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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended
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Jun. 30, 2024
Accounting Policies [Abstract] |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the Company’s audited consolidated financial statements. These unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements for the year ended December 31, 2023, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC. The condensed consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. All dollar amounts are stated in thousands of U.S. dollars.
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us 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 our consolidated financial statements. Estimates also affect the reported amounts of net sales and expenses during each reporting period. Significant items subject to estimates and assumptions include the valuation allowance for inventories, accounts receivable allowances, realizability of deferred tax assets and long-lived asset recovery. Actual results could differ from those estimates.
Recently Issued New Accounting Standards | Recently Issued New Accounting Standards In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting Topic (280): Improvements to Reportable Segment Disclosure. The ASU supplements reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU enhances the transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures. Out-of-Period Correction During the first quarter of 2024, we identified an error that understated our accrued liabilities by approximately $178 as of December 31, 2023. We corrected the error on a prospective basis during the first quarter of 2024 through an out of period adjustment lowering our net income by $178 in both the three and six months ended June 30, 2024. We assessed the materiality of the error and concluded that the error was not material to the results of operations or financial condition or for the prior annual and interim periods, and the correction is not expected to be material to the full year results for fiscal year 2024.
Inventories | Inventories Inventories are as follows: SCHEDULE OF INVENTORIES
|  | June 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Raw materials |  | $ | 22,463 |  |  | $ | 20,863 |
Work in process |  |  | 645 |  |  |  | 1,033 |
Finished goods |  |  | 965 |  |  |  | 934 |
Reserves |  |  | (1,280 | ) |  |  | (1,170 | )
Inventories, net |  | $ | 22,793 |  |  | $ | 21,660 |
Other Intangible Assets | Other Intangible Assets Other intangible assets as of June 30, 2024 and December 31, 2023 are as follows: SCHEDULE OF OTHER INTANGIBLE ASSETS
|  | Customer Relationships |  |  | Patents |  |  | Total |
Balances as of January 1, 2023 |  | $ | 216 |  |  | $ | 206 |  |  | $ | 422 |
Amortization |  |  | 144 |  |  |  | 15 |  |  |  | 159 |
Balances as of December 31, 2023 |  | $ | 72 |  |  | $ | 191 |  |  | $ | 263 |
Balances |  | $ | 72 |  |  | $ | 191 |  |  | $ | 263 |
Amortization |  |  | 72 |  |  |  | 8 |  |  |  | 80 |
Balances as of June 30, 2024 |  | $ | - |  |  | $ | 183 |  |  | $ | 183 |
Balances |  | $ | - |  |  | $ | 183 |  |  | $ | 183 |
Intangible assets are amortized on a straight-line basis over their estimated useful lives. The weighted average remaining amortization period of our intangible assets is 5.5 years. Of the patents value as of June 30, 2024, $98 are being amortized and $85 are in process and a patent has not yet been issued. Amortization expense of finite life intangible assets for both the three months ended June 30, 2024 and 2023 was $40. Amortization expense of finite life intangible assets for both the six months ended June 30, 2024 and 2023 was $80. As of June 30, 2024, estimated future annual amortization expense (except projects in process) related to these assets is as follows: SCHEDULE OF ESTIMATED FUTURE ANNUAL AMORTIZATION EXPENSE
Year |  |  | Amount |
2024 |  |  | $ | 9 |
2025 |  |  |  | 18 |
2026 |  |  |  | 18 |
2027 |  |  |  | 18 |
2028 |  |  |  | 18 |
Thereafter |  |  |  | 17 |
Total |  |  | $ | 98 |

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