10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2018

or

¨ 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	(I. R. S. Employer
incorporation or organization)	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)

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 x     No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes x     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 x  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 x

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 July 31, 2018
Common Stock, $.20 par value	2,582,833

INDEX

			Page No.
	PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited):
		a) Consolidated Balance Sheets, June 30, 2018 and December 31, 2017 (Audited)	3
		b) Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017	4
		c) Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	5
		d) Notes to Consolidated Financial Statements	6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.		Controls and Procedures	22
	PART II. OTHER INFORMATION
Item 1.		Legal Proceedings	23
Item 1A.		Risk Factors	23
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.		Defaults Upon Senior Securities	23
Item 4.		Mine Safety Disclosures	23
Item 5.		Other Information	23
Item 6.		Exhibits	24
Forward-Looking Statement			24
Signatures			25

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SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($000’s omitted except share and per share data)

	June 30,			December 31,
	2018			2017
	(Unaudited)
Current assets:
Cash and cash equivalents	$	3,199		$	4,707
Accounts receivable, net		9,960			8,424
Inventories, net		13,587			12,791
Prepaid income taxes		149			-
Other current assets		429			249
Total current assets		27,324			26,171
Property, plant and equipment, net		11,502			11,021
Deferred income taxes		409			409
Other non-current assets		379			385
Total Assets	$	39,614		$	37,986
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt	$	548		$	548
Current portion of capitalized lease obligations		175			133
Dividend payable		416			-
Accounts payable		2,546			1,377
Accrued employee compensation and benefits costs		2,077			1,784
Accrued income taxes		-			414
Other accrued liabilities		560			872
Total current liabilities		6,322			5,128
Long-term debt		2,771			2,950
Post retirement obligation		1,799			1,743
Shareholders' equity:
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,614,506 shares; outstanding 2,498,870 (2,308,315 - 2017) shares		523			523
Capital in excess of par value		14,192			14,171
Retained earnings		16,325			15,709
Accumulated other comprehensive loss		(26	)		(32	)
Employee stock ownership trust commitment		(662	)		(662	)
Treasury stock, at cost 115,636 (183,983 - 2017) shares		(1,630	)		(1,544	)
Total shareholders' equity		28,722			28,165
Total Liabilities and Shareholders' Equity	$	39,614		$	37,986

See notes to consolidated financial statements

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SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

($000’s omitted except per share data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Revenue	$	11,946	$	9,616	$	22,505	$	18,719
Cost, expenses and other (income):
Costs of goods sold, inclusive of depreciation and amortization		9,022		7,830		17,531		15,074
Selling, general and administrative		2,013		1,622		3,641		3,462
Interest expense		27		15		52		38
Total expenses		11,062		9,467		21,224		18,574
Income before income tax provision		884		149		1,281		145
Income tax provision		177		44		243		14
Net income	$	707	$	105	$	1,038	$	131
Income per share:
Basic
Net Income per share	$	0.31	$	0.05	$	0.46	$	0.06
Diluted
Net income per share	$	0.30	$	0.05	$	0.45	$	0.06

See notes to consolidated financial statements

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SERVOTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($000’s omitted)

(Unaudited)

	Six Months Ended
	June 30,
	2018			2017
Cash flows related to operating activities:
Net Income	$	1,038		$	131
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		502			428
Loss on disposal of property		1			16
Stock based compensation		85			107
Increase in inventory reserve		54			12
Increase in warranty reserve		217			1
Change in assets and liabilities:
Accounts receivable		(1,536	)		141
Inventories		(850	)		211
Prepaid income taxes		(149	)		(24	)
Other current assets		(180	)		9
Other non-current assets		6			(378	)
Accounts payable		1,169			(512	)
Accrued employee compensation and benefit costs		293			66
Other accrued liabilities		(473	)		(96	)
Accrued income taxes		(414	)		(193	)
Net cash used in operating activities		(237	)		(81	)
Cash flows related to investing activities:
Capital expenditures - property, plant and equipment		(984	)		(571	)
Proceeds from sale of assets		-			180
Net cash used in investing activities		(984	)		(391	)
Cash flows related to financing activities:
Principal payments on long-term debt		(274	)		(295	)
Principal payments on capital lease obligations		(73	)		-
Proceeds from capital leases		210			-
Purchase of treasury shares		(150	)		(160	)
Net cash used in financing activities		(287	)		(455	)
Net decrease in cash and cash equivalents		(1,508	)		(927	)
Cash and cash equivalents at beginning of period		4,707			3,515
Cash and cash equivalents at end of period	$	3,199		$	2,588

See notes to consolidated financial statements

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited 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 accompanying 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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The consolidated financial statements should be read in conjunction with the 2017 annual report and the notes thereto.

2. Business Description and Summary of Significant Accounting Policies

Business Description

Servotronics, Inc. and its subsidiaries design, manufacture and market advanced technology products consisting primarily of control components, and consumer products consisting of knives and various types of cutlery and other edged products.

Principles of Consolidation

The consolidated financial statements include the accounts of Servotronics, Inc. and its wholly-owned subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated upon consolidation.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to include all cash accounts and short-term investments purchased with an original maturity of three months or less.

Accounts Receivable

The Company grants credit to substantially all of its customers and carries its accounts receivable at original invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on history of past write-offs, collections, and current credit conditions. The allowance for doubtful accounts amounted to approximately $149,000 at June 30, 2018 and December 31, 2017. The Company does not accrue interest on past due receivables.

Revenue Recognition

Revenues are recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance. Purchase orders generally include specific terms relative to quantity, item description, specifications, price, customer responsibility for in-process costs, delivery schedule, shipping point, payment and other standard terms and conditions of purchase. Service sales, principally representing repair, are recognized at the time of shipment of goods.

The costs incurred for nonrecurring engineering, development and repair activities of our products under agreements with commercial customers are expensed as incurred. Subsequently, the revenue is recognized as products are delivered to the customers with the approval by the customers.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods and services to a customer. The Company determines revenue recognition using the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the company satisfies a performance obligation.

Revenue excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (e.g., sales and use taxes). Revenue includes payments for shipping activities that are reimbursed by the customer to the Company.

Revenue on a significant portion of our contracts is currently recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance.

Performance obligations are satisfied as of a point in time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. As a significant portion of the Company’s revenue are recognized at the time of shipment, transfer of title and customer acceptance, there is no significant judgment applied to determine the timing of the satisfaction of performance obligations or transaction price.

The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment. The Company generally receives payment for these contracts within the payment terms negotiated and agreed upon by each customer contract.

Warranty and repair obligations are assessed on all returns. Revenue is not recorded on any warranty returns. Revenue is recognized on repair returns, covered under a customer contract, at the contractual price upon shipment to the customer.

The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost includes all costs incurred to bring each product to its present location and condition. Market provisions in respect of lower of cost or market adjustments and inventory on hand that is greater than the expected amount to be used that is greater than one year are applied to the gross value of the inventory through a reserve of approximately $1,492,000 and $1,438,000 at June 30, 2018 and December 31, 2017, respectively. Pre-production and start-up costs are expensed as incurred.

The purchase of suppliers’ minimum economic quantities of material such as steel, etc. may result in a purchase of quantities exceeding one year of customer requirements. Also, in order to maintain a reasonable and/or agreed to lead time, certain larger quantities of other product support items may have to be purchased and may result in over one year’s supply. These amounts are not included in the inventory reserve discussed above.

Shipping and Handling Costs

Shipping and handling costs are classified as a component of cost of goods sold.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment

Property, plant and equipment is carried at cost; expenditures for new facilities and equipment and expenditures which substantially increase the useful lives of existing plant and equipment are capitalized; expenditures for maintenance and repairs are expensed as incurred. Upon disposal of properties, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is included in income.

Depreciation is provided on the basis of estimated useful lives of depreciable properties, primarily by the straight-line method for financial statement purposes and by accelerated methods for income tax purposes. Depreciation expense includes the amortization of capital lease assets. The estimated useful lives of depreciable properties are generally as follows:

Buildings and improvements	5-40 years
Machinery and equipment	5-20 years
Tooling	3-5 years

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities, as well as operating loss and credit carryforwards. The Company and its subsidiaries file a consolidated federal income tax return, combined New York and Texas state income tax returns and separate Pennsylvania and Arkansas income tax returns.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company did not have any accrued interest or penalties included in its consolidated balance sheets at June 30, 2018 or December 31, 2017, and did not recognize any interest and/or penalties in its consolidated statements of income during the six months ended June 30, 2018 and 2017. The Company did not have any material uncertain tax positions or unrecognized tax benefits or obligations as of June 30, 2018 and December 31, 2017. The 2014 through 2016 federal and state tax returns remain subject to examination.

Supplemental Cash Flow Information

Income taxes paid during the six months ended June 30, 2018 and 2017 amounted to approximately $775,000 and $165,000, respectively. Interest paid amounted to approximately $52,000 and $38,000, respectively, during the six months ended June 30, 2018 and 2017.

Employee Stock Ownership Plan

Contributions to the employee stock ownership plan are determined annually by the Company according to plan formula.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable based on undiscounted future operating cash flow analyses. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. The Company has determined that no impairment of long-lived assets existed at June 30, 2018 and December 31, 2017.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain balances, as previously reported, were reclassified to conform with classifications adopted in the current period.

Research and Development Costs

Research and development costs are expensed as incurred.

Concentration of Credit Risks

Financial instruments that potentially subject the Company to concentration of credit risks principally consist of cash accounts in financial institutions. Although the accounts exceed the federally insured deposit amount, management does not anticipate nonperformance by the financial institutions.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity. Based on variable interest rates and the borrowing rates currently available to the Company for loans similar to its long-term debt, the fair value approximates its carrying amount.

Recent Accounting Pronouncements Adopted

Effective January 1, 2018 the Company adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” issued by the Financial Accounting Standards Board (FASB) which requires employers to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. The other components of net periodic benefit cost will be presented separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. ASU 2017-07 allows a practical expedient that permits an entity to use amounts disclosed in its pension and other post retirement requirements. The Company adopted this guidance during the reporting period. The reporting of the annual service costs is expected to be immaterial.

Effective January 1, 2018, the Company adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" using the modified retrospective method. The new revenue recognition standard outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Topic 606 also requires significantly expanded disclosure requirements and applied the standard to all contracts that were not completed as of January 1, 2018. There was no cumulative effect of the adoption recognized. We have obtained an understanding of the new standard and determined that the Company will retain much of the same accounting treatment used to recognize revenue as compared to current standards. See above for the Company’s updated revenue recognition accounting policy.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective January 1, 2018, the Company adopted ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. tax reform legislation commonly known as the Tax Cuts and Jobs Act of 2017. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company applied the guidance as of the beginning of the period of adoption and reclassified approximately $6,000 from accumulated other comprehensive loss to retained earnings due to the change in the federal corporate tax rate.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” There are elements of the new standard that could impact almost all entities to some extent, although the lessees will likely see the most significant changes. Lessee will need to recognize virtually all of their leases on the balance sheet, by recording the right-of-use asset and a lease liability. Public business entities are required to adopt the new leasing standard for fiscal years, and interim period within those fiscal years, beginning December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019. Early adoption is permitted. The Company does not believe the adoption will have a material impact on the financial statements and disclosures.

3. Inventories

	June 30,			December 31,
	2018			2017
	($000's omitted)
Raw material and common parts	$	7,500		$	8,375
Work-in-process		4,568			2,940
Finished goods		3,011			2,914
		15,079			14,229
Less inventory reserve		(1,492	)		(1,438	)
Total inventories	$	13,587		$	12,791

4. Property, Plant and Equipment

	June 30,			December 31,
	2018			2017
	($000's omitted)
Land	$	7		$	7
Buildings		10,384			10,288
Machinery, equipment and tooling		18,007			17,249
Construction in progress		776			665
		29,174			28,209
Less accumulated depreciation		(17,672	)		(17,188	)
	$	11,502		$	11,021

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As previously disclosed, the Company through a wholly-owned subsidiary, entered into a contract to sell unused commercial real property in Franklinville, New York for approximately $180,000. The sale transaction closed on March 9, 2017 and the wholly-owned subsidiary recognized a de minimis loss on the sale.

Depreciation and amortization expense amounted to approximately $502,000 and $428,000 for the six months ended June 30, 2018 and 2017, respectively. Depreciation and amortization expense amounted to approximately $244,000 and $218,000 for the 3 months ended June 30, 2018 and 2017, respectively. Depreciation expense amounted to approximately $465,000 and $421,000 for the six months ended June 30, 2018 and 2017, respectively. Depreciation expense amounted to approximately $224,000 and $215,000 for the 3 months ended June 30, 2018 and 2017, respectively. Amortization expense primarily related to capital leases amounted to approximately $37,000 and $7,000 for the six months ended June 30, 2018 and June 30, 2017, respectively. Amortization expense amounted to approximately $20,000 and $3,000 for the three months ended June 30, 2018 and June 30, 2017. The Company believes that it maintains property and casualty insurance in amounts adequate for the risk and nature of its assets and operations and which are generally customary in its industry.

As of June 30, 2018, there is approximately $776,000 ($665,000 – 2017) of construction in progress included in property, plant and equipment all of which is related to capital projects, primarily the implementation costs for the enterprise resource planning software that will be used as an integral part of the product in the process at the Advanced Technology Group (“ATG”) and the Consumer Products Group (“CPG”). See Note 7, Commitments and Contingencies, for more information on anticipated capital expenditures.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Long-Term Debt

	June 30,			December 31,
	2018			2017
	($000's omitted)
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $21,833 through 2021 with a balloon payment of $786,000 due December 1, 2021	$	1,703		$	1,835
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $23,810 through December 1, 2021		1,000			1,142
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months)		791			654
		3,494			3,631
Less current portion		(723	)		(681	)
	$	2,771		$	2,950

The Company has a $2,000,000 line of credit on which there was no balance outstanding at June 30, 2018 and December 31, 2017.

The term loans are secured by all personal property of the Company with the exception of certain equipment that was purchased from proceeds of government grants.

Certain lenders require the Company to comply with debt covenants as described in the specific loan documents, including a debt service ratio. At June 30, 2018 and December 31, 2017 the Company was in compliance with these covenants.

The Company established a lease line of credit for equipment financing in the amount of $1,000,000 available until June 28, 2018. This line is non-revolving and non-renewable. The lease term for equipment covered by the lease line of credit is 60 months, with a $1 buy out at the end of the term. Monthly payments will be fixed for the term of each funding based upon the Lender’s lease pricing in effect at the time of such funding.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principal payments for the capital lease obligations are expected for 2018 and for each of the next five years:

	June 30,
	2018
	($000's omitted)
2018	$	193
2019		193
2020		193
2021		193
2022		100
Total minimum lease payments		872
Less amount representing interest		(81	)
Present value of net minimum lease payment		791
Less current portion		(175	)
	$	616

Each lease is secured by the underlying equipment. There was approximately $791,000 outstanding at June 30, 2018.

6. Shareholders’ Equity

	Common Stock				($000's omitted except for share data)
																Accumulated
	Number				Capital in											Other			Total
	of shares				excess of		Retained						Treasury			Comprehensive			shareholders'
	issued		Amount		par value		earnings			ESOT			stock			Loss			equity
Balance at December 31, 2017		2,614,506	$	523	$	14,171	$	15,709		$	(662	)	$	(1,544	)	$	(32	)	$	28,165
Net income								1,038												1,038
Purchase of treasury shares		-		-		-		-			-			(150	)		-			(150	)
Cash dividend		-		-		-		(416	)		-			-			-			(416	)
Stock based compensation, net of tax benefit		-		-		21		(6	)		-			64			6			85
Balance at June 30, 2018		2,614,506	$	523	$	14,192	$	16,325		$	(662	)	$	(1,630	)	$	(26	)	$	28,722

The Company’s Board of Directors authorized the purchase of up to 450,000 shares of its common stock in the open market or in privately negotiated transactions. As of June 30, 2018, the Company has purchased 352,680 shares and there remains 97,320 shares available to purchase under this program. There were 3,350 shares purchased by the Company during the six month period ended June 30, 2018.

On April 18, 2013, the Company issued 165,000 shares of restricted stock to Executive Officers of the Company under the Company's 2012 Long-Term Incentive Plan that was approved by the shareholders at the 2012 Annual Meeting of Shareholders. This plan authorizes the issuance of up to 300,000 shares. The restricted share awards vest over four year periods between January 2014 and January 2017; however, these shares have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value ($1,336,500) was recognized over the four year requisite service period.

On April 11, 2016, the Company issued 51,000 shares of restricted stock to Executive Officers and certain key management of the Company under the Company’s 2012 Long-Term Incentive Plan. The restricted share awards have varying vesting periods between January 2017 and January 2018; however, these shares have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value ($406,000) and was recognized over the requisite service period.

On January 1, 2018, 28,500 shares of restricted stock vested of which 11,341 shares were withheld and repurchased by the Company for approximately $117,000 to satisfy statutory minimum withholding tax requirements for those participants who elected this option as permitted under the Company’s 2012 Long-Term Incentive Plan. Additionally, upon the death of Servotronics’ Chairman of the Board and Chief Executive Officer (CEO) in August 2017, 15,000 restricted shares awarded to the Chairman and CEO vested.

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SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 25, 2018, the Company issued 78,750 shares of restricted stock to Executive Officers and certain key management of the Company under the Company’s 2012 Long-Term Incentive Plan. The restricted share awards have varying vesting periods between January 2019 and January 2021; however, these shares have voting rights and accrue dividends prior to vesting. The accrued dividends are paid upon vesting of the restricted shares. The aggregate amount of expense to the Company, measured based on grant date fair value is expected to be approximately $735,000 and will be recognized over the requisite service period.

On May 25, 2018, the Company revised its director compensation policy pursuant to which non-employee directors receive a portion of their annual retainer in the form of restricted stock under the Company’s 2012 Long-Term Incentive Plan. An aggregate of 4,288 restricted shares were issued that vest quarterly over a twelve month service period. These shares have voting rights and accrue dividends that are paid upon vesting. The aggregate amount of expense to the Company, measured based on the grant date fair value is expected to be approximately $40,000 and will be recognized over the requisite service period.

Included in the six months ended June 30, 2018 and 2017 is approximately $85,000 and $107,000, respectively, of stock-based compensation expense related to the restrictive share awards.

On May 18, 2018 the Company announced that its Board of Directors declared a $0.16 per share cash dividend. The dividend was subsequently paid on July 16, 2018 to shareholders of record on June 30, 2018 and was approximately $416,000 in the aggregate. These dividends do not represent that the Company will pay dividends on a regular or scheduled basis. The amount is recorded in dividends payable and as a reduction to retained earnings on the accompanying consolidated balance sheet.

Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on the earnings per share that were outstanding for the period. Incremental shares from assumed conversions are calculated as the number of shares that would be issued, net of the number of shares that could be purchased in the marketplace with the cash received upon stock option exercise. The dilutive effect of unvested restrictive stock is determined using the treasury stock method.

- 14 -

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
	($000's omitted except per share data)
Net Income	$	707	$	105	$	1,038	$	131
Weighted average common shares outstanding (basic)		2,267		2,251		2,241		2,251
Unvested restricted stock		83		43		83		43
Weighted average common shares outstanding (diluted)		2,350		2,294		2,324		2,294
Basic
Net income per share	$	0.31	$	0.05	$	0.46	$	0.06
Diluted
Net income per share	$	0.30	$	0.05	$	0.45	$	0.06

7. Commitments and Contingencies

Post retirement obligation. As previously disclosed in filings with the Securities and Exchange Commission (“SEC”), the Company, under an employment agreement, is expected to pay post-employment health related benefits to a former Executive Officer of the Company (the “Former Employee”), of which approximately $1,007,000 has been accrued as of June 30, 2018 and December 31, 2017, and is reflected as Post Retirement Obligation in the accompanying balance sheet. After termination, the scope of the health related benefits obligation in the agreement became an issue. In June 2016 an Arbitrator was selected by the parties to hear this matter. The Company did not consider the risk of loss to be probable at June 30, 2017 however, a final opinion and award was issued on March 22, 2018 resulting in the increased accrual at June 30, 2018. Additionally, the Company paid approximately $367,000 pursuant to the arbitration award as of June 30, 2018.

The Company provides certain post-employment health and life insurance benefits for Kenneth Trbovich. Upon retirement and after attaining at least the age of 65, the Company will pay for the retired Executive’s and dependent’s health benefits and will continue the Company-provided life insurance offered at the time of retirement. The retiree’s health insurance benefits ceases upon the death of the retired executive. Approximately $792,000 and $736,000 has been accrued as of June 30, 2018 and December 31, 2017, respectively, and is reflected as Post Retirement Obligation in the accompanying balance sheet.

Facility Expansion. The Company’s Consumer Products Group (“CPG”) was awarded a $300,000 grant from Cattaraugus County Industrial Development Agency (“CCIDA”) on March 13, 2014. The grant was used towards new manufacturing equipment in connection with the proposed expansion project. As part of the terms of the Grant Contract with CCIDA, the Company’s CPG has agreed to maintain certain employment levels for a period of five years from the date of the agreement. If the employment levels are not maintained, the Company will be required to repay the grant proceeds on a prorated basis. The Company has maintained the required employment levels as of June 30, 2018.

8. Litigation

Litigation. The Company has pending litigation relative to leases of certain equipment and real property with a former related party. Aero, Inc. is suing Servotronics, Inc. and its wholly owned subsidiary and has alleged damages in the amount of $3,000,000. The Company has filed a response to the Aero, Inc. lawsuit and has also filed a counter-claim in the amount of $3,191,000. The Company considers the risk of loss remote, and is unable to reasonably or accurately estimate the likelihood and amount of any liability or benefit that may be realized as a result of this litigation. Accordingly, no gain or loss has been recognized in the accompanying financials statements related to this litigation.

- 15 -

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There are no other legal proceedings currently pending by or against the Company other than ordinary routine litigation incidental to the business which is not expected to have a material adverse effect on the business or earnings of the Company.

9. Related Party Transactions

The Company paid legal fees and disbursements of approximately $95,000 and $144,000 in the six month period ended June 30, 2018 and 2017, respectively, for services provided by a law firm that is owned by a member of the Company’s Board of Directors. Legal fees paid for the three month period ended June 30, 2018 and 2017 amounted to approximately $48,000 and $94,000, respectively. Additionally, the Company had accrued unbilled legal fees at June 30, 2018 and 2017 of approximately $32,000 and $23,000, respectively, with this firm.

10. Business Segments

The Company operates in two business segments, ATG and CPG. The Company’s reportable segments are strategic business units that offer different products and services. The segments are composed of separate corporations and are managed separately. Operations in ATG primarily involve the design, manufacture, and marketing of servo-control components (i.e., torque motors, control valves, actuators, etc.) for government, commercial and industrial applications. CPG’s operations involve the design, manufacture and marketing of a variety of cutlery products for use by consumers and government agencies. The Company derives its primary sales revenue from domestic customers, although a portion of finished products are for foreign end use.

As of June 30, 2018, the Company had identifiable assets of approximately $39,614,000 ($37,986,000 – December 31, 2017) of which approximately $28,666,000 ($26,331,000 – December 31, 2017) was for ATG and approximately $10,948,000 ($11,655,000 – December 31, 2017) was for CPG.

Information regarding the Company’s operations in these segments is summarized as follows:

	($000's omitted)
	ATG						CPG						Consolidated
	Six Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	19,389		$	15,050		$	3,116		$	3,669		$	22,505		$	18,719
Cost of goods sold, inclusive of depreciation and amortization		(14,635	)		(11,628	)		(2,896	)		(3,446	)		(17,531	)		(15,074	)
Selling, general and administrative		(2,655	)		(2,506	)		(986	)		(956	)		(3,641	)		(3,462	)
Interest expense		(35	)		(23	)		(17	)		(15	)		(52	)		(38	)
Income (loss) before income tax provision (benefits)		2,064			893			(783	)		(748	)		1,281			145
Income tax provision (benefits)		392			239			(149	)		(225	)		243			14
Net income (loss)	$	1,672		$	654		$	(634	)	$	(523	)	$	1,038		$	131
Capital expenditures	$	845		$	495		$	139		$	76		$	984		$	571

- 16 -

SERVOTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	($000's omitted)
	ATG						CPG						Consolidated
	Three Months Ended						Three Months Ended						Three Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	10,274		$	7,630		$	1,672		$	1,986		$	11,946		$	9,616
Cost of goods sold, inclusive of depreciation and amortization		(7,552	)		(6,024	)		(1,470	)		(1,806	)		(9,022	)		(7,830	)
Selling, general and administrative		(1,426	)		(1,173	)		(587	)		(449	)		(2,013	)		(1,622	)
Interest expense		(18	)		(8	)		(9	)		(7	)		(27	)		(15	)
Income (loss) before income tax provision (benefits)		1,278			425			(394	)		(276	)		884			149
Income tax provision (benefits)		262			127			(85	)		(83	)		177			44
Net income (loss)	$	1,016		$	298		$	(309	)	$	(193	)	$	707		$	105
Capital expenditures	$	440		$	314		$	33		$	74		$	473		$	388

11. Subsequent Events

None.

- 17 -

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

During the three and six months ended June 30, 2018 and 2017 approximately 9% of the Company’s revenues were derived from contracts with agencies of the U.S. Government or their prime contractors and their subcontractors. The Company believes that government involvement in military operations overseas will continue to have an impact on the financial results in both the Advanced Technology and Consumer Products markets. While the Company is optimistic in relation to these potential opportunities, it recognizes that sales to the government are affected by defense budgets, the foreign policies of the U.S. and other nations, the level of military operations and other factors, and as such, it is difficult to predict the impact on future financial results.

The Company’s commercial business is affected by such factors as uncertainties in today’s global economy, global competition, the vitality and ability of the commercial aviation industry to purchase new aircraft, the effects and threats of terrorism, market demand and acceptance both for the Company’s products and its customers’ products which incorporate Company made components.

The ATG engages in business development efforts in its primary markets and is broadening its activities to include new domestic and foreign markets that are consistent with its core competencies. We believe our business remains particularly well positioned in the strong commercial aircraft market driven by the replacement of older aircraft with more fuel efficient alternatives and the increasing demand for air travel in emerging markets. Although the ATG backlog continues to be strong, actual scheduled shipments may be delayed/changed as a function of the Company’s customers’ final delivery determinations based on changes in the global economy and other factors.

The CPG consumer products are marketed throughout the United States and in select foreign markets. Consumer sales are moderately seasonal. Sales are direct to consumer, through national and international distributors, and through retailers such as big box, hardware, supermarket, variety, department, discount, gift, drug, outdoors and sporting stores. The CPG also sells knives and tools, principally machetes, bayonets, survival knives and kitchen knives, to various branches of the United States Government which accounted for less than 2% of the Company’s consolidate revenues in the three and six months ended June 30, 2018 and 2017.

See also Note 10, Business Segments, for information concerning business segment operating results.

- 18 -

Results of Operations

The following table compares the Company’s consolidated statements of income data for the six months and three months ended June 30, 2018 and 2017 ($000’s omitted):

	($000's omitted except per share data)
	Six Months Ended June 30,
											2018 vs 2017
	2018					2017					Dollar			% Increase
	Dollars		% of Sales			Dollars		% of Sales			Change			(Decrease)
Revenues:
Advanced Technology	$	19,389		86.2	%	$	15,050		80.4	%	$	4,339			28.8	%
Consumer Products		3,116		13.8	%		3,669		19.6	%		(553	)		(15.1	)%
		22,505		100.0	%		18,719		100.0	%		3,786			20.2	%
Cost of goods sold, inclusive of depreciation and amortization		17,531		77.9	%		15,074		80.5	%		2,457			16.3	%
Selling, general and administrative		3,641		16.2	%		3,462		18.5	%		179			5.2	%
Total costs and expenses		21,172		94.2	%		18,536		99.0	%		2,636			14.2	%
Operating income, net		1,333		5.9	%		183		1.0	%		1,150			628.4	%
Interest expense		52		0.2	%		38		0.2	%		14			36.8	%
Income tax provision		243		1.1	%		14		0.1	%		229			1635.7	%
Net income	$	1,038		4.6	%	$	131		0.7	%	$	907			692.4	%

	($000's omitted except per share data)
	Three Months Ended June 30,
											2018 vs 2017
	2018					2017					Dollar			% Increase
	Dollars		% of Sales			Dollars		% of Sales			Change			(Decrease)
Revenues:
Advanced Technology	$	10,274		86.0	%	$	7,630		79.3	%	$	2,644			34.7	%
Consumer Products		1,672		14.0	%		1,986		20.7	%		(314	)		(15.8	)%
		11,946		100.0	%		9,616		100.0	%		2,330			24.2	%
Cost of goods sold, inclusive of depreciation and amortization		9,022		75.5	%		7,830		81.4	%		1,192			15.2	%
Selling, general and administrative		2,013		16.9	%		1,622		16.9	%		391			24.1	%
Total costs and expenses		11,035		92.4	%		9,452		98.3	%		1,583			16.7	%
Operating income, net		911		7.6	%		164		1.7	%		747			455.5	%
Interest expense		27		0.2	%		15		0.2	%		12			80.0	%
Income tax provision		177		1.5	%		44		0.5	%		133			302.3	%
Net income	$	707		5.9	%	$	105		1.0	%	$	602			573.3	%

Revenue

The Company’s consolidated revenues from operations increased approximately $3,786,000 or 20.2% for the six month period ended June 30, 2018 when compared to the same period in 2017. During this period the ATG increased commercial shipments by approximately $4,365,000 offset by the CPG commercial shipments decrease of approximately $474,000. Both ATG and CPG decreased government shipments by approximately $26,000 and $79,000, respectively, during the six month period ended June 30, 2018.

The Company’s consolidated revenues from operations increased approximately $2,330,000 or 24.2% for the three month period ended June 30, 2018 when compared to the same period in 2017. During this period the ATG increased commercial shipments by approximately $2,775,000 offset by the CPG commercial shipments decrease of approximately $270,000. Both ATG and CPG decreased government shipments by approximately $131,000 and $44,000, respectively, during the three months period ended June 30, 2018.

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Cost of Goods Sold (including depreciation and amortization)

Cost of goods sold increased approximately $2,457,000 or 16.3% for the six month period ended June 30, 2018 and increased approximately $1,192,000 or 15.2% for the three month period ended June 30, 2018 when compared to the same period in 2017. This is due in part to the mix of product, but primarily due to the increase in revenue for the period ended June 30, 2018 from the same period in 2017. The consolidated production employment levels grew by 18.1% for the period ended June 30, 2018 and our gross margin percentage improved to approximately 24.5% for the second quarter of 2018 from 18.6% for the same period of 2017. In addition, depreciation and amortization increased by 17.1% and 9.9% for the six and three month periods ended June 30, 2018, respectively, from the same period in 2017, primarily due to additional machinery and equipment procured for the ATG increase in production.

Selling, General and Administrative Expenses (including depreciation and amortization)

Selling, general and administrative (SG&A) increased approximately $179,000 or 5.2% for the six month period ended June 30, 2018 and increased approximately $391,000 or 24.1% for the three month period ended June 30, 2018 when compared to the same period in 2017. This is attributable to employee and employee related benefits, such expenses increased approximately $159,000 and $285,000 for the six month period and three month period ended June 30, 2018, primarily due to an increase in wages and vacation accrual. Although a de minimis amount, depreciation and amortization increased by 20.7% and 47.3% in the six and three month periods ended June 30, 2018, respectively, when compared to the same period in 2017. The balance of the increase in SG&A expenses is attributable to the sales and marketing of products including commissions, sales support and expenses related to trade shows.

Interest Expense

Interest expense increased by 36.8% and 80% in the six and three month periods ended June 30, 2018, respectively, when compared to the same period in 2017. This is primarily due to the lease line of credit for the equipment financing for the ATG increase in production. See also Note 5, Long-Term Debt, for information on long-term debt.

Income Taxes

The Company’s effective tax rate was approximately 19.0% and 9.7% for the six month periods ended June 30, 2018 and 2017, respectively. The Company’s effective tax rate was approximately 20.0% and 29.5% for the three month periods ended June 30, 2018 and 2017, respectively.  The effective tax rate in both years reflects federal and state income taxes, permanent non-deductible expenditures and the federal tax credit for research and development expenditures.

Net Income

Net income for the six month period ended June 30, 2018 increased approximately $907,000 and net income for the three month period ended June 30, 2018 increased approximately $602,000, when compared to the same periods in 2017. This increase is primarily the result of increases in revenue at the ATG business segment offset by a decrease in revenue at the CPG business segment as discussed above.

- 20 -

Liquidity and Capital Resources

The Company’s primary liquidity and capital requirements relate to working capital needs; primarily inventory, accounts receivable and accounts payable as well as capital expenditures for property, plant and equipment and principal and interest payments on debt. At June 30, 2018, the Company had working capital of approximately $21,002,000 of which approximately $3,199,000 was comprised of cash and cash equivalents.

The Company utilized approximately $237,000 in cash from operations during the six months ended June 30, 2018. The primary use of cash for the Company’s operating activities for the six month period ended June 30, 2018 includes working capital requirements, increased receivables due to timing of shipments offset by timing differences on payments to vendors. In addition, there is an increase in inventory primarily due to the increase in production by the ATG business segment. The Company’s primary use of cash in its financing and investing activities in the six months ended June 30, 2018 included approximately $274,000 of principal payments on long-term debt as well as approximately $150,000 for the purchase of treasury shares. The Company also expended approximately $984,000 for capital expenditures during the six months ended June 30, 2018.

The Company has a $2,000,000 line of credit available until June 19, 2019.

The Company believes its cash generating capability and financial condition, together with available credit facilities will be adequate to meet our operating, investing and financing needs.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

- 21 -

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of its management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of June 30, 2018. Based upon that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in SEC reports under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

During the six month period ended June 30, 2018, there were no changes in internal controls over financial reporting that have materially affected, or are reasonably likely to affect, the Company’s internal controls over financial reporting.

- 22 -

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 8, Litigation, there are no other legal proceedings which are material to the Company currently pending by or against the Company other than ordinary routine litigation incidental to the business which is not expected to materially adversely affect the business or earnings of the Company.

Item 1A. Risk Factors

Not applicable.

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

(c) Company Purchases of Company’s Equity Securities

2018 Periods	Total Number of Shares Purchased			Weighted Average Price $ Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that may yet be Purchased under the Plans or Programs (1)
January - March		11,341	(2)	$	10.40		-		100,670
April		399			9.83		399		100,271
May		2,054			9.20		2,054		98,217
June		897			9.26		897		97,320
Total		14,691		$	10.15		3,350		97,320

(1)      The Company’s Board of Directors authorized the purchase of up to 450,000 shares of its common stock in the open market or in privately negotiated transactions. As of June 30, 2018, the Company has purchased 352,680 shares and there remains 97,320 shares available to purchase under this program. There were 3,350 shares purchased by the Company during the six month period ended June 30, 2018.

(2)       Includes 11,341 shares withheld/purchased by the Company in January 2018 to satisfy statutory minimum withholding tax requirements for those participants who elected this option as permitted under the Company’s 2012 Long-Term Incentive Plan.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable

- 23 -

Item 6. Exhibits

10.1	Non-Employee Director Compensation Policy (Filed herewith)
31.1	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 (Filed herewith)
31.2	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 (Filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
101	The following materials from Servotronics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language):  (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows and (v) the notes to the consolidated financial statements.

FORWARD-LOOKING STATEMENTS

In addition to historical information, certain sections of this Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as those pertaining to the Company’s capital resources and profitability, the timing and amount of payment obligation relating to the arbitration award and the Company’s ability to pay these obligations. Forward-looking statements involve numerous risks and uncertainties. The Company derives a material portion of its revenues from contracts with agencies of the U.S. Government or their prime contractors. The Company’s business is performed under fixed price contracts and the following factors, among others discussed herein, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: uncertainties in today’s global economy and global competition, and difficulty in predicting defense appropriations, the vitality of the commercial aviation industry and its ability to purchase new aircraft, the willingness and ability of the Company’s customers to fund long-term purchase programs, and market demand and acceptance both for the Company’s products and its customers’ products which incorporate Company-made components. The success of the Company also depends upon the trends of the economy, including interest rates, income tax laws, governmental regulation, legislation, population changes and those risk factors discussed elsewhere in this Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis only as of the date hereof. The Company assumes no obligation to update forward-looking statements.

.

- 24 -

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.

Date: August 13, 2018

SERVOTRONICS, INC.

By:	/s/ Kenneth D. Trbovich, Chief Executive Officer
	Kenneth D. Trbovich
	Chief Executive Officer

By:	/s/ Lisa F. Bencel, Chief Financial Officer
	Lisa F. Bencel
	Chief Financial Officer

- 25 -

EX-10.1

Exhibit 10.1

Director Compensation Program including the Independent Director Compensation Policy

pursuant to the

2012 Long Term Incentive Plan

Unless the context otherwise requires, all capitalized terms used herein shall have the respective meanings assigned to them in the Servotronics, Inc. 2012 Long Term Incentive Plan (the “Plan”).

EQUITY AWARDS

The following shall constitute the equity awards under the Independent Director Compensation Policy under the Plan:

Annual Retainer Share Award

(a)       Each year, as of the date of the Company’s annual meeting of shareholders, the Company shall automatically award Restricted Shares to each Independent Director who has been elected or reelected as a member of the Board of Directors at the annual meeting. The number of Restricted Shares shall be equal to $10,000 divided by the Fair Market Value of a Share on the date of such election. If a fraction results, the number of Shares shall be rounded up to the next whole number.

(b)       If an Independent Director is elected or appointed to the Board of Directors other than at an annual meeting of the Company and has not received an award pursuant to paragraph (a) during the twelve months preceding election or appointment, the Company shall automatically award to the Independent Director a number of Restricted Shares that is equal to the amount determined pursuant to paragraph (a) based on the date of election or appointment multiplied by a fraction, the numerator of which is the remainder of 365 minus the number of days between the adjournment of the last annual meeting and the effective date of the appointment or election, and the denominator of which is 365. If a fraction results, the number of Restricted Shares shall be rounded up to the next whole number.

(c)       The Company shall issue the Restricted Shares awarded under this paragraph (a) or (b) on the first business day following the effective date of the election, reelection or appointment. The Restricted Shares awarded under paragraph (a) will vest in four quarterly installments on the date of each of the three regularly scheduled quarterly board meetings to review the financial statements for the quarters ending June 30, September 30 and December 31 (each a “Quarterly Board Meeting”) each year following the annual meeting and the remainder of which shall vest on the date of the next annual meeting. The Restricted Shares awarded under paragraph (b) will vest in equal parts on the date of the remaining Quarterly Board Meetings and the remainder of which shall vest on the date of the next annual meeting. The Company will credit a bookkeeping account with amounts equal to the dividends payable with respect to the Restricted Shares and the amounts credited to the dividend account will be payable as the Restricted Shares vest. If an Independent ceases to serve as a Board member for any reason other than due to death, then all Restricted Stock that is not then vested shall be immediately forfeited. If an Independent Director ceases to serve as a Board member by reason of death or Disability then all Restricted Stock shall immediately become vested.

CASH COMPENSATION

Payment Amount

Independent Directors shall be eligible to receive an annual cash retainer of $50,000 for service on the Board. For purposes of this Policy, “annual” means from Annual Shareholders’ Meeting to Annual Shareholders’ Meeting each year. In addition, (i) the chairperson of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee shall each be eligible to receive an additional annual retainer of $10,000, paid in cash, for such service.

No Separate Meeting Fees

No separate meeting fees shall be paid for Board or committee meetings or for actions taken by unanimous written consent in lieu of a meeting in accordance with the Company’s Bylaws.

Payment Schedule

The annual retainers for service on the Board and as chairperson of a committee of the Board as set forth above shall be paid by the Company in arrears in twelve equal monthly installments, the first installment being paid on the date of the one month anniversary of the Annual Shareholders’ Meeting and the remaining installments being paid on each successive one month anniversary date (each such payment date, a “Monthly Payment Date”); provided, however, that if the Company’s Annual Shareholders’ Meeting for the following year occurs prior to the end of the one year period, the final Monthly Payment Date shall be paid on the day of such Annual Shareholders’ Meeting. If any Independent Director holds office as a director of the Board or chairperson of a Board committee for less than a full monthly period, such Independent Director shall only be entitled to a pro-rated amount of their applicable annual retainer as measured from the most recent Monthly Payment Date through the date on which the Independent Director shall have ceased to serve on the Board and/or as chairperson of a Board Committee, as the case may be.

New Directors

In the event a new Independent Director is elected or appointed to the Board, such Independent Director shall be eligible to receive as compensation for service as a member of the Board or as Chairperson a Board committee, a pro-rated amount of their applicable annual retainer as measured from the date of appointment or election through the next scheduled Monthly Payment Date and thereafter shall be paid in conformity with the other Independent Directors.

TRAVEL EXPENSE REIMBURSEMENT

Each of the Independent Directors shall be entitled to receive reimbursement for reasonable travel expenses which they properly incur in connection with their functions and duties as a director.

Reimbursement for travel expenses incurred is also initiated by the Director, by submitting a Director Expense Reimbursement Form and accompanying receipts to the Finance Department. The reimbursement will be processed within one week of receipt by the Finance Department.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kenneth D. Trbovich, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Servotronics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2018

/s/ Kenneth D. Trbovich, Chief Executive Officer

Kenneth D. Trbovich

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Lisa F. Bencel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Servotronics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2018

/s/ Lisa F. Bencel, Chief Financial Officer

Lisa F. Bencel

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Servotronics, Inc. (the “Company”), on Form 10-Q for the period ended June 30, 2018, I hereby certify solely for the purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The quarterly report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and

2. The information contained in the quarterly report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2018

/s/ Kenneth D. Trbovich, Chief Executive Officer

Kenneth D. Trbovich

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Servotronics, Inc. (the “Company”), on Form 10-Q for the period ended June 30, 2018, I hereby certify solely for the purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The quarterly report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and

2. The information contained in the quarterly report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2018

/s/ Lisa F. Bencel, Chief Financial Officer

Lisa F. Bencel

Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 31, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	SERVOTRONICS INC /DE/
Entity Central Index Key	0000089140
Trading Symbol	svt
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,582,833
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 3,199	$ 4,707
Accounts receivable, net	9,960	8,424
Inventories, net	13,587	12,791
Prepaid income taxes	149
Other current assets	429	249
Total current assets	27,324	26,171
Property, plant and equipment, net	11,502	11,021
Deferred income taxes	409	409
Other non-current assets	379	385
Total Assets	39,614	37,986
Current liabilities:
Current portion of long-term debt	548	548
Current portion of capitalized lease obligations	175	133
Dividend payable	416
Accounts payable	2,546	1,377
Accrued employee compensation and benefits costs	2,077	1,784
Accrued income taxes		414
Other accrued liabilities	560	872
Total current liabilities	6,322	5,128
Long-term debt	2,771	2,950
Post retirement obligation	1,799	1,743
Shareholders' equity:
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,614,506 shares; outstanding 2,498,870 (2,308,315 - 2017) shares	523	523
Capital in excess of par value	14,192	14,171
Retained earnings	16,325	15,709
Accumulated other comprehensive loss	(26)	(32)
Employee stock ownership trust commitment	(662)	(662)
Treasury stock, at cost 115,636 (183,983 - 2017) shares	(1,630)	(1,544)
Total shareholders' equity	28,722	28,165
Total Liabilities and Shareholders' Equity	$ 39,614	$ 37,986

XML

CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.20	$ 0.20
Common stock, shares authorized	4,000,000	4,000,000
Common stock, shares issued	2,614,506	2,614,506
Common stock, shares outstanding	2,498,870	2,308,315
Treasury stock, shares	115,636	183,983

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Revenue	$ 11,946	$ 9,616	$ 22,505	$ 18,719
Cost, expenses and other (income):
Costs of goods sold, inclusive of depreciation and amortization	9,022	7,830	17,531	15,074
Selling, general and administrative	2,013	1,622	3,641	3,462
Interest expense	27	15	52	38
Total expenses	11,062	9,467	21,224	18,574
Income before income tax provision	884	149	1,281	145
Income tax provision	177	44	243	14
Net income	$ 707	$ 105	$ 1,038	$ 131
Basic
Net Income per share (in dollars per share)	$ 0.31	$ 0.05	$ 0.46	$ 0.06
Diluted
Net income per share (in dollars per share)	$ 0.30	$ 0.05	$ 0.45	$ 0.06

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows related to operating activities:
Net Income	$ 1,038	$ 131
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	502	428
Loss on disposal of property	1	16
Stock based compensation	85	107
Increase in inventory reserve	54	12
Increase in warranty reserve	217	1
Change in assets and liabilities:
Accounts receivable	(1,536)	141
Inventories	(850)	211
Prepaid income taxes	(149)	(24)
Other current assets	(180)	9
Other non-current assets	6	(378)
Accounts payable	1,169	(512)
Accrued employee compensation and benefit costs	293	66
Other accrued liabilities	(473)	(96)
Accrued income taxes	(414)	(193)
Net cash used in operating activities	(237)	(81)
Cash flows related to investing activities:
Capital expenditures - property, plant and equipment	(984)	(571)
Proceeds from sale of assets		180
Net cash used in investing activities	(984)	(391)
Cash flows related to financing activities:
Principal payments on long-term debt	(274)	(295)
Principal payments on capital lease obligations	(73)
Proceeds from capital leases	210
Purchase of treasury shares	(150)	(160)
Net cash used in financing activities	(287)	(455)
Net decrease in cash and cash equivalents	(1,508)	(927)
Cash and cash equivalents at beginning of period	4,707	3,515
Cash and cash equivalents at end of period	$ 3,199	$ 2,588

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited 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 accompanying 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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The consolidated financial statements should be read in conjunction with the 2017 annual report and the notes thereto.

XML

Business Description and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Business Description and Summary of Significant Accounting Policies

2. Business Description and Summary of Significant Accounting Policies

Business Description

Servotronics, Inc. and its subsidiaries design, manufacture and market advanced technology products consisting primarily of control components, and consumer products consisting of knives and various types of cutlery and other edged products.

Principles of Consolidation

The consolidated financial statements include the accounts of Servotronics, Inc. and its wholly-owned subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated upon consolidation.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to include all cash accounts and short-term investments purchased with an original maturity of three months or less.

Accounts Receivable

The Company grants credit to substantially all of its customers and carries its accounts receivable at original invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on history of past write-offs, collections, and current credit conditions. The allowance for doubtful accounts amounted to approximately $149,000 at June 30, 2018 and December 31, 2017. The Company does not accrue interest on past due receivables.

Revenue Recognition

Revenues are recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance. Purchase orders generally include specific terms relative to quantity, item description, specifications, price, customer responsibility for in-process costs, delivery schedule, shipping point, payment and other standard terms and conditions of purchase. Service sales, principally representing repair, are recognized at the time of shipment of goods.

The costs incurred for nonrecurring engineering, development and repair activities of our products under agreements with commercial customers are expensed as incurred. Subsequently, the revenue is recognized as products are delivered to the customers with the approval by the customers. 

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods and services to a customer. The Company determines revenue recognition using the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the company satisfies a performance obligation.

Revenue excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (e.g., sales and use taxes). Revenue includes payments for shipping activities that are reimbursed by the customer to the Company.

Revenue on a significant portion of our contracts is currently recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance.

Performance obligations are satisfied as of a point in time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. As a significant portion of the Company’s revenue are recognized at the time of shipment, transfer of title and customer acceptance, there is no significant judgment applied to determine the timing of the satisfaction of performance obligations or transaction price.

The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment. The Company generally receives payment for these contracts within the payment terms negotiated and agreed upon by each customer contract.

Warranty and repair obligations are assessed on all returns. Revenue is not recorded on any warranty returns. Revenue is recognized on repair returns, covered under a customer contract, at the contractual price upon shipment to the customer.

The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost includes all costs incurred to bring each product to its present location and condition. Market provisions in respect of lower of cost or market adjustments and inventory on hand that is greater than the expected amount to be used that is greater than one year are applied to the gross value of the inventory through a reserve of approximately $1,492,000 and $1,438,000 at June 30, 2018 and December 31, 2017, respectively. Pre-production and start-up costs are expensed as incurred.

The purchase of suppliers’ minimum economic quantities of material such as steel, etc. may result in a purchase of quantities exceeding one year of customer requirements. Also, in order to maintain a reasonable and/or agreed to lead time, certain larger quantities of other product support items may have to be purchased and may result in over one year’s supply. These amounts are not included in the inventory reserve discussed above.

Shipping and Handling Costs

Shipping and handling costs are classified as a component of cost of goods sold. 

Property, Plant and Equipment

Property, plant and equipment is carried at cost; expenditures for new facilities and equipment and expenditures which substantially increase the useful lives of existing plant and equipment are capitalized; expenditures for maintenance and repairs are expensed as incurred. Upon disposal of properties, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is included in income.

Depreciation is provided on the basis of estimated useful lives of depreciable properties, primarily by the straight-line method for financial statement purposes and by accelerated methods for income tax purposes. Depreciation expense includes the amortization of capital lease assets. The estimated useful lives of depreciable properties are generally as follows:

Buildings and improvements	5-40 years
Machinery and equipment	5-20 years
Tooling	3-5 years

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities, as well as operating loss and credit carryforwards. The Company and its subsidiaries file a consolidated federal income tax return, combined New York and Texas state income tax returns and separate Pennsylvania and Arkansas income tax returns.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company did not have any accrued interest or penalties included in its consolidated balance sheets at June 30, 2018 or December 31, 2017, and did not recognize any interest and/or penalties in its consolidated statements of income during the six months ended June 30, 2018 and 2017. The Company did not have any material uncertain tax positions or unrecognized tax benefits or obligations as of June 30, 2018 and December 31, 2017. The 2014 through 2016 federal and state tax returns remain subject to examination.

Supplemental Cash Flow Information

Income taxes paid during the six months ended June 30, 2018 and 2017 amounted to approximately $775,000 and $165,000, respectively. Interest paid amounted to approximately $52,000 and $38,000, respectively, during the six months ended June 30, 2018 and 2017.

Employee Stock Ownership Plan

Contributions to the employee stock ownership plan are determined annually by the Company according to plan formula.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable based on undiscounted future operating cash flow analyses. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. The Company has determined that no impairment of long-lived assets existed at June 30, 2018 and December 31, 2017.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain balances, as previously reported, were reclassified to conform with classifications adopted in the current period.

Research and Development Costs

Research and development costs are expensed as incurred.

Concentration of Credit Risks

Financial instruments that potentially subject the Company to concentration of credit risks principally consist of cash accounts in financial institutions. Although the accounts exceed the federally insured deposit amount, management does not anticipate nonperformance by the financial institutions.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity. Based on variable interest rates and the borrowing rates currently available to the Company for loans similar to its long-term debt, the fair value approximates its carrying amount.

Recent Accounting Pronouncements Adopted

Effective January 1, 2018 the Company adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” issued by the Financial Accounting Standards Board (FASB) which requires employers to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. The other components of net periodic benefit cost will be presented separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. ASU 2017-07 allows a practical expedient that permits an entity to use amounts disclosed in its pension and other post retirement requirements. The Company adopted this guidance during the reporting period. The reporting of the annual service costs is expected to be immaterial.

Effective January 1, 2018, the Company adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" using the modified retrospective method. The new revenue recognition standard outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Topic 606 also requires significantly expanded disclosure requirements and applied the standard to all contracts that were not completed as of January 1, 2018. There was no cumulative effect of the adoption recognized. We have obtained an understanding of the new standard and determined that the Company will retain much of the same accounting treatment used to recognize revenue as compared to current standards. See above for the Company’s updated revenue recognition accounting policy.

Effective January 1, 2018, the Company adopted ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. tax reform legislation commonly known as the Tax Cuts and Jobs Act of 2017. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company applied the guidance as of the beginning of the period of adoption and reclassified approximately $6,000 from accumulated other comprehensive loss to retained earnings due to the change in the federal corporate tax rate.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” There are elements of the new standard that could impact almost all entities to some extent, although the lessees will likely see the most significant changes. Lessee will need to recognize virtually all of their leases on the balance sheet, by recording the right-of-use asset and a lease liability. Public business entities are required to adopt the new leasing standard for fiscal years, and interim period within those fiscal years, beginning December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019. Early adoption is permitted. The Company does not believe the adoption will have a material impact on the financial statements and disclosures.

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Inventories

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Inventories

3. Inventories

	June 30,			December 31,
	2018			2017
	($000's omitted)
Raw material and common parts	$	7,500		$	8,375
Work-in-process		4,568			2,940
Finished goods		3,011			2,914
		15,079			14,229
Less inventory reserve		(1,492	)		(1,438	)
Total inventories	$	13,587		$	12,791

XML

Property, Plant and Equipment

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

4. Property, Plant and Equipment

	June 30,			December 31,
	2018			2017
	($000's omitted)
Land	$	7		$	7
Buildings		10,384			10,288
Machinery, equipment and tooling		18,007			17,249
Construction in progress		776			665
		29,174			28,209
Less accumulated depreciation		(17,672	)		(17,188	)
	$	11,502		$	11,021

As previously disclosed, the Company through a wholly-owned subsidiary, entered into a contract to sell unused commercial real property in Franklinville, New York for approximately $180,000. The sale transaction closed on March 9, 2017 and the wholly-owned subsidiary recognized a de minimis loss on the sale.

Depreciation and amortization expense amounted to approximately $502,000 and $428,000 for the six months ended June 30, 2018 and 2017, respectively. Depreciation and amortization expense amounted to approximately $244,000 and $218,000 for the 3 months ended June 30, 2018 and 2017, respectively. Depreciation expense amounted to approximately $465,000 and $421,000 for the six months ended June 30, 2018 and 2017, respectively. Depreciation expense amounted to approximately $224,000 and $215,000 for the 3 months ended June 30, 2018 and 2017, respectively. Amortization expense primarily related to capital leases amounted to approximately $37,000 and $7,000 for the six months ended June 30, 2018 and June 30, 2017, respectively. Amortization expense amounted to approximately $20,000 and $3,000 for the three months ended June 30, 2018 and June 30, 2017. The Company believes that it maintains property and casualty insurance in amounts adequate for the risk and nature of its assets and operations and which are generally customary in its industry.

As of June 30, 2018, there is approximately $776,000 ($665,000 – 2017) of construction in progress included in property, plant and equipment all of which is related to capital projects, primarily the implementation costs for the enterprise resource planning software that will be used as an integral part of the product in the process at the Advanced Technology Group (“ATG”) and the Consumer Products Group (“CPG”). See Note 7, Commitments and Contingencies, for more information on anticipated capital expenditures.

XML

Long-Term Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Long-Term Debt

5. Long-Term Debt

	June 30,			December 31,
	2018			2017
	($000's omitted)
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $21,833 through 2021 with a balloon payment of $786,000 due December 1, 2021	$	1,703		$	1,835
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $23,810 through December 1, 2021		1,000			1,142
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months)		791			654
		3,494			3,631
Less current portion		(723	)		(681	)
	$	2,771		$	2,950

The Company has a $2,000,000 line of credit on which there was no balance outstanding at June 30, 2018 and December 31, 2017.

The term loans are secured by all personal property of the Company with the exception of certain equipment that was purchased from proceeds of government grants.

Certain lenders require the Company to comply with debt covenants as described in the specific loan documents, including a debt service ratio. At June 30, 2018 and December 31, 2017 the Company was in compliance with these covenants.

The Company established a lease line of credit for equipment financing in the amount of $1,000,000 available until June 28, 2018. This line is non-revolving and non-renewable. The lease term for equipment covered by the lease line of credit is 60 months, with a $1 buy out at the end of the term. Monthly payments will be fixed for the term of each funding based upon the Lender’s lease pricing in effect at the time of such funding.

Principal payments for the capital lease obligations are expected for 2018 and for each of the next five years:

	June 30,
	2018
	($000's omitted)
2018	$	193
2019		193
2020		193
2021		193
2022		100
Total minimum lease payments		872
Less amount representing interest		(81	)
Present value of net minimum lease payment		791
Less current portion		(175	)
	$	616

Each lease is secured by the underlying equipment. There was approximately $791,000 outstanding at June 30, 2018.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Shareholders' Equity

6. Shareholders’ Equity

	Common Stock				($000's omitted except for share data)
																Accumulated
	Number				Capital in											Other			Total
	of shares				excess of		Retained						Treasury			Comprehensive			shareholders'
	issued		Amount		par value		earnings			ESOT			stock			Loss			equity
Balance at December 31, 2017		2,614,506	$	523	$	14,171	$	15,709		$	(662	)	$	(1,544	)	$	(32	)	$	28,165
Net income								1,038												1,038
Purchase of treasury shares		-		-		-		-			-			(150	)		-			(150	)
Cash dividend		-		-		-		(416	)		-			-			-			(416	)
Stock based compensation, net of tax benefit		-		-		21		(6	)		-			64			6			85
Balance at June 30, 2018		2,614,506	$	523	$	14,192	$	16,325		$	(662	)	$	(1,630	)	$	(26	)	$	28,722

The Company’s Board of Directors authorized the purchase of up to 450,000 shares of its common stock in the open market or in privately negotiated transactions. As of June 30, 2018, the Company has purchased 352,680 shares and there remains 97,320 shares available to purchase under this program. There were 3,350 shares purchased by the Company during the six month period ended June 30, 2018.

On April 18, 2013, the Company issued 165,000 shares of restricted stock to Executive Officers of the Company under the Company's 2012 Long-Term Incentive Plan that was approved by the shareholders at the 2012 Annual Meeting of Shareholders. This plan authorizes the issuance of up to 300,000 shares. The restricted share awards vest over four year periods between January 2014 and January 2017; however, these shares have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value ($1,336,500) was recognized over the four year requisite service period.

On April 11, 2016, the Company issued 51,000 shares of restricted stock to Executive Officers and certain key management of the Company under the Company’s 2012 Long-Term Incentive Plan. The restricted share awards have varying vesting periods between January 2017 and January 2018; however, these shares have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value ($406,000) and was recognized over the requisite service period.

On January 1, 2018, 28,500 shares of restricted stock vested of which 11,341 shares were withheld and repurchased by the Company for approximately $117,000 to satisfy statutory minimum withholding tax requirements for those participants who elected this option as permitted under the Company’s 2012 Long-Term Incentive Plan. Additionally, upon the death of Servotronics’ Chairman of the Board and Chief Executive Officer (CEO) in August 2017, 15,000 restricted shares awarded to the Chairman and CEO vested.

On May 25, 2018, the Company issued 78,750 shares of restricted stock to Executive Officers and certain key management of the Company under the Company’s 2012 Long-Term Incentive Plan. The restricted share awards have varying vesting periods between January 2019 and January 2021; however, these shares have voting rights and accrue dividends prior to vesting. The accrued dividends are paid upon vesting of the restricted shares. The aggregate amount of expense to the Company, measured based on grant date fair value is expected to be approximately $735,000 and will be recognized over the requisite service period.

On May 25, 2018, the Company revised its director compensation policy pursuant to which non-employee directors receive a portion of their annual retainer in the form of restricted stock under the Company’s 2012 Long-Term Incentive Plan. An aggregate of 4,288 restricted shares were issued that vest quarterly over a twelve month service period. These shares have voting rights and accrue dividends that are paid upon vesting. The aggregate amount of expense to the Company, measured based on the grant date fair value is expected to be approximately $40,000 and will be recognized over the requisite service period.

Included in the six months ended June 30, 2018 and 2017 is approximately $85,000 and $107,000, respectively, of stock-based compensation expense related to the restrictive share awards.

On May 18, 2018 the Company announced that its Board of Directors declared a $0.16 per share cash dividend. The dividend was subsequently paid on July 16, 2018 to shareholders of record on June 30, 2018 and was approximately $416,000 in the aggregate. These dividends do not represent that the Company will pay dividends on a regular or scheduled basis. The amount is recorded in dividends payable and as a reduction to retained earnings on the accompanying consolidated balance sheet.

Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on the earnings per share that were outstanding for the period. Incremental shares from assumed conversions are calculated as the number of shares that would be issued, net of the number of shares that could be purchased in the marketplace with the cash received upon stock option exercise. The dilutive effect of unvested restrictive stock is determined using the treasury stock method.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
	($000's omitted except per share data)
Net Income	$	707	$	105	$	1,038	$	131
Weighted average common shares outstanding (basic)		2,267		2,251		2,241		2,251
Unvested restricted stock		83		43		83		43
Weighted average common shares outstanding (diluted)		2,350		2,294		2,324		2,294
Basic
Net income per share	$	0.31	$	0.05	$	0.46	$	0.06
Diluted
Net income per share	$	0.30	$	0.05	$	0.45	$	0.06

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Post retirement obligation. As previously disclosed in filings with the Securities and Exchange Commission (“SEC”), the Company, under an employment agreement, is expected to pay post-employment health related benefits to a former Executive Officer of the Company (the “Former Employee”), of which approximately $1,007,000 has been accrued as of June 30, 2018 and December 31, 2017, and is reflected as Post Retirement Obligation in the accompanying balance sheet. After termination, the scope of the health related benefits obligation in the agreement became an issue. In June 2016 an Arbitrator was selected by the parties to hear this matter. The Company did not consider the risk of loss to be probable at June 30, 2017 however, a final opinion and award was issued on March 22, 2018 resulting in the increased accrual at June 30, 2018. Additionally, the Company paid approximately $367,000 pursuant to the arbitration award as of June 30, 2018.

The Company provides certain post-employment health and life insurance benefits for Kenneth Trbovich. Upon retirement and after attaining at least the age of 65, the Company will pay for the retired Executive’s and dependent’s health benefits and will continue the Company-provided life insurance offered at the time of retirement. The retiree’s health insurance benefits ceases upon the death of the retired executive. Approximately $792,000 and $736,000 has been accrued as of June 30, 2018 and December 31, 2017, respectively, and is reflected as Post Retirement Obligation in the accompanying balance sheet.

Facility Expansion. The Company’s Consumer Products Group (“CPG”) was awarded a $300,000 grant from Cattaraugus County Industrial Development Agency (“CCIDA”) on March 13, 2014. The grant was used towards new manufacturing equipment in connection with the proposed expansion project. As part of the terms of the Grant Contract with CCIDA, the Company’s CPG has agreed to maintain certain employment levels for a period of five years from the date of the agreement. If the employment levels are not maintained, the Company will be required to repay the grant proceeds on a prorated basis. The Company has maintained the required employment levels as of June 30, 2018.

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Litigation

6 Months Ended

Jun. 30, 2018

Litigation [Abstract]

Litigation

8. Litigation

Litigation. The Company has pending litigation relative to leases of certain equipment and real property with a former related party. Aero, Inc. is suing Servotronics, Inc. and its wholly owned subsidiary and has alleged damages in the amount of $3,000,000. The Company has filed a response to the Aero, Inc. lawsuit and has also filed a counter-claim in the amount of $3,191,000. The Company considers the risk of loss remote, and is unable to reasonably or accurately estimate the likelihood and amount of any liability or benefit that may be realized as a result of this litigation. Accordingly, no gain or loss has been recognized in the accompanying financials statements related to this litigation.

There are no other legal proceedings currently pending by or against the Company other than ordinary routine litigation incidental to the business which is not expected to have a material adverse effect on the business or earnings of the Company.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

9. Related Party Transactions

The Company paid legal fees and disbursements of approximately $95,000 and $144,000 in the six month period ended June 30, 2018 and 2017, respectively, for services provided by a law firm that is owned by a member of the Company’s Board of Directors. Legal fees paid for the three month period ended June 30, 2018 and 2017 amounted to approximately $48,000 and $94,000, respectively. Additionally, the Company had accrued unbilled legal fees at June 30, 2018 and 2017 of approximately $32,000 and $23,000, respectively, with this firm.

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Business Segments

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Business Segments

10. Business Segments

The Company operates in two business segments, ATG and CPG. The Company’s reportable segments are strategic business units that offer different products and services. The segments are composed of separate corporations and are managed separately. Operations in ATG primarily involve the design, manufacture, and marketing of servo-control components (i.e., torque motors, control valves, actuators, etc.) for government, commercial and industrial applications. CPG’s operations involve the design, manufacture and marketing of a variety of cutlery products for use by consumers and government agencies. The Company derives its primary sales revenue from domestic customers, although a portion of finished products are for foreign end use.

As of June 30, 2018, the Company had identifiable assets of approximately $39,614,000 ($37,986,000 – December 31, 2017) of which approximately $28,666,000 ($26,331,000 – December 31, 2017) was for ATG and approximately $10,948,000 ($11,655,000 – December 31, 2017) was for CPG.

Information regarding the Company’s operations in these segments is summarized as follows:

	($000's omitted)
	ATG						CPG						Consolidated
	Six Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	19,389		$	15,050		$	3,116		$	3,669		$	22,505		$	18,719
Cost of goods sold, inclusive of depreciation and amortization		(14,635	)		(11,628	)		(2,896	)		(3,446	)		(17,531	)		(15,074	)
Selling, general and administrative		(2,655	)		(2,506	)		(986	)		(956	)		(3,641	)		(3,462	)
Interest expense		(35	)		(23	)		(17	)		(15	)		(52	)		(38	)
Income (loss) before income tax provision (benefits)		2,064			893			(783	)		(748	)		1,281			145
Income tax provision (benefits)		392			239			(149	)		(225	)		243			14
Net income (loss)	$	1,672		$	654		$	(634	)	$	(523	)	$	1,038		$	131
Capital expenditures	$	845		$	495		$	139		$	76		$	984		$	571

	($000's omitted)
	ATG						CPG						Consolidated
	Three Months Ended						Three Months Ended						Three Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	10,274		$	7,630		$	1,672		$	1,986		$	11,946		$	9,616
Cost of goods sold, inclusive of depreciation and amortization		(7,552	)		(6,024	)		(1,470	)		(1,806	)		(9,022	)		(7,830	)
Selling, general and administrative		(1,426	)		(1,173	)		(587	)		(449	)		(2,013	)		(1,622	)
Interest expense		(18	)		(8	)		(9	)		(7	)		(27	)		(15	)
Income (loss) before income tax provision (benefits)		1,278			425			(394	)		(276	)		884			149
Income tax provision (benefits)		262			127			(85	)		(83	)		177			44
Net income (loss)	$	1,016		$	298		$	(309	)	$	(193	)	$	707		$	105
Capital expenditures	$	440		$	314		$	33		$	74		$	473		$	388

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

11. Subsequent Events

None.

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Business Description and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Servotronics, Inc. and its wholly-owned subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated upon consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers cash and cash equivalents to include all cash accounts and short-term investments purchased with an original maturity of three months or less.

Accounts Receivable

Accounts Receivable

The Company grants credit to substantially all of its customers and carries its accounts receivable at original invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on history of past write-offs, collections, and current credit conditions. The allowance for doubtful accounts amounted to approximately $149,000 at June 30, 2018 and December 31, 2017. The Company does not accrue interest on past due receivables.

Revenue Recognition

Revenue Recognition

Revenues are recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance. Purchase orders generally include specific terms relative to quantity, item description, specifications, price, customer responsibility for in-process costs, delivery schedule, shipping point, payment and other standard terms and conditions of purchase. Service sales, principally representing repair, are recognized at the time of shipment of goods.

The costs incurred for nonrecurring engineering, development and repair activities of our products under agreements with commercial customers are expensed as incurred. Subsequently, the revenue is recognized as products are delivered to the customers with the approval by the customers.

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods and services to a customer. The Company determines revenue recognition using the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the company satisfies a performance obligation.

Revenue excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (e.g., sales and use taxes). Revenue includes payments for shipping activities that are reimbursed by the customer to the Company.

Revenue on a significant portion of our contracts is currently recognized at the time of shipment of goods, transfer of title and customer acceptance, as required. Our revenue transactions generally consist of a single performance obligation to transfer contracted goods and are not accounted for under industry-specific guidance.

Performance obligations are satisfied as of a point in time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. As a significant portion of the Company’s revenue are recognized at the time of shipment, transfer of title and customer acceptance, there is no significant judgment applied to determine the timing of the satisfaction of performance obligations or transaction price.

The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment. The Company generally receives payment for these contracts within the payment terms negotiated and agreed upon by each customer contract.

Warranty and repair obligations are assessed on all returns. Revenue is not recorded on any warranty returns. Revenue is recognized on repair returns, covered under a customer contract, at the contractual price upon shipment to the customer.

The Company elected the practical expedient allowing it to not recognize as a contract asset the commission paid to its salesforce on the sale of its products as an incremental cost of obtaining a contract with a customer but rather recognize such commission as expense when incurred as the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost includes all costs incurred to bring each product to its present location and condition. Market provisions in respect of lower of cost or market adjustments and inventory on hand that is greater than the expected amount to be used that is greater than one year are applied to the gross value of the inventory through a reserve of approximately $1,492,000 and $1,438,000 at June 30, 2018 and December 31, 2017, respectively. Pre-production and start-up costs are expensed as incurred.

The purchase of suppliers’ minimum economic quantities of material such as steel, etc. may result in a purchase of quantities exceeding one year of customer requirements. Also, in order to maintain a reasonable and/or agreed to lead time, certain larger quantities of other product support items may have to be purchased and may result in over one year’s supply. These amounts are not included in the inventory reserve discussed above.

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs are classified as a component of cost of goods sold.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment is carried at cost; expenditures for new facilities and equipment and expenditures which substantially increase the useful lives of existing plant and equipment are capitalized; expenditures for maintenance and repairs are expensed as incurred. Upon disposal of properties, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is included in income.

Depreciation is provided on the basis of estimated useful lives of depreciable properties, primarily by the straight-line method for financial statement purposes and by accelerated methods for income tax purposes. Depreciation expense includes the amortization of capital lease assets. The estimated useful lives of depreciable properties are generally as follows:

Buildings and improvements	5-40 years
Machinery and equipment	5-20 years
Tooling	3-5 years

Income Taxes

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities, as well as operating loss and credit carryforwards. The Company and its subsidiaries file a consolidated federal income tax return, combined New York and Texas state income tax returns and separate Pennsylvania and Arkansas income tax returns.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company did not have any accrued interest or penalties included in its consolidated balance sheets at June 30, 2018 or December 31, 2017, and did not recognize any interest and/or penalties in its consolidated statements of income during the six months ended June 30, 2018 and 2017. The Company did not have any material uncertain tax positions or unrecognized tax benefits or obligations as of June 30, 2018 and December 31, 2017. The 2014 through 2016 federal and state tax returns remain subject to examination.

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Income taxes paid during the six months ended June 30, 2018 and 2017 amounted to approximately $775,000 and $165,000, respectively. Interest paid amounted to approximately $52,000 and $38,000, respectively, during the six months ended June 30, 2018 and 2017.

Employee Stock Ownership Plan

Employee Stock Ownership Plan

Contributions to the employee stock ownership plan are determined annually by the Company according to plan formula.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable based on undiscounted future operating cash flow analyses. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. The Company has determined that no impairment of long-lived assets existed at June 30, 2018 and December 31, 2017.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain balances, as previously reported, were reclassified to conform with classifications adopted in the current period.

Research and Development Costs

Research and Development Costs

Research and development costs are expensed as incurred.

Concentration of Credit Risks

Concentration of Credit Risks

Financial instruments that potentially subject the Company to concentration of credit risks principally consist of cash accounts in financial institutions. Although the accounts exceed the federally insured deposit amount, management does not anticipate nonperformance by the financial institutions.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity. Based on variable interest rates and the borrowing rates currently available to the Company for loans similar to its long-term debt, the fair value approximates its carrying amount.

Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted

Effective January 1, 2018 the Company adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” issued by the Financial Accounting Standards Board (FASB) which requires employers to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. The other components of net periodic benefit cost will be presented separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. ASU 2017-07 allows a practical expedient that permits an entity to use amounts disclosed in its pension and other post retirement requirements. The Company adopted this guidance during the reporting period. The reporting of the annual service costs is expected to be immaterial.

Effective January 1, 2018, the Company adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" using the modified retrospective method. The new revenue recognition standard outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Topic 606 also requires significantly expanded disclosure requirements and applied the standard to all contracts that were not completed as of January 1, 2018. There was no cumulative effect of the adoption recognized. We have obtained an understanding of the new standard and determined that the Company will retain much of the same accounting treatment used to recognize revenue as compared to current standards. See above for the Company’s updated revenue recognition accounting policy.

Effective January 1, 2018, the Company adopted ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. tax reform legislation commonly known as the Tax Cuts and Jobs Act of 2017. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company applied the guidance as of the beginning of the period of adoption and reclassified approximately $6,000 from accumulated other comprehensive loss to retained earnings due to the change in the federal corporate tax rate.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” There are elements of the new standard that could impact almost all entities to some extent, although the lessees will likely see the most significant changes. Lessee will need to recognize virtually all of their leases on the balance sheet, by recording the right-of-use asset and a lease liability. Public business entities are required to adopt the new leasing standard for fiscal years, and interim period within those fiscal years, beginning December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019. Early adoption is permitted. The Company does not believe the adoption will have a material impact on the financial statements and disclosures.

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Business Description and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Schedule of property, plant and equipment estimated useful life

Buildings and improvements	5-40 years
Machinery and equipment	5-20 years
Tooling	3-5 years

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Inventories (Table)

6 Months Ended

Jun. 30, 2018

Inventory Disclosure [Abstract]

Schedule of inventories

	June 30,			December 31,
	2018			2017
	($000's omitted)
Raw material and common parts	$	7,500		$	8,375
Work-in-process		4,568			2,940
Finished goods		3,011			2,914
		15,079			14,229
Less inventory reserve		(1,492	)		(1,438	)
Total inventories	$	13,587		$	12,791

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

	June 30,			December 31,
	2018			2017
	($000's omitted)
Land	$	7		$	7
Buildings		10,384			10,288
Machinery, equipment and tooling		18,007			17,249
Construction in progress		776			665
		29,174			28,209
Less accumulated depreciation		(17,672	)		(17,188	)
	$	11,502		$	11,021

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of long-term debt

	June 30,			December 31,
	2018			2017
	($000's omitted)
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $21,833 through 2021 with a balloon payment of $786,000 due December 1, 2021	$	1,703		$	1,835
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly prinicipal payments of $23,810 through December 1, 2021		1,000			1,142
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months)		791			654
		3,494			3,631
Less current portion		(723	)		(681	)
	$	2,771		$	2,950

schedule of payments for capital lease obligations

	June 30,
	2018
	($000's omitted)
2018	$	193
2019		193
2020		193
2021		193
2022		100
Total minimum lease payments		872
Less amount representing interest		(81	)
Present value of net minimum lease payment		791
Less current portion		(175	)
	$	616

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Schedule of stockholders equity

	Common Stock				($000's omitted except for share data)
																Accumulated
	Number				Capital in											Other			Total
	of shares				excess of		Retained						Treasury			Comprehensive			shareholders'
	issued		Amount		par value		earnings			ESOT			stock			Loss			equity
Balance at December 31, 2017		2,614,506	$	523	$	14,171	$	15,709		$	(662	)	$	(1,544	)	$	(32	)	$	28,165
Net income								1,038												1,038
Purchase of treasury shares		-		-		-		-			-			(150	)		-			(150	)
Cash dividend		-		-		-		(416	)		-			-			-			(416	)
Stock based compensation, net of tax benefit		-		-		21		(6	)		-			64			6			85
Balance at June 30, 2018		2,614,506	$	523	$	14,192	$	16,325		$	(662	)	$	(1,630	)	$	(26	)	$	28,722

Schedule of earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
	($000's omitted except per share data)
Net Income	$	707	$	105	$	1,038	$	131
Weighted average common shares outstanding (basic)		2,267		2,251		2,241		2,251
Unvested restricted stock		83		43		83		43
Weighted average common shares outstanding (diluted)		2,350		2,294		2,324		2,294
Basic
Net income per share	$	0.31	$	0.05	$	0.46	$	0.06
Diluted
Net income per share	$	0.30	$	0.05	$	0.45	$	0.06

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Business Segments (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Schedule of information regarding operations in business segment

	($000's omitted)
	ATG						CPG						Consolidated
	Six Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	19,389		$	15,050		$	3,116		$	3,669		$	22,505		$	18,719
Cost of goods sold, inclusive of depreciation and amortization		(14,635	)		(11,628	)		(2,896	)		(3,446	)		(17,531	)		(15,074	)
Selling, general and administrative		(2,655	)		(2,506	)		(986	)		(956	)		(3,641	)		(3,462	)
Interest expense		(35	)		(23	)		(17	)		(15	)		(52	)		(38	)
Income (loss) before income tax provision (benefits)		2,064			893			(783	)		(748	)		1,281			145
Income tax provision (benefits)		392			239			(149	)		(225	)		243			14
Net income (loss)	$	1,672		$	654		$	(634	)	$	(523	)	$	1,038		$	131
Capital expenditures	$	845		$	495		$	139		$	76		$	984		$	571

	($000's omitted)
	ATG						CPG						Consolidated
	Three Months Ended						Three Months Ended						Three Months Ended
	June 30,						June 30,						June 30,
	2018			2017			2018			2017			2018			2017
Revenues from unaffiliated customers	$	10,274		$	7,630		$	1,672		$	1,986		$	11,946		$	9,616
Cost of goods sold, inclusive of depreciation and amortization		(7,552	)		(6,024	)		(1,470	)		(1,806	)		(9,022	)		(7,830	)
Selling, general and administrative		(1,426	)		(1,173	)		(587	)		(449	)		(2,013	)		(1,622	)
Interest expense		(18	)		(8	)		(9	)		(7	)		(27	)		(15	)
Income (loss) before income tax provision (benefits)		1,278			425			(394	)		(276	)		884			149
Income tax provision (benefits)		262			127			(85	)		(83	)		177			44
Net income (loss)	$	1,016		$	298		$	(309	)	$	(193	)	$	707		$	105
Capital expenditures	$	440		$	314		$	33		$	74		$	473		$	388

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Business Description and Summary of Significant Accounting Policies - Estimated useful lives of depreciable properties (Details)	6 Months Ended
	Jun. 30, 2018
Buildings and improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	5 years
Buildings and improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	40 years
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	5 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	20 years
Tooling | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	3 years
Tooling | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of depreciable properties	5 years

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Business Description and Summary of Significant Accounting Policies (Detail Textuals) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Accounting Policies [Abstract]
Allowance for doubtful accounts	$ 149,000		$ 149,000
Inventory reserve	1,492,000		$ 1,438,000
Income taxes paid	775,000	$ 165,000
Interest paid	52,000	$ 38,000
Accumulated other comprehensive loss to retained earnings due to change in corporate tax rate	$ 6,000

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Inventories - Summary of inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Raw material and common parts	$ 7,500	$ 8,375
Work-in-process	4,568	2,940
Finished goods	3,011	2,914
Inventory, Gross	15,079	14,229
Inventory reserve	(1,492)	(1,438)
Total inventories	$ 13,587	$ 12,791

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Property, Plant and Equipment - Summary of property, plant and equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	$ 29,174	$ 28,209
Less accumulated depreciation	(17,672)	(17,188)
Total property, plant and equipment	11,502	11,021
Land
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	7	7
Buildings
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	10,384	10,288
Machinery, equipment and tooling
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	18,007	17,249
Construction in progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	$ 776	$ 665

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Property, Plant and Equipment (Detail Textuals) - USD ($)		3 Months Ended		6 Months Ended
	Mar. 09, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Sell unused commercial real property in Franklinville, New York	$ 180,000
Depreciation and amortization expense		$ 244,000	$ 218,000	$ 502,000	$ 428,000
Depreciation		224,000	215,000	465,000	421,000
Amortization		20,000	$ 3,000	37,000	$ 7,000
Advanced Technology Group ("ATG") and the Consumer Products Group ("CPG")
Property, Plant and Equipment [Line Items]
Construction in progress		$ 776,000		$ 776,000		$ 665,000

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Long-Term Debt - Summary of long term debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Long-term debt	$ 3,494	$ 3,631
Less current portion	(723)	(681)
Long-term debt, Noncurrent	2,771	2,950
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly principal payments of $21,833 through 2021 with a balloon payment of $786,000 due December 1, 2021
Debt Instrument [Line Items]
Long-term debt	1,703	1,835
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly principal payments of $23,810 through December 1, 2021
Debt Instrument [Line Items]
Long-term debt	1,000	1,142
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months)
Debt Instrument [Line Items]
Long-term debt	$ 791	$ 654

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Long-Term Debt - Summary of long term debt (Parentheticals) (Details)	6 Months Ended
	Jun. 30, 2018 USD ($)
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly principal payments of $21,833 through 2021 with a balloon payment of $786,000 due December 1, 2021
Debt Instrument [Line Items]
Description of rate basis	Libor
Percentage of floating interest rate payable	1.40%
Percentage of fixed interest rate payable	3.382%
Frequency of principal payments	monthly
Monthly principal payments	$ 21,833
Balloon payment due December 1, 2021	$ 786,000
Term loan payable to a financial institution; Interest rate option of bank prime or Libor plus 1.4% (3.382% as of June 30, 2018), monthly principal payments of $23,810 through December 1, 2021
Debt Instrument [Line Items]
Description of rate basis	Libor
Percentage of floating interest rate payable	1.40%
Percentage of fixed interest rate payable	3.382%
Frequency of principal payments	monthly
Monthly principal payments	$ 23,810
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months)
Debt Instrument [Line Items]
Period of principal payments	60 months
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months) | Minimum
Debt Instrument [Line Items]
Percentage of floating interest rate payable	1.82276%
Capital lease obligations; Interest rate fixed for term of each funding based upon the Lender's lease pricing at time of funding. (Interest rate/factor 1.822758% - 1.869304% at time of funding with principal payments made over 60 months) | Maximum
Debt Instrument [Line Items]
Percentage of floating interest rate payable	1.8693%

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Long-Term Debt (Details 1) $ in Thousands	Jun. 30, 2018 USD ($)
Debt Disclosure [Abstract]
2018	$ 193
2019	193
2020	193
2021	193
2022	100
Total minimum lease payments	872
Less amount representing interest	(81)
Present value of net minimum lease payment	791
Less current portion	(175)
Principal payments for the capital lease obligations	$ 616

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Long-Term Debt (Detail Textuals)	6 Months Ended
	Jun. 30, 2018 USD ($)
Debt Disclosure [Abstract]
Line of credit	$ 2,000,000
Lease line of credit	$ 1,000,000
lease term for equipment covered by lease line of credit	60 months
Buy out at end of term	$ 1
Line of credit outstanding	$ 791,000

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Stockholders' Equity - Summary of common shareholders' equity (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			$ 28,165
Balance at December 31, 2017 (shares)			2,614,506
Net Income	$ 707	$ 105	$ 1,038	$ 131
Purchase of treasury shares			(150)
Cash dividend			(416)
Stock based compensation, net of tax benefit			85
Balance at June 30, 2018	$ 28,722		$ 28,722
Balance at June 30, 2018 (shares)	2,614,506		2,614,506
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			$ 523
Balance at December 31, 2017 (shares)			2,614,506
Purchase of treasury shares			$ 0
Cash dividend			0
Stock based compensation, net of tax benefit			0
Balance at June 30, 2018	$ 523		$ 523
Balance at June 30, 2018 (shares)	2,614,506		2,614,506
Capital in excess of par value
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			$ 14,171
Purchase of treasury shares			0
Cash dividend			0
Stock based compensation, net of tax benefit			21
Balance at June 30, 2018	$ 14,192		14,192
Retained earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			15,709
Net Income			1,038
Purchase of treasury shares			0
Cash dividend			(416)
Stock based compensation, net of tax benefit			(6)
Balance at June 30, 2018	16,325		16,325
ESOT
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			(662)
Purchase of treasury shares			0
Cash dividend			0
Stock based compensation, net of tax benefit			0
Balance at June 30, 2018	(662)		(662)
Treasury stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			(1,544)
Purchase of treasury shares			(150)
Cash dividend			0
Stock based compensation, net of tax benefit			64
Balance at June 30, 2018	(1,630)		(1,630)
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2017			(32)
Purchase of treasury shares			0
Cash dividend			0
Stock based compensation, net of tax benefit			6
Balance at June 30, 2018	$ (26)		$ (26)

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Shareholders' Equity - Calculation of earning per share (Details 1) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Equity [Abstract]
Net Income	$ 707	$ 105	$ 1,038	$ 131
Weighted average common shares outstanding (basic) (in shares)	2,267	2,251	2,241	2,251
Unvested restricted stock (in shares)	83	43	83	43
Weighted average common shares outstanding (diluted) (in shares)	2,350	2,294	2,324	2,294
Basic
Net income per share (in dollars per share)	$ 0.31	$ 0.05	$ 0.46	$ 0.06
Diluted
Net income per share (in dollars per share)	$ 0.30	$ 0.05	$ 0.45	$ 0.06

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Shareholders' Equity (Detail Textuals)	6 Months Ended
	Jun. 30, 2018 shares
Equity, Class of Treasury Stock [Line Items]
Shares purchased during period	3,350
Share Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Number of common shares authorized to be purchased	450,000
Shares purchased during period	352,680
Remaining number of shares authorized to be purchased	97,320

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Shareholders' Equity (Detail Textuals 1) - 2012 Long-Term Incentive Plan - USD ($)		1 Months Ended			6 Months Ended
	Apr. 11, 2016	May 25, 2018	Jan. 31, 2018	Apr. 18, 2013	Jun. 30, 2018	Jun. 30, 2017
Executive Officers
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of restricted stock issued	51,000	78,750		165,000
Number of shares authorized for issuance				300,000
Vesting period of restricted share awards				4 years
Compensation expense not yet recognized	$ 406,000	$ 735,000		$ 1,336,500
Service period				4 years
Expense recognized for issuance of restricted shares					$ 85,000	$ 107,000
Number of restricted stock shares vested			28,500
Number of shares withheld and repurchased			11,341
Value of shares withheld and repurchased			$ 117,000
Non-employee directors
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of restricted stock issued		4,288
Compensation expense not yet recognized		$ 40,000
Service period		12 months
Chairman and CEO
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of shares vested			15,000

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Shareholders' Equity (Detail Textuals 2) - USD ($) $ / shares in Units, $ in Thousands	May 18, 2018	Jun. 30, 2018
Equity [Abstract]
Dividends declaration date	May 18, 2018
Per share cash dividend	$ 0.16
Date of dividends to be paid	Jul. 16, 2018
Dividends payable record date	Jun. 30, 2018
Aggregate dividend payable	$ 416	$ 416

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Commitments and Contingencies (Detail Textuals) - USD ($)	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Loss Contingencies [Line Items]
Post retirement obligation	$ 1,007,000	$ 1,007,000
Arbitration-related expense	$ 367,000
Employment Agreement
Loss Contingencies [Line Items]
Minimum age limit	65 years
Term of maintaining employment level	5 years
Employment Agreement | Kenneth Trbovich
Loss Contingencies [Line Items]
Post retirement obligation	$ 792,000	$ 736,000
CPG
Loss Contingencies [Line Items]
Amount of grant received from Cattaraugus County, New York	$ 300,000

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Litigation (Detail Textuals) - Aero, Inc.	6 Months Ended
	Jun. 30, 2018 USD ($)
Litigation [Line Items]
Amount of alleged damages	$ 3,000,000
Amount of counter claim	$ 3,191,000

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Related Party Transactions (Detail Textuals) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Related Party Transactions [Abstract]
Legal fees and disbursements	$ 48,000	$ 94,000	$ 95,000	$ 144,000
Accrued additional legal fees	$ 32,000	$ 23,000	$ 32,000	$ 23,000

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Business Segments - Summary of company's operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment Reporting Information [Line Items]
Revenues from unaffiliated customers	$ 11,946	$ 9,616	$ 22,505	$ 18,719
Cost of goods sold, inclusive of depreciation and amortization	(9,022)	(7,830)	(17,531)	(15,074)
Selling, general and administrative	(2,013)	(1,622)	(3,641)	(3,462)
Interest expense	(27)	(15)	(52)	(38)
Income (loss) before income tax provision (benefits)	884	149	1,281	145
Income tax provision (benefits)	177	44	243	14
Net income (loss)	707	105	1,038	131
Capital expenditures			984	571
Operating Segments
Segment Reporting Information [Line Items]
Revenues from unaffiliated customers	11,946	9,616	22,505	18,719
Cost of goods sold, inclusive of depreciation and amortization	(9,022)	(7,830)	(17,531)	(15,074)
Selling, general and administrative	(2,013)	(1,622)	(3,641)	(3,462)
Interest expense	(27)	(15)	(52)	(38)
Income (loss) before income tax provision (benefits)	884	149	1,281	145
Income tax provision (benefits)	177	44	243	14
Net income (loss)	707	105	1,038	131
Capital expenditures	473	388	984	571
Operating Segments | Advanced Technology Group ("ATG")
Segment Reporting Information [Line Items]
Revenues from unaffiliated customers	10,274	7,630	19,389	15,050
Cost of goods sold, inclusive of depreciation and amortization	(7,552)	(6,024)	(14,635)	(11,628)
Selling, general and administrative	(1,426)	(1,173)	(2,655)	(2,506)
Interest expense	(18)	(8)	(35)	(23)
Income (loss) before income tax provision (benefits)	1,278	425	2,064	893
Income tax provision (benefits)	262	127	392	239
Net income (loss)	1,016	298	1,672	654
Capital expenditures	440	314	845	495
Operating Segments | CPG
Segment Reporting Information [Line Items]
Revenues from unaffiliated customers	1,672	1,986	3,116	3,669
Cost of goods sold, inclusive of depreciation and amortization	(1,470)	(1,806)	(2,896)	(3,446)
Selling, general and administrative	(587)	(449)	(986)	(956)
Interest expense	(9)	(7)	(17)	(15)
Income (loss) before income tax provision (benefits)	(394)	(276)	(783)	(748)
Income tax provision (benefits)	(85)	(83)	(149)	(225)
Net income (loss)	(309)	(193)	(634)	(523)
Capital expenditures	$ 33	$ 74	$ 139	$ 76

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Business Segments (Detail Textuals)	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($) Segment	Dec. 31, 2017 USD ($) Segment
Segment Reporting Information [Line Items]
Total identifiable assets	$ 39,614,000	$ 37,986,000
Number of operating segments | Segment	2	2
Operating Segments | Advanced Technology Group ("ATG")
Segment Reporting Information [Line Items]
Total identifiable assets	$ 28,666,000	$ 26,331,000
Operating Segments | CPG
Segment Reporting Information [Line Items]
Total identifiable assets	$ 10,948,000	$ 11,655,000