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 likelymay 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 firstthird quarter of 2021 were $9,304,949$8,555,731 compared to $7,576,455$7,645,259 in the firstthird quarter of 2020, an increase of $1,728,494,$910,472, or 22.8%11.9%. The increase was the resultAs of greater demand in both our fastener segment and our assembly equipment segment as the outlookSeptember 30, 2021, year to date sales totaled $26,225,070 compared to $19,325,234, for the global economy improved andfirst three quarters of 2020, an increase of $6,899,836, or 35.7%.  Current year-to-date sales reflect an improvement of 2.1% compared to the post-pandemic recovery appears$25,686,034 reported for the first three quarters of 2019.  Net income for the third quarter of 2021 was $172,659, or $0.18 per share compared to be underway. The increase in sales resulted in net income of $540,128,$309,135, or $0.56$0.32 per share in the first quarter of this year compared to $56,568, or $0.06 per share, in the firstthird quarter of 2020.  ImprovedThe decline in net income in the quarter was primarily due to higher operating conditionscosts in the current year, allowedespecially related to raw materials, transportation and labor.  Net income for the restorationfirst three quarters of the regular quarterly dividend to $0.222021 was $1,032,294, or $1.07 per share, after being reduced atcompared to a net loss of $413,813, or $0.43 per share, for the onsetsame period in 2020 and net income of the pandemic$832,198, or $0.86 per share, reported in 2020.2019.

Fastener segment revenues were $8,148,678$7,552,619 in the firstthird quarter of 2021 compared to $6,737,397$7,024,416 in the year earlier quarter, an increase of $528,203, or 7.5%.  While sales to non-automotive customers improved by $929,110, or 39.3% compared to the year earlier quarter, sales to automotive customers declined by $400,907, or 8.6%, as supply chain disruptions reduced demand from such customers.  For the first quarterthree quarters of 2021, fastener segment revenues were $22,843,341 compared to $17,275,555 in 2020, an increase of $1,411,281,$5,567,786, or 20.9%32.2%.  The year-to-date increase is primarily due to the negative impact of the COVID-19 pandemic on 2020 demand.  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 pandemic.  As a result, current year sales to automotive customers have increased $2,756,479, or 25.9%.  Sales to our non-automotive customers have increased $2,811,307, or 42.5%, in the current year.  The increase in fastener segment sales did not result in an increase in gross margins in the third quarter due to higher operating costs.  Fastener segment gross margins were $5,059,469$1,195,425 in the third quarter of 2021 compared to $1,479,652 in the third quarter of 2020.  We have seen an increase of approximately 34% in the price of steel, our primary raw material. Labor costs have increased due to the tight labor market and transportation costs have also increased significantly.  Year-to-date, gross margins have improved to $4,113,646 from $2,531,440 in the first three quarters of 2020.  The improvement in gross margins on a year-to-date basis is primarily due to the increase in sales which more than offsets the higher costs incurred to date.

Assembly equipment segment revenues were $1,003,112 in the third quarter this yearof 2021 compared to $4,413,737$620,843 in the firstthird quarter of 2020, an increase of $645,732,$382,269, or 14.6%61.6%. This compares favorably toFor the first quarter increase in U.S. light-vehicle salesnine months of 11.8%. Fastener2021, assembly equipment segment sales to non-automotive customers were $3,089,209 in the first quarter of this year$3,381,729 compared to $2,323,660$2,049,679 for the same period in the first quarter of 2020, an increase of $765,549$1,332,050, or 32.9%65.0%.  In addition to the general 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 machines in 2021.  The spread of the coronavirus pandemic lateincrease in the first quarter of 2020revenue was the primary factor incause of 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 fastenerassembly equipment segment gross margins to $1,656,629 from $1,091,951$290,606 in the firstthird quarter of 2021 from $160,841 in the third quarter of 2020.  WhileFor the improvement infirst three quarters of 2021, gross margins was significant, we have experienced price increases in various manufacturing costs, including steel, our primary raw material, which has increased approximately 11%were $1,083,899 compared to the first quarter of 2020. Labor costs, which have been held down due to the pandemic, are also expected to increase$489,630 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.$594,269.

Selling and administrative expenses duringfor the firstthird quarter of 2021 were $1,362,201$1,290,046 compared to $1,285,334 recorded$1,258,995 in the firstyear earlier quarter, of 2020, an increase of $76,867,$31,051, or 6.0%2.5%. The increase was primarily due to a $57,000IT consulting expenses incurred during the quarter.  Selling and administrative expenses for the first three quarters of 2021 were $3,936,995 compared to $3,758,752 for the same period of 2020, an increase of $178,243, or 4.7%.  Commission expense increased $99,459 in profitthe current year due to the improvement in sales in 2021, accounting for the majority of the increase.  Profit sharing expense relatedhas increased $40,000 due to improvedthe improvement in operating profit in the current year quarter and a $15,000year.  The remaining net increase relates to various smaller changes in sales commissions due to greater sales in the current year.expense items.  Selling and administrative expenses were 14.6% and 17.0%as a percentage of net sales infor the first quarternine months of 2021 and 2020, respectively.was 15.0% compared to 19.4% for the first nine months of 2020.

Other Income

Other income in the firstthird quarter of 2021 was $17,892$11,674 compared to $46,475$32,637 in the firstthird quarter of 2020.  Other income for the first three quarters of 2021 was $43,744 compared to $122,869 in the same period 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%16.9% and 21.0%25.4% for the firstthird quarter of 2021 and 2020, respectively.  The Company’s effective tax rates were approximately 20.9% and (32.7)% for the nine months ended September 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 as of March 31,September 30, 2021 compared to $16,566,289 atwas $17,299,668, an increase of $733,379 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 three quarters of 2020, and2021, inventory increased by $1,158,666 as$2,591,976 due to raw material price increases and accelerated purchases were accelerated in advanceanticipation of higher prices. Partially offsetting these changes werefurther price increases in accounts payable and accrued expenses related to the greater level of operating activity during the first quarter.ongoing supply chain disruptions.  Other items impacting working capital in the first quarter2021 were capital expenditures of $116,463,$587,615, which consisted primarily of equipment used in fastener production activities, and dividends paid of $212,549.$637,647.  The net result of these changes and other cash flow activityitems was to

leave cash, cash equivalents and certificates of deposit at $6,065,766$5,616,282 as of March 31,September 30, 2021 compared to $7,300,731 as ofat 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

We experienced an increase in overall demand during the firstthird quarter improved dramatically comparedas the economy continued to improve from the first quarter of 2020, when the COVID-19 pandemic and the resultant widespread shut-downs started to push the 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 impactworst period of the pandemic on all aspects ofpandemic.  However, our operations and act as necessary in the best interests ofsales to automotive customers, our employees and the Company. While demand improved in the first quarter, some automobile manufacturers have recently reduced operationsprimary customer market, declined due to shortagesvarious customer plant shut-downs related to their shortage of critical components.  These disruptions could resultshortages are expected to continue in reduced demandthe near-term and may continue to negatively impact demand.  Although overall sales increased during the third quarter compared to a year earlier, higher operating expenses resulted in a decline in net income for our products.the quarter.  We have also experienced significantly higher prices for various commodities compared to last year andin addition to 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.  Additionally, a general labor shortage has kept staffing below ideal levels and resulted in higher than anticipated labor costs.  These factors, as well as the ongoing 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