SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,  D.C. 20549

 

FORM 10-Q

 

ý  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2002.

 

o  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Transition period from                 to                .

 

Commission File Number 0-13257.

 

NORTECH  SYSTEMS  INCORPORATED

(Exact name of registrant as specified in its chapter)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  ý             NO  o

 

 

APPLICABLE ONLY TO CORPORATE REGISTRANTS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of latest practicable date.

 

As of November 5, 2002, there were 2,441,902 shares of the Company’s $.01 per share par value common stock outstanding.

 

(The remainder of this page was intentionally left blank.)

 

2

 

NORTECH SYSTEMS INCORPORATED

FORM 10-Q

QUARTER ENDED September 30, 2002

 

INDEX

 

PART I  -  FINANCIAL INFORMATION
	Item 1	-	Financial Statements
			Notes to Condensed Consolidated Financial Statements
	Item 2	-	Management’s Discussion and Analysis of Financial Condition And Results of Operations
	Item 3	-	Quantitative and Qualitative Disclosures About Market Risk
	Item 4	-	Controls and Procedures
SIGNATURES

 

3

 

NORTECH SYSTEMS INCORPORATED

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2002 AND DECEMBER 31, 2001

 

		SEPTEMBER 30 2002			DECEMBER 31 2001
ASSETS		(UNAUDITED)			(AUDITED)
Current Assets
Cash and cash equivalents		$	215,000		$	181,730
Accounts receivable, net of allowance		8,132,964			9,110,730
Inventories:
Finished goods		2,499,196			1,698,373
Work in process		1,650,929			1,676,730
Raw materials		8,415,385			9,076,376
Total Inventories		$	12,565,510		$	12,451,479
Prepaid expenses and other		409,501			306,428
Deferred tax assets		1,571,000			1,492,000
Total Current Assets		$	22,893,975		$	23,542,367
Property and Equipment
Land and building/leaseholds		$	4,778,027		$	4,550,966
Manufacturing equipment		5,539,255			4,878,954
Office and other equipment		2,642,598			2,434,429
Total Property and Equipment		$	12,959,880		$	11,864,349
Accumulated depreciation		(6,942,885		)	(5,999,451		)
Net Property and Equipment		$	6,016,995		$	5,864,898
Other Assets
Goodwill and other intangible assets		1,767,843			83,478
Other assets		74,409			—
Other assets from discontinued operations		—			16,795
Total Other Assets		$	1,842,252		100,273
Total Assets		$	30,753,222		$	29,507,538
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of notes and capital lease payable		$	868,243		$	501,681
Accounts payable		4,229,653			4,866,442
Accrued payrolls and commissions		2,798,825			2,171,124
Accured income taxes		63,256			538,706
Other liabilities		1,604,505			845,586
Net current liabilities from discontinued operations		23,277			159,484
Total Current Liabilities		$	9,587,759		$	9,083,023
Long-Term Liabilities
Notes and capital lease payable (net of current maturities)		$	8,606,779		$	9,791,722
Deferred tax liability		160,000			61,000
Total Long-Term Liabilities		$	8,766,779		$	9,852,722
Total Liabilities		$	18,354,538		$	18,935,745
Shareholders’ Equity
Preferred Stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and  outstanding		$	250,000		$	250,000
Common Stock - $0.01 par value; 9,000,000 shares authorized; 2,413,281 and 2,361,192 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively		24,133			23,612
Additional paid-in capital		12,361,610			12,179,399
Accumulated deficit		(237,059		)	(1,881,218		)
Total Shareholders’ Equity		$	12,398,684		$	10,571,793
Total Liabilities & Shareholders’ Equity		$	30,753,222		$	29,507,538

 

See accompanying notes to consolidated financial statements

 

4

 

NORTECH SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2002 AND 2001

 

		SEPTEMBER 30 2002			SEPTEMBER 30 2001
		(Unaudited)			(Unaudited)
Net Sales		$	14,670,449		$	13,706,447
Cost of Goods Sold		12,149,418			11,380,106
Gross Profit		$	2,521,031		$	2,326,341
Selling Expenses		593,101			762,980
General and Administrative Expenses		891,358			708,122
Interest Income		(3,794		)	(4,977		)
Miscellaneous (Income) Expense		21,615			123,036
Interest Expense		96,717			158,931
Income from Continuing Operations Before Income Taxes		$	922,034		$	578,249
Income Tax Expense		363,000			217,000
Income from Continuing Operations		$	559,034		$	361,249
Basic Income per Share of Common Stock		$	0.23		$	0.15
Diluted Income per Share of Common Stock		$	0.22		$	0.15
Weighted Average Common Shares:
Basic		2,410,456			2,361,192
Diluted		2,518,961			2,450,438

 

See accompanying notes to consolidated financial statements

 

5

 

NORTECH SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2002 AND 2001

 

		SEPTEMBER 30 2002			SEPTEMBER 30 2001
		(Unaudited)			(Unaudited)
Net Sales		$	45,277,025		$	41,173,806
Cost of Goods Sold		37,065,227			34,154,867
Gross Profit		$	8,211,798		$	7,018,939
Selling Expenses		2,017,352			2,024,071
General and Administrative Expenses		2,987,503			2,389,297
Interest Income		(11,256		)	(15,462		)
Miscellaneous Expense		63,200			180,873
Interest Expense		328,776			587,764
Income from Continuing Operations Before Income Taxes		$	2,826,223		$	1,852,396
Income Tax Expense		1,114,000			695,000
Income from Continuing Operations		$	1,712,223		$	1,157,396
Basic Income per Share of Common Stock		$	0.72		$	0.49
Diluted Income per Share of Common Stock		$	0.68		$	0.47
Weighted Average Common Shares:
Basic		2,390,713			2,361,158
Diluted		2,514,829			2,470,907

 

See accompanying notes to consolidated financial statements

 

6

 

 

NORTECH SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001

 

		SEPTEMBER 30 2002			SEPTEMBER 30 2001
		(Unaudited)			(Unaudited)
Cash Flows from Operating Activities
Net income from continuing operations		$	1,712,223		$	1,157,396
Adjustments to reconcile net income from continuing operations to net cash provided (used) by continuing operations
Depreciation and amortization		890,909			937,318
Deferred taxes		(150,000		)	(18,000		)
Changes in Operating Assets and Liabilities:
Accounts receivable		996,558			210,388
Inventories		(69,418		)	(2,026,187		)
Prepaid expenses and other		(43,348		)	(306,953		)
Other assets		(63,397		)	—
Accounts payable		(638,910		)	(298,952		)
Accrued payrolls and commissions		603,516			419,332
Accured income taxes		(475,450		)	(55,000		)
Other liabilities		758,919			(57,267		)
Net Cash Provided (Used) by Continuing Operations		$	3,521,602		$	(37,925	)
Net Cash Used by Discontinued Operations		(119,412		)	(25,698		)
Net Cash Provided (Used) by Operating Activities		$	3,402,190		$	(63,623	)
Cash Flows from Investing Activities:
Acquistion of equipment		$	(844,226	)	$	(626,966	)
Purchase of subsidiary		(650,000		)	—
Net Cash Used by Investing Activity		$	(1,494,226	)	$	(626,966	)
Cash Flows from Financing Activities:
Net change in line of credit		$	(2,897,947	)	$	514,840
Proceeds from notes payable		4,879,017			234,000
Payments on notes and capital lease payable		(3,970,432		)	(437,082		)
Issuance of common stock		182,799			968
Repurchase of treasury stock		(68,131		)	—
Net Cash Provided (Used) by Financing Activities		$	(1,874,694	)	$	312,726
Net Increase (Decrease) in Cash and Cash Equivalents		$	33,270		$	(377,863	)
Cash and Cash Equivalents - Beginning		181,730			527,998
Cash and Cash Equivalents - Ending		$	215,000		$	150,135

 

During 2002, the Company issued a long-term note payable in the amount of $1,170,983 as part of the purchase price of a subsidiary.

 

See accompanying notes to consolidated financial statements

 

7

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1.  BUSINESS DESCRIPTION

 

Nortech Systems Incorporated (the Company) is a Minnesota corporation with headquarters in Wayzata, Minnesota, a suburb of Minneapolis, Minnesota.  The Company has manufacturing facilities located in Bemidji, Fairmont, Merrifield and Baxter, Minnesota as well as Augusta, Wisconsin.  In July 2002, the Company launched production from a new facility in Monterrey, Mexico, as described in Note 6.

 

The Company manufactures wire harnesses, cables and electromechanical assemblies, printed circuit boards and higher-level assemblies for a wide range of commercial and defense industries.  The Company provides a full “turn-key” contract manufacturing service to its customers.  All products are built to the customers design specifications.  Products are sold to customers both domestically and internationally.  The Company also provides repair service on circuit boards used in machines in the medical industry.

 

NOTE 2.  USE OF ESTIMATES

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management 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 the financial statements.  Estimates also affect the reported amounts of revenue and expense during the reporting period.  Actual results could differ from those estimates.

 

NOTE 3.  PRINCIPLES OF CONSOLIDATION

 

Nortech Medical, a wholly owned subsidiary, was sold during the quarter ended September 30, 2002. The Company now owns 100 percent of the outstanding common shares of Manufacturing Assembly Solutions of Monterrey, Inc. (MAS), a Mexican corporation, located in Monterrey, Mexico.  The consolidated financial statements include the accounts of the Company and it’s wholly owned subsidiary.  All significant intercompany accounts and transactions have been eliminated.

 

NOTE 4.  BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the financial information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

 

8

 

The operating results of the interim periods presented are not necessarily indicative of the results expected for the year ending December 31, 2002 or for any other interim period.  The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2001 included in the Company’s Annual Report Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission.

 

NOTE 5.  SEGMENT REPORTING INFORMATION

 

During 1999, the Company formally adopted a plan to dispose of two of its operating segments, including Display Products and Medical Management.  See disclosures regarding these discontinued operations in Note 9 of the annual consolidated financial statement contained in the Company’s Annual Report Form 10K for the year ended December 31, 2001 as filed with the SEC.  During the quarter ended September 30, 2002, the Medical Management segment was sold.  The Company’s results from continuing operations for the quarter and nine-months ending September 30, 2002 and 2001 consist entirely of the Contract Manufacturing segment.

 

NOTE 6. ACQUISITION

 

On June 27, 2002, the Company acquired 100 percent of the outstanding common shares of Manufacturing Assembly Solutions of Monterrey, Inc. (MAS), a Mexican corporation, located in Monterrey, Mexico.  The results of operations since this acquisition have been included in the consolidated financial statements.  The primary reason for the acquisition was to enhance the Company’s manufacturing capabilities in a low cost country.

 

The aggregate purchase price was $1,850,000, including $650,000 paid in cash in July 2002 and a $1,200,000 Promissory Note.  (See Note 8)

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

Current assets		$	152,148
Net property and equipment		186,761
Other assets		11,012
Goodwill		1,270,000
Intangible assets		426,384
Total assets acquired		2,046,305
Current liabilities		(26,305		)
Long-term liabilities		(170,000		)
Total liabilities assumed		(196,305		)
Net assets acquired		$	1,850,000

 

The intangible assets acquired include customer lists and relationships, a favorable lease, company name and logo and non-compete agreements.  These assets will be amortized over their average useful lives, which range from 2-5 years.

 

The amount assigned to goodwill is not deductible for tax purposes.

 

9

 

NOTE 7. DEBT

 

As payment for the acquisition described in Note 6, the Company paid $650,000 in cash in July 2002 and has signed a $1,200,000 Promissory Note for the balance.  The note bears interest at 6% and is payable in four semiannual installments beginning December 27, 2002.  Each installment on the note may be satisfied with the issue of 31,704 shares of Nortech stock.  If the market price of the stock should fail to reach or exceed $7.00 during a four-week period of time during each semi-annual period, the company shall repurchase such shares within 30 days at a price of $7.00.  The Promissory Note is collateralized by an assignment of 126,815 shares of Nortech stock.

 

NOTE 8. LEASES

 

As part of the acquisition described in Note 6, Nortech assumed a three-year lease on the 15,000 square foot manufacturing facility located in Monterrey, Mexico.  The lease matures during 2004 and allows the Company the option of two three-year renewals.  Annual lease payments due over the next three years are as follows:

 

2002		$	47,215
2003		94,431
2004		39,346
Total		$	180,992

 

NOTE 9.  RECLASSIFICATIONS

 

Certain reclassifications have been made to the financial statements for the periods presented from amounts previously reported to conform to classifications currently adopted. Such reclassifications had no effect on previously reported  balance sheets or results of operations.

 

NOTE 10.  RECENTLY ISSUED ACCOUNTING PRONOUNCMENTS

 

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No.142 (“SFAS 142”) “Goodwill and Other Intangible Assets”.  The statement addresses accounting and reporting for (i) intangible assets at acquisition and (ii) for intangible assets and goodwill subsequent to their acquisition.  SFAS 142 replaces the requirement to amortize intangible assets with indefinite lives and goodwill with a requirement for an impairment test.  SFAS 142 also requires an evaluation of intangible assets and their useful lives and a transitional impairment test for goodwill and certain intangibles assets upon adoption.  After transition, the impairment tests will be performed annually.  The adoption of SFAS 142 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, “Impairment or Disposal of Long-Lived Assets” (“SFAS 144’).  The provisions of this statement require that all long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing or discontinued operations.  The adoption of SFAS 144 did not materially impact the Company’s consolidated financial positions or results of operations.

 

10

 

In April 2002, SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” was issued. SFAS 145 provides guidance for income statement classification of gains and losses on extinguishment of debt and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 is effective for the Company in January 2003. The Company is evaluating the impact of SFAS No. 145 on its financial position and results of operations.

 

In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities”, which is effective for exit or disposal activities that are initiated after December 31, 2002.  SFAS 146 nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).”  The Company is currently reviewing this statement but does not expect it to have a material impact on future financial statements or results of operations.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

(1.) Results of Operations for Quarter and Nine-Month Period Ended September 30, 2002

 

Revenue:

The Company had revenues of $14,670,449 compared to revenues of $13,706,447 for the quarters ended September 30, 2002 and 2001, respectively.  Revenue for the nine-month period ended September 30, 2002, was $45,277,025 compared to $41,173,806 in the prior year. The increase in revenues resulted primarily from increased revenue from the current customer base.

 

Gross Profit:

The Company had gross profit of $2,521,031 or 17.2% compared to gross profit of $2,326,341 or 17.0% for the quarters ended September 30, 2002 and 2001, respectively. The Company had gross profit of $8,211,798 or 18.1% compared to gross profit of 7,018,939 or 17.0% for the nine-month periods ended September 30, 2002 and 2001, respectively. The improvement was due to improved productivity, offset slightly by unfavorable margin due to product mix.

 

Operating Expenses:

The Company’s operating expenses were $1,484,459 for quarter ended September 30, 2002 compared to $1,471,102 for the quarter ended September 30, 2001. Operating expenses were $5,004,855 for the nine-month period ended September 30 2002 compared to $4,413,368 for the nine-month period ended September 30, 2001. The increased expenses relate to higher costs due to revenue volume and consulting and benefit costs.

 

Other Income and Expense:

Other income and expense was $114,538 for quarter ended September 30, 2002 compared to $276,990 for the quarter ended September 30, 2001. Other income and expense was $380,720 for nine-month period ended September 30 2002 compared to $753,175 for the nine-month period ended September 30, 2001. The reduced expense relates to lower interest costs due to lower debt levels and more favorable lending rates.

 

11

 

Net Income:

Net income for the three months ended September 30, 2002 was $559,034 or $0.23 per share compared to a net income of $361,249 or $0.15 per share for the three months ended September 30, 2001.  Net income for the nine-month period ended September 30, 2002 was $1,712,223 or $0.72 per share compared to $1,157,396 or $0.49 per share for the nine-month period ended September 30, 2001.

 

Backlog:

The Company’s 90-day order backlog was approximately $9,880,000 as of September 30, 2002, compared with approximately $9,216,000 at the beginning of the quarter.  Based on the current conditions, the Company anticipates revenue levels in the fourth quarter of 2002 to be slightly higher than third quarter of 2002.

 

Sale of Operating Segment:

The sale of Medical Management, a discontinued operating segment, was recorded during the quarter ended September 30, 2002.  This sale did not have and is not expected to have a financial impact on future results from continuing operations.

 

(2.) Liquidity and Capital Resources.

 

The Company’s working capital increased to $13,306,216 at the close of third quarter 2002, compared to $12,689,621 as of June 30, 2002.  The Company believes that its financial liquidity will improve during 2002 and would expect that its operating cash flow and available credit facilities will be sufficient to fund the expected growth in the near term.

 

(3.) Critical Accounting Policies

 

Allowance for Uncollectible Accounts

The Company maintains an allowance for customer accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past-due amounts. Changes in these conditions may result in additional allowances.

 

Inventory Reserves

Inventory reserves are maintained for the estimated value of the inventory that may have a lower value than stated or in excess of production needs.  These values are estimates and may differ from actual results.

 

Goodwill

Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest impairment exists. The test for impairment requires the Company to make several estimates about fair value, most of which are based on projected future cash flows. The estimates associated with the goodwill impairment tests are considered critical due to the judgments required in determining fair value amounts, including projected future cash flows. Changes in these estimates may result in the recognition of an impairment loss.

 

Revenue Recognition

Revenue from product sales is recognized upon shipment to customer, upon title passing and after all obligations of the Company have been satisfied.  Provisions for discounts and rebates to customers, and returns and other adjustments are provided for in the same period the related sales are recorded.

 

12

 

(4.) Acquisition

 

On June 27, 2002, the Company acquired 100 percent of the stock of Manufacturing Assembly Solutions of Monterrey, Inc., A Mexican corporation, located in Monterrey, Mexico.  The primary reason for the acquisition was to enhance the Company’s manufacturing capabilities in a low cost country.  (Please  refer to Note 6 to the Consolidated Financial Statements for further details)

 

Forward-Looking Statements

Those statements in the foregoing report that are not historical facts are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.  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 Nortech Systems, Inc. believes 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:

 

•                  Volatility in the marketplace which may affect market supply and demand the Company’s products;

•                  Increased competition;

•                  Changes in the reliability and efficiency of the Company’s operating facilities or those of third parties;

•                  Risks related to availability of labor;

•                  General economic, financial and business conditions that could effect the Company’s financial condition and results of operations.

 

The 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 the Company.  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-Q are expressly qualified in their entirety by the forgoing cautionary statements.  The Company undertakes no obligations to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There have been no material changes in market risk from what was reported on Form 10-K for the year ended December 31, 2001.

 

13

 

ITEM 4. CONTROLS AND PROCEDURES.

 

(a)          Evaluation of disclosure controls and procedures:  The Company’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective and designed to ensure that material information relating to the Company and the Company’s consolidated subsidiaries would be made known to them by others within those entities.

 

(b)         Changes in internal controls:  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the Evaluation Date.

 

14

 

PART II  — OTHER INFORMATION

 

Item 6.  Exhibits and Reports on Form 8-K.

 

(a)  Exhibits

 

CEO and CFO Quarterly Certifications of Form 10Q

 

(b)  None

 

 

Signatures

 

 

Pursuant to the requirements 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, Inc. and Subsidiary

 

 

Date: November 11, 2002	By	/s/ Michael J. Degen
		Michael J. Degen
		President and Chief Executive Officer
Date: November 11, 2002	By	/s/ Garry M. Anderly
		Garry M. Anderly
		Principal Financial Officer and Principal Accounting Officer

 

15

 

Quarterly Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Michael J. Degen, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of Nortech Systems, Inc. and Subsidiary;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

a)              designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b)             evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee or registrant’s board of directors (or persons performing the equivalent function):

 

a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and Quarterly Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Date: November 11, 2002	/s/ Michael J. Degen
	Michael J. Degen
	President and Chief Executive Officer

 

 

16

 

Quarterly Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Garry M. Anderly, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of Nortech Systems, Inc. and Subsidiary;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

d)             designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

e)              evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

f)                presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee or registrant’s board of directors (or persons performing the equivalent function):

 

c)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and Quarterly Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

d)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

 

Date: November 11, 2002		/s/ Garry M. Anderly
		Garry M. Anderly
		Principal Financial Officer and Principal Accounting Officer

 

 

17

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

 

PURSUANT TO

 

18 U.S.C. SECTION 1350,

 

AS ADOPTED PURSUANT TO

 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, Michael J. Degen, certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Nortech Systems Incorporated on Form 10-Q for the fiscal quarter ended September 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Nortech Systems Incorporated.

 

By:	/s/ Michael J. Degen
	Michael J. Degen
	Chief Executive Officer
	Nortech Systems Incorporated.

 

 

I, Garry M. Anderly, certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Nortech Systems Incorporated on Form 10-Q for the fiscal quarter ended September 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Nortech Systems Incorporated.

 

By:	/s/ Garry M. Anderly
	Garry M. Anderly
	Principal Financial Officer and Principal Accounting Officer
	Nortech Systems Incorporated

 

 

18