Exhibit 10.2

 [ex_198814img001.jpg]

August 11, 2020

 

Nortech Systems Announces Second-Quarter 2020 Results, Sale-Leaseback and Plant
Consolidation

 

MINNEAPOLIS, MINNESOTA, USA – Nortech Systems Incorporated (Nasdaq: NSYS), a
leading provider of engineering and manufacturing solutions for complex
electromedical and electromechanical products serving the medical, aerospace &
defense and industrial markets, reported nets sales of $26.5 million for the
second quarter ended June 30, 2020, compared with $27.3 million for the second
quarter of 2019.

 

Operating income for the second quarter of 2020 was $49,000, which compares with
an operating loss of $1.2 million for the second quarter of 2019. Net loss for
the second quarter of 2020 was $123,000, or $0.05 per diluted common share. This
compares with a net loss for the second quarter of 2019 of $1.6 million, or
$0.58 per diluted common share. Nortech’s backlog at the end of the second
quarter 2020 was $46.6 million.

 

The Company also announced today that it has entered into sale and leaseback
agreements with Essjay Investment Company, LLC (“Essjay”) relating to the
Company’s manufacturing facilities in Bemidji and Mankato, Minnesota. Nortech
and Essjay are expected to close the agreements during the Company’s fiscal
third quarter, subject to final documentation and other customary conditions.

 

Nortech expects net proceeds from the sale, excluding expenses and expected
taxes, of approximately $5 million. Nortech intends to use the funds to pay down
debt, provide additional liquidity for initiatives, capital investments and
working capital, and strengthen the Company’s financial position. At closing,
Nortech will enter into a lease agreement for the Bemidji and Mankato, Minnesota
facilities for an initial 15-year term, with multiple renewal options.

 

To further improve operational efficiencies and lower overhead costs, the
Company announced that it is closing its Merrifield, Minnesota, production
facility, shifting wire and cable assembly, system-level assembly and printed
circuit board (PCB) manufacturing to Nortech’s other Minnesota locations.

 

The Merrifield production facility consolidation is expected to be complete on
or before December 31, 2020, and will impact approximately 60 employees, who
will be offered positions at other Nortech facilities in Minnesota.
Additionally, by the end of 2020, the company will shift its PCB manufacturing
from it’s Monterrey, Mexico, location to its Mankato, Minnesota production
facility, Nortech’s PCB center of excellence.

 

"Given the challenging economic environment, we are pleased with the significant
improvement in operating profitability for the second quarter, our sale and
leaseback agreements with Essjay and the Company’s plans to drive PCB
manufacturing productivity. Our balance sheet continues to strengthen, and the
sale leaseback and plant consolidation will provide significant liquidity to
make further investments in the business. Our goal through these essential moves
is to enhance Nortech’s ability to operate through the current COVID-19 pandemic
and succeed long term." stated Jay D. Miller, Chief Executive Officer and
President.

 

 

--------------------------------------------------------------------------------

 

[ex_198814img001.jpg]

Nortech, in partnership with our medical, industrial and defense customers, uses
intelligence, innovation, speed and global expertise to provide manufacturing
and engineering solutions. This enables our customers to be leaders in digital
connectivity and data management to achieve their business
goals. Nortech strives to be a premier workplace that fosters valued
relationships internally and in our communities.

 

About Nortech Systems Incorporated Nortech Systems is a leading provider of
design and manufacturing solutions for complex electromedical devices,
electromechanical systems, assemblies, and components. Nortech Systems primarily
serves the medical, aerospace & defense, and industrial markets. Its design
services span concept development to commercial design, and include medical
device, software, electrical, mechanical, and biomedical engineering. Its
manufacturing and supply chain capabilities are vertically integrated around
wire/cable/interconnect assemblies, printed circuit board assemblies, as well as
system-level assembly, integration, and final test. Headquartered in Maple
Grove, Minn., Nortech currently has seven manufacturing locations and design
centers across the U.S., Latin America, and Asia. Nortech Systems is traded on
the NASDAQ Stock Market under the symbol NSYS. Nortech’s website is
www.nortechsys.com.

 

Forward-Looking Statements This press release contains forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. While this release is based on management’s best
judgment and current expectations, actual results may differ and involve a
number of risks and uncertainties. Specifically, the company states above that
it will complete the sale and leaseback transaction during the company’s fiscal
third quarter of 2020 and that the company will gain operational efficiencies
through plant consolidations. Important factors that could cause actual results
to differ materially from the forward-looking statements include, without
limitation: volatility in market conditions which may affect market supply of
and demand for the company’s products; increased competition; changes in the
reliability and efficiency of operating facilities or those of third parties;
risks related to availability of labor; commodity and energy cost instability;
general economic, financial and business conditions that could affect the
company’s financial condition and results of operations; as well as risk factors
listed from time to time in the company’s filings with the SEC.

 

 

--------------------------------------------------------------------------------

 

[ex_198814img001.jpg]

Condensed Consolidated Statements of Operations

 

(in thousands, except for share data)

   

THREE MONTHS ENDED

   

SIX MONTHS ENDED

     

June 30,

   

June 30,

     

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

     

2020

   

2019

   

2020

   

2019

                                   

Net Sales

  $ 26,461     $ 27,292     $ 53,901     $ 55,457                              
     

Cost of Goods Sold

    24,020       24,967       48,455       50,171                              
     

Gross Profit

    2,441       2,325       5,446       5,286         9.2 %     8.5 %     10.1 %
    9.5 %                                  

Operating Expenses

                               

Selling Expenses

    730       797       1,351       1,558  

General and Administrative Expenses

    1,662       2,737       3,655       5,041  

Total Operating Expenses

    2,392       3,534       5,006       6,599                                  
 

Income (Loss) from Operations

    49       (1,209 )     440       (1,313 )                                  

Interest Expense

    (176 )     (279 )     (400 )     (524 )                                  

Income (Loss) Before Income Taxes

    (127 )     (1,488 )     40       (1,837 )                                  

Income Tax (Benefit) Expense

    (4 )     64       26       78                                    

Net Income (Loss)

  $ (123 )   $ (1,552 )   $ 14     $ (1,915 )                                  

Income (Loss) Per Common Share - Diluted

  $ (0.05 )   $ (0.58 )   $ 0.01     $ (0.72 )                                  

Weighted Average Number of Common Shares Outstanding - Diluted

    2,657,530       2,676,449       2,666,532       2,672,758  

 

 

--------------------------------------------------------------------------------

 

[ex_198814img001.jpg]

Condensed Consolidated Balance Sheets

 

(in thousands)

 

 

 

 

   

June 30,

   

December 31,

     

2020

   

2019

     

Unaudited

   

Audited

 

Cash

  $ 345     $ 351  

Restricted Cash

    409       309  

Accounts Receivable

    19,219       18,558  

Inventories

    15,492       14,279  

Contract Assets

    6,399       7,659  

Prepaid Expenses and Other Current Assets

    1,785       2,128  

Property and Other Long-term Assets

    13,817       14,408  

Goodwill and Other Long-term Assets, Net

    3,612       3,718  

Total Assets

  $ 61,078     $ 61,410                    

Accounts Payable

  $ 13,523     $ 14,014  

Current Portion of Lease Obligation

    1,434       1,415  

Other Current Liabilities

    6,926       6,803  

Long Term Line of Credit

    4,392       10,088  

Long-term Debt and Other Liabilities

    9,162       3,297  

Long Term Lease Obligation

    5,618       5,817  

Shareholders’ Equity

    20,023       19,976  

Total Liabilities and Shareholders’ Equity

  $ 61,078     $ 61,410