Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Mar. 06, 2023 | |
Document Information [Line Items] | ||
Document Type | 10-K | |
Document Annual Report | true | |
Document Period End Date | Dec. 31, 2022 | |
Document Transition Report | false | |
Entity Registrant Name | NORTECH SYSTEMS INCORPORATED | |
Entity File Number | 0-13257 | |
Entity Incorporation, State or Country Code | MN | |
Entity Tax Identification Number | 41-1681094 | |
Entity Address, Address Line One | 7550 Meridian Circle N #150 | |
Entity Address, City or Town | Maple Grove | |
Entity Address, State or Province | MN | |
Entity Address, Postal Zip Code | 55369 | |
City Area Code | 952 | |
Local Phone Number | 345-2244 | |
Title of 12(b) Security | Common Stock, par value $.01 per share | |
Trading Symbol | NSYS | |
Security Exchange Name | NASDAQ | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Public Float | $ 17,606,931 | |
Entity Common Stock, Shares Outstanding (in shares) | 2,700,633 | |
Auditor Firm ID | 23 | |
Auditor Name | Baker Tilly US, LLP | |
Auditor Location | Minneapolis, Minnesota | |
Entity Central Index Key | 0000722313 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | FY | |
Amendment Flag | false |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Net Sales | $ 134,123 | $ 115,168 |
Cost of Goods Sold | 113,643 | 99,304 |
Gross Profit | 20,480 | 15,864 |
Operating Expenses: | ||
Selling Expenses | 3,719 | 2,361 |
General and Administrative Expenses | 11,425 | 10,002 |
Restructuring Expenses | 0 | 327 |
R&D Expenses | 1,463 | 483 |
Loss on Abandonment of Intangible Asset | 0 | 560 |
Gain on Sale of Property and Equipment | (15) | (141) |
Total Operating Expenses | 16,592 | 13,592 |
Income from Operations | 3,888 | 2,272 |
Other (Expense) Income | ||
Interest Expense | (411) | (430) |
PPP Loan Forgiviness Gain | 0 | 6,171 |
Total Other (Expense) Income | (411) | 5,741 |
Income Before Income Taxes | 3,477 | 8,013 |
Income Tax Expense | 1,467 | 859 |
Net Income | $ 2,010 | $ 7,154 |
Income Per Common Share: | ||
Basic (in dollars per share) | $ 0.75 | $ 2.68 |
Weighted Average Number of Common Shares Outstanding - Basic (in shares) | 2,685,378 | 2,664,586 |
Diluted (in dollars per share) | $ 0.70 | $ 2.54 |
Weighted Average Number of Common Shares Outstanding - Dilutive (in shares) | 2,891,285 | 2,821,523 |
Other comprehensive income | ||
Foreign currency translation | $ (426) | $ 93 |
Comprehensive income, net of tax | $ 1,584 | $ 7,247 |
Consolidated Balance Sheet
Consolidated Balance Sheet - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current Assets | ||
Cash | $ 1,027 | $ 643 |
Restricted Cash | 1,454 | 1,582 |
Accounts Receivable, less allowances of $334 and $328 | 15,975 | 14,548 |
Employee Retention Credit Receivable | 2,650 | 5,209 |
Inventories, Net | 22,438 | 19,434 |
Contract Assets | 9,982 | 8,698 |
Prepaid Assets | 1,334 | 1,660 |
Total Current Assets | 54,860 | 51,774 |
Property and Equipment, Net | 6,408 | 5,833 |
Operating Lease Assets | 7,850 | 8,983 |
Other Intangible Assets, Net | 422 | 501 |
Total Assets | 69,540 | 67,091 |
Current Liabilities | ||
Current Portion of Finance Lease Obligations | 390 | 601 |
Current Portion of Operating Leases | 1,155 | 1,043 |
Accounts Payable | 14,792 | 12,710 |
Accrued Payroll and Commissions | 4,803 | 4,045 |
Other Accrued Liabilities | 5,258 | 3,907 |
Total Current Liabilities | 26,398 | 22,306 |
Long-Term Liabilities | ||
Long-term Line of Credit | 6,853 | 8,959 |
Long-Term Finance Lease Obligations, Net of Current Portion | 565 | 916 |
Long-Tem Operating Lease Obligations, Net of current Portion | 7,549 | 8,695 |
Other Long-Term Liabilities | 95 | 104 |
Total Long-Term Liabilities | 15,062 | 18,674 |
Total Liabilities | 41,460 | 40,980 |
Shareholders' Equity | ||
Preferred Stock, $1 par value; 1,000,000 Shares Authorized; 250,000 Shares Issued and Outstanding | 250 | 250 |
Common Stock - $0.01 par value; 9,000,000 Shares Authorized; 2,690,633 and 2,672,064 Shares Issued and Outstanding, respectively | 27 | 27 |
Additional Paid-In Capital | 16,347 | 15,962 |
Accumulated Other Comprehensive (Loss) Income | (370) | 56 |
Retained Earnings | 11,826 | 9,816 |
Total Shareholders' Equity | 28,080 | 26,111 |
Total Liabilities and Shareholders' Equity | $ 69,540 | $ 67,091 |
Consolidated Balance Sheet (Par
Consolidated Balance Sheet (Parentheticals) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Accounts receivable allowance | $ 334 | $ 328 |
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred Stock, Shares Authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 250,000 | 250,000 |
Preferred stock, shares outstanding (in shares) | 250,000 | 250,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 9,000,000 | 9,000,000 |
Common stock, shares outstanding, Ending Balance (in shares) | 2,690,633 | 2,672,064 |
Common stock, shares issued (in shares) | 2,690,633 | 2,672,064 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income | $ 2,010 | $ 7,154 |
Adjustments to Reconcile Net Income to Net Cash | ||
Depreciation | 1,768 | 1,774 |
Amortization | 150 | 176 |
Compensation on Stock-Based Awards | 334 | 111 |
Compensation on Equity Appreciation Rights | 0 | 143 |
Loss on Abandonment of Intangible Asset | 0 | 560 |
Change in Accounts Receivable Allowance | 6 | (15) |
Change in Inventory Reserves | (149) | (860) |
Gain on Disposal of Property and Equipment | (15) | (141) |
PPP Loan Forgiveness Gain | 0 | (6,171) |
Foreign Currency Transaction Gain | (72) | 0 |
Changes in Current Operating Items | ||
Accounts Receivable | (1,746) | 1,134 |
Employee Retention Credit Receivable | 2,574 | (5,209) |
Inventories | (2,985) | (4,613) |
Contract Assets | (1,283) | (2,799) |
Prepaid Expenses and other Curent Assets | 317 | (171) |
Income Taxes | 643 | 634 |
Accounts Payable | 2,216 | 1,471 |
Accrued Payroll and Commissions | 783 | 1,176 |
Other Accrued Liabilities | 851 | 1,106 |
Net Cash Provided by (Used In) Operating Activities | 5,402 | (4,540) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from Sale of Property and Equipment | 15 | 626 |
Purchase of Intangible Asset | (71) | (64) |
Purchases of Property and Equipment | (2,370) | (1,292) |
Net Cash Used In Investing Activities | (2,426) | (730) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from Line of Credit | 119,349 | 109,544 |
Payments to Line of Credit | (121,468) | (103,856) |
Principal Payments on Long-Term Debt | 0 | (1,128) |
Principal Payments on Financing Leases | (599) | (664) |
Stock Option Excercises | 51 | 35 |
Net Cash (Used In) Provided By Financing Activities | (2,667) | 3,931 |
Effect of Exchange Rate Changes on Cash | (53) | 0 |
Net Change in Cash and Cash Equivalents | 256 | (1,339) |
Cash and Cash Equivalents - Beginning of Year | 2,225 | 3,564 |
Cash and Cash Equivalents - End of Year | 2,481 | 2,225 |
Reconciliation of cash and restricted cash reported within the consolidated balance sheets | ||
Cash | 1,027 | 643 |
Restricted Cash | 1,454 | 1,582 |
Total Cash and restricted cash reported in the consolidated statements of cash flows | 2,481 | 2,225 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash Paid for Interest | 476 | 316 |
Cash Paid (Refunded) for Income Taxes | 237 | (114) |
Supplemental Noncash Investing and Financing Activities: | ||
Property and Equipment Purchases in Accounts Payable | 14 | 35 |
Property Acquired under Operating Lease | 44 | 1,188 |
Equipment Acquired under Finance Lease | 41 | 368 |
PPP Loan Forgiviness Gain | $ 0 | $ 6,171 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | AOCI Attributable to Parent [Member] | Retained Earnings [Member] | Total |
Balance at Dec. 31, 2020 | $ 250 | $ 27 | $ 15,816 | $ (37) | $ 2,662 | $ 18,718 |
Net Loss | 0 | 0 | 0 | 0 | 7,154 | 7,154 |
Foreign Currency Translation Adjustment | 0 | 0 | 0 | 93 | 0 | 93 |
Stock Option Exercises | 35 | 35 | ||||
Compensation on Stock-based awards | 0 | 0 | 111 | 0 | 0 | 111 |
Balance at Dec. 31, 2021 | 250 | 27 | 15,962 | 56 | 9,816 | 26,111 |
Net Loss | 0 | 0 | 0 | 0 | 2,010 | 2,010 |
Foreign Currency Translation Adjustment | 0 | 0 | 0 | (426) | 0 | (426) |
Stock Option Exercises | 51 | 51 | ||||
Compensation on Stock-based awards | 0 | 0 | 334 | 0 | 0 | 334 |
Balance at Dec. 31, 2022 | $ 250 | $ 27 | $ 16,347 | $ (370) | $ 11,826 | $ 28,080 |
Note 1 - Summary of Significant
Note 1 - Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Basis of Presentation and Significant Accounting Policies [Text Block] | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements of Nortech Systems, Incorporated and Subsidiaries (“the Company”, “we”, “our”) have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Nature of Business Our manufacturing services include complete medical devices, printed circuit board assemblies, wire and cable assemblies, and complex higher-level electromechanical assemblies for a wide range of medical, industrial and defense and aerospace industries. We provide a full "turn-key" contract manufacturing service to our customers. All products are built to the customer's design specifications. We also provide engineering services and repair services. Our manufacturing facilities are located in Bemidji, Blue Earth, Milaca, and Mankato, Minnesota as well as, Monterrey, Mexico and Suzhou, China. Products are sold to customers both domestically and internationally. Principles of Consolidation The consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly-owned subsidiaries, Manufacturing Assembly Solutions of Monterrey, Inc. and Nortech Systems Hong Kong Company, Limited and its subsidiary, Nortech Systems Suzhou Company, Limited. All significant intercompany accounts and transactions have been eliminated in consolidation. 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 revenue and expense during the reporting period. Significant items subject to estimates and assumptions include the valuation allowance for inventories, allowance for doubtful accounts, realizability of deferred tax assets and long-lived asset impairment testing. Actual results could differ from those estimates. Restricted Cash Cash and cash equivalents classified as restricted cash on our consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. As of December 31, 2022 we had outstanding letters of credit for $300. Restricted cash as of December 31, 2022 and December 31, 2021 was $1,454 and $1,582, respectively. The December 31, 2022 and 2021 restricted cash balance included lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against our line of credit the next business day. Accounts Receivable and Allowance for Doubtful Accounts We grant credit to customers in the normal course of business. Accounts receivable are unsecured and are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts was $334 and $328 at December 31, 2022 and 2021, respectively. We determine our allowance by considering a number of factors, including the length of time accounts receivable are past due, our previous loss history, the customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Employee Retention Credit (ERC) and Payroll Tax Deferral On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. The Company qualified and applied for the ERC in 2021 for the first and second quarters of that year. The Company has elected to account for the credit as a government grant. U.S. GAAP does not include grant accounting guidance for for-profit entities, therefore, the Company has elected to follow the grant accounting model in International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, the Company cannot recognize any income from the grant until there is reasonable assurance (similar to the “probable” threshold in U.S. GAAP) that any conditions attached to the grant will be met and that the grant will be received. Once it is reasonably assured that the grant conditions will be met and that the grant will be received, grant income is recorded on a systematic basis over the periods in which the Company recognizes the payroll expenses for which the grant is intended to compensate. Income from the grant can be presented as either other income or as a reduction in the expenses for which the grant was intended to compensate. The CARES Act allowed for the deferral of the employer portion of social security taxes incurred through the end of calendar 2020. As of December 31, 2022, there was $1,158 of social security tax payments deferred, of which 50% was required to be remitted by December 2021 and the remaining 50% by December 2022. IRS Notice 2020-22 and Notice 2021-24 provides that employers are not subject to the penalty for failing to timely deposit employment taxes under Code Section 6656 if (i) the amount of employment taxes that are not deposited (i.e., the deemed credit amount) is less than or equal to the employer’s anticipated credits (ERC) and (ii) the employer did not previously file for advance payment of these credits. We did not remit the amount due on December 31, 2021 or during 2022 due to our awaiting receipt of the anticipated credits under the ERC that exceeds the deferral amount as allowed under the above IRS Notices. The deferred amounts are recorded within accrued payroll and commissions on the condensed consolidated balance sheets. Inventories Inventories consist of finished goods, raw materials and work-in-process and are stated at the lower of average cost (which approximates first-in, first-out) or net realizable value. Costs include material, labor, and overhead required in the production of our products. Inventory reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs. We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write down inventories to their net realizable value. The determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products and current market conditions. Inventories are as follows: 2022 2021 Raw materials $ 21,673 $ 18,492 Work in process 1,238 1,678 Finished goods 671 562 Reserves (1,144 ) (1,298 ) Total $ 22,438 $ 19,434 Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized, while maintenance and minor repairs are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operations. Leasehold improvements are depreciated over the shorter of their estimated useful lives or their remaining lease terms. All other property and equipment are depreciated by the straight-line method over their estimated useful lives, as follows: (in years) Buildings 39 Leasehold improvements 3 - 15 Manufacturing equipment 3 - 7 Office and other equipment 3 - 7 Property and equipment at December 31, 2022 and 2021: 2022 2021 Land $ 148 $ 148 Building and Leasehold Improvements 5,289 4,083 Manufacturing Equipment 19,128 18,892 Office and Other Equipment 6,822 6,934 Accumulated Depreciation and Amortization (24,979 ) (24,224 ) Total Property and Equipment, Net $ 6,408 $ 5,833 Long-Lived Asset Impairment We evaluate long-lived assets, primarily property and equipment, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets or asset group. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to dispose. No impairments of long-lived assets were recorded during the years ended December 31, 2022 and 2021. Preferred Stock Preferred stock issued is non-cumulative and nonconvertible. The holders of the preferred stock are entitled to a non-cumulative dividend of 12% when and if declared. In liquidation, holders of preferred stock have preference to the extent of $1.00 per share plus dividends accrued but unpaid. No Revenue Recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation. Goods created for customers with no alternative use and enforceable right to a payment of cost plus a reasonable margin, revenue is recognized over time instead of at a point in time. Revenue is recorded net of returns, allowances and customer discounts. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the Consolidated Statements of Operations and Comprehensive Loss. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Product Warranties We provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost to our customers. We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including, without limitation, warranties to merchantability, fit for a particular purpose or non-infringement of patent or the like unless agreed upon in writing. We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date. Our warranty claim costs are not material given the nature of our products and services. Advertising Advertising costs are charged to operations as incurred. The total amount charged to expense was $63 and $57 for the years ended December 31, 2022 and 2021, respectively. Income Taxes We account for income taxes under the asset and liability method. Deferred income tax assets and liabilities are recognized annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We recognize interest and penalties accrued on any unrecognized tax benefits as a component on income tax expense. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Management must also assess whether uncertain tax positions as filed could result in the recognition of a liability for possible interest and penalties if any. Our estimates are based on the information available to us at the time we prepare the income tax provisions. Our income tax returns are subject to audit by federal, state, and local governments, generally three years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. Incentive Compensation We use a Black-Scholes option-pricing model to determine the grant date fair value of our service-based incentive awards and recognize the expense on a straight-line basis over the vesting period. We determine the grant date fair value of our market-based incentive awards using a lattice simulation model and recognize the expense on a straight-line basis over the vesting period. The grant date fair value of restricted stock units is determined based on the closing market price of the Company's common stock on the date of grant, with compensation expense recognized ratably over the applicable vesting period. See Note 8 for additional information. Net Income Per Common Share Basic net income per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Dilutive net income (loss) per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding, unless their effect is antidilutive. For the year ended December 31, 2022, stock options of 205,907 were included in the computation of diluted income per common share as their impact were dilutive. For the year ended December 31, 2021, stock options of 156,937 were included in the computation of diluted income per common share as their impact were dilutive. Fair Value of Financial Instruments The carrying amounts of all financial instruments approximate their fair values. The carrying amounts for cash, accounts receivable, ERC receivable, accounts payable, and other assets and liabilities approximate fair value because of the short maturity of these instruments. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the carrying value of our long-term debt and line of credit approximates its fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value framework requires the categorization of assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. We endeavor to use the best available information in measuring fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note 4, Other Intangible Assets, Enterprise-Wide Disclosures Our results of operations for the years ended December 31, 2022 and 2021 represent a single operating and reporting segment referred to as Contract Manufacturing within the EMS industry. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. Export sales from our domestic operations represent approximately 4.0% and 3.1% of consolidated net sales for the years ended December 31, 2022 and 2021, respectively. Net sales by our major EMS industry markets for the years ended December 31, 2022 and 2021 are as follows: 2022 2021 Medical $ 75,907 $ 63,047 Aerospace and Defense 19,479 16,639 Industrial 38,737 35,482 Total Net Sales $ 134,123 $ 115,168 Noncurrent assets, excluding deferred taxes, by country are as follows: United States Mexico China Total December 31, 2022 Property and Equipment, Net $ 5,109 $ 494 $ 805 $ 6,408 Operating Lease Assets $ 5,381 2,469 - $ 7,850 Other Assets $ 422 - - $ 422 December 31, 2021 Property and Equipment, Net $ 4,664 $ 454 $ 715 $ 5,833 Operating Lease Assets $ 5,287 2,800 896 $ 8,983 Other Assets $ 501 - - $ 501 Foreign Currency Transactions The functional currency for our Mexico subsidiary is the US dollar. Foreign exchange transaction gains and losses attributable to exchange rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a long-term investment nature are recorded in other income (expense). The functional currency for our China subsidiary is the Renminbi (“RMB”). Assets and liabilities of the China operation are translated from RMB into U.S. dollars at period-end rates, while income and expense are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within shareholders’ equity. The total foreign currency translation adjustment decreased shareholders’ equity by $426 and increased shareholder’s equity by $93 for the years ended December 31, 2022 and 2021, respectively. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the Consolidated Statements of Operations. Net foreign currency transaction losses included in the determination of net earnings was $42 and $131 for the years ended December 31, 2022 and 2021, respectively. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The ASU also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the SEC for interim and annual periods beginning after December 15, 2022. We have evaluated the impact of this standard on our consolidated financial statements and related disclosures and conclude it will not be material. Revision and Immaterial Correction of an Error in Previously Issued Financial Statements The Company identified an error related to the classification of the activity on our line of credit facility with Bank of America at December 31, 2021 as reported on Form 10-K. In our December 31, 2021 consolidated financial statements, we incorrectly classified borrowings and payments on our line of credit facility on a net basis within the financing section of the consolidated cash flow statement; this activity should be shown on a gross basis. This change in presentation to the consolidated cash flow statement does not impact total operating, investing, or financing cash flows. There was no change to the consolidated statement of income or consolidated balance sheet. In accordance with ASC 250, Accounting Changes and Error Corrections, we evaluated the materiality of the errors from quantitative and qualitative perspectives and concluded that the errors were immaterial to the Company’s 2022 audited financial statements. Since these revisions were not material to any prior period financial statements, no amendments to previously filed financial statements are required. Consequently, the Company has corrected these immaterial errors by revising the December 31, 2021 consolidated financial statements presented herein. The tables below present the effect of the financial statement adjustments related to the revision discussed above of the Company’s previously reported financial statements as of and for the periods ended December 31, 2021. The effect of the immaterial correction of an error on our previously filed audited consolidated financial statements as of December 31, 2021 and for the year then ended is as follows: Consolidated Statements of Cash Flows December 31, 2021 CASH FLOWS FROM FINANCING ACTIVITIES As reported Adjustment As revised Net Proceeds from Line of Credit 5,688 (5,688 ) - Proceeds from Line of Credit - 109,544 109,544 Payments to Line of Credit - (103,856 ) (103,856 ) Principal Payments on Long-Term Debt (1,128 ) (1,128 ) Principal Payments on Financing Leases (664 ) (664 ) Stock Option Excercises 35 35 Net Cash Provided By Financing Activities 3,931 - 3,931 |
Note 2 - Concentration of Credi
Note 2 - Concentration of Credit Risk and Major Customers | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Concentration Risk Disclosure [Text Block] | NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. With regard to cash, we maintain our excess cash balances in checking accounts at two high-credit quality financial institutions. These accounts may at times exceed federally insured limits. We grant credit to customers in the normal course of business and do not require collateral on our accounts receivable. We have certain customers whose revenue individually represented 10% or more of net sales, or whose accounts receivable balances individually represented 10% or more of total accounts receivable. One |
Note 3 - Revenue
Note 3 - Revenue | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Revenue from Contract with Customer [Text Block] | NOTE 3. REVENUE Revenue recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances and customer discounts. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold. The majority of our revenue is derived from the transfer of goods produced under contract manufacturing agreements which have no alternative use and we have an enforceable right to payment for our performance completed to date. Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced. If these requirements are not met, the revenue is recognized at a point in time, generally upon shipment. Revenue under contract manufacturing agreements that was recognized over time accounted for approximately 72% and 78% of our revenue for the years ended December 31, 2022 and 2021, respectively. Revenues under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred. Accounting for contract manufacturing agreements involves the use of various techniques to estimate total revenue and costs. We estimate profit on these agreements as the difference between total estimated revenue and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced. The estimates to determine the profit earned on the performance obligation are based on anticipated selling prices and historical cost of goods sold and represent our best judgement at the time. Changes in judgements on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated profit. On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in revenue as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold. The inclusion of noncash consideration has no impact on overall profitability. Contract Assets Contract assets, recorded as such in the Consolidated Balance Sheet, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the years ended December 31, 2022 and 2021 was as follows: Balance outstanding at December 31, 2021 $ 8,698 Increase (decrease) attributed to: Amounts transferred over time to contract assets 96,924 Amounts invoiced during the period (95,640 ) Balance outstanding at December 31, 2022 $ 9,982 We expect substantially all of the remaining performance obligations for the contract assets recorded as of December 31, 2022, 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. The following tables summarize our net sales by market for the years ended December 31, 2022 and 2021: Year Ending December 31, 2022 Product/ Service Transferred Over Time Product Transferred at Point in Time Noncash Consideration Total Net Sales by Market Medical $ 51,473 $ 22,288 $ 2,146 $ 75,907 Aerospace and Defense 16,745 1,859 875 19,479 Industrial 28,706 8,541 1,490 38,737 Total net sales $ 96,924 $ 32,688 $ 4,511 $ 134,123 Year Ending December 31, 2021 Product/ Service Transferred Over Time Product Transferred at Point in Time Noncash Consideration Total Net Sales by Market Medical $ 47,285 $ 13,250 $ 2,512 $ 63,047 Aerospace and Defense 14,879 861 899 16,639 Industrial 27,213 6,851 1,418 35,482 Total net sales $ 89,377 $ 20,962 $ 4,829 $ 115,168 |
Note 4 - Goodwill and Other Int
Note 4 - Goodwill and Other Intangible Assets | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Goodwill and Intangible Assets Disclosure [Text Block] | NOTE 4. OTHER INTANGIBLE ASSETS Finite life intangible assets at December 31, 2022 and 2021 are as follows: Customer Relationships Trade Names Patents Total Balance at January 1, 2021 $ 507 $ 589 $ 77 $ 1,173 Additions - - 64 64 Amortization 147 29 - 176 Abandonment Loss - 560 - 560 Balance at December 31, 2021 $ 360 $ - $ 141 $ 501 Additions - - 71 71 Amortization 144 - 6 150 Balance at December 31, 2022 $ 216 $ - $ 206 $ 422 In 2021, we determined the fair value of the Devicix tradename was more likely than not at $0 based on management’s best estimate and recognized a $560 loss on abandonment of intangible assets. 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 1.9 years. Of the patents value at December 31, 2022, $95 are being amortized and $111 are in process and a patent has not yet been received. Amortization expense of finite life intangible assets was $150 and $176 for the years ended December 31, 2022 and 2021, respectively. Estimated future annual amortization expense (except projects in process) related to these assets is approximately as follows: Year Amount 2023 $ 159 2024 87 2025 14 2026 14 2027 14 Thereafter 23 Total $ 311 |
Note 5 - Financing Arrangements
Note 5 - Financing Arrangements | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Debt Disclosure [Text Block] | NOTE 5. FINANCING ARRANGEMENTS We have a credit agreement with Bank of America which was entered into on June 15, 2017, and subsequently extended, which provides for a line of credit arrangement of $16,000 that expires on June 15, 2026. Under the amended Bank of America credit agreement signed December 31, 2021, the line of credit is subject to variations in the Bloomberg Short-Term Bank Yield (BSBY) index rate. Prior to the amendment, the line of credit was subject to variations in LIBOR. Our line of credit bears interest at a weighted-average interest rate of 5.2% and 3.5% as of December 31, 2022 and 2021, respectively. We had borrowings on our line of credit of $6,897 and $9,016 outstanding as of December 31, 2022 and December 31, 2021, respectively. There are no subjective acceleration clauses under the credit agreement that would accelerate the maturity of our outstanding borrowings. In addition, the credit agreement does not expire within one year, the Company is not in violation of the covenants and the Company expects Bank of America to be capable of honoring the financing arrangement. The line of credit is shown net of debt issuance costs of $44 thousand on the consolidated balance sheet for the year ended December 31, 2022. The line of credit with Bank of America contains certain covenants which, among other things, require us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The Bank of America Credit Agreement provides for, among other things, a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0, for the twelve months ending December 31, 2022 and each Fiscal Quarter end thereafter subject only during a trigger period commencing when our availability under our line is less than $2,000 until availability is above that amount for 30 days. The Company met the covenants for the period ended December 31, 2022. At December 31, 2022 and 2021, we had unused availability under our line of credit of $8,380 and $3,539, respectively, supported by our borrowing base. The line is secured by substantially all of our assets. During 2022, we amended our credit agreement to include the Employee Retention Credit Receivable as security in our line of credit which improves our unused availability which expired on January 15, 2023. On April 15, 2020, we entered into a Promissory Note with Bank of America, N.A., which provides for an unsecured loan of $6,077 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus, Aid, Relief, and Economic Security Act and applicable regulations (the “CARES Act”) of which funds were received on April 22, 2020. The loan was accounted for as debt until November 3, 2021 when the $6,077 loan and $93 accrued interest was fully forgiven by the SBA. As a result, we recorded a PPP loan forgiveness gain of $6,170 which is included in other income (expense) on the consolidated statements of operations and other comprehensive income for the year ended December 31, 2021. Our China operation has a financing agreement with China Construction Bank which provides for a line of credit arrangement of 10,000,000 Renminbi (RMB) (approximately 1.5 million USD) that will expire on August 18, 2023. We had no amounts outstanding as of December 31, 2022 and 2021. |
Note 6 - Leases
Note 6 - Leases | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Lease Disclosure [Text Block] | NOTE 6. 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 five We have financing leases for certain property and equipment used in the normal course of business. The components of lease expense were as follows: December 31, December 31, Lease Cost 2022 2021 Operating lease cost $ 2,309 $ 2,291 Finance lease interest cost 63 79 Finance lease amortization expense 730 502 Total lease cost $ 3,102 $ 2,872 Supplemental balance sheet information related to leases was as follows: Balance Sheet Location December 31, 2022 December 31, 2021 Assets Operating lease assets Operating lease assets $ 7,850 $ 8,983 Finance lease assets Property, Plant and Equipment 1,363 2,052 Total leased assets $ 9,213 $ 11,035 Liabilities Current Current operating lease liabilities Current Portion of Operating Lease Obligations $ 1,155 $ 1,043 Current finance lease liabilities Current Portion of Finance Lease Obligations 390 601 Noncurrent Long-term operating lease liabilities Long Term Operating Lease Liabilities, Net 7,549 8,695 Long term finance lease liabilities Long Term Finance Lease Obligations, Net 565 916 Total lease liabilities $ 9,659 $ 11,255 Supplemental cash flow information related to leases was as follows: December 31, December 31, 2022 2021 Operating leases Cash paid for amounts included in the measurement of lease liabilities $ 1,721 $ 1,649 Right-of-use assets obtained in exchange for lease obligations $ 44 $ 1,188 The right-of use-assets obtained in exchange in for lease obligations in the year ended December 31, 2021 was largely due to leasing of additional space in our Suzhou, China facility. Maturities of lease liabilities were as follows: Operating Leases Finance Leases Total 2023 1,786 433 2,219 2024 1,515 379 1,894 2025 1,265 103 1,368 2026 1,227 109 1,336 2027 1,256 - 1,256 Thereafter 5,818 - 5,818 Total lease payments $ 12,867 $ 1,024 $ 13,891 Less: Interest (4,163 ) (69 ) (4,232 ) Present value of lease liabilities $ 8,704 $ 955 $ 9,659 The lease term and discount rate at December 31, 2022 were as follows: Weighted-average remaining lease term (years) Operating leases 8.9 Finance leases 2.6 Weighted-average discount rate Operating leases 7.7 % Finance leases 5.2 % |
Note 7 - Restructuring Charges
Note 7 - Restructuring Charges | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Restructuring and Related Activities Disclosure [Text Block] | NOTE 7. RESTRUCTURING CHARGES In 2021, we recorded restructuring charges of $327 related to the consolidation of our production facilities and closure of our Merrifield, Minnesota facility. With the Merrifield closure, we shifted wire and cable assembly, system-level assembly and printed circuit board (PCB) manufacturing to Nortech’s other Minnesota locations. No amounts were accrued as of December 31, 2021. We reduced our workforce by approximately 42 employees as a result of this facility closure. |
Note 8 - Income Taxes
Note 8 - Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] | NOTE 8. INCOME TAXES In December 2020, the Consolidated Appropriations Act, 2021 (“CAA”) was signed into law. The CAA included additional funding through tax credits as part of its economic package for 2021. We evaluated these items in its tax computation as of December 31, 2020 and determined that the items do not have a material impact on our financial statements as of December 31, 2020. Additionally, as part of the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), we received a PPP loan on April 15, 2020. The full amount of the loan and accrued interest were forgiven on November 3, 2021. This extinguishment of debt income is recorded in other income (expense) on the consolidated statements of operations and other comprehensive income for the year ended December 31, 2021. The PPP loan forgiveness will be treated as tax-exempt income due to the provisions in the CAA. The income tax expense for the years ended December 31, 2022 and 2021 consists of the following: 2022 2021 Current taxes - Federal $ 855 $ 401 Current taxes - State 55 17 Current taxes - Foreign 557 441 Income tax expense $ 1,467 $ 859 The statutory rate reconciliation for the years ended December 31, 2022 and 2021 is as follows: 2022 2021 Statutory Rate $ 572 $ 1,606 State Income Tax 41 14 Effect of foreign operations 71 110 Change in State Deferred Rate 29 (39 ) Valuation Allowance 587 472 PPP Loan Forgiveness - (1,276 ) US Permanent differences (28 ) 3 Federal Tax Credits (272 ) (37 ) Global Intangible Low-Taxed Income Effect 301 391 Return to provision - credits, perm diffs 9 (481 ) Withholding Tax 122 - IRS Payable 17 121 Other 18 (25 ) $ 1,467 $ 859 Income and loss from operations before income taxes was derived from the following sources: 2022 2021 Domestic $ 990 $ 6,072 Foreign 2,487 1,941 $ 3,477 $ 8,013 Deferred tax (liabilities) assets at December 31, 2022 and 2021, consist of the following: 2022 2021 Deferred Tax Allowance for uncollectable accounts $ 81 $ 80 Inventories reserve 263 303 Accrued vacation 127 135 Accrued bonus 462 274 Stock-based compensation and equity appreciation rights 159 135 Other Accruals 548 547 Lease Accounting ASC 842 Lease Liability 1,351 1,555 Capitalized Research Expenses 318 - Net operating loss carryforwards - 101 Tax credit carryforwards 156 162 Unrealized Foreign Currency Gain 20 22 Intangibles 515 569 COGS Rev Rec Adjustment 1,864 1,776 COGS Offset Adjustment (1,875 ) (1,807 ) Other 235 10 Total 4,224 3,862 Valuation allowance (2,563 ) (1,976 ) Deferred tax assets 1,661 1,886 Accumulated Other Comprehensive Income (56 ) (297 ) Lease Accounting ASC 842 Lease Asset (1,301 ) (1,518 ) Prepaid Expenses (143 ) - Property and equipment (161 ) (71 ) Deferred tax liabilities (1,661 ) (1,886 ) Net deferred tax assets $ - $ - We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our financial statements become deductible for tax purposes. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on guidance provided in current financial accounting standards. Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives. After considering all available evidence, both positive and negative, we have concluded that a valuation allowance is needed for all our United States based deferred tax assets due to the history of operating losses sustained in the past three years. At December 31, 2022, for U.S. state purposes, we have Minnesota R&D credit carry forwards of $172, which begin to expire in 2027. The tax effects from uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following tables set forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2022 and 2021 (in thousands): Balance at December 31, 2021 $ 50 Tax Positions - Additions - Tax Positions - Reductions - Balance at December 31, 2022 $ 50 Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2022 and 2021 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2022, our 2018 IRS audit was finalized. |
Note 9 - 401(K) Retirement Plan
Note 9 - 401(K) Retirement Plan | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Retirement Benefits [Text Block] | NOTE 9. 401(K) RETIREMENT PLAN We have a 401(k) profit sharing plan (the 401(k) Plan) for our employees. The 401(k) Plan is a defined contribution plan covering substantially all of our U.S. employees. Employees are eligible to participate in the Plan after completing three months of service and attaining the age of 18. Employees are allowed to contribute up to 60% of their wages to the 401(k) Plan. Historically we have matched 25% of the employees’ contributions up to 6% of covered compensation. We made contributions, net of forfeitures, of approximately $301 and $276 during the years ended December 31, 2022 and 2021, respectively. |
Note 10 - Incentive Plans
Note 10 - Incentive Plans | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Share-Based Payment Arrangement [Text Block] | NOTE 10. INCENTIVE PLANS In May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000 shares. An additional 50,000 and 175,000 shares were authorized by the shareholders in March 2020 and May 2022, respectively. There were 115,000 options and restricted stock units and 49,000 options granted during the years ended December 31, 2022 and 2021, respectively. Stock Options We estimate the fair value of share-based awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense in the consolidated statements of operations over the requisite service periods. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. We estimate forfeitures at the time of grant and revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We used the Black-Scholes option-pricing model to calculate the fair value of option-based awards. Our determination of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, our expected stock price, volatility over the term of the awards, risk-free interest rate, and the expected life of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of our stock options. The expected volatility and holding period are based on our historical experience. For all grants, the amount of compensation expense recognized has been adjusted for an estimated forfeiture rate, which is based on historical data. We granted 21,000 market condition options to our Chief Executive Officer during the twelve months ended December 31, 2022. The market condition options vest if certain stock prices are exceeded between February 27, 2024 and February 27, 2028. We granted 73,000 service-based options during the twelve months ended December 31, 2022. There were 49,000 stock options granted during the twelve months ended December 31, 2021. Total compensation expense related to stock options was $237 for the twelve months ended December 31, 2022. Total compensation expense related to stock options was $116 for the twelve months ended December 31, 2021. As of December 31, 2022, there was $762 of unrecognized compensation which will vest and expense over the next 3.61 years. A summary of option activity as of and for the years ended December 31, 2022 and 2021 as follows: Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding – January 1, 2021 362,640 $ 3.96 Granted 49,000 8.50 Exercised (13,400 ) 3.43 Cancelled (10,740 ) 3.42 Outstanding – December 31, 2021 387,500 $ 4.57 7.17 $ 1,225 Granted 94,000 11.18 Exercised (19,800 ) 3.40 Cancelled (9,000 ) 4.19 Outstanding – December 31, 2022 452,700 $ 5.97 6.87 $ 2,855 Exercisable on December 31, 2022 223,300 $ 4.11 5.76 $ 1,817 Restricted Stock Units During the twelve months ended December 31, 2022, we granted 21,000 restricted stock units (“RSUs”) under our 2017 Stock Incentive Plan to non-employee directors which vest over two no No Equity Appreciation Rights Plan In November 2010, the Board of Directors approved the adoption of the Nortech Systems Incorporated Equity Appreciation Rights Plan (the 2010 Plan). The total number of Equity Appreciation Right Units (Units) the Plan can issue shall not exceed an aggregate of 1,000,000 Units as amended and restated on March 11, 2015 and approved by the shareholders on May 6, 2015. The 2010 Plan provides that Units issued shall fully vest three During the years ended December 31, 2022 and 2021, no |
Note 11 - Commitments and Conti
Note 11 - Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Commitments and Contingencies Disclosure [Text Block] | NOTE 11. COMMITMENTS AND CONTINGENCIES Litigation We are subject to various legal proceedings and claims that arise in the ordinary course of business. In our opinion, the amount of any ultimate liability with respect to these actions will not materially affect our consolidated financial statements or results of operations. Change of Control Agreements Since 2002, we entered into Change of Control Agreements (the Agreement(s)) with certain key executives (the Executive(s)). The Agreements provide an inducement for each Executive to remain as an employee in the event of any proposed or anticipated change of control in the organization, including facilitating an orderly transition, and to provide economic security for the Executive after a change in control has occurred. In the event of an involuntarily termination in connection with a change of control as defined in the agreements, each Executive would receive their base salary, annual bonus at time of termination, and continued participation in health, disability and life insurance plans for a period of three two |
Note 12 - Employee Retention Cr
Note 12 - Employee Retention Credit | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Employee Retention Credit [Text Block] | NOTE 12. EMPLOYEE RETENTION CREDIT We qualified for Employee Retention Credits on qualified wages paid in the first and second quarters of 2021 and filed for both credits in the third quarter of 2021. We recognize government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. In 2021, there was $5,209 related to Employee Retention Credits recognized as a reduction of the associated costs within cost of goods sold of $4,670, selling of $125, and general and administrative expenses of $414 on the consolidated statements of operations. We received payment on the Employee Retention Credit for the first quarter of 2021 of $2,559 in the fourth quarter of 2022. The remaining Employee Retention Credits Receivable of $2,650 is recorded on the Consolidated Balance Sheets. During the year ended December 31, 2022, the Company received the ERC related to the first quarter of 2021 of $2,559. The remaining Employee Retention Credits Receivable of $2,650 is recorded on the consolidated balance sheets as of December 31, 2022. |
Note 13 - Related Party Transac
Note 13 - Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Notes to Financial Statements | |
Related Party Transactions Disclosure [Text Block] | NOTE 13. RELATED PARTY TRANSACTIONS David Kunin, our Chairman, is a minority owner of Abilitech Medical, Inc. Mr. Kunin also was a consultant to Abilitech, which relationship ended on March 1, 2021. Abilitech paid the Company $247 and $1,079 in the years ended December 31, 2022 and 2021, respectively, for delivery of medical products. We have exposure to Abilitech which includes $141 of accounts receivable and $113 of inventory. We do not believe that Abilitech will pay the Company on accounts receivable or for inventory and we have fully reserved for such exposure. The Company believes that transactions with Abilitech are on terms comparable to those that the Company could reasonably expect in an arm's length transaction with an unrelated third party. David Kunin, our Chairman, is a minority owner (less than 10 500 |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation |
Consolidation, Policy [Policy Text Block] | Principles of Consolidation |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates |
Cash and Cash Equivalents, Unrestricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted Cash |
Accounts Receivable [Policy Text Block] | Accounts Receivable and Allowance for Doubtful Accounts |
Employee Retention Credit and Payroll Tax Deferral Policy [Policy Text Block] | Employee Retention Credit (ERC) and Payroll Tax Deferral |
Inventory, Policy [Policy Text Block] | Inventories 2022 2021 Raw materials $ 21,673 $ 18,492 Work in process 1,238 1,678 Finished goods 671 562 Reserves (1,144 ) (1,298 ) Total $ 22,438 $ 19,434 |
Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment (in years) Buildings 39 Leasehold improvements 3 - 15 Manufacturing equipment 3 - 7 Office and other equipment 3 - 7 2022 2021 Land $ 148 $ 148 Building and Leasehold Improvements 5,289 4,083 Manufacturing Equipment 19,128 18,892 Office and Other Equipment 6,822 6,934 Accumulated Depreciation and Amortization (24,979 ) (24,224 ) Total Property and Equipment, Net $ 6,408 $ 5,833 |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long-Lived Asset Impairment |
Stockholders' Equity, Policy [Policy Text Block] | Preferred Stock No |
Revenue [Policy Text Block] | Revenue Recognition |
Standard Product Warranty, Policy [Policy Text Block] | Product Warranties |
Advertising Cost [Policy Text Block] | Advertising |
Income Tax, Policy [Policy Text Block] | Income Taxes |
Share-Based Payment Arrangement [Policy Text Block] | Incentive Compensation |
Earnings Per Share, Policy [Policy Text Block] | Net Income Per Common Share |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments Other Intangible Assets, |
Segment Reporting, Policy [Policy Text Block] | Enterprise-Wide Disclosures 2022 2021 Medical $ 75,907 $ 63,047 Aerospace and Defense 19,479 16,639 Industrial 38,737 35,482 Total Net Sales $ 134,123 $ 115,168 United States Mexico China Total December 31, 2022 Property and Equipment, Net $ 5,109 $ 494 $ 805 $ 6,408 Operating Lease Assets $ 5,381 2,469 - $ 7,850 Other Assets $ 422 - - $ 422 December 31, 2021 Property and Equipment, Net $ 4,664 $ 454 $ 715 $ 5,833 Operating Lease Assets $ 5,287 2,800 896 $ 8,983 Other Assets $ 501 - - $ 501 |
Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign Currency Transactions |
New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued Accounting Standards |
Reclassification, Comparability Adjustment [Policy Text Block] | Revision and Immaterial Correction of an Error in Previously Issued Financial Statements Consolidated Statements of Cash Flows December 31, 2021 CASH FLOWS FROM FINANCING ACTIVITIES As reported Adjustment As revised Net Proceeds from Line of Credit 5,688 (5,688 ) - Proceeds from Line of Credit - 109,544 109,544 Payments to Line of Credit - (103,856 ) (103,856 ) Principal Payments on Long-Term Debt (1,128 ) (1,128 ) Principal Payments on Financing Leases (664 ) (664 ) Stock Option Excercises 35 35 Net Cash Provided By Financing Activities 3,931 - 3,931 |
Note 1 - Summary of Significa_2
Note 1 - Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Schedule of Inventory, Current [Table Text Block] | 2022 2021 Raw materials $ 21,673 $ 18,492 Work in process 1,238 1,678 Finished goods 671 562 Reserves (1,144 ) (1,298 ) Total $ 22,438 $ 19,434 |
Property, Plant and Equipment [Table Text Block] | (in years) Buildings 39 Leasehold improvements 3 - 15 Manufacturing equipment 3 - 7 Office and other equipment 3 - 7 2022 2021 Land $ 148 $ 148 Building and Leasehold Improvements 5,289 4,083 Manufacturing Equipment 19,128 18,892 Office and Other Equipment 6,822 6,934 Accumulated Depreciation and Amortization (24,979 ) (24,224 ) Total Property and Equipment, Net $ 6,408 $ 5,833 |
Revenue from External Customers by Products and Services [Table Text Block] | 2022 2021 Medical $ 75,907 $ 63,047 Aerospace and Defense 19,479 16,639 Industrial 38,737 35,482 Total Net Sales $ 134,123 $ 115,168 |
Schedule of Long-lived Assets by Geographical Areas [Table Text Block] | United States Mexico China Total December 31, 2022 Property and Equipment, Net $ 5,109 $ 494 $ 805 $ 6,408 Operating Lease Assets $ 5,381 2,469 - $ 7,850 Other Assets $ 422 - - $ 422 December 31, 2021 Property and Equipment, Net $ 4,664 $ 454 $ 715 $ 5,833 Operating Lease Assets $ 5,287 2,800 896 $ 8,983 Other Assets $ 501 - - $ 501 |
Schedule of Error Corrections and Prior Period Adjustments [Table Text Block] | Consolidated Statements of Cash Flows December 31, 2021 CASH FLOWS FROM FINANCING ACTIVITIES As reported Adjustment As revised Net Proceeds from Line of Credit 5,688 (5,688 ) - Proceeds from Line of Credit - 109,544 109,544 Payments to Line of Credit - (103,856 ) (103,856 ) Principal Payments on Long-Term Debt (1,128 ) (1,128 ) Principal Payments on Financing Leases (664 ) (664 ) Stock Option Excercises 35 35 Net Cash Provided By Financing Activities 3,931 - 3,931 |
Note 3 - Revenue (Tables)
Note 3 - Revenue (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block] | Balance outstanding at December 31, 2021 $ 8,698 Increase (decrease) attributed to: Amounts transferred over time to contract assets 96,924 Amounts invoiced during the period (95,640 ) Balance outstanding at December 31, 2022 $ 9,982 |
Disaggregation of Revenue [Table Text Block] | Year Ending December 31, 2022 Product/ Service Transferred Over Time Product Transferred at Point in Time Noncash Consideration Total Net Sales by Market Medical $ 51,473 $ 22,288 $ 2,146 $ 75,907 Aerospace and Defense 16,745 1,859 875 19,479 Industrial 28,706 8,541 1,490 38,737 Total net sales $ 96,924 $ 32,688 $ 4,511 $ 134,123 Year Ending December 31, 2021 Product/ Service Transferred Over Time Product Transferred at Point in Time Noncash Consideration Total Net Sales by Market Medical $ 47,285 $ 13,250 $ 2,512 $ 63,047 Aerospace and Defense 14,879 861 899 16,639 Industrial 27,213 6,851 1,418 35,482 Total net sales $ 89,377 $ 20,962 $ 4,829 $ 115,168 |
Note 4 - Goodwill and Other I_2
Note 4 - Goodwill and Other Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Schedule of Finite-Lived Intangible Assets [Table Text Block] | Customer Relationships Trade Names Patents Total Balance at January 1, 2021 $ 507 $ 589 $ 77 $ 1,173 Additions - - 64 64 Amortization 147 29 - 176 Abandonment Loss - 560 - 560 Balance at December 31, 2021 $ 360 $ - $ 141 $ 501 Additions - - 71 71 Amortization 144 - 6 150 Balance at December 31, 2022 $ 216 $ - $ 206 $ 422 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | Year Amount 2023 $ 159 2024 87 2025 14 2026 14 2027 14 Thereafter 23 Total $ 311 |
Note 6 - Leases (Tables)
Note 6 - Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Lease, Cost [Table Text Block] | December 31, December 31, Lease Cost 2022 2021 Operating lease cost $ 2,309 $ 2,291 Finance lease interest cost 63 79 Finance lease amortization expense 730 502 Total lease cost $ 3,102 $ 2,872 December 31, December 31, 2022 2021 Operating leases Cash paid for amounts included in the measurement of lease liabilities $ 1,721 $ 1,649 Right-of-use assets obtained in exchange for lease obligations $ 44 $ 1,188 Weighted-average remaining lease term (years) Operating leases 8.9 Finance leases 2.6 Weighted-average discount rate Operating leases 7.7 % Finance leases 5.2 % |
Schedule of Supplemental Balance Sheet Information Related to Leases [Table Text Block] | Balance Sheet Location December 31, 2022 December 31, 2021 Assets Operating lease assets Operating lease assets $ 7,850 $ 8,983 Finance lease assets Property, Plant and Equipment 1,363 2,052 Total leased assets $ 9,213 $ 11,035 Liabilities Current Current operating lease liabilities Current Portion of Operating Lease Obligations $ 1,155 $ 1,043 Current finance lease liabilities Current Portion of Finance Lease Obligations 390 601 Noncurrent Long-term operating lease liabilities Long Term Operating Lease Liabilities, Net 7,549 8,695 Long term finance lease liabilities Long Term Finance Lease Obligations, Net 565 916 Total lease liabilities $ 9,659 $ 11,255 |
Schedule of Lease Liability Maturity [Table Text Block] | Operating Leases Finance Leases Total 2023 1,786 433 2,219 2024 1,515 379 1,894 2025 1,265 103 1,368 2026 1,227 109 1,336 2027 1,256 - 1,256 Thereafter 5,818 - 5,818 Total lease payments $ 12,867 $ 1,024 $ 13,891 Less: Interest (4,163 ) (69 ) (4,232 ) Present value of lease liabilities $ 8,704 $ 955 $ 9,659 |
Note 8 - Income Taxes (Tables)
Note 8 - Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | 2022 2021 Current taxes - Federal $ 855 $ 401 Current taxes - State 55 17 Current taxes - Foreign 557 441 Income tax expense $ 1,467 $ 859 |
Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | 2022 2021 Statutory Rate $ 572 $ 1,606 State Income Tax 41 14 Effect of foreign operations 71 110 Change in State Deferred Rate 29 (39 ) Valuation Allowance 587 472 PPP Loan Forgiveness - (1,276 ) US Permanent differences (28 ) 3 Federal Tax Credits (272 ) (37 ) Global Intangible Low-Taxed Income Effect 301 391 Return to provision - credits, perm diffs 9 (481 ) Withholding Tax 122 - IRS Payable 17 121 Other 18 (25 ) $ 1,467 $ 859 |
Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] | 2022 2021 Domestic $ 990 $ 6,072 Foreign 2,487 1,941 $ 3,477 $ 8,013 |
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | 2022 2021 Deferred Tax Allowance for uncollectable accounts $ 81 $ 80 Inventories reserve 263 303 Accrued vacation 127 135 Accrued bonus 462 274 Stock-based compensation and equity appreciation rights 159 135 Other Accruals 548 547 Lease Accounting ASC 842 Lease Liability 1,351 1,555 Capitalized Research Expenses 318 - Net operating loss carryforwards - 101 Tax credit carryforwards 156 162 Unrealized Foreign Currency Gain 20 22 Intangibles 515 569 COGS Rev Rec Adjustment 1,864 1,776 COGS Offset Adjustment (1,875 ) (1,807 ) Other 235 10 Total 4,224 3,862 Valuation allowance (2,563 ) (1,976 ) Deferred tax assets 1,661 1,886 Accumulated Other Comprehensive Income (56 ) (297 ) Lease Accounting ASC 842 Lease Asset (1,301 ) (1,518 ) Prepaid Expenses (143 ) - Property and equipment (161 ) (71 ) Deferred tax liabilities (1,661 ) (1,886 ) Net deferred tax assets $ - $ - |
Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block] | Balance at December 31, 2021 $ 50 Tax Positions - Additions - Tax Positions - Reductions - Balance at December 31, 2022 $ 50 |
Note 10 - Incentive Plans (Tabl
Note 10 - Incentive Plans (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Notes Tables | |
Share-Based Payment Arrangement, Option, Activity [Table Text Block] | Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding – January 1, 2021 362,640 $ 3.96 Granted 49,000 8.50 Exercised (13,400 ) 3.43 Cancelled (10,740 ) 3.42 Outstanding – December 31, 2021 387,500 $ 4.57 7.17 $ 1,225 Granted 94,000 11.18 Exercised (19,800 ) 3.40 Cancelled (9,000 ) 4.19 Outstanding – December 31, 2022 452,700 $ 5.97 6.87 $ 2,855 Exercisable on December 31, 2022 223,300 $ 4.11 5.76 $ 1,817 |
Note 1 - Summary of Significa_3
Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Letters of Credit Outstanding, Amount | $ 300 | |
Restricted Cash and Cash Equivalents, Current, Total | 1,454 | $ 1,582 |
Accounts Receivable, Allowance for Credit Loss, Ending Balance | $ 334 | $ 328 |
Preferred Stock, Dividend Rate, Percentage | 12% | |
Preferred Stock, Liquidation Preference Per Share | $ 1 | |
Preferred Stock, Dividends Per Share, Declared (in dollars per share) | $ 0 | $ 0 |
Advertising Expense | $ 63 | $ 57 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 205,907 | 156,937 |
Cumulative Translation Adjustment, Net of Tax, Period Increase (Decrease), Total | $ 426 | $ (93) |
Cumulative Translation Adjustment, Net of Tax, Period Increase (Decrease), Total | (426) | 93 |
Foreign Currency Transaction Gain (Loss), before Tax, Total | $ 42 | $ 131 |
Revenue Benchmark [Member] | Product Concentration Risk [Member] | Geographic Distribution, Domestic [Member] | ||
Concentration Risk, Percentage | 4% | 3.10% |
Employee-related Liabilities, Current [Member] | ||
Accrual for Taxes Other than Income Taxes | $ 1,158 |
Note 1 - Summary of Significa_4
Note 1 - Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Raw materials | $ 21,673 | $ 18,492 |
Work in process | 1,238 | 1,678 |
Finished goods | 671 | 562 |
Reserves | (1,144) | (1,298) |
Total | $ 22,438 | $ 19,434 |
Note 1 - Summary of Significa_5
Note 1 - Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Accumulated Depreciation and Amortization | $ (24,979) | $ (24,224) |
Property and Equipment, Net | $ 6,408 | 5,833 |
Building [Member] | ||
Estimated useful lives (Year) | 39 years | |
Land [Member] | ||
Property and equipment | $ 148 | 148 |
Leasehold Improvements [Member] | Minimum [Member] | ||
Estimated useful lives (Year) | 3 years | |
Leasehold Improvements [Member] | Maximum [Member] | ||
Estimated useful lives (Year) | 15 years | |
Building and Leasehold Improvements [Member] | ||
Property and equipment | $ 5,289 | 4,083 |
Manufacturing Equipment [Member] | ||
Property and equipment | $ 19,128 | 18,892 |
Manufacturing Equipment [Member] | Minimum [Member] | ||
Estimated useful lives (Year) | 3 years | |
Manufacturing Equipment [Member] | Maximum [Member] | ||
Estimated useful lives (Year) | 7 years | |
Office and Other Equipment [Member] | ||
Property and equipment | $ 6,822 | $ 6,934 |
Office and Other Equipment [Member] | Minimum [Member] | ||
Estimated useful lives (Year) | 3 years | |
Office and Other Equipment [Member] | Maximum [Member] | ||
Estimated useful lives (Year) | 7 years |
Note 1 - Summary of Significa_6
Note 1 - Summary of Significant Accounting Policies - Net Sales (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Net Sales | $ 134,123 | $ 115,168 |
Medical [Member] | ||
Net Sales | 75,907 | 63,047 |
Aerospace and Defense [Member] | ||
Net Sales | 19,479 | 16,639 |
Industrial [Member] | ||
Net Sales | $ 38,737 | $ 35,482 |
Note 1 - Summary of Significa_7
Note 1 - Summary of Significant Accounting Policies - Noncurrent Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Property and Equipment, Net | $ 6,408 | $ 5,833 |
Operating Lease Assets | 7,850 | 8,983 |
Other Assets | 422 | 501 |
UNITED STATES | ||
Property and Equipment, Net | 5,109 | 4,664 |
Operating Lease Assets | 5,381 | 5,287 |
Other Assets | 422 | 501 |
MEXICO | ||
Property and Equipment, Net | 494 | 454 |
Operating Lease Assets | 2,469 | 2,800 |
Other Assets | 0 | 0 |
CHINA | ||
Property and Equipment, Net | 805 | 715 |
Operating Lease Assets | 0 | 896 |
Other Assets | $ 0 | $ 0 |
Note 1 - Summary of Significa_8
Note 1 - Summary of Significant Accounting Policies - Error Corrections and Prior Period Adjustments (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Net Proceeds from Line of Credit | $ 0 | |
Proceeds from Line of Credit | $ 119,349 | 109,544 |
Payments to Line of Credit | (121,468) | (103,856) |
Principal Payments on Long-Term Debt | 0 | (1,128) |
Principal Payments on Financing Leases | (599) | (664) |
Stock Option Excercises | 51 | 35 |
Net Cash Provided By Financing Activities | $ (2,667) | 3,931 |
Previously Reported [Member] | ||
Net Proceeds from Line of Credit | 5,688 | |
Proceeds from Line of Credit | 0 | |
Payments to Line of Credit | 0 | |
Principal Payments on Long-Term Debt | (1,128) | |
Principal Payments on Financing Leases | (664) | |
Stock Option Excercises | 35 | |
Net Cash Provided By Financing Activities | 3,931 | |
Revision of Prior Period, Adjustment [Member] | ||
Net Proceeds from Line of Credit | (5,688) | |
Proceeds from Line of Credit | 109,544 | |
Payments to Line of Credit | (103,856) | |
Net Cash Provided By Financing Activities | $ 0 |
Note 2 - Concentration of Cre_2
Note 2 - Concentration of Credit Risk and Major Customers (Details Textual) - Customer Concentration Risk [Member] - One Customer [Member] | 12 Months Ended | ||
Jan. 01, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Revenue from Contract with Customer Benchmark [Member] | |||
Concentration Risk Number of Customers | 1 | ||
Concentration Risk, Percentage | 26.90% | 26.90% | |
Accounts Receivable [Member] | |||
Concentration Risk, Percentage | 19.30% | 21.10% |
Note 3 - Revenue 1 (Details Tex
Note 3 - Revenue 1 (Details Textual) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Percentage of Revenue Transferred to Customers | 72% | 78% |
Revenue Remaining Performance Obligation, Customers Upon Shipment With Payment Terms | 120 days |
Note 3 - Revenue 2 (Details Tex
Note 3 - Revenue 2 (Details Textual) | Dec. 31, 2022 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 180 days |
Note 3 - Revenue - Contract Ass
Note 3 - Revenue - Contract Assets (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Balance outstanding at December 31, 2021 | $ 8,698 |
Amounts transferred over time to contract assets | 96,924 |
Amounts invoiced during the period | (95,640) |
Balance outstanding at December 31, 2022 | $ 9,982 |
Note 3 - Revenue - Disaggregati
Note 3 - Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Net Sales | $ 134,123 | $ 115,168 |
Medical [Member] | ||
Net Sales | 75,907 | 63,047 |
Aerospace and Defense [Member] | ||
Net Sales | 19,479 | 16,639 |
Industrial [Member] | ||
Net Sales | 38,737 | 35,482 |
Transferred over Time [Member] | ||
Net Sales | 96,924 | 89,377 |
Transferred over Time [Member] | Medical [Member] | ||
Net Sales | 51,473 | 47,285 |
Transferred over Time [Member] | Aerospace and Defense [Member] | ||
Net Sales | 16,745 | 14,879 |
Transferred over Time [Member] | Industrial [Member] | ||
Net Sales | 28,706 | 27,213 |
Transferred at Point in Time [Member] | ||
Net Sales | 32,688 | 20,962 |
Transferred at Point in Time [Member] | Medical [Member] | ||
Net Sales | 22,288 | 13,250 |
Transferred at Point in Time [Member] | Aerospace and Defense [Member] | ||
Net Sales | 1,859 | 861 |
Transferred at Point in Time [Member] | Industrial [Member] | ||
Net Sales | 8,541 | 6,851 |
Noncash Consideration [Member] | ||
Net Sales | 4,511 | 4,829 |
Noncash Consideration [Member] | Medical [Member] | ||
Net Sales | 2,146 | 2,512 |
Noncash Consideration [Member] | Aerospace and Defense [Member] | ||
Net Sales | 875 | 899 |
Noncash Consideration [Member] | Industrial [Member] | ||
Net Sales | $ 1,490 | $ 1,418 |
Note 4 - Goodwill and Other I_3
Note 4 - Goodwill and Other Intangible Assets (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Loss on Abandonment of Intangible Asset | $ 0 | $ 560 |
Finite-Lived Intangible Assets, Remaining Amortization Period | 1 year 10 months 24 days | |
Amortization | $ 150 | 176 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets, Fair Value Disclosure | 0 | |
Amortization | 0 | 29 |
Patents [Member] | ||
Finite-lived Intangible Assets, Amortized | 95 | |
Finite-lived Intangible Assets, In-process | 111 | |
Amortization | $ 6 | $ 0 |
Note 4 - Goodwill and Other I_4
Note 4 - Goodwill and Other Intangible Assets - Schedule of Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Balance | $ 501 | $ 1,173 |
Additions | 71 | 64 |
Amortization | 150 | 176 |
Abandonment Loss | 560 | |
Balance | 422 | 501 |
Customer Relationships [Member] | ||
Balance | 360 | 507 |
Additions | 0 | 0 |
Amortization | 144 | 147 |
Abandonment Loss | 0 | |
Balance | 216 | 360 |
Trade Names [Member] | ||
Balance | 0 | 589 |
Additions | 0 | 0 |
Amortization | 0 | 29 |
Abandonment Loss | 560 | |
Balance | 0 | 0 |
Patents [Member] | ||
Balance | 141 | 77 |
Additions | 71 | 64 |
Amortization | 6 | 0 |
Abandonment Loss | 0 | |
Balance | $ 206 | $ 141 |
Note 4 - Goodwill and Other I_5
Note 4 - Goodwill and Other Intangible Assets - Estimated Future Annual Amortization Expense (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Thereafter | $ 23 | ||
Total | 422 | $ 501 | $ 1,173 |
Finite-lived Intangible Assets, Excluding Projects in Process [Member] | |||
2023 | 159 | ||
2024 | 87 | ||
2025 | 14 | ||
2026 | 14 | ||
2027 | 14 | ||
Total | $ 311 |
Note 5 - Financing Arrangemen_2
Note 5 - Financing Arrangements (Details Textual) $ in Thousands | 12 Months Ended | ||||
Apr. 15, 2020 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2022 CNY (¥) | Jun. 15, 2017 USD ($) | |
Gain (Loss) on Extinguishment of Debt, Total | $ 0 | $ 6,171 | |||
Credit Agreement [Member] | Bank of America [Member] | |||||
Debt Issuance Costs, Net, Total | 44 | ||||
Paycheck Protection Program CARES Act [Member] | |||||
Proceeds from Issuance of Long-Term Debt, Total | $ 6,077 | ||||
Long-Term Debt, Total | 6,077 | ||||
Interest Payable | 93 | ||||
Gain (Loss) on Extinguishment of Debt, Total | 6,170 | ||||
Bank of America [Member] | Credit Agreement [Member] | |||||
Long-Term Line of Credit, Total | $ 6,897 | 9,016 | |||
Line of Credit, Minimum Fixed Charge Coverage Ratio During the Period | 1 | ||||
Line of Credit Facility, Remaining Borrowing Capacity | $ 8,380 | $ 3,539 | |||
Bank of America [Member] | Credit Agreement [Member] | Line of Credit [Member] | |||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 16,000 | ||||
Debt Instrument, Interest Rate During Period | 5.20% | 3.50% | |||
China Construction Bank [Member] | Line of Credit [Member] | |||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,500 | ¥ 10,000,000 | |||
Long-Term Line of Credit, Total | $ 0 | $ 0 |
Note 6 - Leases (Details Textua
Note 6 - Leases (Details Textual) | Dec. 31, 2022 |
Minimum [Member] | |
Lessee, Operating Lease, Renewal Term | 1 year |
Maximum [Member] | |
Lessee, Operating Lease, Renewal Term | 5 years |
Note 6 - Leases - Lease Cost (D
Note 6 - Leases - Lease Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating lease cost | $ 2,309 | $ 2,291 |
Cash paid for amounts included in the measurement of lease liabilities | $ 1,721 | 1,649 |
Operating leases (Year) | 8 years 10 months 24 days | |
Finance lease interest cost | $ 63 | 79 |
Finance leases (Year) | 2 years 7 months 6 days | |
Property Acquired under Operating Lease | $ 44 | 1,188 |
Finance lease amortization expense | $ 730 | 502 |
Operating leases | 7.70% | |
Finance leases | 5.20% | |
Total lease cost | $ 3,102 | $ 2,872 |
Note 6 - Leases - Supplemental
Note 6 - Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Operating lease assets | $ 7,850 | $ 8,983 |
Total leased assets | 9,213 | 11,035 |
Current operating lease liabilities | 1,155 | 1,043 |
Current finance lease liabilities | 390 | 601 |
Long-term operating lease liabilities | 7,549 | 8,695 |
Long term finance lease liabilities | 565 | 916 |
Total lease liabilities | 9,659 | 11,255 |
Property and Equipment [Member] | ||
Finance lease assets | $ 1,363 | $ 2,052 |
Note 6 - Leases - Maturity of L
Note 6 - Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Operating leases, 2023 | $ 1,786 | |
Finance leases, 2023 | 433 | |
Total, 2023 | 2,219 | |
Operating leases, 2024 | 1,515 | |
Finance leases, 2024 | 379 | |
Total, 2024 | 1,894 | |
Operating leases, 2025 | 1,265 | |
Finance leases, 2025 | 103 | |
Total, 2025 | 1,368 | |
Operating leases, 2026 | 1,227 | |
Finance leases, 2026 | 109 | |
Total, 2026 | 1,336 | |
Operating leases, 2027 | 1,256 | |
Finance leases, 2027 | 0 | |
Total, 2027 | 1,256 | |
Operating leases, Thereafter | 5,818 | |
Finance leases, Thereafter | 0 | |
Total, Thereafter | 5,818 | |
Operating leases, total lease payments | 12,867 | |
Finance leases, total lease payments | 1,024 | |
Total, total lease payments | 13,891 | |
Operating leases, less: Interest | (4,163) | |
Finance leases, less: Interest | (69) | |
Total, less: Interest | (4,232) | |
Operating leases, present value of lease liabilities | 8,704 | |
Finance leases, present value of lease liabilities | 955 | |
Total lease liabilities | $ 9,659 | $ 11,255 |
Note 7 - Restructuring Charges
Note 7 - Restructuring Charges (Details Textual) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Restructuring Charges, Total | $ 0 | $ 327 |
Consolidation of our Production Facilities and Closure of our Merrifield, Minnesota Facility [Member] | ||
Restructuring Charges, Total | 327 | |
Restructuring Reserve, Ending Balance | $ 0 | |
Restructuring and Related Cost, Number of Positions Eliminated | 42 |
Note 8 - Income Taxes (Details
Note 8 - Income Taxes (Details Textual) $ in Thousands | Dec. 31, 2022 USD ($) |
State and Local Jurisdiction [Member] | Minnesota Department of Revenue [Member] | |
Tax Credit Carryforward, Amount | $ 172 |
Note 8 - Income Taxes - Income
Note 8 - Income Taxes - Income Tax Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current taxes - Federal | $ 855 | $ 401 |
Current taxes - State | 55 | 17 |
Current taxes - Foreign | 557 | 441 |
Income tax expense | $ 1,467 | $ 859 |
Note 8 - Income Taxes - Incom_2
Note 8 - Income Taxes - Income Tax Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Statutory Rate | $ 572 | $ 1,606 |
State Income Tax | 41 | 14 |
Effect of foreign operations | 71 | 110 |
Change in State Deferred Rate | 29 | (39) |
Valuation Allowance | 587 | 472 |
PPP Loan Forgiveness | 0 | (1,276) |
US Permanent differences | (28) | 3 |
Federal Tax Credits | (272) | (37) |
Global Intangible Low-Taxed Income Effect | 301 | 391 |
Return to provision - credits, perm diffs | 9 | (481) |
Withholding Tax | 122 | 0 |
IRS Payable | 17 | 121 |
Other | 18 | (25) |
Income tax expense | $ 1,467 | $ 859 |
Note 8 - Income Taxes - Incom_3
Note 8 - Income Taxes - Income (Loss) From Operations Before Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Domestic | $ 990 | $ 6,072 |
Foreign | 2,487 | 1,941 |
Income Before Income Taxes | $ 3,477 | $ 8,013 |
Note 8 - Income Taxes - Deferre
Note 8 - Income Taxes - Deferred Tax Assets (Liabilities) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Allowance for uncollectable accounts | $ 81 | $ 80 |
Inventories reserve | 263 | 303 |
Accrued vacation | 127 | 135 |
Accrued bonus | 462 | 274 |
Stock-based compensation and equity appreciation rights | 159 | 135 |
Other Accruals | 548 | 547 |
Lease Accounting ASC 842 Lease Liability | 1,351 | 1,555 |
Capitalized Research Expenses | 318 | 0 |
Net operating loss carryforwards | 0 | 101 |
Tax credit carryforwards | 156 | 162 |
Unrealized Foreign Currency Gain | 20 | 22 |
Intangibles | 515 | 569 |
COGS Rev Rec Adjustment | 1,864 | 1,776 |
COGS Offset Adjustment | (1,875) | (1,807) |
Other | 235 | 10 |
Total | 4,224 | 3,862 |
Valuation allowance | (2,563) | (1,976) |
Deferred tax assets | 1,661 | 1,886 |
Accumulated Other Comprehensive Income | (56) | (297) |
Lease Accounting ASC 842 Lease Asset | (1,301) | (1,518) |
Prepaid Expenses | (143) | 0 |
Property and equipment | (161) | (71) |
Deferred tax liabilities | (1,661) | (1,886) |
Net deferred tax assets | $ 0 | $ 0 |
Note 8 - Income Taxes - Unrecog
Note 8 - Income Taxes - Unrecognized Tax Benefits (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Balance | $ 50 |
Tax Positions - Additions | 0 |
Tax Positions - Reductions | 0 |
Balance | $ 50 |
Note 9 - 401(K) Retirement Pl_2
Note 9 - 401(K) Retirement Plan (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Defined Contribution Plan, Eligibility Age of Employee | 18 years | |
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent | 60% | |
Defined Contribution Plan, Employer Matching Contribution Rate | 25% | |
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay | 6% | |
Defined Contribution Plan, Cost | $ 301 | $ 276 |
Note 10 - Incentive Plans (Deta
Note 10 - Incentive Plans (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
May 31, 2022 | May 31, 2020 | Nov. 30, 2010 | Dec. 31, 2022 | Dec. 31, 2021 | May 31, 2017 | |
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 94,000 | 49,000 | ||||
Market Condition Options [Member] | Chief Executive Officer [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 21,000 | |||||
Service-based Options [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 73,000 | |||||
Share-Based Payment Arrangement, Option [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 49,000 | |||||
Share-Based Payment Arrangement, Expense | $ 237 | $ 116 | ||||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 762 | |||||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 3 years 7 months 9 days | |||||
Equity Appreciation Right Units [Member] | ||||||
Share-Based Payment Arrangement, Expense | $ 0 | $ 143 | ||||
Stock Incentive Plan 2017 [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized | 350,000 | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Additional Shares Authorized | 175,000 | 50,000 | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Shares Issued in Period | 115,000 | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross | 49,000 | |||||
Stock Incentive Plan 2017 [Member] | Restricted Stock Units (RSUs) [Member] | ||||||
Share-Based Payment Arrangement, Expense | $ 97 | $ 0 | ||||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 155 | |||||
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 1 year 2 months 26 days | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Non-Option Equity Instruments, Granted | 21,000 | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period | 2 years | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 12 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Granted, Weighted Average Remaining Contractual Terms | 9 years 2 months 26 days | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period | 0 | |||||
Equity Appreciation Rights Plan 2010 [Member] | Equity Appreciation Right Units [Member] | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized | 1,000,000 | |||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Non-Option Equity Instruments, Granted | 0 | 0 | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period | 3 years | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Redemption Cash Payment Period | 90 days |
Note 10 - Incentive Plans - Opt
Note 10 - Incentive Plans - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Outstanding (in shares) | 387,500 | 362,640 |
Outstanding, weighted average exercise price (in dollars per share) | $ 4.57 | $ 3.96 |
Granted (in shares) | 94,000 | 49,000 |
Granted, weighted average exercise price (in dollars per share) | $ 11.18 | $ 8.50 |
Exercised (in shares) | (19,800) | (13,400) |
Exercised, weighted average exercise price (in dollars per share) | $ 3.40 | $ 3.43 |
Cancelled (in shares) | (9,000) | (10,740) |
Cancelled (in dollars per share) | $ 4.19 | $ 3.42 |
Outstanding, weighted average remaining contractual term (Year) | 6 years 10 months 13 days | 7 years 2 months 1 day |
Outstanding, aggregate intrinsic value | $ 2,855 | $ 1,225 |
Outstanding (in shares) | 452,700 | 387,500 |
Outstanding, weighted average exercise price (in dollars per share) | $ 5.97 | $ 4.57 |
Exercisable (in shares) | 223,300 | |
Exercisable, weighted average exercise price (in dollars per share) | $ 4.11 | |
Exercisable, weighted average remaining contractual term (Year) | 5 years 9 months 3 days | |
Exercisable, aggregate intrinsic value | $ 1,817 |
Note 11 - Commitments and Con_2
Note 11 - Commitments and Contingencies (Details Textual) | 12 Months Ended |
Dec. 31, 2022 | |
Officers [Member] | |
Disability and Life Insurance Plans, Period (Year) | 3 years |
Other Participants Except Officers [Member] | |
Disability and Life Insurance Plans, Period (Year) | 2 years |
Note 12 - Employee Retention _2
Note 12 - Employee Retention Credit (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Employee Retention Credit Benefits, CARES Act | $ 5,209 | ||
Proceeds from Employee Retention Credit, CARES Act | $ 2,559 | $ 2,559 | |
Employee Retention Credit Receivable | $ 2,650 | $ 2,650 | 5,209 |
Cost of Sales [Member] | |||
Employee Retention Credit Benefits, CARES Act | 4,670 | ||
Selling Expense [Member] | |||
Employee Retention Credit Benefits, CARES Act | 125 | ||
General and Administrative Expense [Member] | |||
Employee Retention Credit Benefits, CARES Act | $ 414 |
Note 13 - Related Party Trans_2
Note 13 - Related Party Transactions (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Inventory, Net, Total | $ 22,438 | $ 19,434 |
Agreement Between the BIRD Foundation, the Company, and MARPE Technologies, LTD [Member] | ||
Agreement, Conditional Grant | $ 1,000 | |
Agreement, Exclusive Manufacturing Rights, Term (Year) | 10 years | |
Abilitech Medical, Inc [Member] | Loss on Long-Term Purchase Commitment [Member] | ||
Accounts Receivable, after Allowance for Credit Loss, Total | $ 141 | |
Inventory, Net, Total | 113 | |
Abilitech Medical, Inc [Member] | Payments Received for Delivery of EMS Products [Member] | ||
Related Party Transaction, Amounts of Transaction | $ 247 | 1,079 |
David Kunin [Member] | Marpe Technologies, LTD [Member] | Maximum [Member] | ||
Ownership, Percent | 10% | |
Marpe Technologies, LTD [Member] | Agreement Between the BIRD Foundation, the Company, and MARPE Technologies, LTD [Member] | ||
Agreement, Conditional Grant Matching Amount | $ 500 | |
Revenue from Related Parties | $ 440 | $ 148 |