Nortech Systems Incorporated (NASDAQ:NSYS) (the "Company"), a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving medical, industrial and defense markets, reported 2021 fourth quarter and full year results for the year ended December 31, 2021.

2021 Fourth Quarter and Full Year Highlights

Fourth quarter revenue up more than 40 percent from prior year.
Full year revenue of $115.2 million, up nearly 11% from 2020.
Net income of $7.2 million, up from of a net loss of $1.5 million in the prior year.
Year-end backlog of $95 million, up over 50 percent from 2020.
Completed extension of the Bank of America $16 million credit facility in December 2021.

Management Commentary

"Our entire Nortech team deserves enormous credit for their commitment to delivering mission-critical solutions for our customers despite ongoing Covid concerns and significant supply chain disruptions," said Jay D. Miller, Chief Executive Officer and President.

"In 2021 we made progress on several important fronts. We strengthened our balance sheet, extended our Bank of America agreement until 2026, restored revenue growth, and improved gross margins. We tightened our focus on operational excellence and innovation for our customers," Miller added.

"Creating shareholder value remains a top priority; we believe this is best accomplished by creating value for our diverse customer base. In today's problematic supply chain environment, our current and new customers increasingly recognize and appreciate Nortech as a key long-term partner offering complete fulfillment solutions. We believe that creating efficiencies for our customers and deepening these relationships will further improve Nortech's revenue, gross margin, and operating cash flow."

In the fourth quarter of 2021, revenue totaled $33.5 million. This represents a 40.3% increase from revenue of $23.8 million in the fourth quarter of 2020. For the full year 2021, revenue totaled $115.2 million. This represents a 10.6% increase from revenue of $104.1 million in 2020.

In the fourth quarter of 2021, gross profit totaled $2.7 million, or 8.0%, compared to gross profit of $1.7 million, or 7.3%, in the prior-year quarter. For the full year 2021, gross profit totaled $15.9 million, or 13.8%, compared to a gross profit of $9.7 million, or 9.3%, in the prior year. Full year 2021 gross profit included $4.7 million in CARES Act Employee Retention Credits (ERC). Net of the ERC, full year 2021 gross profit would have totaled $11.2 million or 9.7%.

Net income totaled $5.0 million, or $1.76 per diluted share, in the fourth quarter of 2021, up from a net loss of $3.5 million, or $1.33 per basic share, in the prior-year quarter. In the fourth quarter of 2021 Nortech recognized a non-cash gain of $6.2 million related to PPP loan forgiveness. For the full year 2021, net income totaled $7.2 million, or $2.54 per diluted share, up from a net loss of $1.5 million, or $0.58 per diluted share, in the prior year.

Business Outlook

"We believe our results for 2021 provide a great springboard for 2022," continued Jay Miller. "For the remainder of this year, we will continue to focus on managing supply-chain disruptions and related cost challenges that our customers are experiencing." Miller added that rising material and labor costs continue to be the large issues facing the Company. A January 2022 report by the global trade organization IPC found that 90 percent of electronics manufacturers report rising material costs and over 75 percent report rising labor costs.

"In this current environment, our partnerships with customers run much deeper than purchase orders," concluded Miller. "In tandem with our customers, we are leveraging our decades of technical expertise to develop innovative proprietary technologies for manufacturing methods and products."

Conference Call

The Company will hold a live conference call and webcast at 4:00 p.m. central time on Monday, March 21, 2022, to discuss the company's fourth quarter financial results. The call will be hosted by Jay Miller, Chief Executive Officer and Chris Jones, Chief Financial Officer. To access the live audio conference call, U.S. participants may call 888-506-0062 and international participants may call 973-528-0011. Participant Access Code: 551424. Participants may also access the call via webcast at: https://www.webcaster4.com/Webcast/Page/2814/44766.

About Nortech Systems Incorporated

Nortech Systems Incorporated is a leading provider of design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies, and components. Nortech Systems primarily serves the medical, 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 including without limitation statements regarding future financial results, improving supply chain management, the impact of new products and innovations on our customers' and our results, monthly sales booking and backlog trends, customer demand, the ability of our supply chain to supply materials on a timely basis, our ability to hire and retain sufficient direct labor to produce our products on a cost effective basis, and our ability to develop innovative proprietary technologies for manufacturing methods and products. While this release is based on management's best judgment and current expectations, actual results may differ materially from those expressed or implied and 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: (1) the impact of the COVID-19 pandemic on our customers, employees, manufacturing facilities, suppliers, the capital markets and our financial condition (2) supply chain disruptions leading to parts shortages for critical components; (3) volatility in market conditions which may affect market supply of and demand for the company's products; (4) increased competition; (5) changes in the reliability and efficiency of operating facilities or those of third parties; (6) risks related to the availability and cost of labor; (7) commodity cost increases coupled with our inability to raise prices charged to our customers; (8) the unanticipated loss of key members of senior management and the transition of new members of our management teams to their new roles; (9) general economic, financial and business conditions that could affect the company's financial condition and results of operations; (10) the Company's ability to steadily improve manufacturing output throughout the remainder of 2022. Some of the above-mentioned factors are described in further detail in the section entitled "Risk Factors" in our annual and quarterly reports, as applicable. You should assume the information appearing in this document is accurate only as of the date hereof, or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since such date. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

		THREE MONTHS ENDED						TWELVE MONTHS ENDED
		December 31,						December 31,
INCOME STATEMENT		Unaudited			Unaudited			Audited			Audited
		2021			2020			2021			2020

Net Sales	$	33,462		$	23,843		$	115,168		$	104,106

Cost of Goods Sold		30,785			22,105			99,304			94,441

Gross Profit		2,677			1,738			15,864			9,665
		8.0	%		7.3	%		13.8	%		9.3	%

Operating Expenses
Selling Expenses		620			529			2,361			2,474
General and Administrative Expenses		2,755			2,599			10,002			9,253
R&D Expenses		135			-			483			-
Restructuring Expenses		8			-			327			-
Loss on Abandonment of Intangible Asset		-			-			560			-
Impairment of Goodwill		-			-			-			2,375
Gain on Sale of Assets		35			2,375			(141	)		(3,821	)
Total Operating Expenses		3,553			5,503			13,592			10,281

Income (Loss) from Operations		(876	)		(3,765	)		2,272			(616	)

Other Income (Expense)
PPP Loan Forgiveness Gain		6,171			-			6,171			-
Interest Expense		(116	)		(94	)		(430	)		(620	)

Income Before Income Taxes		5,178			(3,859	)		8,013			(1,236	)

Income Tax Expense		212			(328	)		859			310

Net Income	$	4,966		$	(3,531	)	$	7,154		$	(1,546	)

Income Per Common Share - Basic	$	1.86		$	(1.33	)	$	2.68		$	(0.58	)

Weighted Average Number of Common Shares Outstanding - Basic		2,664,586			2,658,358			2,664,586			2,657,738

Income Per Common Share - Diluted	$	1.76		$	(1.33	)	$	2.54		$	(0.58	)
Weighted Average Number of Common Shares Outstanding - Diluted		2,821,523			2,658,358			2,821,523			2,657,738

		December 31,		December 31,
BALANCE SHEET		2021		2020
		Audited		Audited
Cash	$	643	$	352
Restricted Cash		1,582		3,212
Accounts Receivable		14,548		15,625
Employee Retention Credit Receivable		5,209		-
Inventories		19,434		13,917
Contract Assets		8,698		5,899
Prepaid Expenses and Other Current Assets		1,660		2,032
Property and Equipment, Net		5,833		6,426
Operating Lease Assets		8,983		8,998
Other Intangible Assets, Net		501		1,173
Total Assets	$	67,091	$	57,634

Accounts Payable	$	12,710	$	11,239
Lease Obligations, Finance & Operating, Net		11,255		11,389
All Other Liabilities		8,055		5,891
Line of Credit		8,959		3,328
Long-term Debt, Net		0		7,069
Shareholders' Equity		26,111		18,718
Total Liabilities and Shareholders' Equity	$	67,091	$	57,634

CASH FLOW STATEMENT		December 31,			December 31,
		2021			2020
Cash Flows from Operating Activities		Audited			Audited
Net Income (Loss)	$	7,154		$	(1,546	)
Depreciation and Amortization		1,950			2,193
Compensation on Stock-Based Awards		254			176
Change in Accounts Receivable Allowance		(15	)		8
Change in Inventory Reserves		(860	)		672
Loss on Abandonment of Intangible Asset		560			-
Loss on Goodwill Impairment		-			2,375
Gain on Disposal of Assets		(141	)		(3,821	)
PPP Loan Forgiveness Gain		(6,171	)		-
Employee Retention Credit Receivable		(5,209	)		-
Changes in Current Operating Items
Accounts Receivable		1,134			3,019
Inventories		(4,613	)		(216	)
Contract Assets		(2,799	)		1,760
Prepaid Expenses and Other Assets		(171	)		651
Accounts Payable		1,471			(2,950	)
Accrued Payroll and Commissions		1,176			(623	)
All Other Operating Items		1,740			(335	)
Net Cash (Used In) Provided By Operating Activities	$	(4,540	)	$	1,363

Cash Flows from Investing Activities
Proceeds from Sale of Property and Equipment		626			6,019
Purchase of Intangible Asset		(64	)		(34	)
Purchase of Property and Equipment		(1,292	)		(485	)
Net Cash (Used In) Provided By Investing Activities	$	(730	)	$	5,500

Cash Flows from Financing Activities
Net Change in Line of Credit		5,688			(6,760	)
Proceeds from Long-Term Debt		-			6,077
Payments on Long-Term Debt		(1,128	)		(2,684	)
Payments on Capital Lease		(664	)		(592	)
Stock Option Exercises		35			-
Net Cash Provided by (Used in) Financing Activities	$	3,931		$	(3,959	)

Net Change in Cash	$	(1,339	)	$	2,904
Cash - Beginning of Period		3,564			660
Cash - Ending of Period	$	2,225		$	3,564

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Nortech Systems Announces 2021 Fourth Quarter and Full Year Results