”) with Roundball, LLC (“Roundball”). The Convertible Loan provides approximately

$467,000

of liquidity to meet working capital requirements of the Company and allows

$250,000

of borrowing on the agreement at the Company's discretion at an interest rate of

0.34%.

Borrowings under the Convertible Loan mature on

December 30, 2019.

Roundball, a major shareholder of the Company, is an affiliate of Steven Rosen and Matthew Crawford, who serve on the Board of Directors of the Company.

The Convertible Loan provides Roundball with the option to elect to convert amounts outstanding under the Convertible Loan into Class A Common Shares at a conversion price of

$1.43

per Class A Common Share. In

December 2018,

the Convertible Loan was amended to provide Roundball with the option to elect to convert, subject to shareholder approval which was obtained on

May 10, 2019,

a portion of the indebtedness into Class B Common Shares at a conversion price of

$1.43

per Class B Common Share, up to a maximum amount of

75,000

Class B Common Shares. The outstanding principal balance on the Convertible Loan as of

September 30, 2019

and

December 31, 2018,

respectively, was

$200,000

In connection with the Convertible Loan, the Company issued a warrant to Roundball to purchase, at Roundball’s option, up to

100,000

shares of Class A Common Stock of the Company at an exercise price of

$2.50

per share, subject to certain anti-dilution and other adjustments. The warrant expires on

December 30, 2019.

Notes Payable – Related Party

The Company has

two

separate outstanding promissory notes with First Francis Company Inc. (“First Francis”), which were originally issued in

July 2016

in connection with the acquisition of Federal Hose Manufacturing (“Federal Hose”) and which were amended in

July 2018

in connection with acquisition of CAD. The

first

promissory note was issued with original principal in the amount of

$2,000,000,

and the

second

was issued with original principal in the amount of

$2,768,662.

The promissory notes each have an interest rate of

6.25%

per annum, which was increased from

4.0%

per annum as part of the

July 2018

amendments to the Credit Agreement. In addition, the promissory note with original principal amount of

$2,768,662

was amended in

July 2018

to provide for a conversion option commencing

July 5, 2019

which allows First Francis to convert the promissory note, in whole in part with respect to a maximum amount of

$648,000,

into shares of the Company’s Class B common stock at the price of

$6.48

per share (subject to adjustment), subject to shareholder approval which was obtained on

May 10, 2019.

July 9, 2019,

First Francis exercised its option to convert

$648,000

of existing indebtedness into

100,000

Class B Common Shares of the Company. First Francis is owned by Matthew Crawford, who serves on the Board of Directors of the Company, and Edward Crawford, who served on the Board of Directors of the Company until

June 17, 2019.

Notes Payable – Seller Note

Effective

July 1, 2018,

the Company completed the acquisition of CAD for an aggregate purchase price of

$21

million,

$12

million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a seller (the “Seller Note”), which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement entered into in connection with the acquisition (the “Share Purchase Agreement”). The Seller Note bears interest at a rate of

four

percent (

) per annum and is payable in full

later than

June 30, 2023 (

the “Maturity Date”). The Maturity Date, with respect to any then-outstanding portion of the original principal amount which is subject to an indemnification claim by the Company (asserted in accordance with the terms of the Share Purchase Agreement) pending as of the date thereof, will be automatically extended until such time as any claim relating to such disputed amount is

longer pending, pursuant to the terms of the Seller Note and subject to additional conditions set forth therein and in the Share Purchase Agreement. The Company is

not

permitted to prepay any amounts due and owing under the Seller Note. Payment of the Seller Note is secured by a

second

-priority security interest in the assets of the Company. Interest accrued on the original principal amount became due and payable in arrears beginning

September 30, 2018,

and subsequent interest is due on the

first

day of each calendar quarter thereafter up to and including the quarter ending

September 30, 2019.

The Company is required to make quarterly principal payments, the amount of which is calculated based on a

four

(

) year amortization schedule, beginning on

September 30, 2019

and continuing on the last day of each calendar quarter thereafter up to and including the Maturity Date.

Notes payable consists of the following:

	September 30, 2019		December 31, 2018

In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,000,000 loan due to First Francis Company, payable in quarterly installments. The remaining balance of the note shall be payable in full on July 1, 2022.	$	1,349,413	$	1,485,061

In connection with the Federal Hose acquisition, the Company entered into a promissory note on July 1, 2016 for a $2,768,662 loan due to First Francis Company, payable in quarterly installments. The remaining balance of the note shall be payable in full on July 1, 2022.		1,322,084		2,157,004

In connection with the CAD acquisition, the Company entered into a promissory note on July 1, 2018 for a $9,000,000 loan due to the Loudermilk’s, payable in quarterly installments. The first principal payment was made in the current quarter.		8,437,500		9,000,000

Total notes payable		11,108,997		12,642,065
Less current portion		2,742,760		1,555,663

Notes payable – non-current portion	$	8,366,237	$	11,086,402