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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
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Mar. 31, 2025
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, 2024, 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 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 net realizable value reserves 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 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 Company adopted this ASU in the fourth quarter of 2024 and have included related interim reporting disclosures in Note 9 – Segment Information, to these condensed consolidated financial statements. In December 2023, the Financial Accounting Standards Board (“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 disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated expense information in the notes to the financial statements related to purchases of inventory, employee compensation, depreciation, intangible asset amortization and selling expenses for each statement of earnings line item that contains those expenses. ASU No. 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The guidance is to be applied on a prospective basis with the option to apply the standard retrospectively; this ASU allows for early adoption. The Company is currently evaluating the impact of this ASU on its consolidated financial statements disclosures. Inventories Inventories are as follows: SCHEDULE OF INVENTORIES
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Raw materials |  | $ | 20,799 |  |  | $ | 21,122 |
Work in process |  |  | 744 |  |  |  | 892 |
Finished goods |  |  | 1,044 |  |  |  | 1,070 |
Reserves |  |  | (1,677 | ) |  |  | (1,446 | )
Inventories, net |  | $ | 20,910 |  |  | $ | 21,638 |
Other Intangible Assets Other intangible assets as of March 31, 2025 and December 31, 2024 are as follows: SCHEDULE OF OTHER INTANGIBLE ASSETS
|  | Patents |
Balances as of December 31, 2024 |  | $ | 174 |
Amortization |  |  | (5 | )
Balances as of March 31, 2025 |  | $ | 169 |
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 4.8 years. Of the patents value as of March 31, 2025, $85 are being amortized and $84 are in process and a patent has not yet been issued. Amortization expense of finite life intangible assets for the three months ended March 31, 2025 and 2024 was $5 and $40, respectively. As of March 31, 2025, 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 |
Remainder of 2025 |  | $ | 14 |
2026 |  |  | 18 |
2027 |  |  | 18 |
2028 |  |  | 18 |
2029 |  |  | 12 |
Thereafter |  |  | 5 |
Total |  | $ | 85 |
Property and Equipment As of March 31, 2025, the Company classified its Blue Earth manufacturing facility and related land as held for sale as the criteria for classification as held for sale were met and the sale is expected to be completed in the next twelve months. The carrying value of these assets held for sale was $507 as of March 31, 2025, which approximates its fair value, and is classified as a current asset in our condensed consolidated balance sheets.

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