U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2006 Commission File Number 1-07109
SERVOTRONICS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 16-0837866
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1110 Maple Street 14059
Elma, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (716) 655-5990
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.20 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
--- ---
Issuer's revenues for its most recent fiscal year: $24,548,000
As of March 31, 2007 the aggregate market value of the voting common stock held
by non-affiliates of the registrant was $14,109,278 based on the closing sales
price reported by the American Stock Exchange on that day.
As of March 31, 2007 the number of $.20 par value common shares outstanding was
2,329,102.
Transitional Small Business Disclosure Format. Yes No X
--- ---
EXPLANATORY NOTE AS TO PURPOSE OF THIS AMENDMENT
This Amendment No. 1 to the Annual Report on Form 10-KSB of Servotronics, Inc.
(the "Company") for the fiscal year ended December 31, 2006 is being filed to
provide information required by Items 9, 10, 11, 12, and 14 of Part III of the
Annual Report on Form 10-KSB, rather than incorporate by reference portions of
the proxy statement into Part III.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), new certifications of our principal executive
officer and principal financial officer are being filed as exhibits to this Form
10-KSB/A.
For purposes of this Form 10-KSB/A, and in accordance with Rule 12b-15
under the Exchange Act, each item of our Annual Report on Form 10-KSB/A for the
year ended December 31, 2006, as filed on March 30, 2007, that was affected by
this amendment, has been amended and restated in its entirety. No attempt has
been made in this Form 10-KSB/A to modify or update other disclosures as
presented in our original Form 10-KSB, except as may be required to reflect such
amendments.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.
(a) DIRECTORS. The table below sets forth certain information
regarding the directors of the Company, each of whom was elected at the
Company's 2006 Annual Meeting of Shareholders. The term of office of each
director is until the next Annual Meeting of Shareholders and until his
successor is elected and shall have qualified.
Position with the Company
and Principal Occupation
and Business Experience
Name Age for Past Five Years
---- --- -------------------------
Dr. William H. Duerig 85 Director of the Company since 1990; Physicist
and Senior Program Manager for Kearfott Guidance
& Navigation Corporation for more than five
years prior to retirement in 1993.
Donald W. Hedges 85 Director of the Company since 1967;
self-employed attorney since 1988.
Nicholas D. Trbovich, Jr. 46 Director of the Company since 1990; Executive
Vice President of the Company since 2006; Vice
President of the Company since 1990; Director of
eAutoclaims, Inc.
Dr. Nicholas D. Trbovich 71 Chairman of the Board of Directors, President
and Chief Executive Officer of the Company since
1959.
(b) EXECUTIVE OFFICERS. The following is a listing of the
Company's current executive officers:
Position with the Company
and Principal Occupation
and Business Experience
Name Age for Past Five Years
---- --- -------------------------
Dr. Nicholas D. Trbovich 71 See table under "Directors."
Nicholas D. Trbovich, Jr. 46 See table under "Directors."
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Cari L. Jaroslawsky 37 Treasurer and Chief Financial Officer of the
Company since 2005; CPA Consultant/Controller
for the Company for more than five years prior
to 2005.
Michael D. Trbovich 44 Corporate Secretary of the Company since 2005;
Corporate Administration and Liaison for the
Company for more than five years prior to 2005.
Nicholas D. Trbovich, Jr. and Michael D. Trbovich are the sons
of Dr. Nicholas D. Trbovich. There are no other family relationships between any
of the directors or executive officers of the Company.
(c) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based
solely on its review of reports filed pursuant to Section 16(a) of the
Securities Exchange Act or representations from directors and executive officers
required to file such reports, the Company believes that all such filings
required of its executive officers, directors and greater than 10% beneficial
owners were timely made.
(d) CODE OF ETHICS. The Company has adopted a Code of Ethics and
Business Conduct that applies to all directors, officers and employees of the
Company as required by the listing standards of the American Stock Exchange. The
Code is available on the Company's website at www.servotronics.com and the
Company intends to disclose on this website any amendment to the Code. Waivers
under the Code, if any, will be disclosed under the rules of the SEC and the
American Stock Exchange.
(e) AUDIT COMMITTEE. The Board of Directors has an Audit Committee
comprised of Dr. Duerig and Mr. Hedges. The Board has (i) determined that Dr.
Duerig and Mr. Hedges are independent pursuant to Section 121A of the listing
standards of the American Stock Exchange and (ii) designated Dr. Duerig as the
Company's "Audit Committee financial expert."
Item 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE. The following table contains
information with respect to the annual compensation for the year ended December
31, 2006 for the Company's Chief Executive Officer and the two most highly
compensated Executive Officers who were serving as Executive Officers at
December 31, 2006 (the "Named Executive officers").
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All Other
Name and Compen-
Principal Position Year Salary Bonus sation (1) Total
------------------ --------- --------- --------- --------- ---------
Dr. Nicholas D. Trbovich................. 2006 $407,333 $40,000 $39,765 $487,098
Chairman, President and CEO
Nicholas D. Trbovich, Jr................. 2006 $186,547 $25,000 $36,250 $247,797
Director, Executive Vice President
Raymond C. Zielinski..................... 2006 $151,800 $ 8,000 $20,510 $180,310
Vice President
(1) All Other Compensation for 2006 includes (i) an allocation of 1,180
shares, 1,180 shares, and 1,003 shares for Dr. Trbovich, Mr. Trbovich,
Jr. and Mr. Zielinski, respectively, of common stock of the Company
under the Servotronics, Inc. Employee Stock Ownership Plan valued as
of November 30, 2006 (the date of the allocation) at the closing price
on the American Stock Exchange of $8.10 per share; (ii) $7,787, $387
and $1,481 to Dr. Trbovich, Mr. Trbovich, Jr. and Mr. Zielinski,
respectively, for life insurance; (iii) $15,488, $23,818 and $10,903
paid for Dr. Trbovich, Mr. Trbovich, Jr. and Mr. Zielinski,
respectively, for health insurance and medical related expenses, and
$6,934 and $2,489 for personal use of company cars to Dr. Trbovich and
Mr. Trbovich, Jr., respectively.
EMPLOYMENT AGREEMENTS. Dr. Trbovich and Mr. Trbovich, Jr. have
employment agreements with the Company pursuant to which they are entitled to
receive minimum salary compensation of $412,300 and $188,820 per annum
respectively, or such greater amount as the Company's Board of Directors may
determine, and individual and spousal lifetime health and life insurance
benefits. In the event of Dr. Trbovich's or Mr. Trbovich, Jr.'s death or total
disability during the term of the employment agreement, they or their estate is
entitled to receive 50% of the compensation they are receiving from the Company
at the time of their death or disability during the remainder of the term of the
employment agreement. Also, in the event of (i) a breach of the agreement by the
Company, (ii) a change in control of the Company, as defined, or (iii) a change
in the responsibilities, positions or geographic office location of Dr. Trbovich
or Mr. Trbovich, Jr., they are entitled to terminate the agreement and receive a
payment of 2.99 times their average annual compensation from the Company for the
preceding five years. If this provision is invoked by Dr. Trbovich or Mr.
Trbovich, Jr. and the Company makes the required payment, the Company will be
relieved of any further salary liability under the agreement notwithstanding the
number of years covered by the agreement prior to termination.
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The term of the agreement extends to and includes July 1, 2010 for Dr. Trbovich
and extends to and includes July 1, 2011 for Mr. Trbovich, Jr., provided,
however the term of the agreement will be automatically extended for one
additional year beyond its then expiration date unless either party has notified
the other in writing that the term will not be extended. If the Company elects
not to extend the agreement, Dr. Trbovich and/or Mr. Trbovich, Jr. will be
entitled to a severance payment equal to nine months' salary and benefits.
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR END. The following
table shows information with respect to the value of unexercised options held by
the Named Executive Officers as of December 31, 2006. All of the options granted
to the Named Executive Officers are currently exercisable.
---------------------------------- --------------------------------------------------------
Option Awards
--------------------------------------------------------
Name of Officer Number of securities Option Option
underlying unexercised Exercise Expiration
options (#) Price Date
---------------------------------- ----------------------- ---------------- --------------
Dr. Nicholas D. Trbovich 37,800 $8.50 03/24/2008
37,800 $3.8125 07/07/2010
45,000 $4.38 09/06/2011
50,000 $2.045 04/11/2013
25,000 $4.70 12/30/2015
---------------------------------- ----------------------- ---------------- --------------
Nicholas D. Trbovich Jr. 18,400 $8.50 03/24/2008
18,400 $3.8125 07/07/2010
24,000 $4.38 09/06/2011
27,000 $2.045 04/11/2013
15,000 $4.70 12/30/2015
---------------------------------- ----------------------- ---------------- --------------
Raymond C. Zielinski 5,800 $8.50 03/24/2008
7,500 $3.8125 07/07/2010
8,000 $4.38 09/06/2011
9,000 $2.045 04/11/2013
7,500 $4.70 12/30/2015
---------------------------------- ----------------------- ---------------- --------------
DIRECTORS' COMPENSATION. Under the Company's compensation
arrangements, non-employee directors are paid a yearly director's fee of $10,000
plus a per meeting fee of $700 and reimbursement of actual expenses for
attendance at Board meetings. Directors who are also employees do not receive
the Director's and/or meeting fees. Members of the Audit Committee of the Board
are paid a yearly Audit Committee fee of $2,500 plus a per-meeting fee of $500
and reimbursement of actual expenses for attendance at Audit Committee meetings.
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The following table contains information with respect to the
compensation paid to the non-employee directors for the year ended December 31,
2006.
Fees Earned or Option
Name Paid in Cash (1) Awards (2)
---- ---------------- ----------
William H. Duerig $25,500 --
Donald W. Hedges $25,500 --
(1) Includes cash compensation earned by the Directors during the fiscal
year 2006.
(2) No options were awarded in 2006. As of December 31, 2006, Dr. Duerig
and Mr. Hedges stock option holdings in the Company consisted of:
12,600 options with an exercise price of $8.50 expiring on March 24,
2008; 15,000 options with an exercise price of $3.8125 expiring on
July 7, 2010; 16,000 options with an exercise price of $4.38 expiring
on September 6, 2011; 18,000 options with an exercise price of $2.045
expiring on April 11, 2013; and 7,500 options with an exercise price
of $4.70 expiring on December 30, 2015. All stock options are
currently exercisable.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The following
table lists the persons that owned beneficially, as of March 31, 2007, more than
5% of the outstanding shares of common stock of the Company, based on the
Company's records. Unless otherwise stated, each person has sole voting and
investment power with respect to the shares of common stock indicated as
beneficially owned by that person.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (1)
------------------- -------------------- ----------
Servotronics, Inc. Employee
Stock Ownership Trust (2) 783,630 (2) 33.6%
1110 Maple Street
P.O. Box 300
Elma, New York 14059
Dr. Nicholas D. Trbovich (3) 583,278 (3) 23.1%
1110 Maple Street
P.O. Box 300
Elma, New York 14059
Nicholas D. Trbovich, Jr. (4) 142,866 (4) 5.9%
1110 Maple Street
P.O. Box 300
Elma, New York 14059
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Harvey Houtkin (5) 352,088(5) 15.1%
160 Summit Avenue
Montvale, New Jersey 07645
(1) Percent of class is based upon 2,329,102 shares of common stock
outstanding as of March 31, 2007 plus, in the case of Dr. Trbovich and
Nicholas D. Trbovich, Jr., the shares underlying their stock options,
all of which are presently exercisable.
(2) The trustees of the Servotronics, Inc. Employee Stock Ownership Trust
(the "ESOT") -- Dr. Nicholas D. Trbovich and Nicholas D. Trbovich, Jr.
-- direct the voting of unallocated shares. The participants in the
related plan have the right to direct the voting of shares which have
been allocated to their respective accounts; if a participant does not
direct the vote, the trustees may direct the vote of that
participant's shares. As of March 31, 2007, approximately 412,262
shares have been allocated to the accounts of participants and
approximately 371,368 shares remain unallocated.
(3) This amount includes (i) 32,309 shares held by a charitable foundation
for which Dr. Trbovich serves as a trustee; (ii) 195,600 shares which
Dr. Trbovich has the right to acquire under stock options which are
currently exercisable and (iii) approximately 44,983 shares allocated
to Dr. Trbovich's account under the Servotronics, Inc. Employee Stock
Ownership Plan. This amount does not include the shares beneficially
owned by certain of Dr. Trbovich's other relatives. Except as set
forth above, does not include shares held by the ESOT as to which Dr.
Trbovich serves as one of the two trustees. See note (2) above.
(4) This amount includes (i) 102,800 shares which Mr. Trbovich, Jr. has
the right to acquire under stock options which are currently
exercisable and (ii) approximately 24,252 shares allocated to Mr.
Trbovich, Jr.'s account under the Servotronics, Inc. Employee Stock
Ownership Plan. Except as set forth above, does not include shares
held by the ESOT as to which Mr. Trbovich, Jr. serves as one of two
trustees. See note (2) above.
(5) Based on a statement on Schedule 13D, as last amended on February 12,
2004, filed by Mr. Houtkin with the Securities and Exchange
Commission. According to Mr. Houtkin's statement, he has sole voting
and investment power with respect to 190,000 shares and shared voting
and investment power with respect to 162,088 shares. Mr. Houtkin
disclaims beneficial ownership in additional shares owned by other
members of his family.
(b) SECURITY OWNERSHIP OF MANAGEMENT. The following table sets
forth, as of March 31, 2007, information as to the beneficial ownership of
shares of common stock of the Company held by each director, executive officer
and by all directors and officers as a group (each individual listed in the
following table has sole voting and investment power with respect to the shares
of common stock indicated as beneficially owned by that person, except as
otherwise indicated):
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Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (1)
---------------- -------------------- ---------
Dr. Nicholas D. Trbovich 583,278 (2) 23.1%
Nicholas D. Trbovich, Jr. 142,866 (3) 5.9%
Donald W. Hedges 73,836 (4) 3.1%
Dr. William H. Duerig 72,693 (5) 3.0%
Raymond C. Zielinski 65,023 (6) 2.7%
Cari L. Jaroslawsky 7,500 (7) 0.3%
Michael D. Trbovich 34,120 (8) 1.4%
All directors and
officers as a group 1,350,684 (9) 47.6%
(1) Percent of class is based upon 2,329,102 shares of common stock
outstanding as of March 31, 2007 plus the number of shares subject to
stock options held by the indicated person or group.
(2) See note (9) below and note (3) to the table in "Security Ownership of
Certain Beneficial Owners."
(3) See note (9) below and note (4) to the table in "Security Ownership of
Certain Beneficial Owners."
(4) This amount includes 69,100 shares which Mr. Hedges has the right to
acquire under stock options which are currently exercisable. Mr.
Hedges has sole voting and investment power with respect to 4,261
shares and shared voting and investment power with respect to 475
shares.
(5) This amount includes 69,100 shares which Dr. Duerig has the right to
acquire under stock options which are currently exercisable.
(6) This amount includes (i) 37,800 shares which Mr. Zielinski has the
right to acquire under stock options which are currently exercisable
and (ii) approximately 13,199 shares allocated to Mr. Zielinski's
account under the Servotronics, Inc. Employee Stock Ownership Plan.
(7) This amount represents 7,500 shares which Mrs. Jaroslawsky has the
right to acquire under stock options which are currently exercisable.
(8) This amount includes (i) 24,500 shares which Mr. Trbovich has the
right to acquire under stock options which are currently exercisable
and (ii) approximately 8,084 shares allocated to Mr. Trbovich's
account under the Servotronics, Inc. Employee Stock Ownership Plan.
(9) See notes (2) through (8) above. Also includes unallocated shares held
by the ESOT over which certain officers, as trustees of the ESOT, may
be deemed to have voting power, as well as shares allocated to the
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accounts of all officers as a group under the related plan. See the
table in "Security Ownership of Certain Beneficial Owners" and note
(2) thereto.
(c) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS.
EQUITY COMPENSATION PLAN INFORMATION
------------------------------------
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of outstanding exercise price of equity compensation
options, warrants outstanding options, plans (excluding securities
and rights warrants and rights reflected in column (a))
Plan category (a) (b) (c)
------------- ----------------------- -------------------- ---------------------------
Equity compensation
plans approved by
security holders............ 333,000 $3.503 17,000
Equity compensation
plans not approved
by security holders......... 180,900 $6.072 84,100
------- -------
513,900 $4.407 101,100
======= =======
Total.........................
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Nicholas D. Trbovich, Jr., Executive Vice President of the
Company, is an inventor or co-inventor of certain issued patents and patent
pending applications that are used in the business of a subsidiary of the
Company. The patents have been and are currently used by the subject subsidiary
on a royalty-free basis with Mr. Trbovich, Jr.'s consent.
The Board has determined that Dr. Duerig and Mr. Hedges are
independent pursuant to Section 121A of the listing standards of the American
Stock Exchange. The Board of Directors has an Audit Committee comprised of Dr.
Duerig and Mr. Hedges. The Board does not have a standing nominating or
compensation committee. The Board of Directors approves/ratifies all director
nominees after they are determined by the independent directors. Additionally,
the independent directors determine the compensation of the Chief Executive
Officer and determine/recommend the compensation for all other Executive
Officers and such determinations/recommendations are then subsequently submitted
to the full Board of Directors for approval/ratification.
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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table shows the fees paid or accrued by the Company
for the audit and other services provided by Freed Maxick & Battaglia, CPAs, PC
and RSM McGladrey for fiscal years 2006 and 2005.
2006 2005
-------- --------
Audit Fees (1).............. $ 71,050 $ 63,000
Tax Fees (2)................ 33,223 1,713
All Other Fees (3).......... 1,446 35,704
-------- --------
Total....................... $105,719 $100,417
======== ========
(1) Audit fees represent fees for professional services provided in
connection with the audit of the Company's financial statements and
review of the Company's quarterly financial statements and audit
services provided in connection with other statutory or regulatory
filings.
(2) Tax fees principally included fees for tax preparation and tax
consulting services.
(3) Primarily for a forensic accounting report by RSM McGladrey.
The Audit Committee pre-approves audit and non-audit services provided by
Freed Maxick & Battaglia, CPAs, PC and RSM McGladrey.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: April 30, 2007
SERVOTRONICS, INC.
By: /s/ Cari L. Jaroslawsky, Treasurer and CFO
------------------------------------------
Cari L. Jaroslawsky, Treasurer and
Chief Financial Officer
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Exhibits
Exhibit No. Description
----------- -----------
31.1 Certification of Chief Financial
Officer pursuant to Rule 13a-14 or
15d-14 of the Securities Exchange
act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certification of Chief Executive
Officer pursuant to Rule 13a-14 or
15d-14 of the Securities Exchange
act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002.
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