svt20240930_10q.htm

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-07109

SERVOTRONICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	16-0837866
(State or other jurisdiction of incorporation or organization)	(I. R. S. Employer Identification No.)

1110 Maple Street

Elma, New York 14059

(Address of principal executive offices) (zip code)

(716) 655-5990

(Registrant’s telephone number, including area code)

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

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
Common Stock	SVT	NYSE American

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 ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 Securities Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ 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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October 25, 2024
Common Stock, $.20 par value		2,554,236

Table of Contents

INDEX

			Page No.

	PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited):

		a) Condensed Consolidated Balance Sheets, September 30, 2024 and December 31, 2023 (Audited)	3

		b) Condensed Consolidated Statements of Operations for the three-and nine-months ended September 30, 2024 and 2023	4

		c) Condensed Consolidated Statements of Comprehensive Loss for the three-and nine-months ended September 30, 2024 and 2023	5

		d) Condensed Consolidated Statements of Cash Flows for the nine-months ended September 30, 2024 and 2023	6

		e) Notes to Condensed Consolidated Financial Statements	7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.		Controls and Procedures	28

	PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	29

Item 1A.		Risk Factors	29

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.		Defaults Upon Senior Securities	29

Item 4.		Mine Safety Disclosures	29

Item 5.		Other Information	29

Item 6.		Exhibits	29

Forward-Looking Statements			30

Signatures			31

- 2 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	*September 30,*			*December 31,*
	*2024*			*2023*
	(Unaudited)			(Audited)
Current Assets:
Cash	$	46		$	95
Cash, restricted		150			150
Accounts receivable, net		12,598			12,065
Inventories, net		15,408			14,198
Prepaid and other current assets		810			1,507
Assets related to discontinued operation		1,466			1,552
Total current assets		30,478			29,567

Property, plant and equipment, net		7,143			6,978
Other non-current assets		42			42
Total Assets	$	37,663		$	36,587

Liabilities and Shareholders' Equity
Current Liabilities:
Line of credit	$	3,169		$	2,103
Current portion of post-retirement obligation		97			97
Accounts payable		2,954			2,061
Accrued employee compensation and benefits costs		927			1,003
Accrued warranty		413			542
Other accrued liabilities		1,046			1,909
Liabilities related to discontinued operation		27			213
Total Current Liabilities		8,633			7,928

Post-retirement obligation		4,210			4,165
Other long-term liabilities		427			-
Total Liabilities		13,270			12,093

Shareholders' Equity:
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,629,052 shares; outstanding 2,527,484 (2,514,775 - 2023) shares		525			525
Capital in excess of par value		14,796			14,617
Retained earnings		12,631			12,954
Accumulated other comprehensive loss		(2,331	)		(2,389	)
Employee stock ownership trust commitment		(56	)		(56	)
Treasury stock, at cost 74,816 (87,525 - 2023) shares		(1,172	)		(1,157	)
Total shareholders' equity		24,393			24,494

Total Liabilities and Shareholders' Equity	$	37,663		$	36,587

See notes to condensed consolidated financial statements

- 3 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
	*2024*			*2023*			*2024*			*2023*

Revenue	$	12,430		$	11,582		$	35,149		$	31,291

Costs of goods sold, inclusive of depreciation and amortization		10,162			9,083			28,083			26,252
Gross profit		2,268			2,499			7,066			5,039

Operating expenses
Selling, general and administrative		1,979			2,219			6,394			7,663
Legal settlement (Note 9)		570			-			570			-
Total operating expenses		2,549			2,219			6,964			7,663

Operating (loss) income		(281	)		280			102			(2,624	)

Other expense
Interest & other expense, net		172			98			353			239
Total other expense		172			98			353			239

(Loss) income from continuing operations before income taxes		(453	)		182			(251	)		(2,863	)
Income tax expense		-			-			-			(1,063	)
(Loss) income from continuing operations, net of tax		(453	)		182			(251	)		(3,926	)

Loss from discontinued operation before income taxes		(43	)		(386	)		(72	)		(7,326	)
Income taxes		-			-			-			-
Loss from discontinued operation, net of tax (Note 2)		(43	)		(386	)		(72	)		(7,326	)

Net loss	$	(496	)	$	(204	)	$	(323	)	$	(11,252	)

Basic and diluted (loss) earnings per share:
Continuing operations	$	(0.18	)	$	0.07		$	(0.10	)	$	(1.59	)
Discontinued operation		(0.02	)		(0.16	)		(0.03	)		(2.97	)
Basic and diluted loss per share	$	(0.20	)	$	(0.09	)	$	(0.13	)	$	(4.56	)

See notes to condensed consolidated financial statements

- 4 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
	*2024*			*2023*			*2024*			*2023*

Net loss	$	(496	)	$	(204	)	$	(323	)	$	(11,252	)

Other comprehensive income items:
Actuarial gains		19			17			58			42
Income tax benefit on actuarial losses		-			-			-			-
Retirement benefits adjustments, net of income taxes		19			17			58			42

Total comprehensive loss	$	(477	)	$	(187	)	$	(265	)	$	(11,210	)

See notes to condensed consolidated financial statements

- 5 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	*Nine Months Ended*
	*September 30,*
	*2024*			*2023*
Cash flows related to operating activities:
Loss from continuing operations	$	(251	)	$	(3,926	)
Adjustments to reconcile loss from continuing operations to net cash provided (used) by operating activities:
Depreciation and amortization		768			790
Stock based compensation		185			111
Allowance for credit losses		(90	)		8
Inventory reserve		108			34
Warranty reserve		(129	)		(37	)
Deferred income taxes		-			1,077
Changes in assets and liabilities providing (using) cash:
Accounts receivable		(443	)		(3,852	)
Inventories		(1,318	)		(796	)
Prepaid and other current assets		697			(251	)
Accounts payable		893			1,118
Accrued employee compensation and benefit costs		(18	)		229
Other accrued liabilities		(863	)		528
Post-retirement obligations		45			59
Other long-term liabilities		427			-
Net cash provided (used) by operating activities from continuing operations		11			(4,908	)

Cash flows related to investing activities:
Purchase of property, plant and equipment, net of disposals		(933	)		(606	)
Net cash used by investing activities from continuing operations		(933	)		(606	)

Cash flows related to financing activities:
Proceeds from line of credit, net of payments		1,066			2,164
Purchase of treasury shares		(21	)		-
Payments on finance lease obligations		-			(501	)
Net cash provided by financing activities from continuing operations		1,045			1,663

Discontinued Operation
Cash used by operating activities		(172	)		(1,753	)
Cash provided by investing activities		-			2,100
Net cash (used) provided by discontinued operation		(172	)		347

Net decrease in cash and restricted cash		(49	)		(3,504	)
Cash and restricted cash at beginning of period		245			3,812
Cash and restricted cash at end of period	$	196		$	308

See notes to condensed consolidated financial statements

- 6 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Operations and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

Servotronics, Inc. (“Servotronics”) and its subsidiaries (“Company”) design, manufacture and market servo-control components and other advanced technology products for aerospace, military and medical applications. The Company was incorporated in New York in 1959. In 1972, the Company was merged into a wholly owned subsidiary organized under the laws of the State of Delaware, thereby changing the Company’s state of incorporation from New York to Delaware. The Company’s shares currently trade on the New York Stock Exchange (NYSE American) under the symbol SVT.

Until 2023, the Company had operated historically under two business segments: Advanced Technology Group (“ATG”) and Consumer Products Group (“CPG”), which had been strategic business segments that offered different products and services. Operations in ATG included the design, manufacturing and marketing of servo-control components and other advanced technology products, and the CPG operations included the design, manufacture and marketing of a variety of cutlery products for use by consumers and government agencies. During 2023, the Company’s Management made the strategic decision to sell certain assets of The Ontario Knife Company (“OKC”) and divest the CPG business segment. This divestiture represented a strategic shift, as the Company has realigned its corporate and management reporting structure to focus solely on servo-control components and other advanced technology products, and now organizes its business in a single reportable segment with no reference to ATG or CPG. This segment structure reflects the financial information and reports used by Management, specifically the Chief Executive Officer and Chief Operating Officer.

The condensed consolidated financial statements currently include the accounts of Servotronics, OKC, and other inactive, wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The Company derives its primary sales revenue from domestic customers, although a portion of finished products are for foreign end use. As stated, the Company executed an Asset Purchase Agreement (“APA”) with a third party to sell certain assets of OKC, which transaction closed on August 1, 2023. Accordingly, the sale of assets and results of operations for OKC are presented as a “Loss from Discontinued Operation, net of tax” on the Condensed Consolidated Statements of Operations, and assets and liabilities are reflected as “Assets and Liabilities related to Discontinued Operation” in the Condensed Consolidated Balance Sheets. The “Loss from Discontinued Operation, net of tax” is included in the net income or net loss on the Condensed Consolidated Statements of Comprehensive Loss, and the cash used by operating activities from the discontinued operation is included in the “Discontinued Operation” section of the Condensed Consolidated Statements of Cash Flows.

- 7 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited Condensed Consolidated Financial Statements (“consolidated financial statements”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three- and nine-months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The consolidated financial statements should be read in conjunction with the 2023 annual report and the notes thereto.

The 2023 financial information included in the aforementioned Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations were reclassified to conform with the discontinued operation presentation. Amounts for all periods discussed below reflect the results of operations, financial condition and cash flows from the Company’s continuing operations, unless otherwise noted. Refer to Note 2 “Discontinued Operation and Assets and Liabilities Related to Discontinued Operation”, for further discussion.

- 8 -

Table of Contents

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash and Restricted Cash

The following table provides a reconciliation of cash and restricted cash to the amounts in the statement of cash flows:

	*September 30,*		*December 31,*
(in thousands)	*2024*		*2023*
Cash	$	46	$	95
Restricted cash		150		150
Total cash and restricted cash	$	196	$	245

The Company considers cash to include all currency and coin owned by the Company as well as all deposits in the bank including checking and savings accounts. The restricted cash of $150,000 as of September 30, 2024 and December 31, 2023 represents collateral with a financial institution.

SEC Form 10-Q filed by Servotronics Inc.