UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
file number
State
of Incorporation:
IRS
Employer Identification No.
Executive
Offices:
Telephone
number:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | |
| Smaller
Reporting Company | ||
| 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
Number of shares of $ par value common stock outstanding as of May 2, 2025 was .
TABLE OF CONTENTS
| 2 |
PART
I
ITEM 1. FINANCIAL STATEMENTS
NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
| THREE MONTHS ENDED | ||||||||
| MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| Net sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Restructuring charges | ||||||||
| Total operating expenses | ||||||||
| (Loss) income from operations | ( | ) | ||||||
| Other expense: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax (benefit) expense | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Net (loss) income per common share: | ||||||||
| Basic (in dollars per share) | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - basic (in shares) | ||||||||
| Diluted (in dollars per share) | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - diluted (in shares) | ||||||||
| Other comprehensive (loss) income | ||||||||
| Foreign currency translation | ( | ) | ||||||
| Comprehensive (loss) income, net of tax | $ | ( | ) | $ | ||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
| 3 |
NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2025 AND DECEMBER 31, 2024
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, 2025 | DECEMBER 31, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, less allowances of $ | ||||||||
| Inventories, net | ||||||||
| Contract assets | ||||||||
| Assets held for sale | ||||||||
| Prepaid assets and other assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease assets, net | ||||||||
| Deferred tax assets | ||||||||
| Other intangible assets, net | ||||||||
Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and commissions | ||||||||
| Customer deposits | ||||||||
| Current portion of operating leases | ||||||||
| Current portion of finance lease obligations | ||||||||
Notes payable | ||||||||
| Other accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Long-term line of credit | ||||||||
| Long-term operating lease obligations, net of current portion | ||||||||
| Long-term finance lease obligations, net of current portion | ||||||||
| Other long-term liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock - $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See Accompanying Notes to Condensed Consolidated Financial Statement.
| 4 |
NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
| THREE MONTHS ENDED | ||||||||
| MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Compensation on stock-based awards | ||||||||
| Change in accounts receivable allowance | ( | ) | ||||||
| Change in inventory reserves | ||||||||
| Other, net | ( | ) | ||||||
| Changes in current operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Contract assets | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued payroll and commissions | ||||||||
| Customer deposits | ( | ) | ( | ) | ||||
| Other accrued liabilities | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sale of property and equipment | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit | ||||||||
| Payments to line of credit | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Principal payments on financing leases | ( | ) | ( | ) | ||||
| Stock option exercises | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net change in cash | ||||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| 5 |
NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
| THREE MONTHS ENDED | ||||||||
| MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental noncash investing and financing activities: | ||||||||
| Property and equipment purchases in accounts payable | $ | $ | ||||||
| Operating lease assets acquired under operating leases | $ | $ | ||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
| 6 |
NORTECH
SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(IN THOUSANDS)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Comprehensive | Retained | Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Earnings | Equity | |||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Restricted Stock Unit Vesting | - | |||||||||||||||||||||||||||||||
| Compensation on stock-based awards | - | - | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Stock option exercises | - | - | ||||||||||||||||||||||||||||||
| Compensation on stock-based awards | - | - | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
| 7 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the Company’s audited consolidated financial statements. These unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements for the year ended December 31, 2024, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC.
The condensed consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. All dollar amounts are stated in thousands of U.S. dollars.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us 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 our consolidated financial statements. Estimates also affect the reported amounts of net sales and expenses during each reporting period. Significant items subject to estimates and assumptions include the net realizable value reserves for inventories, accounts receivable allowances, realizability of deferred tax assets and long-lived asset recovery. Actual results could differ from those estimates.
Recently Issued New Accounting Standards
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting Topic (280): Improvements to Reportable Segment Disclosure. The ASU supplements reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted this ASU in the fourth quarter of 2024 and have included related interim reporting disclosures in Note 9 – Segment Information, to these condensed consolidated financial statements.
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU enhances the transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated expense information in the notes to the financial statements related to purchases of inventory, employee compensation, depreciation, intangible asset amortization and selling expenses for each statement of earnings line item that contains those expenses. ASU No. 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The guidance is to be applied on a prospective basis with the option to apply the standard retrospectively; this ASU allows for early adoption. The Company is currently evaluating the impact of this ASU on its consolidated financial statements disclosures.
| 8 |
Inventories
Inventories are as follows:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Reserves | ( | ) | ( | ) | ||||
| Inventories, net | $ | $ | ||||||
Other Intangible Assets
Other intangible assets as of March 31, 2025 and December 31, 2024 are as follows:
| Patents | ||||
| Balances as of December 31, 2024 | $ | |||
| Amortization | ( | ) | ||
| Balances as of March 31, 2025 | $ | |||
Intangible
assets are amortized on a straight-line basis over their estimated useful lives. The weighted average remaining amortization period of
our intangible assets is
Amortization
expense of finite life intangible assets for the three months ended March 31, 2025 and 2024 was $
As of March 31, 2025, estimated future annual amortization expense (except projects in process) related to these assets is as follows:
| Year | Amount | |||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Property and Equipment
As of March 31, 2025, the Company classified its
Blue Earth manufacturing facility and related land as held for sale as the criteria for classification as held for sale were met and the sale is expected to be completed in the next twelve months.
The carrying value of these assets held for sale was $
NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
Financial
instruments that potentially subject us to concentrations of credit risk consist principally of cash, accounts receivable, and contract
assets. With regard to cash, we maintain our excess cash balances in checking accounts at primarily
We have certain customers whose revenue individually represented 10% or more of net sales, or whose accounts receivable balances or contract asset balances individually represented 10% or more of gross accounts receivable.
Customers who represent 10% or more of net sales for the three months ended March 31, 2025 and 2024 are as follows:
Net Sales | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Total | % | % | ||||||
Customers who represent 10% or more of accounts receivable and contract assets for the period ended March 31, 2025 and December 31, 2024 are as follows:
| Accounts Receivable | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| Customer A | % | % | ||||||
| Customer C | % | % | ||||||
| Total | % | % | ||||||
| Contract Asset | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| Customer A | % | % | ||||||
| Customer D | % | % | ||||||
| Total | % | % | ||||||
| 9 |
Export
sales from the U.S. represented approximately
NOTE 3. NET SALES
Revenue Recognition
Revenue
under contract manufacturing agreements that was recognized over time excluding noncash consideration accounted for
The following tables summarize our net sales by market for the three months ended March 31, 2025 and 2024, respectively:
| Three Months Ended March 31, 2025 | ||||||||||||||||
| Product/ Service Transferred Over Time | Product Transferred at Point in Time | Noncash Consideration1 | Total Net Sales by Market | |||||||||||||
| Medical Device | $ | $ | $ | $ | ||||||||||||
| Medical Imaging | ||||||||||||||||
| Industrial | ||||||||||||||||
| Aerospace and Defense | ||||||||||||||||
| Total net sales | $ | $ | $ | $ | ||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||
| Product/ Service Transferred Over Time | Product Transferred at Point in Time | Noncash Consideration1 | Total Net Sales by Market | |||||||||||||
| Medical Device(2) | $ | $ | $ | $ | ||||||||||||
| Medical Imaging(2) | ||||||||||||||||
| Industrial | ||||||||||||||||
| Aerospace and Defense | ||||||||||||||||
| Total net sales | $ | $ | $ | $ | ||||||||||||
| 1 | |
| 2 |
| 10 |
Contract Assets
Contract assets, recorded as such in the condensed consolidated balance sheet, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the three months ended March 31, 2025 were as follows:
| Balances as of January 1, 2025 | $ | |||
| Increase (decrease) attributed to: | ||||
| Amounts transferred over time to contract assets | ||||
| Allowance for current expected credit losses | ||||
| Amounts invoiced during the period | ( | ) | ||
| Balance outstanding as of March 31, 2025 | $ |
We expect substantially all of the remaining performance obligations for the contract assets recorded as of March 31, 2025 to be transferred to receivables within 90 days, with any remaining amounts to be transferred within 180 days. We bill our customers upon shipment with payment terms of up to 120 days.
NOTE 4. FINANCING ARRANGEMENTS
On
February 29, 2024, we entered into a $
The Revolver requires the Company to maintain no more than 2.5 times leverage ratio and at least a 1.25 times minimum fixed charges coverage ratio, both of which are defined in the Revolver agreement. These ratios are calculated based on trailing twelve-month results. There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of outstanding borrowings. The Revolver contains certain covenants which, among other things, require the Company to adhere to regular reporting requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The Revolver is secured by substantially all the Company’s assets and expires on February 28, 2027. We were not in compliance with financial covenants related to the maximum operating expense contributions to our Mexican operations in the first and second quarters of 2024. We have received a waiver of this event of default from the bank. On March 27, 2025, we amended (the “First Amendment”) the Revolver to waive our non-compliance with the leverage ratio and minimum fixed charge ratio as of December 31, 2024, and March 31, 2025. Provisions of the First Amendment relating to the Company’s compliance with these ratios were replaced with provisions of the Second Amendment (described below). Provisions of the First Amendment relating to minimum EBITDA requirements of the Company were replaced with provisions of the Second Amendment (described below). Provisions of the First Amendment requiring the Company to maintain unrestricted cash and Revolver availability (collectively, “Liquidity”) at specified levels were replaced with provisions of the Second Amendment (described below). The First Amendment also requires the Company to provide incremental monthly reporting and increased the Company’s borrowing rate by one percent until the Company is in compliance with the original terms of the Revolver.
On
May 14, 2025, we further amended (the “Second Amendment”) the Revolver, which amended the First Amendment in part, to
defer the Company’s compliance with the leverage ratio and minimum fixed charge ratio until the fourth quarter of 2025 at which
time the Company must maintain
The Revolver, as amended, bears interest at a weighted-average interest rate of
The
Company has an interim funding agreement as of March 31, 2025 with a bank related to deposits made on equipment purchases that will be
funded through a finance lease when the equipment is received and operational. As of March 31, 2025 we have $
| 11 |
NOTE 5. LEASES
We
have operating leases for certain manufacturing sites, office space, and equipment. Most leases include the option to renew, with renewal
terms that can extend the lease term from one
to
The components of lease expense were as follows:
| Three Months Ended March 31, | ||||||||
| Lease Cost | 2025 | 2024 | ||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease interest cost | ||||||||
| Finance lease amortization expense | ||||||||
| Total lease cost | $ | $ | ||||||
Supplemental condensed consolidated balance sheet information related to leases was as follows:
| Balance Sheet Location | March 31, 2025 | December 31, 2024 | ||||||||
| Assets | ||||||||||
| Finance lease assets | Property, plant and equipment | $ | $ | |||||||
| Operating lease assets | Operating lease assets | |||||||||
| Total leased assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Current operating lease liabilities | Current portion of operating lease obligations | $ | $ | |||||||
| Current finance lease liabilities | Current portion of finance lease obligations | |||||||||
| Noncurrent | ||||||||||
| Long-term operating lease liabilities | Long term operating lease liabilities, net | |||||||||
| Long term finance lease liabilities | Long term finance lease obligations, net | |||||||||
| Total lease liabilities | $ | $ | ||||||||
| 12 |
Supplemental condensed consolidated statements of cash flows information for the three months ended March 31, 2025 and 2024 related to leases was as follows:
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| Operating Leases | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Property acquired under operating lease | $ | $ | ||||||
Future annual payments of lease liabilities as of March 31, 2025 were as follows:
Operating Leases | Finance Leases | Total | ||||||||||
| Remainder of 2025 | $ | $ | $ | |||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| 2029 | ||||||||||||
| Thereafter | ||||||||||||
| Total lease payments | $ | $ | $ | |||||||||
| Less: imputed interest | ( | ) | ( | ) | ( | ) | ||||||
| Present value of lease liabilities | $ | $ | $ | |||||||||
The lease term and discount rate as of March 31, 2025 and 2024 were as follows:
| Weighted-average remaining lease term (years) | March 31, 2025 | March 31, 2024 |
||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted-average discount rate | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
| 13 |
Stock-based compensation expense was reported as follows in the condensed consolidated statements of operations within general and administrative expenses of $ and $ for the three months ended March 31, 2025 and 2024, respectively.
Stock Options
Under the 2017 Stock Incentive Plan (“2017 Plan”), as amended, there are an aggregate of shares authorized for issuance.
| 2024 | ||||
| Stock option fair value assumptions: | ||||
| Risk-free interest rate | -% | |||
| Expected life (years) | ||||
| Dividend yield | % | |||
| Expected volatility | % | |||
| Weighted average grant date fair value of stock options granted | $ | |||
| 14 |
Total compensation expense related to stock options was $ and $ for the three months March 31, 2025 and 2024, respectively. As of March 31, 2025, there was $ of unrecognized compensation related to stock options which will be recognized over a weighted average period of years.
| Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding – December 31, 2023 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ) | |||||||||||||||
| Outstanding – March 31, 2024 | $ | $ | ||||||||||||||
| Outstanding – December 31, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ) | |||||||||||||||
| Forfeited | ) | |||||||||||||||
| Outstanding – March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable on March 31, 2025 | $ | $ | ||||||||||||||
Restricted Stock Units
During the periods ended March 31, 2025 and 2024, we did not grant restricted stock units (“RSUs”). Total compensation expense related to the RSUs was $ and $ for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, total unrecognized compensation expense related to the RSUs was $, which will vest over a weighted average period of years.
| Shares | Weighted- Average Remaining Vesting Term | Aggregate Intrinsic Value | ||||||||||
| Outstanding – December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Vested | ) | |||||||||||
| Forfeited | ||||||||||||
| Outstanding – March 31, 2024 | $ | |||||||||||
| Outstanding – December 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Vested | ||||||||||||
| Forfeited | ||||||||||||
| Outstanding – March 31, 2025 | $ | |||||||||||
| 15 |
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding. Dilutive net (loss) income per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding using the treasury stock method, unless their effect is antidilutive. For the three months ended March 31, 2025 and 2024, there were restricted stock units and stock options totalling and , respectively, excluded from the computation of diluted weighted-average shares outstanding as their inclusion would be anti-dilutive. Basic and diluted weighted average shares outstanding were as follows:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Basic weighted average shares outstanding | ||||||||
| Dilutive effect of outstanding stock options and non-vested restricted stock units | ||||||||
| Diluted weighted average shares outstanding | ||||||||
NOTE 8. INCOME TAXES
On a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events.
Our
effective tax rate for the three months ended March 31, 2025 was
NOTE 9. SEGMENT INFORMATION
Our results of operations for the three months ended March 31, 2025 and 2024 represent a single operating and reporting segment referred to as Contract Manufacturing within the EMS industry. The Company operates in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets with over 50% of its net sales coming from the medical-related markets. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers’ needs. Our plants generate net sales over several of the markets the Company serves. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll, and all corporate accounting functions. Our chief operating decision maker (the “CODM”) is the Company’s President and Chief Executive Officer. The CODM regularly evaluates financial information prepared in accordance with U.S. GAAP on a consolidated basis to assess performance and allocate resources.
The Company’s net sales were located as follows:
| March 31, 2025 | March 31, 2024 | |||||||
| United States | $ | $ | ||||||
| Mexico | ||||||||
| China | ||||||||
| Total net sales | $ | $ | ||||||
The Company’s long-lived tangible assets, including the Company’s operating lease assets recognized on the consolidated balance sheets were located as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| United States | $ | $ | ||||||
| Mexico | ||||||||
| China | ||||||||
| Total long-lived tangible assets | $ | $ | ||||||
NOTE 10. RESTRUCTURING CHARGES
During
2024, we recorded restructuring charges of $
The following table summarizes the related activity for the quarter ended March 31, 2025:
| Facility Consolidation | Workforce Reductions | Total | ||||||||||
| December 31, 2024 | $ | $ | $ | |||||||||
| Charges | ||||||||||||
| Cash payments | ( | ) | ( | ) | ( | ) | ||||||
| March 31, 2025 | $ | $ | $ | |||||||||
NOTE 11. RELATED PARTY TRANSACTIONS
David
Kunin, our Chairman, is a minority owner of Abilitech Medical, Inc. We had accounts receivable related to Abilitech of $
David
Kunin, our Chairman, is a minority owner (less than
NOTE 12. SUBSEQUENT EVENT
On May 14, 2025, the Company amended its Revolver line of credit agreement as discussed in Note 4 – “Financing Arrangements.”
| 16 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a Minnesota, United States based full-service global EMS contract manufacturer in the Medical Device, Medical Imaging, Aerospace and Defense and Industrial markets offering a full range of value-added engineering, technical and manufacturing services and support including project management, design, testing, prototyping, manufacturing, supply chain management and post-market services. Our products are complex electromedical and electromechanical products including medical devices, wire and cable assemblies, printed circuit board assemblies, complex higher-level assemblies and other box builds for a wide range of industries. As of December 31, 2024, we have facilities in Minnesota: Bemidji, Mankato, Milaca and Maple Grove. We closed our facility in Blue Earth, Minnesota in December 2024 and are currently seeking to sell this facility. We also have facilities in Monterrey, Mexico and Suzhou, China.
Our net sales are derived from complex designed products built to the customers’ specifications. The products we manufacture are engineered and designed products that require sophisticated manufacturing support. Quality, on-time delivery, and reliability are of upmost importance. Our goal is to expand and diversify our customer base by focusing on sales and marketing efforts that fit our value-added service, early engagement design, and development strategy. We continue to focus on lean manufacturing initiatives, quality and on-time delivery improvements to increase asset utilization, reduce lead times and provide competitive pricing.
Our strategic investments have positioned us to capitalize on growth opportunities in the medical markets and improve our competitiveness by expanding our global footprint. Our industrial and defense markets are focused on improving our asset utilization and profitability while transforming to a value added, solution-sell business model that supports early engagement, design for manufacturability and rapid prototyping.
All dollar amounts are stated in thousands of U.S. dollars.
Restructuring Activities
In fiscal year 2024, the Company initiated a restructuring plan related to the closure of its Blue Earth, MN facility. During the quarter ended March 31, 2025, the Company had restructuring charges related to staff reductions and activities related to the Blue Earth facility closure. The total estimated cost of these restructuring programs is approximately $850, of which $571 was recorded in the prior fiscal year. These charges relate to employee severance and facility closure costs. We do not expect significant additional expenses related to this plan.
Results of Operations
Net Sales. Net sales for the three months ended March 31, 2025 and 2024 were $26,895 and $34,215, respectively, a decrease of $7,320 or 21.4%. Net sales in the first quarter of 2025 were negatively impacted by delays in Aerospace and Defense customer approvals of products transferred from our Blue Earth facility to our Bemidji facility as well as manufacturing and plant utilization inefficiencies related to the movement of various production between plants. We expect these matters to be positively resolved over the next two quarters. The following is a summary of net sales by our major industry markets:
| Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | Increase (Decrease) | ||||||||||||||
| Medical Device | $ | 8,070 | $ | 10,738 | $ | (2,668 | ) | (24.8 | )% | |||||||
| Medical Imaging | 8,588 | 9,544 | (956 | ) | (10.0 | )% | ||||||||||
| Industrial | 6,945 | 8,073 | (1,128 | ) | (14.0 | )% | ||||||||||
| Aerospace and Defense | 3,292 | 5,860 | (2,568 | ) | (43.8 | )% | ||||||||||
| Total net sales | $ | 26,895 | $ | 34,215 | $ | (7,320 | ) | (21.4 | )% | |||||||
| ● | Medical Device: Net sales to our medical customers decreased $2,668, or 24.8%, in the three months ended March 31, 2025 as compared with the same period in 2024. The decrease was primarily due to inventory re-balancing with existing customers, timing of customer product launches and lower productivity as we managed our facility consolidation. | |
| ● | Medical Imaging: Net sales to our Medical Imaging customers decreased $956, or 10.0%, in the three months ended March 31, 2025 as compared with the same period in 2024. The decrease was primarily due to inventory re-balancing with existing customers, timing of customer product launches and lower manufacturing productivity arising from the transfer of production between facilities. | |
| ● | Industrial: Net sales to our industrial customers decreased $1,128, or 14.0%, in the three months ended March 31, 2025, as compared with the same period in 2024. The decrease in net sales was primarily due to customer order delays and part shortages. | |
| ● | Defense: Net sales to our aerospace and defense customers were down $2,568, or 43.8%, in the three months ended March 31, 2025, as compared with the same period in 2024. The decrease in net sales relates to delays in customer approvals as we have consolidated this business into our Bemidji facility. |
Backlog. Our 90-day shipment backlog as of March 31, 2025 was $26,742, an increase of 1.1% from $26,451 at the beginning of the quarter, and a 24.1% decrease from March 31, 2024. Our 90-day backlog consists of firm purchase orders we expect to ship in the next 90 days, with any remaining amounts to be shipped within 180 days.
Our total order backlog as of March 31, 2025, was $68,332, a 3.8% increase from $65,852 at the beginning of the quarter and a 20.5% decrease from the prior-year comparable quarter end as some customers are requesting much shorter order lead times, which has resulted in a decrease in our backlog. As we develop deep strategic partnerships with these customers, we have agreed to these shorter lead times. More recently we are also noting reduced visibility to revenues in the next several quarters as customers are rebalancing their inventories and, therefore, deferring the placement of some orders. In addition, several of our Aerospace and Defense customers are delaying orders until they approve the move of production at our Bemidji facility. We expect the majority of those approvals to be completed by the end of the second quarter of 2025.
90-day shipment and total backlog by our major industry markets are as follows:
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||||||||||||||
| 90 Day | Total | 90 Day | Total | 90 Day | Total | |||||||||||||||||||
| Medical Device | $ | 5,735 | $ | 19,925 | $ | 6,953 | $ | 21,706 | $ | 8,365 | $ | 27,504 | ||||||||||||
| Medical Imaging | 7,526 | 10,020 | 7,168 | 10,353 | 8,630 | 12,697 | ||||||||||||||||||
| Industrial | 5,999 | 10,005 | 5,173 | 7,306 | 8,200 | 15,184 | ||||||||||||||||||
| Aerospace and Defense | 7,482 | 28,382 | 7,157 | 24,487 | 10,018 | 30,616 | ||||||||||||||||||
| Total backlog | $ | 26,742 | $ | 68,332 | $ | 26,451 | $ | 65,852 | $ | 35,213 | $ | 86,001 | ||||||||||||
| 17 |
The 90-day and total backlog as of March 31, 2025 includes orders already recognized in net sales and included in the contract asset value of $13,404.
Operating Costs and Expenses.
Net sales, cost of goods sold, gross profit, and operating costs were as follows:
| Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | Increase/(Decrease) | ||||||||||||||
| Net sales | $ | 26,895 | $ | 34,215 | $ | (7,320) | (21.4 | )% | ||||||||
| Cost of goods sold (3) | 23,817 | 28,767 | (4,950) | (17.2 | )% | |||||||||||
| Gross profit | 3,078 | 5,448 | (2,370) | (43.5 | )% | |||||||||||
| Gross margin percentage (1) | 11.4 | % | 15.9 | % | (450) | bpc(2) | ||||||||||
| Selling (3) | 1,184 | 805 | 379 | 47.1 | % | |||||||||||
| % of Net sales | 4.4 | % | 2.3 | % | ||||||||||||
| General and administrative | 2,915 | 3,170 | (255 | ) | (8.0 | )% | ||||||||||
| % of Net sales | 10.8 | % | 9.3 | % | ||||||||||||
| Research and development | 326 | 318 | 8 | 2.5 | % | |||||||||||
| % of Net sales | 1.2 | % | 0.9 | % | ||||||||||||
| Restructuring charges | 266 | - | 266 | - | % | |||||||||||
| % of Net sales | 0.9 | % | - | % | ||||||||||||
| Operating (loss) income | (1,613 | ) | 1,155 | (2,768 | ) | (239.7 | )% | |||||||||
| % of Net sales | (6.0 | )% | 3.4 | % | ||||||||||||
| (1) | Gross margin percentage is defined as gross profit as a percentage of net sales. | |
| (2) | Basis points change in gross margin percentage. | |
| (3) | During the three months ended March 31, 2025, the Company modified the responsibilities and reporting relationships of certain customer-facing managers. As a result of these organizational changes, the related costs, which were previously classified as cost of sales, are now reported as selling expenses to better reflect the nature of the activities performed. |
Gross profit and gross margins. Gross profit as a percent of net sales was 11.4% and 15.9% for the three months ended March 31, 2025, and 2024, respectively. The decrease in gross profit as a percentage of net sales in the 2025 period as compared with the same prior-year period was the result of lower net sales, as discussed above, reduced facility utilization and decreased manufacturing productivity.
Selling expenses. Selling expenses, as measured as a percent of net sales, was 4.4% and 2.3% for the three months ended March 31, 2025, and 2024, respectively. This increase is a result of realignment of our customer facing managers that were previously included in cost of sales to selling expense as well as the impact of fixed costs on a lower revenue base.
General and administrative expenses. General and administrative expenses decreased in the 2025 period as compared with the 2024 period as the result of lower incentive compensation accruals in the current year.
Restructuring charges. Restructuring charges were $266 in the three months ended March 31, 2025 for severance charges for a February 2025 reduction in force to align staffing to our forecasted net sales of $235 and expenses related to our closed Blue Earth facility of $31.
Operating (loss) income. Operating loss for the three months ended March 31, 2025 was ($1,613) or (6.0)% of net sales. Operating income for the three months ended March 31, 2024 was $1,155 or 3.4% of net sales. Decrease in the period was driven by the decrease in net sales and resulting gross margin.
Interest expense. Interest expense was $214 and $167 for the three months ended March 31, 2025 and 2024, respectively. This increase was driven by higher borrowings under our line of credit arrangement. Refer to “Liquidity and Capital Resources” for further discussion of financing arrangements.
Income taxes. Our effective tax rate for the three ended March 31, 2025 was 28.0%. Our effective tax rate for the three months ended March 31, 2024 was 22.6%. The primary drivers of the increase in effective tax rate were changes in pretax (loss) income and an increase in the GILTI inclusion.
Cash Flow Operating Results
The following is a summary of cash flow results:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash provided by (used in): | ||||||||
| Operating activities | $ | (2,930 | ) | $ | 2,828 | |||
| Investing activities | (268 | ) | (735 | ) | ||||
| Financing activities | 3,446 | 274 | ||||||
| Effect of exchange rates on changes in cash and cash equivalents | (2 | ) | (14 | ) | ||||
| Net change in cash and cash equivalents | $ | 246 | $ | 2,355 | ||||
Operating Activities. Cash used in operating activities was $2,930 in the first three months of 2025, compared with cash provided of $2,828 in the same prior-year period. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
| ● | Cash used by accounts receivable was $814 in the three months ended March 31, 2025 as compared with cash provided of $3,215 in the same prior-year period. The use of cash in the three months ended March 31, 2025 is largely due to timing of customer shipments and cash collections. The cash provided in the prior year was due an expected increase in cash collections due to higher sales and the timing of customer payments. | |
| ● | Cash provided by inventory was $487 in the three months ended March 31, 2025 as compared with cash used of $1,400 in the prior-year period. The decrease in the current-year period cash usage was the result of normal timing variances of inventory purchases and timing of product shipments. We plan to actively reduce inventory balances over the next several quarters. | |
| ● | Cash used by changes in accounts payable was $1,441 in the current-year period as compared with cash used of $8 in the same prior-year period, primarily related to the timing of cash payments. |
| 18 |
Investing Activities. Cash used in investing activities was $268 in the first three months of 2025, compared with cash used of $735 in the same prior-year period, both primarily for capital expenditures.
Financing Activities. Cash provided by financing activities was $3,446 in the first three months of 2025, compared with cash provided of $274 in the same prior-year period. The increase in cash provided by financing activities resulted from the line of credit advances for working capital and operations in the three months ended March 31, 2025.
Liquidity and Capital Resources
We believe that our existing financing arrangements, anticipated cash flows from operations and cash on hand will be sufficient to satisfy our working capital needs, capital expenditures and debt repayments for the next twelve months.
On February 29, 2024, we entered into a $15,000 Senior Secured Revolving Line of Credit with Bank of America (the “Revolver”). The Revolver allows for borrowings at a defined base rate, or at the one, three or six month Secured Overnight Finance Rate, also known as “SOFR,” plus a defined margin. If the Company prepays SOFR borrowings before their contractual maturity, the Company has agreed to compensate the bank for lost margin, as defined in the Revolver agreement. The Company is required to quarterly pay a 20-basis point fee on the unused portion of the Revolver.
The Revolver requires the Company to maintain no more than 2.5 times leverage ratio and at least a 1.25 times minimum fixed charges coverage ratio, both of which are defined in the Revolver agreement. These ratios are calculated based on trailing twelve-month results. There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of outstanding borrowings. The Revolver contains certain covenants which, among other things, require the Company to adhere to regular reporting requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The Revolver is secured by substantially all the Company’s assets and expires on February 28, 2027. We were not in compliance with financial covenants related to the maximum operating expense contributions to our Mexican operations in the first and second quarters of 2024. We have received a waiver of this event of default from the bank. On March 27, 2025, we amended (the “First Amendment”) the Revolver to waive our non-compliance with the leverage ratio and minimum fixed charge ratio as of December 31, 2024, and March 31, 2025. Provisions of the First Amendment relating to the Company’s compliance with these ratios were replaced with provisions of the Second Amendment (described below). Provisions of the First Amendment relating to minimum EBITDA requirements of the Company were replaced with provisions of the Second Amendment (described below). Provisions of the First Amendment requiring the Company to maintain unrestricted cash and Revolver availability (collectively, “Liquidity”) at specified levels were replaced with provisions of the Second Amendment (described below). The First Amendment also requires the Company to provide incremental monthly reporting and increased the Company’s borrowing rate by one percent until the Company is in compliance with the original terms of the Revolver.
On May 14, 2025, we further amended (the “Second Amendment”) the Revolver, which amended the First Amendment in part, to defer the Company’s compliance with the leverage ratio and minimum fixed charge ratio until the fourth quarter of 2025 at which time the Company must maintain (a) a leverage ratio of 2.5 times for the year ended December 31, 2025 and for each twelve-month quarterly reporting period thereafter; and (b) a minimum fixed charge coverage ratio to 1.25 times for the year ended December 31, 2025 and for each twelve-month quarterly reporting period thereafter. The Company must also maintain adjusted EBITDA (earnings before interest, taxes depreciation and amortization), as defined in the Revolver, as of the end of the second quarter of 2025 of at least $1,000, the third quarter of 2025 of at least $1,300 and the fourth quarter of 2025 and each quarter thereafter of at least $1,600. In addition, the Second Amendment requires the Company to always maintain Liquidity of at least $2,500. The Second Amendment accelerated the expiration of the Revolver to June 30, 2026 and increases the borrowing rate by 25 basis points.
The Revolver, as amended, bears interest at a weighted-average interest rate of 7.2% and 7.7% as of March 31, 2025 and December 31, 2024, respectively. We had borrowings on our line of credit of $11,955 and $8,695 outstanding as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, we had unused availability on the line of credit of $3,045, which is subject to a month end cap based on the previously noted minimum Liquidity.
The Company has an interim funding agreement as of March 31, 2025 with a bank related to deposits made on equipment purchases that will be funded through a finance lease when the equipment is received and operational. As of March 31, 2025 we have $563 outstanding on the interim funding agreement for equipment.
Net sales in the first quarter of 2025 and fourth quarter of 2024 were negatively impacted by delays in Aerospace and Defense customer approvals of products transferred from our Blue Earth facility to our Bemidji facility as well as manufacturing and plant utilization inefficiencies related to the movement of various production between plants. We expect these matters to be resolved over the next two quarters. The Company has implemented plant optimization activities and our cost cutting initiatives in the first quarter of 2025 to address losses. These actions plus the planned reduction in inventory levels are intended to drive reduced borrowings during the remainder of 2025. The Company believes it has sufficient capital and liquidity to operate its business for at least twelve months from the filing of this Form 10-Q.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.
| 19 |
Forward-Looking Statements
Those statements in the foregoing report that are not historical facts are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
| ♦ | Volatility in the marketplace which may affect market supply, demand of our products or currency exchange rates; | |
| ♦ | Supply chain disruption and unreliability; | |
| ♦ | Lack of supply of sufficient human resources to produce our products; | |
| ♦ | Increased competition from within the EMS industry or the decision of OEMs to cease or limit outsourcing; | |
| ♦ | Changes in the reliability and efficiency of our operating facilities or those of third parties; | |
| ♦ | Increases in certain raw material costs such as copper and oil; | |
| ♦ | Commodity and energy cost instability; | |
| ♦ | Risks related to FDA noncompliance; | |
| ♦ | The loss of a major customer; | |
| ♦ | General economic, financial and business conditions that could affect our financial condition and results of operations; | |
| ♦ | Increased or unanticipated costs related to compliance with securities and environmental regulation; | |
| ♦ | Disruption of global or local information management systems due to natural disaster or cyber-security incident; and | |
| ♦ | Outbreaks of epidemic, pandemic, or contagious diseases, such as the recent novel coronavirus that affect our operations, our customers’ operations or our suppliers’ operations. |
The factors identified above are believed to be important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Discussion of these factors is also incorporated in Part I, Item 1A, “Risk Factors,” and should be considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unpredictable or unknown factors not discussed herein could also have material adverse effects on forward-looking statements. All forward-looking statements included in this Form 10-K are expressly qualified in their entirety by the forgoing cautionary statements. We undertake no obligation to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events.
Please refer to forward-looking statements and risks as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). These controls and procedures are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of these disclosure controls and procedures as of the date of the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 20 |
PART II
ITEM 1. LEGAL PROCEEDINGS
We are subject to various legal proceedings and claims that arise in the ordinary course of business.
ITEM 1A. RISK FACTORS
We are affected by the risks specific to us as well as factors that affect all businesses operating in a global market. The significant factors known to us that could materially adversely affect our business, financial condition or operating results or could cause our actual results to differ materially from our expectations are described in our annual report on Form 10-K for the fiscal year ended under the heading “Part I – Item 1A.Risk Factors.” There have been no material changes in the risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Exhibits | ||
10.16 |
||
| 31.1* | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |
| 31.2* | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. | |
| 32* | Certification of the Chief Executive Officer and Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101* | Financial statements from the quarterly report on Form 10-Q for the quarter ended March 31, 2025, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith
| 21 |
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.
| Nortech Systems Incorporated and Subsidiaries | ||
| Date: May 14, 2025 | by | /s/ Jay D. Miller |
| Jay D. Miller | ||
| Chief Executive Officer and President | ||
| Nortech Systems Incorporated | ||
| Date: May 14, 2025 | by | /s/ Andrew D. C. LaFrence |
| Andrew D. C. LaFrence | ||
| Chief Financial Officer and Senior Vice President of Finance | ||
| Nortech Systems Incorporated | ||
| 22 |