8.  COVID-19—InCOVID-19 -In March 2020, the World Health Organization characterized the novel coronavirus (“COVID-19”) a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency.  The rapid spread of the virus and the response domestically and internationally to combat it has hadcaused a significant negative impact on the global economy, including the automotive industry upon which we rely for sales.  Beginning in March 2020, most states issued executive orders which temporarily closed businesses deemed non-essential in an effort to limit the spread of the coronavirus.  Similar measures also took place in foreign markets we serve.  As a result, our operations and the operations of our customers and suppliers were adversely affected.  Since some of our customers are classified as essential businesses and were allowed to continue to operate during this period, we were able to continue our operations, but at a significantly reduced level, in order to service those customers.  Our automotive customers were particularly affected, as much of the industrysector was idled for an extended period of time during the second quarter of 2020 due to employee safety concerns.  While most shut-down orders were lifted late in that quarter, various work-related restrictions remained in placecontinued and the economic fallout lingers. Due to thespread.  During this period of rapidly changing business environmentconditions and heightened degree of uncertainty resulting from COVID-19, we took measures to reduce expenses and conserve capital, during this period, including reduced work schedules, delayed capital expenditures and a reduction in dividend payments.  In the second half of 2020, we experienced improved demand as certain government-imposed restrictions were relaxed.  However,While the economy has improved dramatically since this time last year, labor shortages and supply chain disruptions persist.  The timing and sustainability of any broada broader economic recovery is uncertain and will likely continue to be tied to the course of the pandemic.  As we cannot predict the duration or scope of the COVID-19 pandemic, or its broader impact on the global economy, including the demand for automobiles, it is unknown what the impact of COVID-19 and its related effects will be on our business, results of operations or financial condition, but the impact could be material and last for an extended period of time.

CHICAGO RIVET & MACHINE CO.

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

Results of Operations

Net sales for the firstsecond quarter of 2021 were $9,304,949$8,364,390 compared to $7,576,455$4,103,520 in the second quarter of 2020, when government-mandated business closures due to the novel coronavirus (“COVID-19”) pandemic severely limited demand for our products. For the first half of 2021, net sales totaled $17,669,339 compared to $11,679,975 in the first half of 2020, an increase of $5,989,364, or 51.3%.  Net sales in the first half of 2019 were $17,497,129.  The increase in revenue was the primary factor in reporting a net profit of $319,507, or $0.33 per share, in the second quarter of 2021 compared with a net loss of $779,516, or $0.81 per share, in the second quarter of 2020.  For the first half of 2021, net income improved to $859,635, or $0.89 per share, compared to a net loss of $722,948, or $0.75 per share, reported in 2020.  Net income for the first half of 2019 was $516,401, or $0.54 per share.

Fastener segment revenues were $7,142,044 in the second quarter of 2021 compared to $3,513,742 reported in the second quarter of 2020, an increase of $1,728,494,$3,628,302, or 22.8%103.3%.  The increase wasFor the resultfirst six months of greater demand in both our2021, fastener segment and our assembly equipment segment as the outlook for the global economy improved and the post-pandemic recovery appearsrevenues were $15,290,722 compared to be underway. The increase in sales resulted in net income of $540,128, or $0.56 per share,$10,251,139 in the first quarter of this year compared to $56,568, or $0.06 per share, in the first quarter of 2020. Improved operating conditions in the current year allowed for the restoration of the regular quarterly dividend to $0.22 per share after being reduced at the onset of the pandemic in 2020.

Fastener segment revenues were $8,148,678 in the first quarter of 2021 compared to $6,737,397 in the first quarterhalf of 2020, an increase of $1,411,281,$5,039,583, or 20.9%49.2%.  The increases were primarily due to the negative impact of the COVID-19 pandemic on 2020 operating results.  The automotive sector is the primary market for our fastener segment products and much of that sector was idled for an extended period of time during the second quarter of 2020 due to the COVID-19 pandemic, as a result, the current year second quarter and first half sales to automotive customers increased by $2,513,599, or 159.3%, and $3,159,331, or 52.7%, respectively compared to the year earlier periods.  Due to some of our non-automotive customers being deemed “essential businesses” and allowed to continue operating throughout the pandemic, the improvements in such sales were $5,059,469less dramatic, increasing by $1,114,703, or 57.6%, in the second quarter of 2021 and $1,900,252, or 44.8%, in the first quarter this yearhalf of 2021 compared to $4,413,737the year earlier periods.  The rebound in sales resulted in an improvement of fastener segment gross margins to $1,261,592 in the second quarter of 2021 from negative $40,164 in the second quarter of 2020.  On a year to date basis, fastener segment gross margins improved to $2,918,221 in the first half of the current year from $1,051,798 in the first half of 2020.

Assembly equipment segment revenues were $1,222,346 in the second quarter of 2021 compared to $589,778 in the second quarter of 2020, an increase of $645,732,$632,568, or 14.6%107.3%.  This compares favorablyFor the first half of 2021, assembly equipment segment revenues were $2,378,617 compared to $1,428,836 for the first half of 2020, an increase of $949,781, or 66.5%.  In addition to the first quartergeneral rebound in demand for assembly equipment we have experienced since the pandemic-related shut downs of early 2020, revenue growth has also come from the sale of more specialty equipment.  The increase in U.S. light-vehicle salesrevenue was the primary cause of 11.8%. Fastenerthe increase in assembly equipment segment salesgross margins to non-automotive customers were $3,089,209$415,485 in the firstsecond quarter of this2021 from $110,314 in the second quarter of 2020.  For the first half of the year, gross margins were $793,293 compared to $2,323,660$328,789 in 2020, an increase of $464,504. 

Selling and administrative expenses for the second quarter of 2021 were $1,284,748 compared to $1,214,423 in the firstsecond quarter of 2020, an increase of $765,549$70,325, or 32.9%. The spread of the coronavirus pandemic late in the first quarter of 2020 was the primary factor in the lower sales reported that quarter as nearly all the markets we serve were negatively impacted. The increase in sales in the first quarter of 2021 was the primary factor contributing to the $564,678 increase in fastener segment gross margins to $1,656,629 from $1,091,951 in the first quarter of 2020. While the improvement in gross margins was significant, we have experienced price increases in various manufacturing costs, including steel, our primary raw material, which has increased approximately 11% compared to the first quarter of 2020. Labor costs, which have been held down due to the pandemic, are also expected to increase in the near-term.

Assembly equipment segment revenues were $1,156,271 in the first quarter of 2021 compared to $839,058 in the first quarter of 2020, an increase of $317,213, or 37.8%. The increase in sales in the current year is primarily due to an increase in the number and average selling price of machines sold in the current year as well as improved tool sales. The increase in net sales contributed to a $159,332 increase in segment gross margin from $218,476 in 2020 to $377,808 in 2021.

Selling and administrative expenses during the first quarter of 2021 were $1,362,201 compared to $1,285,334 recorded in the first quarter of 2020, an increase of $76,867, or 6.0%5.8%.  The increase was primarily due to a $57,000an increase of approximately $86,000 in sales commissions, due to higher sales, and an $8,000 increase in profit sharing expense, relateddue to improved operating profitresults. Partially offsetting these items was a reduction in consulting expenses related to an ERP system update in 2020 of approximately $32,000.  The remaining difference was related to various smaller items.  For the first six months of 2021, selling and administrative expenses were $2,646,949 compared to $2,499,757 in the current yearfirst half of 2020, an increase of $147,192, or 5.9%.  As in the second quarter, and a $15,000expenditures for the first half of 2021 were higher primarily due to an increase in sales commissions due to greater salesof approximately $101,000 and an increase in the current year.profit sharing expense of $65,000.  These increases were partially offset by a reduction in consulting expense of approximately $19,000.  Selling and administrative expenses were 14.6% and 17.0%as a percentage of net sales for the first half of 2021 were reduced to 15.0% compared to 21.4% in the first quarterhalf of 2021 and 2020, respectively.2020. 

Other Income

Other income in the firstsecond quarter of 2021 was $17,892$14,178, compared to $46,475$43,757 in the second quarter of 2020.  Other income for the first six months of 2021 was $32,070, compared to $90,232 in the first quartersix months of 2020.  The decrease isdeclines were primarily relateddue to a reduction in interest income on certificates of deposit due to lower interest rates in the current year.

Income Tax Expense

The Company’s effective tax rates were approximately 21.7%21.4% and 21.0%(29.2)% for the firstsecond quarter of 2021 and 2020, respectively.  The Company’s effective tax rates were approximately 21.6% and (29.7)% for the six months ended June 30, 2021 and 2020, respectively.  The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.  The CARES Act allows for the carryback of any net operating loss arising in a tax year beginning after December 31, 2017 and before January 1, 2021, to each of the five tax years preceding the tax year in which the loss arises.  As a result, the Company’s effective tax rates in the 2020 periods were higher than the statutory rates.

Liquidity and Capital Resources

Working capital improved to $17,092,651 asat June 30, 2021 was $17,260,183, an increase of March 31, 2021 compared to $16,566,289 at$693,894 from the beginning of the year.  During the quarter, accounts receivable increased by $1,706,441, due to the greater sales activity during the quarter compared to the fourth quarterfirst half of 2020, and2021, inventory increased by $1,158,666$1,903,375 as raw material purchases were accelerated in advanceanticipation of higher prices. Partially offsetting these changes wereprice increases in accounts payable and accrued expenses related to the greater level of operating activity during the first quarter.supply chain disruptions.  Other items impacting working capital in the first quarterhalf of 2021 were capital expenditures of $116,463,$345,213, which consisted primarily of equipment used in fastener production activities, and dividends paid of $212,549. The net result of these$425,098.  These changes and other cash flow activity was to

leaveresulted in a balance of cash, cash equivalents and certificates of deposit at $6,065,766$6,230,284 as of March 31,June 30, 2021 compared to $7,300,731 as of the beginning of the year.  Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the next twelve months.

Results of Operations Summary

Results in the firstsecond quarter improved dramatically compared to the firstsecond quarter of 2020, when the COVID-19 pandemic and the resultantcaused widespread business shut-downs started to push thethat resulted in a global economy into recession.  While the pandemic is not entirely under control, the wider availability of vaccines has allowed for fewer COVID-related restrictions and an improved economic outlook.  We will continue to monitor the impact of the pandemic on all aspects of our operations and act as necessaryAlthough we experienced greater overall demand in the best interests of our employees and the Company. While demand improved in the firstsecond quarter compared to a year earlier, some automobile manufacturers have recently reducedhad to reduce operations during the quarter due to shortages of critical components.  These disruptions could result in reducedhad a negative impact on demand for our products.fastener segment components from certain automotive customers.  We have also experienced higher prices for various commodities compared to last year and longer lead times for certain items.  Cost increases can be difficult to recover and further increases are expected.expected to persist while supply constraints exist.  Most significantly, a general labor shortage has kept staffing below ideal levels and resulted in higher than anticipated labor costs.  These factors, as well as the uncertainties related to COVID-19, are expected to continue to present challenges in the near-term. As we face these challenges, we will make adjustments to our activities which we believe are necessary based on market conditions, while continuing to pursue opportunities to develop new customer relationships and build on existing ones in all the markets we serve.

Forward-Looking Statements

This discussion contains certain “forward-looking statements”"forward-looking statements" which are inherently subject to risks and uncertainties that may cause actual events to differ materially from those discussed herein.  Factors which may cause such differences in events include, those disclosed under “Risk Factors”"Risk Factors" in our Annual Report on Form 10-K and in the other filings we make with the United States Securities and Exchange Commission.  These factors, include among other things: risk related to the COVID-19 pandemic and its related adverse effects, conditions in the domestic automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales with major customers, risks related to export sales, the price and availability of raw materials, supply chain disruptions, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, information systems disruptions, the loss of the services of our key employees and difficulties in achieving cost savings.  Many of these factors are beyond our ability to control or predict.  Readers are cautioned not to place undue reliance on these forward-looking statements.  We undertake no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CHICAGO RIVET & MACHINE CO.

Item 4. Controls and Procedures.

(a)  Disclosure Controls and Procedures.  The Company’sCompany's management, with the participation of the Company’sCompany's Chief Executive Officer and President, Chief Operating Officer and Treasurer (the Company’s principal financial officer), has evaluated the effectiveness of the Company’sCompany's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act")) as of the end of the period covered by this report.  Based on such evaluation, the Company’sCompany's Chief Executive Officer and President, Chief Operating Officer and Treasurer have concluded that, as of the end of such period, the Company’sCompany's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

(b)  Internal Control Over Financial Reporting.  There have not been any changes in the Company’sCompany's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II —-- OTHER INFORMATION

Item 6.  Exhibits