What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-03-26 compared with 2025-03-31 · 137 added, 164 removed, 185 unchanged (62% of the section changed)

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of March 12, 2026, there were 563 shareholders of record.

Our stock is listed on the NASDAQ Capital Market under the symbol “NSYS”.

We intend to invest our profits into the growth of our operations and, therefore, do not plan to pay out dividends to shareholders in

the foreseeable future.

Our stock is listed on the NASDAQ Capital Market under the symbol

We intend to invest our profits into the growth of our operations and, therefore, do not plan to pay out

dividends to shareholders in the foreseeable future.

We did not declare or pay a cash dividend in 2025 or 2024.

Future dividend policy and payments, if any, will

depend upon earnings, our financial condition, our need for funds, limitations on payments of dividends present in our current or future

debt agreements and other factors.

Future dividend

policy and payments, if any, will depend upon earnings, our financial condition, our need for funds, limitations on payments of

dividends present in our current or future debt agreements and other factors.

price comparisons (NASDAQ):

During the Three Months

During the Three Months Ended

March 31, 2025

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assemblies, complex higher-level assemblies and other box builds for a wide range of industries.

As of December 31, 2024, we have facilities in Minnesota:

Bemidji, Mankato, Milaca

and Maple Grove.

We closed our facility in Blue Earth, Minnesota in December 2024 and are currently seeking to sell this facility.

also have facilities in Monterrey, Mexico and Suzhou, China.

As of December 31, 2025, we have facilities

in Minnesota:

Bemidji, Mankato, Milaca and Maple Grove.

We closed our facility in Blue Earth, Minnesota in December 2024 and sold this

facility in July 2025.

We also have facilities in Monterrey, Mexico and Suzhou, China.

net sales are derived from complex designed products built to the customers’ specifications.

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The following is a summary of net sales by our major industry markets:

Increase (Decrease)

Medical Device

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Aerospace and Defense

Total net sales

Net sales to our Medical Device customers decreased $2,706, or 7.8%, in the year ended December 31, 2025 as compared with

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The decrease was primarily due to inventory re-balancing with existing customers and timing of customer

product launches.

Net sales to our Medical Imaging customers decreased $2,416, or 6.1%, in the year ended December 31, 2024 as compared with the

same period in 2023.

The decrease was primarily due to inventory re-balancing with existing customers, timing of customer product launches

and lower average sales prices as we moved several programs to our Monterrey, Mexico facility.

product launches as well as lower productivity as we managed our facility consolidation primarily in the first quarter of 2025.

Net sales to our Medical Imaging customers increased $2,507, or 6.7%, in the year ended December 31, 2025 as compared with

the same period in 2024.

The increase was primarily due to higher sales volume to existing customers driven by new program awards.

Net sales to our Industrial customers decreased $4,577, or 12.9%, in the year ended December 31, 2025 as compared with the same period

The decrease in net sales was primarily due to Industrial customers’ efforts to reduce their inventory investments,

delayed program launches with several customers as well as sales headwinds in several markets for which we provide products for these

The decrease in net sales was primarily due to customer order delays and part shortages.

Net sales to our Aerospace and Defense customers decreased $4,992, or 24.4%, in the year ended December 31, 2025, as

compared with the same period in 2024.

Growth in this market was negatively impacted by the closure of Blue Earth facility in

December 2024 and the movement of these customers programs to our Bemidji facility as well as the timing of customer approvals to approve

As a result, fourth quarter net sales in this market decreased from $6,055 in 2023 to $2,609 in 2024.

Our 90-day shipment backlog as of December 31, 2024 was $26,451, down 24.8% from December 31, 2023.

Our 90-day backlog consists of

firm purchase orders we expect to ship in the next 90 days, with any remaining amounts to be shipped within 180 days.

total order backlog as of December 31, 2024 was $65,852, a 28.2% decrease from December 31, 2023.

As the supply chain lead times have

normalized, customers are returning to their pre-pandemic ordering practices, which has resulted in a decrease in our backlog.

to experience reduced visibility to net sales in the next several quarters as customers are rebalancing their inventories and, therefore,

deferring the placement of some orders, as well as shortening their order to fulfilment lead teams.

The decrease in net sales relates to delays in customer approvals as we have consolidated

this business into our Bemidji facility and higher pre shipment over time revenue in 2024 due from increased production in anticipation

of the closure of the Blue Earth facility.

Our 90-day shipment backlog as of December 31, 2025 was $27,288, up 3.2% from December 31, 2024.

Our 90-day backlog consists of firm

purchase orders we expect to ship in the next 90 days, with any remaining amounts to be shipped within 180 days.

total order backlog as of December 31, 2025 was $77,343, a 17.4% increase from December 31, 2024.

This was driven by increases in customer

demand as well as customer shipment timing.

and total shipment backlog by our major industry markets are as follows:

December 31, 2025

December 31, 2024

Medical Device

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Aerospace and Defense

Total backlog

90-day and total backlog as of December 31, 2025 includes orders already recognized in net sales and included in the contract asset value

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sales, cost of goods sold, gross profit, and operating costs were as follows:

Year Ended December 31,

Increase/(Decrease)

Cost of goods sold

margin percentage (1)

Gross margin percentage (1)

% of Net sales

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% of Net sales

Operating (loss) income

Operating income (loss)

% of Net sales

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profit and gross margins.

Gross profit as a percent of net sales was 13.1% and 16.6% for the years ended December 31, 2024 and 2023,

Gross profit as a percentage of net sales was 15.2% and 13.1% for the years ended December 31, 2025, and

2024, respectively.

The decrease in gross profit as a percentage of net sales in 2024 as compared with the same prior-year periods was the

result of lower net sales, as discussed above, and corresponding lower operating leverage from reduced production at a number of our

manufacturing facilities, as well as incremental costs associated included in costs of goods sold related to the closure of our Blue

Earth facility and moving production to our Bemidji facility.

Selling expenses decreased slightly in the year ended December 31, 2024 as compared with 2023 as the result of lower incentive

compensation expense in 2024.

During the first quarter of 2025, the Company modified the responsibilities and reporting relationships of certain

customer-facing managers.

As a result of these organizational changes, which were previously classified as cost of sales totaling $1,170

in 2024, are now reported as selling expenses to better reflect the nature of the activities performed.

In addition, gross profit increased

as a percentage of net sales in the comparison period as a result of improved plant utilization primarily from our restructuring activities

and favorable sales mix.

Selling expenses, as measured as a percentage of net sales, were 4.1% and 2.7% for the year ended December 31, 2025 and

2024, respectively.

In 2025, we realigned the reporting structure of our customer facing managers from plant operations to business development.

As a result, the year-over-year percentage increase is a result of this realignment from cost of sales as well as the impact of fixed

costs on a lower revenue base.

and administrative expenses.

General and administrative expenses decreased $919 or 7.8% in the year ended December 31, 2025 as compared

with the 2023 as the result of lower incentive compensation expense in 2024.

with 2024 as the result of lower incentive compensation accruals in the current year.

Restructuring

Restructuring charges were $571 in the year ended December 31, 2024 for employee retention bonuses, disposal and moving

costs associated with the closure of our Blue Earth facility.

(loss) income.

Operating (loss) income for the years ended December 31, 2024 and 2023 were $(195), or (0.2)% of net sales, and

as compared with $5,953, or 4.3% of net sales, respectively.

The decreases were driven by lower in net sales and resulting gross

margin, incremental costs associated with the closure of the Blue Earth facility included in costs of sales as well as restructuring

expense, offset by lower incentive compensation of $1,643 in 2024 as we did not meet our bonus objectives.

Restructuring charges were $266 and $571 in the years ended December 31, 2025 and 2024, respectively.

During 2025, we incurred

$235 of severance charges for a February 2025 reduction in force to align staffing to our forecasted net sales and $31 of expenses related

to our closed Blue Earth facility.

During 2024, we incurred employee retention bonuses for our facility consolidation and closure of

our Blue Earth facility.

income (loss).

Operating income was $975 for the year ended December 31, 2025, or 0.8% of net sales, and operating loss was $195,

or 0.2% of net sales, for the year ended December 31, 2024.

This increase was driven by the improved gross margin and lower incentive

compensation expense.

Interest expense was $964 and $744 for the years ended December 31, 2025 and 2024, respectively.

This increase was driven

by higher borrowings under our line of credit arrangement.

Refer to “Liquidity and Capital Resources” for further discussion

of financing arrangements.

by higher borrowings under our line of credit arrangement and an increased interest rate.

Refer to “Liquidity and Capital Resources”

for further discussion of financing arrangements.

Our effective tax rates for the years ended December 31, 2025 and 2024 were (2,391)% and (37.9)%, respectively.

drivers of the change in the effective tax rates relate to changes in pretax book income between the years and the 2023 recording of

a $2.6 million tax benefit from the reduction of our valuation allowance for deferred tax assets.

(Loss) Income.

The unusually

large negative rate in 2025 is primarily driven by the very small amount of pretax book income for the year, which causes normal permanent

differences and valuation allowance adjustments to produce a disproportionately large impact on the calculated effective tax rate.

primary drivers of the change in the effective tax rates relate to changes in pretax book income between the years.

Our net loss in 2025 was $252 or $0.09 per diluted and basic common share.

Our net income in 2023 was $6,874 or

$2.38 per diluted and $2.53 per basic common share.

Our net loss in 2024 was $1,295 or $0.47 per diluted

and basic common share.

and Capital Resources

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and Exchange Commission.

February 29, 2024, we replaced the asset backed line of credit agreement with a $15,000 Senior Secured Revolving Line of Credit with

Bank of America (the “Revolver”).

The Revolver allows for borrowings at a defined base rate, or at the one, three or six

month Secured Overnight Finance Rate, also known as “SOFR,” plus a defined margin.

If the Company prepays SOFR borrowings

before their contractual maturity, the Company has agreed to compensate the bank for lost margin, as defined in the Revolver agreement.

The Company is required to quarterly pay a 20-basis point fee on the unused portion of the Revolver.

Revolver requires the Company to maintain no more than 2.5 times leverage ratio and at least a 1.25 times minimum fixed charges

coverage ratio, both of which are defined in the Revolver agreement.

These ratios are calculated based on trailing twelve-month

There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of outstanding

The Revolver contains certain covenants which, among other things, require the Company to adhere to regular reporting

requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual

capital expenditures.

The Revolver is secured by substantially all the Company’s assets and expires on February 28, 2027.

were not in compliance with financial covenants related to the maximum operating expense contributions to our Mexican operations in

the first and second quarters of 2024.

We have received a waiver of this event of default from the bank.

On March 27, 2025, we

amended (the “Amendment”) the Revolver to waive our non-compliance with the leverage ratio and minimum fixed charge

ratio as of December 31, 2024, and March 31, 2025.

Further, the Amendment defers the Company’s compliance with these ratios

until the third quarter of 2025 at which time the Company must maintain (a) a leverage ratio of 3.5 times or less in the third

quarter of 2025, and 2.5 times or less for each subsequent quarter;

and (b) a minimum fixed charge coverage ratio to 1.25

times for the third quarter of 2025 and each quarter thereafter.

The Company must also maintain EBITDA (earnings before

interest, taxes depreciation and amortization) as of the end of the second quarter and third quarter of at least $1,600.

addition, the Amendment requires the Company to maintain unrestricted cash and Revolver availability of at least $2.5 million at

each month end in the second quarter of 2025, $2.75 million at month end July 2025 and $3.0 million at the end of August and

September 2025.

The Amendment also requires the Company to provide incremental monthly reporting and increased the

Company’s borrowing rate by one percent until the Company is in compliance with the original terms of the Revolver.

We have included the Amendment No.

Credit Agreement, Waiver, and Consent as an exhibit to this filing and any description of that document contained in this risk factor

is only a summary and is qualified by its entirety by the Amendment No.

1 to Credit Agreement, Waiver, and Consent.

the amended Bank of America credit agreement signed February 29, 2024, the line of credit is subject to variations in the SOFR index

Under the prior credit agreement with Bank of America, the line of credit borrowing availability was restricted by a defined asset

borrowing base, and interest was based on variations in the Bloomberg Short-Term Bank Yield (BSBY) index rate.

Our line of credit bears

interest at a weighted-average interest rate of 7.7% and 8.3% as of December 31, 2024 and 2023, respectively.

We had borrowings on our

line of credit of $8,695 and $5,846 outstanding as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 we had unused

availability on the line of credit of $6,305.

Company has an interim funding agreement as of December 31, 2024 with a bank related to $345 of deposits made on equipment purchases

that will be funded through a finance lease when the equipment is received and operational.

As of December 31, we have $345 outstanding

on the interim funding agreement for equipment.

line of credit is shown net of debt issuance costs of $61 and $31 on the consolidated balance sheets as of December 31, 2024

and December 31, 2023, respectively.

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 1.4 million USD) that expires on September 9, 2025.

No amounts were outstanding under this financing arrangement

as of December 31, 2024 or 2023.

The interest rate as of December 31, 2024 was approximately 4%.

as of February 29, 2024, we entered into a credit agreement with Bank of America (the “BOA Revolver”.) This BOA Revolver

contained financial and operating covenants based on our earnings and related cash flows.

Compliance with these covenants was dependent

on our financial results, which are subject to fluctuation as described in the Risk Factors section of this annual report on Form 10-K.

As of a result of our restructuring activities in 2024 and early 2025, including the costs incurred to move hundreds of customer production

parts between plants, as well as addressing post covid customer pricing headwinds, and reductions in our customer orders, we did not

generate sufficient earnings and cash flows to meet certain financial covenants and required multiple amendments and default waivers

under the BOA Revolver.

March 20, 2026, we entered into a new Credit and Security Agreement with Associated Bank, National Association, which provides for a

revolving credit facility of up to $15.0 million, subject to a borrowing base based on eligible accounts receivable and inventory, and a $2.2 million term loan (the “Associated Facility”).

The Associated Facility includes a sublimit

of $1.5 million for letters of credit and is secured by substantially all of our assets in the United States of America, and the

Associated Facility matures in March 2029.

Associated Facility contains customary affirmative and negative covenants that restrict or limit our ability to incur additional indebtedness,

create liens, make investments, sell assets, pay dividends or engage in certain transactions without lender consent.

This agreement also

requires us to comply with financial covenants, including maintaining a Fixed Charge Coverage Ratio of 1.10 to 1.00, which measures the

ratio of earnings before interest, tax, depreciation and amortization (“EBITDA”), as defined to exclude certain other non-cash

items, and less unfunded capital expenditures, to fixed charges such as interest as well as debt and capital lease principal payments.

Associated Facility agreement includes broad and customary events of default such as non-payment of obligations, breaches of representations

or covenants, unauthorized liens, insolvency events, material adverse changes, cross-defaults to other significant indebtedness, and

change-of-control triggers.

Additional events include unsatisfied judgments, loss of lender lien priority, defaults under material business

agreements, impairment of key intellectual property, destruction of collateral, and certain ERISA, hedging, or legal compliance violations.

Upon an event of default, including the lender’s determination that a material adverse event has occurred, as defined by the agreement,

the lender may accelerate all obligations, terminate the commitments, and exercise its full rights and remedies against the collateral.

ability to comply with these covenants depends in part on our ability to generate sufficient EBITDA and operating cash flow.

If our EBITDA

or cash flows declines due to any factor including as described in these risk factors, we may not remain in compliance with our financial

covenants under the Associated Facility.

flows for the years ended December 31, 2025 and 2024 are summarized as follows:

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Financing activities

Effect of exchange rate

changes on cash

Net change in cash and

cash equivalents

used in operating activities for the year ended December 31, 2024 was $2,250 compared with cash provided by operations of $1,769 for

the year ended December 31, 2023.

In 2024, the cash used in operating activities was driven by the timing of accounts payable payments

and the payment of accrued bonus expenses.

In 2023, the cash provided by operating activities was driven by net income.

cash used in investing activities was $1,263 for the year ended December 31, 2024 and net cash used in investing activities was $1,284

Effect of exchange rate changes on cash

Net change in cash

provided by operating activities for the year ended December 31, 2025 was $2,743, compared with cash used in operating activities of

$2,250 for the year ended December 31, 2024.

Cash used in investing activities in both years primarily relates to the purchase of property and

cash provided by financing activities in 2024 of $2,765 consisted primarily of net proceeds from the line of credit of $2,849 and proceeds

from notes payable of $345.

The cash used by financing activities in 2023 of $1,281 consisted primarily of net payments on the line of

credit of $1,050 and capital lease payments of $390.

In 2025, operating cash flow was driven by significant non-cash add-backs as well as favorable

working-capital movements, as increases in accounts receivable and contract assets were more than offset by a decrease in prepaid expenses

and an increase in accounts payable due to timing of payments.

In 2024, cash used in operating activities reflected the timing of accounts

payable payments and the payment of accrued bonus expenses.

cash used in investing activities was $157 and $1,263 for the years ended December 31, 2025 and 2024, respectively.

Cash used in investing

activities in both years primarily relates to the purchase of property and equipment, partially offset in the year ended December 31,

2025 by proceeds from the sale of the Blue Earth property and equipment.

cash used in financing activities in 2025 of $1,867 consisted primarily of net payments on the line of credit.

The cash provided by financing

activities in 2024 of $2,765 consisted primarily of net proceeds from the line of credit of $2,849 and proceeds from notes payable of

Accounting Policies and Estimates

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which have been prepared in accordance with U.S.

The preparation

of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities as of the date of our consolidated financial statements, the reported amounts of net sales and expenses during

the reporting periods presented, as well as our disclosures of contingent assets and liabilities.

On an on-going basis, we evaluate our

estimates and assumptions, including, but not limited to, valuation allowance for inventories, allowance for credit losses, realizability

of deferred tax assets and long-lived asset impairment testing.

The preparation of these consolidated financial statements requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our consolidated financial

statements, the reported amounts of net sales and expenses during the reporting periods presented, as well as our disclosures of contingent

assets and liabilities.

On an on-going basis, we evaluate our estimates and assumptions, including, but not limited to, valuation allowance

for inventories, allowance for credit losses, realizability of deferred tax assets and long-lived asset impairment testing.

base our estimates and assumptions on our historical experience and on various other information available to us at the time that these

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our customer obtains control of the product or service, with the majority of our net sales being recognized over time including goods

produced under contract manufacturing agreements and services net sales.

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.

Most of our contracts have a single performance obligation and require that we provide services and products that are unique to each

customer’s designed products and have no alternative usage.

As of December 31, 2024, the Company has recorded a contract asset

of $13,792 for unbilled customer net sales included in net sales.

produced under contract manufacturing agreements and services net sales, when we have an enforceable right to payment for performance

completed to date..

A performance obligation is a promise in a contract to transfer a distinct product or service to a customer.

transaction price is allocated to each distinct performance obligation.

Most of our contracts have a single performance obligation and

require that we provide services and products that are unique to each customer’s designed products and have no alternative usage.

As of December 31, 2025, the Company has recorded a contract asset of $15,184 for unbilled customer net sales included in net sales.

Net sales are 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) income.

Sales, value added, and other taxes collected from customers

and remitted to governmental authorities are accounted for on a net (excluded from net sales) 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.

Assets Impairment

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to equal estimated fair value.

As of December 31, 2024, the Company’s common stock was trading at

a value less than the Company’s net equity value.

As such, the Company evaluated future undiscounted cash flows and determined that

no long-lived asset impairment was required as of December 31, 2024.

are recorded at the lower of cost or net realizable value for inventory that may have a lower net realizable value than cost or quantities

As of December 31, 2025, the Company’s common stock was trading at a value less than the Company’s

net equity value.

As such, the Company evaluated future undiscounted cash flows and determined that no long-lived asset impairment was

required as of December 31, 2025.

is recorded at the lower of cost or net realizable value for inventory that may have a lower net realizable value than cost or quantities

in excess of future production needs.

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We periodically review the underlying inventory reserve assumptions based on recent trends.

December 31, 2024, we had an inventory reserve of $1,446.

As of December 31, 2025,

we had an inventory reserve of $1,853.

judgment is required in evaluating our tax positions and in determining income tax expense, deferred tax assets and liabilities, and

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deferred tax assets.

In 2023, we recorded a $2,600 tax benefit as we reversed a previously established valuation allowance against our

deferred tax assets.

During 2024, we concluded that it was more likely than not we would realize our recorded net

deferred tax assets.

The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income

or tax liability in either the carryback or carry-forward periods under the tax law.

Due to significant estimates used to establish the

valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record

additional adjustments to the valuation allowance in future reporting periods that could have a material effect on our results of operations.

During 2025 and 2024, we concluded that it was more likely than not we would realize our recorded net deferred tax

The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income or tax liability

in either the carryback or carry-forward periods under the tax law.

establish reserves for uncertain tax positions when, despite our belief that our tax return positions are fully supportable, we believe

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity