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, 2005 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: $23,126,000
As of April 21, 2006 the aggregate market value of the voting common stock held
by non-affiliates of the registrant was $12,650,984 based on the closing sales
price reported by the American Stock Exchange on that day.
As of April 21, 2006 the number of $.20 par value common shares outstanding was
2,389,857.
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, 2005 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, 2005, as filed on March 31, 2006, 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 and Executive Officers of the Registrant.
--------------------------------------------------
(a) DIRECTORS. The table below sets forth certain information
regarding the directors of the Company, each of whom was elected at the
Company's 2005 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 84 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 84 Director of the Company since 1967;
self-employed attorney since 1988.
Nicholas D. Trbovich, Jr. 45 Director of the Company since 1990;
Vice President of the Company since 1990;
Director of Corporate Development of the
Company from 1987 to 1990;
Director of eAutoclaims, Inc.
Dr. Nicholas D. Trbovich 70 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 70 See table under "Directors."
Nicholas D. Trbovich, Jr. 45 See table under "Directors."
Raymond C. Zielinski 61 Vice President since 1990; Director of
Manufacturing of the Company from
1983 to 1990.
Cari L. Jaroslawsky 36 Treasurer and Chief Financial Officer of
the Company since September 2005; CPA
Consultant/Controller for the Company for
more than five years prior to
September 2005.
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Nicholas D. Trbovich, Jr. is the son 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 and directors 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 FINANCIAL EXPERT. The Board has designated Dr.
William H. Duerig as the Company's "Audit Committee financial expert" in
accordance with the SEC rules and regulations. The Board has determined that Dr.
Duerig is independent pursuant to Section 121A of the listing Standards of the
American Stock Exchange.
(f) IDENTIFICATION OF AUDIT COMMITTEE. The Board of Directors has a
standing Audit Committee that consists of Dr. Duerig and Mr. Hedges. Each member
of the Audit Committee is "independent" as that term is defined in the American
Stock Exchange listing standards.
Item 10. Executive Compensation.
----------------------
DIRECTORS' FEES. 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 $650 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 $450 and reimbursement
of actual expenses for attendance at Audit Committee meetings. On December 30,
2005, Dr. Duerig and Mr. Hedges were granted options to purchase 7,500 shares of
common stock at an exercise price of $4.70 per share.
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COMPENSATION TABLE. The following table contains information with
respect to the annual and long-term compensation for the years ended December
31, 2005, 2004 and 2003 for the Company's Chief Executive Officer and each other
person who was an Executive Officer of the Company and received total salary
and bonus in excess of $100,000 during 2005.
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SUMMARY COMPENSATION TABLE
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Long Term
Annual Compensation(2) Compensation
---------------------------------------------------- -------------- ---------------------------- ------------------ -------------
Awards
------
Securities
Underlying All Other
Name and Options Compen-
Principal Position Year Salary Bonus (1) (No. of Shares) sation (3)
---------------------------------------------------- -------------- -------------- ------------- ------------------ -------------
Dr. Nicholas D. Trbovich................. 2005 $391,064 $40,000 25,000 $53,816
Chairman, President and CEO 2004 374,611 40,000 -- 9,665
2003 359,579 -- 50,000 34,886
---------------------------------------------------- -------------- -------------- ------------- ------------------ -------------
Raymond C. Zielinski..................... 2005 $145,725 $7,500 7,500 $5,169
Vice President 2004 139,576 5,000 -- 4,032
2003 134,263 -- 9,000 3,409
---------------------------------------------------- -------------- -------------- ------------- ------------------ -------------
Nicholas D. Trbovich, Jr................. 2005 $179,083 $25,000 15,000 $9,779
Director, Vice President 2004 162,500 15,000 -- 4,601
2003 139,446 -- 27,000 13,848
---------------------------------------------------- -------------- -------------- ------------- ------------------ -------------
Lee D. Burns............................. 2005 $102,596 -- -- $ 10,809
Former Treasurer, Secretary and CFO* 2004 127,942 $ 5,000 -- 1,038
2003 122,809 -- 9,000 12,569
---------------------------------------------------- -------------- -------------- ------------- ------------------ -------------
* Separated from the Company in September of 2005
------------------
(1) The "Bonus" column of the compensation table above includes
discretionary incentive payments authorized by the Board of Directors
and paid in the year indicated in the table. No bonuses were paid in
the year 2003. Discretionary payments authorized for 2006 will be
included in the compensation table for 2006 to the extent they are
paid in that year. The Board of Directors has made no commitment for
incentive payments in subsequent years.
(2) The values of perquisites and other personal benefits are not shown on
the table because the aggregate amount of such compensation (if any)
for each year shown did not exceed 10% of the Executive Officer's
annual salary and bonus for that year.
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(3) All Other Compensation for 2005 includes (i) an allocation of 1,273
shares, 902 shares, and 1,136 shares for Dr. Trbovich, Mr. Zielinski
and Mr. Trbovich, Jr., respectively, of common stock of the Company
under the Servotronics, Inc. Employee Stock Ownership Plan valued as
of November 30, 2004 (the date of the allocation) at the closing price
on the American Stock Exchange on that date of $4.50 per share; (ii)
$3,989, $1,112, $1,304 and $767 to Dr. Trbovich, Mr. Zielinski, Mr.
Trbovich, Jr. and Mr. Burns, respectively, for life insurance; (iii)
$44,099, $3,365 and $10,042 paid for Dr. Trbovich, Mr. Trbovich, Jr.
and Mr. Burns, respectively, for vacation pay in lieu of time off
pursuant to a policy that is generally applicable to all employees of
the Company.
OPTION GRANTS. The following table gives information with respect to
stock options granted to the Executive Officers during 2005.
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OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
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Number of Percent of Total
Securities Options
Underlying Granted to
Options Employees Exercise of Expiration
Name of Officer Granted(#) in Fiscal Year Base Price ($/Sh) Date
----------------------------------------- ---------------------- ------------------ ------------------ -------------
----------------------------------------- ---------------------- ------------------ ------------------ -------------
Dr. Nicholas D. Trbovich............. 25,000 (1) 38.5% $4.70 12/30/15
----------------------------------------- ---------------------- ------------------ ------------------ -------------
Raymond C. Zielinski................. 7,500 (1) 11.5% $4.70 12/30/15
----------------------------------------- ---------------------- ------------------ ------------------ -------------
Nicholas D. Trbovich, Jr............ 15,000 (1) 23.1% $4.70 12/30/15
----------------------------------------- ---------------------- ------------------ ------------------ -------------
Cari L. Jaroslawsky................. 7,500 (1) 11.5% $4.70 12/30/15
----------------------------------------- ---------------------- ------------------ ------------------ -------------
-------------------
(1) Immediately exercisable
OPTION EXERCISES AND FISCAL YEAR END VALUES. No Executive Officer
exercised options during 2005. The following table shows information with
respect to the value of unexercised options held by the Executive Officers as of
December 31, 2005. Valuation calculations for unexercised options are based on
the closing price ($4.70) of a Share on the American Stock Exchange on December
31, 2005. All of the options granted to the Executive Officers are currently
exercisable.
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FISCAL YEAR-END OPTION VALUES
---------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised Securities In-The-Money
Underlying Options at Options at
Name of Officer Fiscal Year-End Fiscal Year End
--------------------------------------- ---------------------------- ------------------------------------
Dr. Nicholas D. Trbovich... 195,600 $180,698
--------------------------------------- ---------------------------- ------------------------------------
Raymond C. Zielinski....... 37,800 $33,111
--------------------------------------- ---------------------------- ------------------------------------
Nicholas D. Trbovich, Jr. . 102,800 $95,695
--------------------------------------- ---------------------------- ------------------------------------
Cari L. Jaroslawsky........ 7,500 -0-
--------------------------------------- ---------------------------- ------------------------------------
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 $397,400 and $182,000 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. The term of the
agreement extends to and includes July 1, 2010, 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 or Mr. Trbovich, Jr. will be entitled to a severance
payment equal to nine months' salary and benefits.
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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 April 7, 2006, 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) 816,467 (2) 32.9%
1110 Maple Street
P.O. Box 300 Elma, New York 14059
Dr. Nicholas D. Trbovich 585,189 (3) 19.8%
1110 Maple Street
P.O. Box 300 Elma, New York 14059
Harvey Houtkin (4) 352,088 (4) 14.2%
160 Summit Avenue
Montvale, New Jersey 07645
-----------------
(1) Percent of class is based upon 2,477,951 shares of common stock
outstanding as of April 7, 2006 plus, in the case of Dr. Trbovich, the
shares underlying his 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, Nicholas D. Trbovich, Jr.
and Raymond C. Zielinski -- 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 April 7, 2006,
approximately 419,180 shares have been allocated to the accounts of
participants and approximately 397,287 shares (16.3% of the shares
outstanding) 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; (iii) approximately 45,474 shares allocated to
Dr. Trbovich's account under the Servotronics, Inc. Employee Stock
Ownership Plan; and (iv) approximately 3,084 shares beneficially owned
-8-
by certain of Dr. Trbovich's children (as to which Dr. Trbovich
disclaims beneficial interest). This amount does not include the
shares beneficially owned by certain of Dr. Trbovich's other
relatives. Does not include shares held by the ESOT as to which Dr.
Trbovich serves as one of the three trustees. See note (2) above.
(4) 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 April 7, 2006, 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):
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (1)
---------------- -------------------- ---------
Dr. Nicholas D. Trbovich 585,189 (2) 21.9%
Nicholas D. Trbovich, Jr. 141,689 (3) 5.5%
Donald W. Hedges 73,836 (4) 2.9%
Dr. William H. Duerig 72,693 (5) 2.9%
Raymond C. Zielinski 64,022 (6) 2.5%
Cari L. Jaroslawsky 7,500 (7) 0.3%
All directors and
officers as a group 1,375,669 (8) 46.1%
----------------
(1) Percent of class is based upon 2,477,951 shares of common stock
outstanding as of April 7, 2006 plus the number of shares subject to
stock options held by the indicated person or group.
(2) See note (8) below and note (3) to the table in "Security Ownership of
Certain Beneficial Owners."
(3) 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 23,075 shares allocated to Mr.
Trbovich, Jr.'s account under the Servotronics, Inc. Employee Stock
Ownership Plan. Does not include shares held by the Servotronics, Inc.
Employee Stock Ownership Trust (the "ESOT") as to which Mr. Trbovich,
Jr. serves as one of three trustees. See note (8) below and note (2)
to the table in "Security Ownership of Certain Beneficial Owners."
-9-
(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 12,198 shares allocated to Mr. Zielinski's
account under the Servotronics, Inc. Employee Stock Ownership Plan.
Does not include shares held by the ESOT as to which Mr. Zielinski
serves as one of three trustees. See note (8) below and note (2) to
the table in "Security Ownership of Certain Beneficial Owners."
(7) This amount represents 7,500 shares which Mrs. Jaroslawsky has the
right to acquire under stock options which are currently exercisable.
(8) See notes (2) through (7) 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
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.
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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 333,000 $3.503 17,000
holders................
---------------------------------- --------------------------- ------------------------- --------------------------------
Equity compensation
plans not approved
by security holders........... 180,900 $6.072 16,300
------- ------
---------------------------------- --------------------------- ------------------------- --------------------------------
513,900 $4.407 33,300
======= ======
Total.................................
---------------------------------- --------------------------- ------------------------- --------------------------------
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Item 12. Certain Relationships and Related Transactions.
----------------------------------------------
During 2005, Dr. Trbovich's son, Nicholas D. Trbovich, Jr., served as
an officer and director of the Company and received the compensation disclosed
in the Summary Compensation Table in Item 10. See also, the discussion under
"Employment Agreement" in Item 10. Michael D. Trbovich, also a son of Dr.
Nicholas D. Trbovich, received remuneration of $81,358 which includes fringe
benefits for health insurance, life insurance and an amount paid for untaken
vacation, but does not include 484 shares allocated by the Company's ESOP or
stock options.
Ms. Jaroslawsky has served as Treasurer and Chief Financial Officer of
the Company since September 2005. Prior to being employed by the Company, she
served as a Consultant/Controller to the Company and received fees totaling
$65,459 and $84,027 in 2005 and 2004 respectively.
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 2005 and by PricewaterhouseCoopers LLP for fiscal 2004.
2005 2004
--------------------------------- --------------- --------------
Audit Fees (1)................... $63,000 $85,200
--------------------------------- --------------- --------------
Tax Fees (2)..................... 1,713 42,150
--------------------------------- --------------- --------------
All Other Fees (3)............... 35,704 -
--------------------------------- --------------- --------------
Total............................ $100,417 $127,350
--------------------------------- --------------- --------------
-----------------
(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) For 2005, this was primarily for the investigation and report by RSM
McGladrey with respect to a defalcation by a former employee.
The Audit Committee pre-approves all audit and legally permissible
non-audit services provided by the independent accountants. The Audit Committee
pre-approved all services performed by Freed Maxick & Battaglia, CPAs, PC and
RSM McGladrey during 2005.
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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: May 1, 2006
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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