NORTECH SYSTEMS INC 10-K

Item 9A. Controls and Procedures In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). These controls and procedures are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of these disclosure controls and procedures as of the date of the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective. Management ’ s Annual Report on Internal Control Over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to management and the board of directors regarding the effectiveness of our internal control processes over the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined effective can provide only reasonable assurance with respect to financial statement preparation and presentation. We have assessed the effectiveness of our internal controls over financial reporting as of December 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework of 2013. Based on our assessment, we concluded that, as of December 31, 2020, our internal control over financial reporting was effective. Changes in Internal Controls There was no change in the Company’s internal control over financial reporting that occurred during our most recent quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information None. 55 PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding the directors and executive officers of the Registrant will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. The company has adopted a code of conduct applicable to all officers, directors, and employees. A copy of this code of conduct will be provided to any person, without charge, upon request from Nortech c/o Chief Financial Officer 7550 Meridian Circle N # 150, Maple Grove, MN 55369. Item 11. Executive Compensation Information regarding executive compensation of the Registrant will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management of the Registrant will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. Information regarding executive compensation plans (including individual compensation arrangements) as of the end of the last fiscal year, on two categories of equity compensation plans (that is, plans that have been approved by security holders and plans that have not been approved by security holders) will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. 56 The following table provides information about our equity compensation plans (including individual compensation arrangements) as of December 31, 2020. Plan category Number of securities to be issued upon the exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) (2) Equity compensation plans approved by security holders 206,840 $ 4.35 143,160 Equity compensation plans not approved by security holders - - - Total 206,840 $ 4.35 143,160 (1) Represents common shares issuable upon the exercise of outstanding options granted under the 2018 Incentive Compensation Plan (the 2018 Plan). (2) Represents common shares remaining available for issuance under the 2018 Plan of 143,160. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this Item will be included in the Registrant's proxy statement relating to its Annual Meeting of Shareholders to be held May 13, 2021 to be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, the end of our fiscal year, and said portions of the proxy statement are incorporated herein by reference. 57 PART IV Item 15. Exhibits and Financial Statements Schedules 1. Consolidated Financial Statements - Consolidated Financial Statements and related Notes are included in Part II, Item 8, and are identified in the Index on Page 25. 2. Consolidated Financial Statement Schedule - The following financial statement schedule and the Auditors' report thereon is included in this Annual Report on Form 10-K: All schedules are omitted because it is not required information or the information is presented in the consolidated financial statements or related notes. 3. The following exhibits are incorporated herein by reference: 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to Form S-1 filed July 16, 1996 (File No. 333-00888) 3.2 Bylaws (incorporated by reference to Exhibit 3.2 to Form 10-K filed on March 19, 2020) 10.1 Amendment dated November 5, 2014 to Employment Agreement with Michael Degen (incorporated by reference to Exhibit 99.1 to Form 8-K filed November 7, 2014)** 10.2 Restated Equity Appreciation Rights Plan dated March 11, 2015 (incorporated by reference to Appendix A to Definitive Proxy Statement filed March 24, 2015)** 10.3 Lease Agreement dated April 1, 2015 between the Company and LSOP 3 MN 3, LLC (incorporated by reference to Form 8-K filed April 9, 2015) 10.4 Lease Agreement dated November 12, 2015 between the Company and Suzhou Industrial Park Biotech Development Co., Ltd. (incorporated by reference to Form 10-K filed March 21, 2016). 10.5 2017 Stock Incentive Plan approved by shareholders May 3, 2017 (incorporated by reference to Exhibit A to the Definitive Proxy Statement filed March 22, 2017).** 10.6 Amended and Restated Employment Agreement with Richard Wasielewski dated May 15, 2017 (incorporated by reference to Exhibit 10.1 to Form 8-K filed May 19, 2017).** 10.7 Loan and Security Agreement with Bank of America N.A. dated June 15, 2017 (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 21, 2017) 10.8 First Amendment dated December 29, 2017 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to Form 8-K filed January 8, 2018) 10.9 Lease Agreement dated February 21, 2018 by and between Manufacturing Assembly Solutions of Monterrey, Inc., a wholly owned Mexican subsidiary of the Company, and OPERADORA STIVA, S.A. DE C.V. (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 27, 2018) 58 10.10 Amendment to the Amended and Restated Employment Agreement with Richard Wasielewski dated December 19, 2018 (incorporated by reference to Exhibit 10.2 to Form 8-K filed December 21, 2018).** 10.11 Employment Agreement with Jay D. Miller dated February 27, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 20, 2019).** 10.12 Second Amendment dated August 13, 2019 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q filed August 14, 2019). 10.13 Employment Agreement with John Lindeen dated September 9, 2019 (incorporated by reference to Exhibit 10.2 to Form 8-K filed September 11, 2019) 10.14 Employment Agreement with Curtis Steichen dated September 17, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed September 18, 2019).** 10.15 Third Amendment dated November 12, 2019 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to Form 10-Q filed November 12, 2019). 10.16 First Amendment to Lease Agreement dated September 17, 2018 between the Company and AR Meridian Circle Owner, LLC, as successor to LSOP 3 MN 3, LLC (incorporated by reference to Exhibit 10.21 to Form 10-K filed March 19, 2020). 10.17 Purchase and Sale Agreement between the Company and Essjay Investment Company, LLC dated June 24, 2020 (incorporated by reference to Exhibit 10.1 to Form 10-Q filed August 11, 2020) 10.18 Lease Agreement between the Company and Essjay Investment Company, LLC dated August 27, 2020 relating to the Company’s Bemidji facility (incorporated by reference to Exhibit 10.1 to Form 8-K filed September 1, 2020) 10.19 Lease Agreement between the Company and Essjay Investment Company, LLC dated August 27, 2020 relating to the Company’s Mankato facility (incorporated by reference to Exhibit 10.2 to Form 8-K filed September 1, 2020) 10.20 Fourth Amendment dated August __,2020 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.3 to Form 8-K filed September 1, 2020). 10.21 Employment Agreement with Christopher D. Jones dated November 2, 2020 (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 6, 2020).** 10.22 First Amendment to Employment Agreement with Jay Miller dated November 11, 2020 (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 12, 2020).** 21 Subsidiaries of Nortech Systems Incorporated* 23 Consent of Baker Tilly US, LLP* 31.1 Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.* 59 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.* 32.1 Certification of the Chief Executive Officer and President and Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101 Financial statements from the annual report on Form 10-K for the year ended December 31, 2020, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.* * Filed electronically herewith. ** Management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate 60 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Nortech Systems Incorporated Registrant By: /s/ Jay D. Miller March 23, 2021 Jay D. Miller President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Jay D. Miller March 23, 2021 Jay D. Miller President and Chief Executive Officer (principal executive officer) and Director By: /s/ Christopher D. Jones March 23, 2021 Christopher D. Jones Chief Financial Officer (principal financial and accounting officer) By: /s/ David B. Kunin March 23, 2021 David B. Kunin, Chairman and Director By: /s/ Kathleen P. Iverson March 23, 2021 Kathleen P. Iverson, Director By: /s/ Ryan P. McManus March 23, 2021 Ryan P. McManus, Director By: /s/ Steven J. Rosenstone March 23, 2021 Steven J. Rosenstone, Director By: /s/ Philip I. Smith March 23, 2021 Philip I. Smith, Director By: /s/ Dan Sachs March 23, 2021 Dan Sachs, Director 61 INDEX TO EXHIBITS DESCRIPTIONS OF EXHIBITS 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to Form S-1 filed July 16, 1996 (File No. 333-00888) 3.2 Bylaws (incorporated by reference to Exhibit 3.2 to Form 10-K filed on April 1, 2019) 10.1 Amendment dated November 5, 2014 to Employment Agreement with Michael Degen (incorporated by reference to Exhibit 99.1 to Form 8-K filed November 7, 2014)** 10.2 Restated Equity Appreciation Rights Plan dated March 11, 2015 (incorporated by reference to Appendix A to Definitive Proxy Statement filed March 24, 2015)** 10.3 Lease Agreement dated April 1, 2015 between the Company and LSOP 3 MN 3, LLC (incorporated by reference to Form 8-K filed April 9, 2015) 10.4 Lease Agreement dated November 12, 2015 between the Company and Suzhou Industrial Park Biotech Development Co., Ltd. (incorporated by reference to Form 10-K filed March 21, 2016). 10.5 2017 Stock Incentive Plan approved by shareholders May 3, 2017 (incorporated by reference to Exhibit A to the Definitive Proxy Statement filed March 22, 2017).** 10.6 Amended and Restated Employment Agreement with Richard Wasielewski dated May 15, 2017 (incorporated by reference to Exhibit 10.1 to Form 8-K filed May 19, 2017).** 10.7 Loan and Security Agreement with Bank of America N.A. dated June 15, 2017 (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 21, 2017) 10.88 First Amendment dated December 29, 2017 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to Form 8-K filed January 8, 2018) 10.9 Lease Agreement dated February 21, 2018 by and between Manufacturing Assembly Solutions of Monterrey, Inc., a wholly owned Mexican subsidiary of the Company, and OPERADORA STIVA, S.A. DE C.V. (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 27, 2018) 10.10 Amendment to the Amended and Restated Employment Agreement with Richard Wasielewski dated December 19, 2018 (incorporated by reference to Exhibit 10.2 to Form 8-K filed December 21, 2018).** 10.11 Employment Agreement with Jay D. Miller dated February 27, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 20, 2019).** 10.12 Second Amendment dated August 13, 2019 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q filed August 14, 2019). 62 10.13 Employment Agreement with John Lindeen dated September 9, 2019 (incorporated by reference to Exhibit 10.2 to Form 8-K filed September 11, 2019) 10.14 Employment Agreement with Curtis Steichen dated September 17, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed September 18, 2019).** 10.15 Third Amendment dated November 12, 2019 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to Form 10-Q filed November 12, 2019). 10.16 First Amendment to Lease Agreement dated September 17, 2018 between the Company and AR Meridian Circle Owner, LLC, as successor to LSOP 3 MN 3, LLC. * 10.17 Purchase and Sale Agreement between the Company and Essjay Investment Company, LLC dated June 24, 2020 (incorporated by reference to Exhibit 10.1 to Form 10-Q filed August 11, 2020) 10.18 Lease Agreement between the Company and Essjay Investment Company, LLC dated August 27, 2020 relating to the Company’s Bemidji facility (incorporated by reference to Exhibit 10.1 to Form 8-K filed September 1, 2020) 10.19 Lease Agreement between the Company and Essjay Investment Company, LLC dated August 27, 2020 relating to the Company’s Mankato facility (incorporated by reference to Exhibit 10.2 to Form 8-K filed September 1, 2020) 10.20 Fourth Amendment dated August __,2020 to Loan and Security Agreement between the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.3 to Form 8-K filed September 1, 2020). 10.21 Employment Agreement with Christopher D. Jones dated November 2, 2020 (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 6, 2020).** 10.22 First Amendment to Employment Agreement with Jay Miller dated November 11, 2020 (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 12, 2020).** 21 Subsidiaries of Nortech Systems Incorporated* 23 Consent of Baker Tilly US, LLP* 31.1 Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.* 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.* 32.1 Certification of the Chief Executive Officer and President and Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101 Financial statements from the annual report on Form 10-K for the year ended December 31, 2020, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.* * Filed electronically herewith. ** Management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate. 63