<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities exchange
Act of 1934
For the quarterly period ended March 31, 1997.
( ) 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 0-13257.
NORTECH SYSTEMS INCORPORATED
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(Exact name of registrant as specified in its chapter)
MINNESOTA 41-1681094
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(State of other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
641 East Lake St. Suite 244, Wayzata, MN 55391
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(Address of principal executive offices) (Zip Codes)
(612) 473-4102
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
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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
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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, 1997, there were 2,312,262 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, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements 4-7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 2 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
MARCH 31 DECEMBER 31
ASSETS 1997 1996
(UNAUDITED) (AUDITED)
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Current Assets
Cash and cash equivalents $ 1,182,754 $ 1,235,127
Accounts receivable, net 4,530,669 3,695,763
Inventories:
Finished goods 1,515,398 1,265,588
Work in process 1,501,568 1,837,247
Raw materials 3,983,853 3,626,665
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Total inventories $ 7,000,819 $ 6,729,500
Prepaid expenses and other 734,840 628,821
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Total current assets $ 13,449,082 $ 12,289,211
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PLANT, Property, and Equipment (at Cost)
Land and Building/leaseholds $ 3,733,500 $ 3,695,455
Manufacturing equipment 5,302,937 4,588,955
Office and other equipment 2,037,661 2,461,997
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$ 11,074,098 $ 10,746,407
Less accumulated depreciation and
amortization (3,160,048) (2,875,702)
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$ 7,914,050 $ 7,870,705
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Other Assets
Goodwill and other intangible assets 818,256 1,025,463
Deferred tax asset 910,000 910,000
Other assets 57,250 57,250
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Total Other Assets $ 1,785,506 1,992,713
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Total Assets $ 23,148,638 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED) (AUDITED)
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Current Liabilities:
Current maturities of long-term debt $ 783,979 $ 731,080
Line of credit 0 500,000
Accounts payable 1,510,451 1,596,326
Accured payrolls and commissions 931,056 673,303
Other 967,943 289,971
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Total Current Liabilities $ 4,193,429 $ 3,790,680
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Long-Term Debt
Notes Payable (net of current
maturities shown above) $ 11,277,671 $ 10,910,757
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Redeemable Stock $ 300,000 $ 300,000
Shareholders' Equity:
preferred stock, $1 par value;
1,000,000 shares authorized; 250,000
shares issued and outstanding in 1991 $ 250,000 $ 250,000
common stock - $.01 par value; 9,000,000
shares authorized; 2,200,863 and 2,194,305
shares issued and outstanding, net of
redeemable shares reported above, at March 31,
1996 and December 31, 1995, Respectively. 23,124 23,124
additional paid-in capital 11,910,554 11,910,554
accumulated deficit (4,806,140) (5,032,486)
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Total Shareholders' Equity $ 7,377,538 $ 7,151,192
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Total Liabilities, Redeemable Stock and
Shareholders' Equity $ 23,148,638 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND MARCH 31, 1996
MARCH 31 MARCH 31
1997 1996
(UNAUDITED) (UNAUDITED)
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Sales $ 8,564,846 $ 5,574,986
Cost of Sales 7,044,357 4,568,631
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Gross Profit $ 1,520,489 $ 1,006,355
17.8% 18.1%
Selling, General and Admin. 1,014,805 593,108
Engineering/Reseach & Development 112,495 73,366
Misc. (Income) Expense, net 8,763 (58)
Interest Expense 183,671 86,745
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Net Income (Loss) Before Tax
Provision $ 200,755 $ 253,194
Tax Provision 68,000 63,300
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Net Income $ 132,755 $ 189,894
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Income (Loss) per Share of Common Stock
Net income $ 0.06 $ 0.08
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Weighted Average Number of Shares
Outstanding 2,362,263 2,450,863
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
***
MARCH 31 MARCH 31
1997 1996
(UNAUDITED) (UNAUDITED)
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Cash Flows from Operating Activities
Net Income $ 132,755 $ 189,894
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 284,346 65,524
Changes in Operating Assets and Liabilities:
Accounts receivable (834,906) (1,014,351)
Inventories (271,319) (828,209)
Prepaid expenses (106,019) (89,922)
Other assets 207,207 10,522
Accounts payable (85,875) 1,085,715
Accured payrolls 257,753 167,777
Other accruals 677,972 (157,362)
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Net cash used by operating act. 261,914 (570,412)
Cash Flows from Investing Activities:
Acquistion of equipment (328,771) (99,928)
Acquistion of Comp. assets 0 0
Net Proceeds Under L/C 0 0
Proceeds from Sale of Stock 0 0
Other activities 19,661
Payment of Pref. Stock Dividend 0 0
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Net cash used by investing act. (328,771) (80,267)
Cash Flows from Financing Activities:
Net borrowing of L/T debt 200,000 225,000
Payments of long term debt (238,415) (31,954)
Change in current debt 52,899 5,648
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Net cash provided by financing
activities 14,484 198,694
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Net Increase (Decrease) in Cash (52,373) (451,985)
Cash at Beginning of Period 1,235,127 924,590
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Cash at End of Period $ 1,182,754 $ 472,605
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR PERIOD ENDED MARCH 31, 1997
For the quarter ended March 31, 1997, the Company had revenues of $8,564,846,
compared to revenues of $5,574,986 for the quarter ended March 31, 1996. The
increase in revenues resulted primarily from the additional revenues generated
by the recently acquired Zercom Division. The Company previously completed this
acquisition in November, 1996. The net income for the three months ended March
31, 1997 was $132,755 or $.06 per share, compared to a net income of $189,894 or
$.08 per share, for the three months ended March 31, 1996. The net income for
the quarter ended March 31, 1997 was primarily impacted by the expending of
funds on Company-sponsored research and development of large-screen, high
resolution video monitors for the imaging division.
Company's 90 day order backlog was $6,668,000 as of March 31, 1997, compared to
$6,127,000 at the beginning of the quarter. Based on the current conditions,
the Company anticipates revenue levels in the second quarter of 1997 to be
higher than the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital increased to $9,755,653 during the first quarter
of 1997, compared to $8,498,531 as of December 31, 1996. The Company believes
that its financial stability will continue to improve during 1997 and would
expect that its operating cash flow and available credit faculities will be
sufficient to fund the expected growth in the near term.
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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.
Dated: May 13, 1997 NORTECH SYSTEMS INCORPORATED
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By: Quentin E. Finkelson
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Quentin E. Finkelson
Its President and Chief
Executive Officer
By: Garry M. Anderly
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Garry M. Anderly
Principal Financial
Officer and Principal
Accounting Officer
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<TABLE> <S> <C>
<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,182,754
<SECURITIES> 0
<RECEIVABLES> 4,530,669
<ALLOWANCES> 0
<INVENTORY> 7,000,819
<CURRENT-ASSETS> 13,449,082
<PP&E> 11,074,098
<DEPRECIATION> 3,160,048
<TOTAL-ASSETS> 23,148,638
<CURRENT-LIABILITIES> 4,193,429
<BONDS> 0
0
250,000
<COMMON> 23,124
<OTHER-SE> 7,404,414
<TOTAL-LIABILITY-AND-EQUITY> 23,148,638
<SALES> 8,564,846
<TOTAL-REVENUES> 8,564,846
<CGS> 7,044,357
<TOTAL-COSTS> 7,044,357
<OTHER-EXPENSES> 1,136,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183,671
<INCOME-PRETAX> 200,755
<INCOME-TAX> 68,000
<INCOME-CONTINUING> 132,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,755
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
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