NORTECH SYSTEMS INC

General

Nortech Systems Incorporated, (“the Company”, “we”, “our”) organized in 1990, is a provider of engineering design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies and components headquartered in Maple Grove, Minnesota, a suburb of Minneapolis, Minnesota. We maintain facilities and operations in Minnesota in the United States; Monterrey, Mexico; and Suzhou, China. All dollar amounts herein, excluding incorporated by reference documents, are in thousands of US Dollars.

We offer a full range of value-added engineering, technical and manufacturing services and support including project management, designing, testing, prototyping, manufacturing, supply chain management and post-market services. Our manufacturing and engineering services include 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. In the design phase, we provide technical support, subject matter expertise in design for manufacturing and testing capabilities that allow our customer programs to get to production faster while meeting both their quality and cost requirements.

Our breadth of manufacturing, technical expertise and experience make us attractive to our broad customer base. Our customers are original equipment manufacturers (“OEMs”) in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets. The diversity in the markets we serve is an advantage to mitigate the effects of fluctuations from the economy and competition. Our customers rely on our experience and capabilities in manufacturing and supply chain to manage and reduce total overall cost over the life cycle of their products. This requires a strong relationship with our customers based on a trusting partnership as we perform as an extension of their operations. Most of our net sales are derived from products built to the customer’s unique design specifications.

Our quality systems and processes are based on ISO standards with all facilities certified to at least one of the following: ISO 9001, ISO 13485 or AS9100. Additionally, our facility in Monterrey, Mexico is now certified in AS9100:D. These certifications and registrations provide our customers assurance of our capabilities and proven processes. Our Milaca operation is a U.S. Food and Drug Administration (“FDA”) registered facility, and our Suzhou operation is National Medical Products Administration certified for class II medical devices. In addition to industry standard certifications, we actively manage quality metrics throughout product life cycle at all levels of the organization to provide real-time, pro-active support to our customers and their projects. Process validation is performed through the strict phases of installation qualification, operation qualification and performance qualification.

Business Segment

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. Substantially all of our operations fall under the Contract Manufacturing segment within the Electronic Manufacturing Services (“EMS”) industry. 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 finance functions. Our financial information is evaluated regularly on a consolidated basis by the chief operating decision maker in assessing performance and allocating resources.

Business Strategy

The EMS industry has evolved into a dynamic, high-tech, regulated global electronics contract services industry. We continue to expand our capabilities and footprint to better meet these changing market requirements. Along with offering technical expertise in our quality processes, engineering design applications and testing, we continue to transform our business model from one that is less transactional, and price/commodity driven to a solution-based model. Our model is focused on value-added customer and supplier-managed inventory solutions and the underlying cost drivers throughout the global supply chain. We continue to pursue strategic opportunities that may include acquisitions, mergers, and/or joint ventures with complementary companies to expand our service offering, advance our competitive edge, grow our customer base and increase net sales. Our strategic objectives and our history have been based on both organic and acquired growth.

We are committed to quality, cost effectiveness and responsiveness to customer requirements. To achieve these objectives, we have invested in equipment, plant capacity studies, people, enterprise resource planning systems, lean manufacturing and supply chain management techniques at our facilities. We have also invested in fiber optic technologies to provide a lighter weight, data-driven and environmentally cleaner solution to our customers. We are committed to continuous improvement and have invested in training our people to identify and act on improvement opportunities. We maintain a diversified customer base and expand into other capabilities and services when there is a fit with our core competencies and strategic vision.

Marketing

We concentrate our marketing efforts in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets. Our marketing strategy emphasizes our breadth, expertise and experience in each of our markets. Our expertise helps our customers save time and money and reduces their risks. The breadth of our manufacturing, supply chain, engineering services and complete turnkey solutions assist our customers in getting their products to market quickly while managing the total cost solution. Our strength is managing low to moderate volume components and assemblies with high mix customer demand. This requires us to have close customer relationships and operational flexibility to manage the variation of product demands.

Our customer emphasis continues to be on companies that require an electronic manufacturing partner with a high degree of manufacturing and quality sophistication, including statistical process control, statistical quality control, ISO standards, military specifications, AS9100 and FDA facility registration. We continue efforts to penetrate our existing customer base and expand market opportunities with participation in industry forums and selected trade shows. We target customers who value proven manufacturing performance, design, project management and application engineering expertise and who value the flexibility to manage the supply chain of a high mix of products and services. We market our services through a mix of traditional marketing outreach, a specialized business development team and in limited circumstances, independent manufacturers’ representatives. For more information on our marketing and service offerings see our website at www.nortechsys.com. The information on our Company’s website is not part of this filing.

Sources and Availability of Materials

We currently purchase most of our electronic components globally and directly from electronic component manufacturers and large electronic distributors. During the COVID pandemic, we, like many other companies in our industries, experienced significant supply chain and shipping disruptions. More recently, we are experiencing shifts in customer order patterns as they seek to reduce fulfillment times, which requires changes to our procurement strategies and inventory investments. We seek to develop, in partnership with our customers, a commitment to strong supplier partnerships and risk management tools through advanced supply chain solutions.

Major Customers

One customer individually accounted for 32.2% of net sales for the year ended December 31, 2025 and 27.7% of net sales for the year ended December 31, 2024.

Patents and Licenses

Our success depends on our technical expertise, trade secrets, supply chain and manufacturing skills. During the normal course of business, we obtain or develop proprietary products requiring licensing, patent, copyright or trademark protection.

Competition

The contract manufacturing EMS industry’s competitive makeup includes small closely held contract manufacturing companies, large global full-service contract manufacturers, company-owned in-house manufacturing facilities and foreign contract manufacturers. We do not believe that the small closely held operations pose a significant competitive threat in the markets and customers we serve, as they generally do not have the complete manufacturing and engineering services or capabilities required by our target customers. We believe the larger global full service and foreign manufacturers are more focused on higher volume customer engagements and we do not see them as our primary competition. We continue to see opportunities with OEM companies that have their own in-house electronic manufacturing capabilities as they evaluate their internal costs and investments against outsourcing to contract manufacturers like us. We see trends of the low volume, high mix customer demand going to a regional supply base. This is a good fit with our operations in US, Mexico and China. We continue to study and investigate other regions and global alternatives to meet our competitive challenges and customer requirements.

Research and Development

We perform research and development (“R&D”) for customers on an as requested, project and program basis for development of conceptual engineering and design activities as well as products moving into production. We spent $1,172 and $1,191 on product research and development in the years ended December 31, 2025 and 2024, respectively. We continue to explore opportunities for developing proprietary manufacturing methods or products, particularly in complex wire and cable interconnect technologies.

In addition to customer directed R&D, we invest in strategic initiatives to expand our technical capabilities and support long-term growth. Our efforts include advancing fiber-optic interconnect technologies, which are becoming increasingly important in the EMS market as customers require higher-speed data transmission, improved signal integrity, and greater bandwidth. These initiatives are designed to strengthen our position in markets rapidly adopting optical solutions, including industrial automation, medical devices, defense communication platforms, and other high reliability connectivity applications.

Environmental Law Compliance

We believe that our manufacturing facilities are currently operating in compliance with local, state, and federal environmental laws. We plan to continue acquiring environmentally efficient equipment and incurring the expenditures we deem necessary for compliance with applicable laws. Expenditures relating to compliance for operating facilities incurred in the past have not significantly affected our capital expenditures, earnings or competitive position.

Government Regulation

As a medical device manufacturer, we have additional compliance requirements. We are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality Management System Regulation (“QMSR”) requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections and product field monitoring by the FDA. In January 2024, the FDA finalized its transition to the new QMSR, which became effective February 2, 2026. The new QMSR incorporates ISO 13485:2016 by reference and replaces most prior Quality System Regulation (“QSR”) requirements, retaining only select U.S.-specific expectations such as labeling and complaint handling. As part of this shift, the FDA adopts the ISO defined Medical Device File structure in place of traditional QSR documentation while emphasizing a risk-based approach consistent with ISO 13485 and ISO 14971 principles. We believe our ISO certified facilities position us well for this transition, and we continue to review and enhance our systems to ensure full compliance.

To support the quality requirements of our Aerospace and Defense market customers, all our US locations are International Traffic in Arms Regulations (“ITAR”) compliant.

Human Capital Resources

We have 685 full-time and 28 part-time/temporary employees as of December 31, 2025, none which are covered by union agreements. Of full-time employees, manufacturing personnel, including direct, indirect support and sales functions, comprise 642 employees, while general administrative employees total 43.

Foreign Operations and Export Sales from Our Domestic Operations

We have leased manufacturing facilities in Monterrey, Mexico and Suzhou, China. Monterrey, Mexico has approximately $607 and $687 in long-term assets, and $1,408 and $1,758 of net operating lease assets as of December 31, 2025 and 2024, respectively. Suzhou, China has approximately $953 and $812 in long-term assets, and $375 and $685 of net operating lease assets as of December 31, 2025 and 2024, respectively. Export sales from our U.S. domestic operations represented 3.3% and 3.4% of net sales for the years ended December 31, 2025 and 2024, respectively.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available free of charge, as soon as reasonably practicable, after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission (“SEC”). These reports are available on our website athttp://www.nortechsys.com and on the SEC’s website athttp://www.sec.gov. Information included on our website is not deemed to be incorporated into this Annual Report on Form 10-K.