What changed in this filing

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Item 1. Business

2026-04-15 compared with 2008-05-13 · 177 added, 156 removed, 2 unchanged (99% of the section changed)

DESCRIPTION OF BUSINESS

We are a Minnesota corporation organized in December 1990, filing annual reports, quarterly reports, proxy statements, and other documents with the Securities

Exchange Act of 1934 (Exchange Act).

Prior to December 1990, we operated as DSC Nortech, Inc., who filed a petition for reorganization under Chapter 11 of the United States Bankruptcy

Code during 1990.

The business and assets of DSC Nortech, Inc.

were transferred to us during 1990.

public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 340 Fifth Street N.W., Washington, D.C.

Also, the SEC maintains an

Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, who file electronically with the SEC.

The public can obtain any

documents that we file with the SEC at http://www.sec.gov.

make available free of charge through our Internet website (http://www.nortechsys.com) our Annual Report on Form 10-K, Quarterly Reports on

Form 10-Q, Press Releases, and Current Reports on Form 8-K.

We are an EMS (Electronic Manufacturing Service) contract manufacturing company with our headquarters in Wayzata, Minnesota, a suburb of Minneapolis, Minnesota.

We maintain manufacturing facilities in Minnesota including Bemidji, Fairmont, Blue Earth, Baxter, and Merrifield as well as Augusta, Wisconsin;

Garner, Iowa;

and Monterrey, Mexico.

We manufacture

wire harness and cable assemblies, electronic sub-assemblies, and printed circuit board assemblies.

We provide value added services and technical support including design, testing,

prototyping and supply chain management.

The vast majority of our revenue is derived from products built to the customer's design specifications.

provide a high degree of manufacturing expertise using statistical process controls to ensure product quality, total supply chain solution techniques and the systems necessary to

effectively manage the business.

This level of sophistication enables us to attract major original equipment manufacturers (OEMs) and to expand and diversify our customer base.

Our strategy is to

develop a customer base across several markets to avoid the effects of fluctuations within a given industry.

The markets we serve are Industrial Equipment, Medical, Military/Defense and

Transportation.

believe the current growth and expansion trends for contract manufacturing and the EMS (Electronic Manufacturing Services) industry will continue.

OEM outsourcing has continued to

escalate as more companies focus their investments on marketing and development of their products and rely more on EMS providers for their production and supply chain requirements.

On February 4, 2007, we acquired the business assets of Suntron Corporation's Mid-West Operation located in Garner, Iowa.

This acquisition will

strengthen our capabilities in printed circuit board assemblies and high level complete box build assemblies while opening new market segments in the agriculture and oil and gas industries.

Note 12 to the consolidated financial statements for further information on this acquisition.

June 28, 2006, we acquired a 140,000 square foot building in Blue Earth, Minnesota from Telex Communications, Inc.

This acquisition expanded our capacity allowing us to

better meet the needs of the growing Military/Defense market.

BUSINESS SEGMENT

All of our operations fall under the Contract Manufacturing segment within the Electronic Manufacturing Services industry.

We strategically direct production

between our various manufacturing facilities based on a number of considerations to best meet our customers' requirements.

BUSINESS STRATEGY

The Electronic Manufacturing Services industry continues to evolve into a dynamic, higher tech global electronics contract services industry.

We continue to

expand our capabilities to better meet these changing market requirements.

Along with offering technical expertise in our quality processes, design applications and testing, we are also increasing our

focus on supplier-managed inventory services and the cost drivers throughout the supply chain.

We continue to expand our international operations and partnerships to take advantage of

lower-cost alternatives for our customers and to remain competitive in the marketplace when required.

continue to pursue acquisitions, mergers, and/or joint ventures of companies in the EMS industry to both remain competitive and grow our customer and revenue base.

Our strategic

objectives and our history have been based on both organic and acquired growth.

quality systems and processes are based on ISO standards with all our domestic and Monterrey, Mexico facilities certified to the latest version of the ISO 9001 standards.

believe these certifications benefit our customer base and increase our chances of attracting new business opportunities.

Systems Incorporated, (“the Company”, “we”, “our”) organized in 1990, is a provider of engineering

design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies and components headquartered

in Maple Grove, Minnesota, a suburb of Minneapolis, Minnesota.

We maintain facilities and operations in Minnesota in the United States;

Monterrey, Mexico;

and Suzhou, China.

All dollar amounts herein, excluding incorporated by reference documents, are in thousands

of US Dollars.

offer a full range of value-added engineering, technical and manufacturing services and support including project management, designing,

testing, prototyping, manufacturing, supply chain management and post-market services.

Our manufacturing and engineering services include

complex electromedical and electromechanical products including medical devices, wire and cable assemblies, printed circuit board assemblies,

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

In the design phase, we provide technical support,

subject matter expertise in design for manufacturing and testing capabilities that allow our customer programs to get to production faster

while meeting both their quality and cost requirements.

breadth of manufacturing, technical expertise and experience make us attractive to our broad customer base.

Our customers are original

equipment manufacturers (“OEMs”) in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets.

diversity in the markets we serve is an advantage to mitigate the effects of fluctuations from the economy and competition.

Our customers

rely on our experience and capabilities in manufacturing and supply chain to manage and reduce total overall cost over the life cycle

of their products.

This requires a strong relationship with our customers based on a trusting partnership as we perform as an extension

of their operations.

Most of our net sales are derived from products built to the customer’s unique design specifications.

quality systems and processes are based on ISO standards with all facilities certified to at least one of the following:

ISO 9001, ISO

13485 or AS9100.

Additionally, our facility in Monterrey, Mexico is now certified in AS9100:D.

These certifications and registrations

provide our customers assurance of our capabilities and proven processes.

Our Milaca operation is a U.S.

Food and Drug Administration

(“FDA”) registered facility, and our Suzhou operation is National Medical Products Administration certified for class II

medical devices.

In addition to industry standard certifications, we actively manage quality metrics throughout product life cycle at

all levels of the organization to provide real-time, pro-active support to our customers and their projects.

Process validation is performed

through the strict phases of installation qualification, operation qualification and performance qualification.

Company operates in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets with over 50% of its net sales

coming from the medical-related markets.

Substantially all of our operations fall under the Contract Manufacturing segment within the

Electronic Manufacturing Services (“EMS”) industry.

We strategically direct production between our various manufacturing

facilities based on a number of considerations to best meet our customers’ needs.

Our plants generate net sales over several of

the markets the Company serves.

We share resources for sales, marketing, engineering, supply chain, information services, human resources,

payroll, and all corporate finance functions.

Our financial information is evaluated regularly on a consolidated basis by the chief operating

decision maker in assessing performance and allocating resources.

EMS industry has evolved into a dynamic, high-tech, regulated global electronics contract services industry.

We continue to expand our

capabilities and footprint to better meet these changing market requirements.

Along with offering technical expertise in our quality

processes, engineering design applications and testing, we continue to transform our business model from one that is less transactional,

and price/commodity driven to a solution-based model.

Our model is focused on value-added customer and supplier-managed inventory solutions

and the underlying cost drivers throughout the global supply chain.

We continue to pursue strategic opportunities that may include acquisitions,

mergers, and/or joint ventures with complementary companies to expand our service offering, advance our competitive edge, grow our customer

base and increase net sales.

Our strategic objectives and our history have been based on both organic and acquired growth.

are committed to quality, cost effectiveness and responsiveness to customer requirements.

To achieve these objectives we have invested in ROHS (lead free) processing, equipment,

additional plant capacity, people, systems and we have adopted lean manufacturing and supply chain management techniques at our facilities.

We are committed to continuous improvement in order to

provide competitive and complete manufacturing service solutions to our customers.

We will continue to maintain a diversified customer base, and expand into other capabilities and services when they

fit our core competencies and strategic vision.

We concentrate our marketing efforts in the industrial equipment, medical, military/defense, transportation, computer, recreation, and food industries, and with

the recent acquisition of our Iowa circuit board operation, we enter into the agriculture and oil and gas markets.

Our marketing strategy emphasizes the breadth of our manufacturing, supply chain and

engineering services and reflects the complete turnkey solution for meeting our customers' current and future requirements.

emphasis continues to be on mature companies, which require a contract manufacturer with a high degree of manufacturing and quality sophistication, including statistical process

control (SPC), statistical quality control (SQC), International Standards Organization (ISO), Military Specifications (Mill Spec) and Aerospace Systems 9100 (AS).

We continue efforts to penetrate our

existing customer base and expand new market opportunities in Mexico, Asia and Europe, in addition to participation in industry publications and selected trade shows.

We target customers who value

proven manufacturing performance, design and application engineering expertise and who value the flexibility to manage the supply chain of a high mix of products and services.

We market our products

and services through our in-house sales force and independent manufacturers' representatives.

SOURCES AND AVAILABILITY OF MATERIALS

On occasion some of our components may be placed on a stringent allocation basis;

however, due to the excess manufacturing capacity currently available at most

component manufacturers, we do not anticipate any major material purchasing or availability problems occurring in the foreseeable future.

PATENTS AND LICENSES

We are not presently dependent on a proprietary product requiring licensing, patent, copyright or trademark protection.

There are no revenues derived from a

service-related business for which patents, licenses, copyrights and trademark protection are necessary for successful operations.

The contract manufacturing EMS industry competitive makeup includes small closely held contract manufacturing companies, large global full-service

contract manufacturers, company-owned in-house manufacturing facilities and foreign contract manufacturers.

We do not believe that the small closely held operations pose a significant

competitive threat in the markets and customers we serve, as they generally do not have the complete manufacturing services or capabilities required by our target customers.

To achieve these objectives, we have invested

in equipment, plant capacity studies, people, enterprise resource planning systems, lean manufacturing and supply chain management techniques

at our facilities.

We have also invested in fiber optic technologies to provide a lighter weight, data-driven and environmentally cleaner

solution to our customers.

We are committed to continuous improvement and have invested in training our people to identify and act on

improvement opportunities.

We maintain a diversified customer base and expand into other capabilities and services when there is a fit

with our core competencies and strategic vision.

concentrate our marketing efforts in the Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets.

Our marketing

strategy emphasizes our breadth, expertise and experience in each of our markets.

Our expertise helps our customers save time and money

and reduces their risks.

The breadth of our manufacturing, supply chain, engineering services and complete turnkey solutions assist

our customers in getting their products to market quickly while managing the total cost solution.

Our strength is managing low to moderate

volume components and assemblies with high mix customer demand.

This requires us to have close customer relationships and operational

flexibility to manage the variation of product demands.

customer emphasis continues to be on companies that require an electronic manufacturing partner with a high degree of manufacturing and

quality sophistication, including statistical process control, statistical quality control, ISO standards, military specifications, AS9100

and FDA facility registration.

We continue efforts to penetrate our existing customer base and expand market opportunities with participation

in industry forums and selected trade shows.

We target customers who value proven manufacturing performance, design, project management

and application engineering expertise and who value the flexibility to manage the supply chain of a high mix of products and services.

We market our services through a mix of traditional marketing outreach, a specialized business development team and in limited circumstances,

independent manufacturers’ representatives.

For more information on our marketing and service offerings see our website at www.nortechsys.com.

The information on our Company’s website is not part of this filing.

and Availability of Materials

currently purchase most of our electronic components globally and directly from electronic component manufacturers and large electronic

distributors.

During the COVID pandemic, we, like many other companies in our industries, experienced significant supply chain and shipping

More recently, we are experiencing shifts in customer order patterns as they seek to reduce fulfillment times, which requires

changes to our procurement strategies and inventory investments.

We seek to develop, in partnership with our customers, a commitment

to strong supplier partnerships and risk management tools through advanced supply chain solutions.

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

December 31, 2024.

success depends on our technical expertise, trade secrets, supply chain and manufacturing skills.

During the normal course of business,

we obtain or develop proprietary products requiring licensing, patent, copyright or trademark protection.

contract manufacturing EMS industry’s competitive makeup includes small closely held contract manufacturing companies, large global

full-service contract manufacturers, company-owned in-house manufacturing facilities and foreign contract manufacturers.

We do not believe

that the small closely held operations pose a significant competitive threat in the markets and customers we serve, as they generally

do not have the complete manufacturing and engineering services or capabilities required by our target customers.

We believe the larger

global full service and foreign manufacturers do provide a substantial competitive environment while the company-owned operations create an increasing opportunity as the trend of more outsourcing

Technical support from foreign competition has improved greatly along with their ability to be more responsive to engineering and schedule changes.

The willingness of foreign manufacturers

to "stock" finished product at warehouse locations in the United States is another of their competitive advantages, however, their inability to react to engineering, product or schedule changes is a

disadvantage and plays into our strength.

To mitigate foreign competition, we operate a manufacturing operation in Mexico and have other sourcing solutions to support our customers with a "Low Cost"

supply chain solution.

Historically, our backlog runs 60 to 90 days.

As of December 31, 2007 our 90 day backlog was approximately $27.3 million compared to

approximately $19.5 million on December 31, 2006.

Approximately 10% of backlog at December 31, 2007 was a result of the Garner, Iowa acquisition.

We expect a major portion of the

backlog will be realized as revenue during first quarter 2008.

MAJOR CUSTOMERS

Two divisions of General Electric, Co.

(G.E.) combined account for 10% or more of our net sales during the past two years.

G.E.'s Medical and

Transportation Divisions together accounted for 17% of net sales for the years ended December 31, 2007 and 2006.

Accounts receivable from G.E.'s Medical and Transportation Divisions at

December 31, 2007 and 2006 represented 10% and 14% of total accounts receivable, respectively.

Additionally, Northrop Grumman Corp.

accounted for 16% of the year ended December 31, 2007

and 10% of net sales for the year ended December 31, 2006.

Accounts receivable from Northrop Grumman at December 31, 2007 and 2006 represented 21% and 15% of total accounts receivable,

respectively.

Historically, we have not experienced significant losses on customer receivable collections in any particular industry or geographic area.

RESEARCH AND DEVELOPMENT

We perform research and development for customers on an as requested and program basis for development of conceptual engineering and design activities prior to

manufacturing the products.

We did not expend significant dollars in 2007 and 2006 on company-sponsored product research and development.

ENVIRONMENTAL LAW COMPLIANCE

We believe that our manufacturing facilities are currently operating under compliance with local, state, and federal environmental laws.

We have incurred and plan

to continue incurring, the necessary expenditures for compliance with applicable laws.

Any environmental-oriented equipment is capitalized and depreciated over a seven-year period.

annualized depreciation expense for this type of environmental equipment is insignificant.

We have 878 full-time, 58 part-time and 5 temporary employees as of December 31, 2007.

Manufacturing personnel, including direct,

indirect support and sales functions, comprise 896 employees, while general administrative employees total 45.

FOREIGN OPERATIONS AND EXPORT SALES

We have a leased manufacturing facility in Monterrey, Mexico with approximately $471,000 in long-term assets at December 31, 2007.

represent 4% of net sales for the year ended December 31, 2007.

For the year ended December 31, 2006, export sales represented 5% of net sales.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in

Item 7, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

We may also make forward-looking statements in other reports filed with

the SEC, in materials delivered to stockholders and in press releases.

Such statements generally will be accompanied by words such as "anticipate," "believe," "estimate," "expect," "forecast,"

"intend," "possible," "potential," "predict," "project," or other similar words that convey the uncertainty of future events or outcomes.

Although we believe these forward-looking statements are

reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate.

Forward-looking statements involve a number of risks

and uncertainties.

Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation:

in the marketplace which may affect market supply and demand of our products;

in the reliability and efficiency of our operating facilities or those of third parties;

related to availability of labor;

in certain raw material costs such as copper;

and Energy cost instability;

economic, financial and business conditions that could affect our financial condition and results of operations.

factors identified above are believed to be important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those

expressed in any forward-looking statement made by us.

Discussion of these factors is also incorporated in Part I, item 1A, "Risk Factors", and should be considered an integral part of

Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Unpredictable or unknown factors not discussed herein could also have material

adverse effects on forward-looking statements.

All forward-looking statements included in this Form 10-K are expressly qualified in their entirety by the forgoing cautionary

We undertake no obligations to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events.

global full service and foreign manufacturers are more focused on higher volume customer engagements and we do not see them as our primary

We continue to see opportunities with OEM companies that have their own in-house electronic manufacturing capabilities as

they evaluate their internal costs and investments against outsourcing to contract manufacturers like us.

We see trends of the low volume,

high mix customer demand going to a regional supply base.

This is a good fit with our operations in US, Mexico and China.

to study and investigate other regions and global alternatives to meet our competitive challenges and customer requirements.

and Development

perform research and development (“R&D”) for customers on an as requested, project and program basis for development

of conceptual engineering and design activities as well as products moving into production.

We spent $1,172 and $1,191 on

product research and development in the years ended December 31, 2025 and 2024, respectively.

We continue to explore opportunities

for developing proprietary manufacturing methods or products, particularly in complex wire and cable interconnect

technologies.

addition to customer directed R&D, we invest in strategic initiatives to expand our technical capabilities and support long-term

Our efforts include advancing fiber-optic interconnect technologies, which are becoming increasingly important in the EMS market

as customers require higher-speed data transmission, improved signal integrity, and greater bandwidth.

These initiatives are designed

to strengthen our position in markets rapidly adopting optical solutions, including industrial automation, medical devices, defense communication

platforms, and other high reliability connectivity applications.

Environmental

Law Compliance

believe that our manufacturing facilities are currently operating in compliance with local, state, and federal environmental laws.

plan to continue acquiring environmentally efficient equipment and incurring the expenditures we deem necessary for compliance with applicable

Expenditures relating to compliance for operating facilities incurred in the past have not significantly affected our capital expenditures,

earnings or competitive position.

a medical device manufacturer, we have additional compliance requirements.

We are required to register with the FDA and are subject

to periodic inspection by the FDA for compliance with the FDA’s Quality Management System Regulation (“QMSR”)

requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control

and documentation procedures.

Compliance with applicable regulatory requirements is subject to continual review and is rigorously

monitored through periodic inspections and product field monitoring by the FDA.

In January 2024, the FDA finalized its transition to

the new QMSR, which became effective February 2, 2026.

The new QMSR incorporates ISO 13485:2016 by reference and replaces most prior

Quality System Regulation (“QSR”) requirements, retaining only select U.S.-specific expectations such as labeling and

complaint handling.

As part of this shift, the FDA adopts the ISO defined Medical Device File structure in place of traditional QSR

documentation while emphasizing a risk-based approach consistent with ISO 13485 and ISO 14971 principles.

We believe our ISO

certified facilities position us well for this transition, and we continue to review and enhance our systems to ensure full

support the quality requirements of our Aerospace and Defense market customers, all our US locations are International Traffic in Arms

Regulations (“ITAR”) compliant.

Capital Resources

have 685 full-time and 28 part-time/temporary employees as of December 31, 2025, none which are covered by union agreements.

employees, manufacturing personnel, including direct, indirect support and sales functions, comprise 642 employees, while general administrative

employees total 43.

Operations and Export Sales from Our Domestic Operations

have leased manufacturing facilities in Monterrey, Mexico and Suzhou, China.

Monterrey, Mexico has approximately $607 and $687 in long-term assets, and $1,408 and $1,758 of net operating lease assets as of December 31, 2025 and 2024, respectively.

China has approximately $953 and $812 in long-term assets, and $375 and $685 of net operating lease assets as of December

31, 2025 and 2024, respectively.

Export sales from our U.S.

domestic operations represented 3.3% and 3.4% of net sales for the years

ended December 31, 2025 and 2024, respectively.

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available

free of charge, as soon as reasonably practicable, after we electronically file such material with, or furnish it to, the United States

Securities and Exchange Commission (“SEC”).

These reports are available on our website at http://www.nortechsys.com

and on the SEC’s website at http://www.sec.gov .

Information included on our website is not deemed to be incorporated into

this Annual Report on Form 10-K.

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/A

Item 1. Business