NORTECH SYSTEMS INC - Quarter Report: 2000 March (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2000.

For the Transition period from                to                .

Commission File Number 0-13257.

NORTECH SYSTEMS INCORPORATED
(Exact name of registrant as specified in its chapter)

(612) 473-4102
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 per share per value.

    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 / /

APPLICABLE ONLY TO CORPORATE REGISTRANTS;

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of latest practicable data.

    As of April 30, 2000, there were 2,353,959 shares of the Company's $.01 per share par value common stock outstanding.

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NORTECH SYSTEMS INCORPORATED

FORM 10-Q

QUARTER ENDED MARCH 31, 2000

INDEX

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NORTECH SYSTEMS INCORPORATED

CONSOLIDATED BALANCE SHEETS

FOR THE PERIODS ENDED
MARCH 31, 2000 AND DECEMBER 31, 1999

See notes to consolidated financials statements

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See notes to consolidated financials statements

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NORTECH SYSTEMS INCORPORATED

STATEMENTS OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999

See notes to consolidated financials statements

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NORTECH SYSTEMS INCORPORATED

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999

See notes to consolidated financials statements

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

    In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the consolidated financial statements for the respective periods. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 1999.

(2) RESULTS OF OPERATIONS FOR PERIOD ENDED MARCH 31, 2000

    Effective June 30, 1999, the Company made a decision to sell Imaging Technology Division (Display Product Segment) and Nortech Medical Services (Medical Management Segment). The following management discussion relates only to the continuing operations of contract manufacturing. See below, the details of discontinued operations.

    For the quarter ended March 31, 2000, the Company had revenues of $12,568,981 compared to revenues of $9,467,339 for the quarter ended March 31, 1999. The increase in revenues resulted primarily from the additional revenues generated from internal growth. The net income for the three months ended March 31, 2000 was $410,220 or $.17 per share, compared to a net income of $248,704 or $.11 per share, for the three months ended March 31, 1999. The net income for the quarter ended March 31, 2000 was primarily impacted by increased gross profit from the increased revenue offset by increased selling and general and administrative expenses.

    Company's 90 day order backlog was $9,535,000 as of March 31, 2000, compared to $9,705,000 at the beginning of the quarter. Based on the current conditions, the Company anticipates revenue levels in the second quarter of 2000 to be about the same as the first quarter of 2000.

Discontinued Operations

    On June 30, 1999, The Company decided to sell the Imaging Technologies operation (Display Product Segments) and Nortech Medical Services (Medical Management Segment). As of February, 2000, the fixed assets and inventory of the Display Products segment were sold to Computron Display Systems. Under the terms of the purchase agreement dated February 22, 2000, the Company sold these assets for $300,000, of which $50,000 will be held in escrow to cover future warranty expenses. These terms are materially consistent with estimates recorded by the Company for 1999.

Liquidity and Capital Resources.

    The Company's working capital increased to $10,040,890 during the first quarter of 2000, compared to $9,691,189 as of December 31, 1999. The 1999 working capital included setting up of reserves for discontinued operations. The Company believes that its financial stability will continue to improve during 2000 and would expect that its operating cash flow and available credit faculties will be sufficient to fund the expected growth in the near term.

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Update on Year 2000 Status

    Nortech Systems Inc incurred no major Y2K related problems in 2000, and does not anticipate any in the future. The Company will continue to evaluate its systems to ensure that any potential issues can be quickly addressed.

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PART II—OTHER INFORMATION

Item 2.  Exhibits and Reports on Form 8-K.

    None

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SIGNATURES

    Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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QuickLinks

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations
Liquidity and Capital Resources.
Update on Year 2000 Status

Item 2. Exhibits and Reports on Form 8-K.