UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022 

OR

 

☐     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 001-32644

 

BK TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada

 

83-4064262

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

7100 Technology Drive

West Melbourne, Florida 32904

(Address of principal executive offices and Zip Code)

 

Registrant’s telephone number, including area code: (321) 984-1414

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common Stock, par value $.60 per share

 

BKTI

 

NYSE American

 

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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

There were 16,864,599 shares of common stock, $0.60 par value, of the registrant outstanding at May 6, 2022.

 

 

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

3

 

 

 

Item 1.

FINANCIAL STATEMENTS.

3

 

 

 

Item 2.

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

17 

 

 

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

26 

 

 

 

Item 4. 

CONTROLS AND PROCEDURES.

26 

 

 

 

PART II - OTHER INFORMATION

27 

 

 

 

Item 1A.

RISK FACTORS.

27 

 

 

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

27 

 

 

 

Item 6.

EXHIBITS.

28 

 

 

 

SIGNATURES.

29 

 

 
2

Table of Contents

 

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

March 31,

2022

 

 

December 31,

 2021

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 6,357

 

 

$ 10,580

 

Trade accounts receivable, net

 

 

4,763

 

 

 

8,229

 

Inventories, net

 

 

21,091

 

 

 

16,978

 

Prepaid expenses and other current assets

 

 

2,538

 

 

 

1,634

 

Total current assets

 

 

34,749

 

 

 

37,421

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

4,559

 

 

 

4,556

 

Right-of-use (ROU) asset

 

 

2,299

 

 

 

2,399

 

Investment in securities

 

 

1,299

 

 

 

1,795

 

Deferred tax assets, net

 

 

4,116

 

 

 

4,116

 

Other assets

 

 

97

 

 

 

98

 

Total assets

 

$ 47,119

 

 

$ 50,385

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 7,254

 

 

$ 5,883

 

Accrued compensation and related taxes

 

 

1,450

 

 

 

1,099

 

Accrued warranty expense

 

 

512

 

 

 

533

 

Accrued other expenses and other current liabilities

 

 

551

 

 

 

938

 

Dividends payable

 

 

 

 

 

505

 

Short-term lease liability

 

 

457

 

 

 

447

 

Credit facility

 

 

1,458

 

 

 

1,470

 

Notes payable-current portion

 

 

269

 

 

 

267

 

Deferred revenue

 

 

1,085

 

 

 

1,045

 

Total current liabilities

 

 

13,036

 

 

 

12,187

 

 

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

537

 

 

 

605

 

Long-term lease liability

 

 

2,151

 

 

 

2,269

 

Deferred revenue

 

 

2,558

 

 

 

2,706

 

Total liabilities

 

 

18,282

 

 

 

17,767

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding

 

 

 

 

 

 

Common stock; $.60 par value; 50,000,000 authorized shares; 18,314,999 and 18,298,999 issued and 16,864,599 and 16,848,599 outstanding shares at March 31, 2022, and December 31, 2021, respectively

 

 

10,989

 

 

 

10,979

 

Additional paid-in capital

 

 

36,007

 

 

 

35,862

 

Accumulated deficit

 

 

(12,757 )

 

 

(8,821 )

Treasury stock, at cost, 1,450,400 shares at March 31, 2022, and December 31, 2021, respectively

 

 

(5,402 )

 

 

(5,402 )

Total stockholders’ equity

 

 

28,837

 

 

 

32,618

 

Total liabilities and stockholders’ equity

 

$ 47,119

 

 

$ 50,385

 

 

See notes to condensed consolidated financial statements.

 

 
3

Table of Contents

 

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data) (Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021*

 

 

 

 

 

 

 

 

Sales, net

 

$ 6,585

 

 

$ 8,564

 

Expenses

 

 

 

 

 

 

 

 

Cost of products

 

 

5,113

 

 

 

5,444

 

Selling, general and administrative

 

 

4,916

 

 

 

3,973

 

Total operating expenses

 

 

10,029

 

 

 

9,417

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(3,444 )

 

 

(853 )

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

Net interest (expense)

 

 

(15 )

 

 

(4 )

(Loss) gain on investment in securities

 

 

(496 )

 

 

205

 

Other income (expense)

 

 

19

 

 

 

(18 )

Total other (expense) income

 

 

(492 )

 

 

183

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(3,936 )

 

 

(670 )

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (3,936 )

 

$ (670 )

 

 

 

 

 

 

 

 

 

Net loss per share-basic and diluted

 

$ (0.23 )

 

$ (0.05 )

Weighted average shares outstanding-basic and diluted

 

 

16,848,777

 

 

 

12,517,412

 

 

 See notes to condensed consolidated financial statements.

 

* The amounts for the three months ended March 31, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements.

 

 
4

Table of Contents

 

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021*

 

Operating activities

 

 

 

 

 

 

Net loss

 

$ (3,936 )

 

$ (670 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Inventories allowances

 

 

48

 

 

 

300

 

Depreciation and amortization

 

 

342

 

 

 

298

 

Share-based compensation expense-stock options

 

 

85

 

 

 

32

 

Share-based compensation expense-restricted stock units

 

 

70

 

 

 

103

 

Loss (gain) on investment in securities

 

 

496

 

 

 

(205 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

3,466

 

 

 

1,900

 

Inventories

 

 

(4,161 )

 

 

(1,394 )

Prepaid expenses and other current assets

 

 

(904 )

 

 

57

 

Other assets

 

 

1

 

 

 

(6 )

ROU asset and lease liabilities

 

 

(8 )

 

 

(4 )

Accounts payable

 

 

1,371

 

 

 

299

 

Accrued compensation and related taxes

 

 

351

 

 

 

(315 )

Accrued warranty expense

 

 

(21 )

 

 

(73 )

Deferred revenue

 

 

(108 )

 

 

(138 )

Accrued other expenses and other current liabilities

 

 

(387 )

 

 

(145 )

Net cash (used in) provided by operating activities

 

 

(3,295 )

 

 

39

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of property, plant, and equipment

 

 

(345 )

 

 

(1,031 )

Net cash used in investing activities

 

 

(345 )

 

 

(1,031 )

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Cash dividends paid

 

 

(505 )

 

 

(250 )

Proceeds from the credit facility

 

 

 

 

 

800

 

Repayment of the credit facility and notes payable

 

 

(78 )

 

 

(21 )

Net cash (used in) provided by financing activities

 

 

(583 )

 

 

529

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(4,223 )

 

 

(463 )

Cash and cash equivalents, beginning of period

 

 

10,580

 

 

 

6,826

 

Cash and cash equivalents, end of period

 

$ 6,357

 

 

$ 6,363

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ 15

 

 

$ 4

 

Non-cash financing activity

 

 

 

 

 

 

 

 

Common stock issued under restricted stock units

 

$ 40

 

 

$ 84

 

 

 See notes to condensed consolidated financial statements.

 

* The amounts for the three months ended March 31, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements.

 

 
5

Table of Contents

 

BK TECHNOLOGIES CORPORATION

Notes to Condensed Consolidated Financial Statements

Unaudited

(In thousands, except share and per share data and percentages)

 

1. Condensed Consolidated Financial Statements

 

Basis of Presentation

 

The condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited. The condensed consolidated balance sheet at December 31, 2021, has been derived from the Company’s audited consolidated financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results for a full year.

 

Principles of Consolidation

 

The accounts of the Company and its subsidiaries have been included in the accompanying condensed financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity.

 

VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.

 

Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.

 

When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20% to 50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost.

 

The Company has an investment in FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated VIE.

 

 
6

Table of Contents

 

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of March 31, 2022, and December 31, 2021, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

 

The Company uses observable market data assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing investment in securities.

 

Recent Accounting Pronouncements

 

The Company does not discuss recent pronouncements that are not anticipated to have a material impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

Change in Accounting Principle

 

As disclosed in Note 4, on July 1, 2021, the Company changed its accounting for inventory to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress. The Company believes that this method improves financial reporting by better reflecting the current value of inventory on the consolidated balance sheets, by providing better matching of revenues and expenses. This change resulted in a net increase of approximately $1,300 in inventory and a net decrease of $1,300 in accumulated deficit as of July 1, 2021.

 

The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three months ended March 31, 2022.

 

2. Significant Events and Transactions

 

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.03 per share of the Company’s common stock on April 6, 2022, to stockholders of record as of May 2, 2022. These dividends will be paid on May 16, 2022.

 

3. Allowance for Doubtful Accounts

 

The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $4,813 and 8,279 at March 31, 2022, and December 31, 2021, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

 

4. Inventories, Net

 

On July 1, 2021, the Company changed its accounting for inventory to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress.

 

 

7

Table of Contents

 

 4. Inventories, Net - continued

 

The fiscal 2021 financial statements have been retrospectively adjusted to apply the new inventory change method. The cumulative effect of this change on periods prior to those presented herein resulted in a net decrease in accumulated deficit of approximately $1,104 as of January 1, 2021.

 

Inventories, which are presented net of allowance for slow moving, excess, or obsolete, consisted of the following:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Finished goods

 

$ 2,465

 

 

$ 2,335

 

Work in process

 

 

6,274

 

 

 

4,527

 

Raw materials

 

 

12,352

 

 

 

10,116

 

 

 

$ 21,091

 

 

$ 16,978

 

 

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $1,214 at March 31, 2022, compared with approximately $1,288 at December 31, 2021.

 

As a result of the retrospective application of this change in accounting method, the following financial statement line items within the accompanying fiscal 2021 Condensed Consolidated financial statements were adjusted as follows:

 

 

 

As

Originally

Reported

($)

 

 

 Effect of

Change

($)

 

 

As Reported

under Change

in Accounting Principle

 ($)

 

 

Condensed Income Statements

 

 

 

 

 

 

 

 

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2021

 

 

5,468

 

 

 

(24 )

 

 

5,444

 

Loss before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2021

 

 

(694 )

 

 

24

 

 

 

(670 )

Net loss:

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2021

 

 

(694 )

 

 

24

 

 

 

(670 )

Net loss income per share-basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2021

 

 

(0.06 )

 

 

0.01

 

 

 

(0.05 )

Condensed Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Net loss as of March 31, 2021

 

 

(694 )

 

 

24

 

 

 

(670 )

Inventories allowance

 

 

289

 

 

 

11

 

 

 

300

 

Inventories

 

 

(1,359 )

 

 

(35 )

 

 

(1,394 )

 

 
8

Table of Contents

 

 5. Income Taxes

 

The Company has not recorded income tax provision or benefit for the three months ended March 31, 2022 and 2021.

 

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision (benefit) in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, changes in the valuation allowance related to net deferred tax assets, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

 

As of March 31, 2022, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

 

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years. The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

 

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, the Company established a valuation allowance of $1,480 and $610 as of March 31, 2022 and December 31, 2021, respectively. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of March 31, 2022.

 

6. Investment in Securities

 

1347 LP

 

The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP (“1347 LP”), was established for the purpose of investing in securities.

 

Affiliates of Fundamental Global GP, LLC (“FG”), serve as the general partner and the investment manager of 1347 LP, and the Company is the sole limited partner. As the sole limited partner, the Company is entitled to 100% of net assets held by 1347 LP. The general partner of 1347 LP is entitled to reimbursement of certain costs, fees, and expenses arising in connection with 1347 LP’s operations, as provided by the partnership agreement, upon approval by the Company’s Board of Directors.

 

FG Financial Group

 

As of March 31, 2022, the Company indirectly held approximately $62 in cash and 477,282 shares of FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq: FGF) (“FGF”), with fair value of $1,299, through an investment in 1347 LP.  These shares were purchased in March and May 2018 for approximately $3,741.  For the three months ended March 31, 2022, the Company recognized unrealized loss of $496 on the investment, compared with unrealized gain of $205 for the same period last year. There have been no costs, fees, and expenses paid to the general partner or its affiliates for any periods, including the three months ended March 31, 2022 and 2021. 

 

 

 
9

Table of Contents

 

6. Investment in Securities -continued

 

As of March 31, 2022, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 3,032,765 shares of FGF’s common stock, representing approximately 60.0% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, a member of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of FG and serves as Chairman of the Board of Directors of Ballantyne Strong, Inc. Mr. Cerminara also serves as Chairman of the Board of Directors of FGF.

 

7. Stockholders’ Equity

 

The changes in condensed consolidated stockholders’ equity for the three months ended March 31, 2022 and 2021*, are as follows:

 

 

 

Common

Stock

Shares

 

 

Common

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

 Deficit

 

 

Treasury

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

18,298,999

 

 

$ 10,979

 

 

$ 35,862

 

 

$ (8,821 )

 

$ (5,402 )

 

$ 32,618

 

Common stock issued under restricted stock units

 

 

16,000

 

 

 

10

 

 

 

(10 )

 

 

 

 

 

 

 

 

 

Share-based compensation expense-stock options

 

 

 

 

 

 

 

 

85

 

 

 

 

 

 

 

 

 

85

 

Share-based compensation expense-restricted stock units

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

70

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,936 )

 

 

 

 

 

(3,936 )

Balance at March 31, 2022

 

 

18,314,999

 

 

$ 10,989

 

 

$ 36,007

 

 

$ (12,757 )

 

$ (5,402 )

 

$ 28,837

 

 

 

 

 

Common

Stock

Shares

 

 

Common

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

 Deficit

 

 

Treasury

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020*

 

 

13,962,366

 

 

$ 8,377

 

 

$ 26,346

 

 

$ (5,693 )

 

$ (5,402 )

 

$ 23,628

 

Common stock issued under restricted stock units

 

 

24,505

 

 

 

15

 

 

 

(15 )

 

 

 

 

 

 

 

 

 

Share-based compensation expense-stock options

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

32

 

Share-based compensation expense-restricted stock units

 

 

 

 

 

 

 

 

103

 

 

 

 

 

 

 

 

 

103

 

Common stock dividends ($0.02 per share)

 

 

 

 

 

 

 

 

 

 

 

(251 )

 

 

 

 

 

(251 )

Net loss*

 

 

 

 

 

 

 

 

 

 

 

(670 )

 

 

 

 

 

(670 )

Balance at March 31, 2021*

 

 

13,986,871

 

 

$ 8,392

 

 

$ 26,466

 

 

$ (6,614 )

 

$ (5,402 )

 

$ 22,842

 

 

*              The amounts as of December 31, 2020, and for the period ended March 31, 2021, have been adjusted to reflect the change in inventory accounting method as described in Notes 1 and 4 of the Condensed Consolidated Financial Statements.

 

 
10

Table of Contents

 

8. Income (Loss) Per Share

 

The following table sets forth the computation of basic and diluted loss per share:

 

 

 

Three Months Ended

 

 

 

March 31,

 2022

 

 

March 31,

2021*

 

Numerator:

 

 

 

 

 

 

Net loss for basic and diluted earnings per share

 

$ (3,936 )

 

$ (670 )

Denominator for basic loss per share weighted average shares

 

 

16,848,777

 

 

 

12,517,412

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Options and restricted stock units

 

 

 

 

 

 

Denominator for diluted loss per share weighted average shares

 

 

16,848,777

 

 

 

12,517,412

 

Basic and diluted loss per share

 

$ (0.23 )

 

$ (0.05 )

 

Approximately 909,000 stock options and 137,055 restricted stock units for the three months ended March 31, 2022, respectively, and 489,000 stock options and 122,533 restricted stock units for the three months ended March, 2021, respectively, were excluded from the calculation because they were anti-dilutive.

 

*              The amounts for 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1and 4 to Condensed Consolidated Financial Statements.

 

9. Non-Cash Share-Based Employee Compensation

 

The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $85 for the three months ended March 31, 2022, compared with $32 for the same period last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.

 

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of stock option grants under this plan. The non-cash share-based employee compensation expense recorded in the three months ended March 31, 2022, was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

 
11

Table of Contents

 

9. Non-Cash Share-Based Employee Compensation - continued

 

A summary of activity under the Company’s stock option plans during the three months ended March 31, 2022, is presented below:

 

 

 

Stock

Options

 

 

Wgt. Avg.

 Exercise

Price ($)

Per Share

 

 

Wgt. Avg.

Remaining

Contractual

Life (Years)

 

 

Wgt. Avg.

Grant Date

Fair Value

($) Per Share

 

 

Aggregate

Intrinsic Value

($)

 

As of January 1, 2022

Outstanding

 

 

676,500

 

 

 

3.68

 

 

 

7.33

 

 

 

1.41

 

 

 

4,500

 

Vested

 

 

361,600

 

 

 

3.80

 

 

 

6.66

 

 

 

1.44

 

 

 

4,500

 

Nonvested

 

 

314,900

 

 

 

3.53

 

 

 

8.10

 

 

 

1.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued

 

 

237,500

 

 

 

2.38

 

 

 

 

 

 

0.78

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired 

 

 

5,000

 

 

 

4.95

 

 

 

 

 

 

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

 

909,000

 

 

 

3.33

 

 

 

7.87

 

 

 

1.25

 

 

 

49,050

 

Vested

 

 

461,933

 

 

 

3.67

 

 

 

6.87

 

 

 

1.37

 

 

 

20,833

 

Nonvested

 

 

447,067

 

 

 

2.98

 

 

 

8.89

 

 

 

1.13

 

 

 

28,217

 

 

Restricted Stock Units

 

On March 31, 2022, the Company granted 16,000 restricted stock units to Joshua Horowitz for strategic advisory service compensation. These restricted stock units were fully vested on the date of grant.

 

On December 17, 2021, upon the resignation of former director John Struble, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Struble’s unvested restricted stock units granted September 6, 2018, September 6, 2019, August 24, 2020, and July 30, 2021, and issued 34,264 shares of common stock to Mr. Struble.

 

On August 24, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $240), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

 

On July 30, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $50 per award (resulting in total aggregate grant-date fair value of $250), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

 

On March 4, 2021, upon the resignation of former director Lewis Johnson, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Johnson’s unvested restricted stock units granted September 6, 2018, September 6, 2019, and August 24, 2021, and issued 24,505 shares of common stock to Mr. Johnson.

 

 
12

Table of Contents

 

9. Non-Cash Share-Based Employee Compensation - continued

 

On April 24, 2020, upon the resignation of former director Ryan Turner, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Turner’s unvested restricted stock units granted September 6, 2019, and September 6, 2018, and issued 10,389 and 4,050 shares of common stock, respectively.

 

There were 137,055 restricted stock units outstanding as of March 31, 2022, and December 31, 2021.

 

The Company recorded non-cash restricted stock unit compensation expense of $70 for the three months ended March 31, 2022, compared with $103 for the same period last year.

 

10. Commitments and Contingencies

 

Legal Matters

 

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, it records a liability in its consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not accrue legal reserves, consistent with applicable accounting guidance. There were no pending material claims or legal matters as of March 31, 2022.

 

COVID-19

 

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced in Wuhan, China, which spread globally and was declared a pandemic by the World Health Organization in March 2020. Although we believe the pandemic has not had a material adverse impact on our business through 2020, it may have the potential of doing so in the future. The extent of the potential impact of the COVID-19 pandemic on our business and financial performance will depend on future developments, which are uncertain and, given the continuing evolution of the COVID-19 pandemic and the global responses to curb its spread, cannot be predicted. In addition, the pandemic has significantly increased economic uncertainty and caused a worldwide economic downturn. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact, including any recession that may occur in the future.

 

Purchase Commitments

 

As of March 31, 2022, the Company had purchase commitments for inventory totaling approximately $12,533.

 

Significant Customers

 

Sales to United States government agencies represented approximately $1,650 (25.05%) of the Company’s net total sales for the three months ended March 31, 2022, compared with approximately $2,116 (24.71%) for the same period last year. Accounts receivable from agencies of the United States government were $1,314 as of March 31, 2022, compared with approximately $1,490 at the same date last year.

 

11. Debt

 

BK Technologies, Inc. (“BK Inc.”), a wholly owned subsidiary of the Company, entered into a $5,000 Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”) on January 30, 2021. The Credit Agreement provides for a revolving line of credit of up to $5,000, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc., pursuant to the terms of the Continuing Security Agreement with JPMC. The Company and each subsidiary of BK Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. On January 31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, 2023.

 

 
13

Table of Contents

 

11. Debt - continued

 

Borrowings under the Credit Agreement will bear interest at the secured overnight financing rate plus a margin of 2.0%. The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2022, with all outstanding principal and interest to be payable in full at maturity (January 31, 2023). As of March 31, 2022, the interest rate was 2.398%.

 

The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20,000 at any fiscal quarter end.

 

The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

 

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of March 31, 2022, and the date of filing this report. As of March 31, 2022, the Company had an outstanding balance of $1,458, and a net balance availability of $2,727 under the Credit Agreement. As of the date of filing this report, the Company had an outstanding balance of $2,458, and a net balance availability of $2,542 under the Credit Agreement.

 

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

 

On September 25, 2019, BK Technologies, Inc., a wholly owned subsidiary of the Company, and U.S. Bank Equipment Finance, a division of U.S. Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $425 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 equal monthly principal and interest payments of approximately $8 beginning on October 25, 2019, matures on September 25, 2024, and bears a fixed interest rate of 5.11%.

 

 
14

Table of Contents

 

11. Debt - continued

 

Current balances of notes payable at March 31, 2022, and December 31, 2021, are set forth in the table below:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Note payable-US. Bank

 

$ 87

 

 

$ 86

 

Note payable-JP Morgan Chase Bank

 

 

182

 

 

 

181

 

 

 

$ 269

 

 

$ 267

 

 

Long-term balances of notes payable at March 31, 2022, and December 31, 2021, are set forth in the table below:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Note payable-US. Bank

 

$ 139

 

 

$ 161

 

Note payable-JP Morgan Chase Bank

 

 

398

 

 

 

444

 

 

 

$ 537

 

 

$ 605

 

 

12. Leases

 

The Company accounts for its leasing arrangements in accordance with Topic 842, “Leases”. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

 

As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

 

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of September 30, 2027. Annual rental, maintenance and tax expenses for the facility are approximately $491.

 

In February 2021, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2021. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent 12-month period.

 

In March 2021, the Company executed an agreement for the termination of its lease for 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, effective March 31, 2021, and recognized a “Lease Termination” expense of approximately $53. The original term of the lease was through December 31, 2021.

 

 
15

Table of Contents

 

12. Leases - continued

 

Lease costs consisted of the following:

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Operating lease cost

 

$ 136

 

 

$ 166

 

Short-term lease cost

 

 

 

 

 

 

Variable lease cost

 

 

33

 

 

 

32

 

Total lease cost

 

$ 169

 

 

$ 198

 

 

Supplemental cash flow information related to leases was as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows (fixed payments)

 

$ 143

 

 

$ 211

 

Operating cash flows (liability reduction)

 

$ 108

 

 

$ 171

 

 

 

 

 

 

 

 

 

 

ROU assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

Operating leases

 

$

 

 

$ 14

 

 

Other information related to operating leases was as follows:

 

 

 

March 31,

2022

 

Weighted average remaining lease term (in years)

 

 

4.95

 

Weighted average discount rate

 

 

5.50 %

Maturities of lease liabilities as of March 31, 2022, were as follows:

 

 

 

 

 

 

 

March 31,

2022

 

Remaining nine months of 2022

 

$ 438

 

2023

 

 

595

 

2024

 

 

608

 

2025

 

 

618

 

2026

 

 

479

 

Thereafter

 

 

243

 

Total payments

 

 

2,981

 

Less: imputed interest

 

 

(373 )

Total present value of lease liabilities

 

$ 2,608

 

 

 
16

Table of Contents

 

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

 

SPECIAL NOTE CONCERNING

FORWARD-LOOKING STATEMENTS

 

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including the statements about our plans, objectives, expectations, and prospects. You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “should,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “are encouraged” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and in our subsequent filings with the Securities and Exchange Commission, and include, among others, the following:

 

 

·

changes or advances in technology;

 

 

 

 

·

the success of our land mobile radio product line;

 

 

 

 

·

successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated new multiband product and other related products in the planned new BKR Series product line and our announced SaaS solutions;

 

 

 

 

·

competition in the land mobile radio industry;

 

 

 

 

·

general economic and business conditions, including federal, state and local government budget deficits and spending limitations, any impact from a prolonged shutdown of the U.S. Government, and the ongoing effects of the COVID-19 pandemic, inflation, supply-chain constraints, ongoing geopolitical conflicts and related sanctions;

 

 

 

 

·

the availability, terms and deployment of capital;

 

 

 

 

·

reliance on contract manufacturers and suppliers;

 

 

 

 

·

risks associated with fixed-price contracts;

 

 

 

 

·

heavy reliance on sales to agencies of the U.S. Government and our ability to comply with the requirements of contracts, laws and regulations related to such sales;

 

 

 

 

·

allocations by government agencies among multiple approved suppliers under existing agreements;

 

 

 

 

·

our ability to comply with U.S. tax laws and utilize deferred tax assets;

 

 

 

 

·

our ability to attract and retain executive officers, skilled workers and key personnel;

 

 

 

 

·

our ability to manage our growth;

 

 
17

Table of Contents

 

 

·

our ability to identify potential candidates and to consummate acquisition, disposition or investment transactions, and risks incumbent with being a noncontrolling interest stockholder in a corporation;

 

 

 

 

·

the impact of general business conditions, including those resulting from the COVID-19 pandemic, ongoing geopolitical conflicts and related sanctions, on the companies in which we hold investments;

 

 

 

 

·

impact of our capital allocation strategy;

 

 

 

 

·

risks related to maintaining our brand and reputation;

 

 

 

 

·

impact of government regulation;

 

 

 

 

·

rising health care costs;

 

 

 

 

·

our business with manufacturers located in other countries, including changes in the U.S. Government and foreign governments’ trade and tariff policies, as well as any further impact resulting from the COVID-19 pandemic, ongoing geopolitical conflicts and related sanctions;

 

 

 

 

·

our inventory and debt levels;

 

 

 

 

·

protection of our intellectual property rights;

 

 

 

 

·

fluctuation in our operating results and stock price;

 

 

 

 

·

acts of war or terrorism, natural disasters and other catastrophic events;

 

 

 

 

·

any infringement claims;

 

 

 

 

·

data security breaches, cyber-attacks and other factors impacting our technology systems;

 

 

 

 

·

availability of adequate insurance coverage;

 

 

 

 

·

maintenance of our NYSE American listing;

 

 

 

 

·

risks related to being a holding company; and

 

 

 

 

·

the effect on our stock price and ability to raise equity capital through future sales of shares of our common stock.

 

Some of these factors and risks have been, and may further be, exacerbated by the COVID-19 pandemic. We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report. Readers are cautioned not to place undue reliance on these forward-looking statements.

 

Reported dollar amounts in the management’s discussion and analysis (“MD&A”) section of this report are disclosed in millions or as whole dollar amounts.

 

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report and the MD&A, consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022.

 

 
18

Table of Contents

 

Executive Overview

 

BK Technologies Corporation is a holding company, with a wholly owned operating subsidiary, BK Technologies, Inc. We design, manufacture and market two-way land mobile radios, repeaters, base stations and related components and subsystems.

 

Two-way land mobile radios can be hand-held (portable) or installed in vehicles (mobile). Repeaters expand the range of two-way land mobile radios, enabling them to operate over a wider area. Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal and reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception. We incorporate both analog and digital technologies in our products. Our digital technology is compliant with the Project 25 standard of the Association of Public-Safety Communications Officials. We offer products primarily under the “BK” brand name. Generally, BK-branded products serve the government and public safety market. We also recently launched our business unit dedicated to the development of software-as-a-service (SaaS) solutions.

 

Holding Company Reorganization

 

On March 28, 2019, we implemented a holding company reorganization. The reorganization created a new holding company, BK Technologies Corporation, which became the new parent company of BK Technologies, Inc. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility. We did not incur any material operational or financial impacts. The holding company reorganization was effected through a merger transaction that was a tax-free transaction for U.S. federal income tax purposes for our stockholders. No stockholder vote was required to effect the merger transaction.

 

As part of the holding company reorganization, stockholders of our predecessor, BK Technologies, Inc., became stockholders of BK Technologies Corporation, on a one-for-one basis, with the same number of shares and same ownership percentage of common stock that they held immediately prior to the holding company reorganization. Following the reorganization, BK Technologies Corporation replaced BK Technologies, Inc. as the publicly traded entity, and shares of BK Technologies Corporation were listed on the NYSE American under the symbol “BKTI,” which is the same symbol as previously used by BK Technologies, Inc. In addition, the common stock of BK Technologies Corporation was assigned a new CUSIP Number: 05587G 104.

 

For the purpose of this report, references to “we” or the “Company” or our management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc., as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates.

 

Impact of COVID-19 Pandemic and Recent Capital Markets Disruption

 

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. In response to the COVID-19 pandemic, we implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing, wearing face masks, and remote work practices. Among other things, we have invested in employee safety equipment, additional cleaning supplies and measures, adjusted production lines and workplaces as necessary and adapted new processes for interactions with our suppliers and customers to safely manage our operations. Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing.

 

Additionally, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.

 

 
19

Table of Contents

 

Furthermore, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

 

The impact to our business in 2022, particularly customer orders, is not known with any certainty. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been delays and long delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 and ongoing geopolitical conflicts and related sanctions are reflected in our results of operations, we cannot at this time separate the direct impacts of these matters from other factors that cause our performance to vary from quarter to quarter. The ultimate duration and impact of the COVID-19 pandemic, the ongoing geopolitical conflicts and related sanctions on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, the duration of the ongoing conflict in Ukraine and additional sanctions related thereto, and the related length of the impact on the global economy, which are uncertain and cannot be predicted at this time. Even after the COVID-19 pandemic has subsided and geopolitical tensions subside, we may continue to experience an adverse impact to our business as a result of the national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic, the ongoing geopolitical conflict and related sanctions, and their negative effects on global economic conditions.

 

We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations. We may also experience fluctuations in our quarterly results, in part, due to our sales to federal and state agencies that participate in wildland fire-suppression efforts, which may be greater during the summer season when forest fire activity is heightened. In some years, these factors may cause an increase in sales for the second and third quarters, compared with the first and fourth quarters of the same fiscal year. Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition.

 

First Quarter Summary

 

 

Customer demand and orders for our products continued to be strong during the three months ended March 31, 2022. Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders. Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during subsequent quarters this year.

 

For the first quarter 2022, sales decreased approximately $2.0 million (23.1%), compared with the first quarter last year. While customer orders were strong during the quarter, factors within our supply chain and manufacturing operations, including component availability and extended lead-times, limited our ability to convert orders into shipments and revenue recognition. Additionally, gross profit margins as a percentage of sales for the first quarter of 2022 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and lower manufacturing volumes. Selling, general and administrative (“SG&A”) expenses for the three-month period ended March 31, 2022, increased approximately $0.9 million (23.7%) compared with the same quarter last year.

 

 
20

Table of Contents

 

For the first quarter of 2022, our sales totaled approximately $6.6 million, compared with approximately $8.6 million for the same quarter last year.

 

Gross profit margins as a percentage of sales for the first quarter of 2022 were approximately 22.4%, compared with 36.4% (as adjusted) for the first quarter last year.

 

SG&A expenses for the first quarter of 2022 totaled approximately $4.9 million, compared with approximately $4.0 million for the same quarter last year.

 

For the first quarter of 2022, we recognized an operating loss of approximately $3.4 million, compared with approximately $853,000 (as adjusted) for the same quarter last year.

 

For the first quarter of 2022, we recognized an unrealized loss totaling approximately $0.5 million on our investment in FGF Financial (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated variable interest entity. This compares with an unrealized gain of approximately $205,000 on the investment for the first quarter last year.

 

Net loss for the three months ended March 31, 2022, was approximately $3.9 million ($0.23 per basic and diluted share), compared with approximately $670,000 ($0.05 per basic and diluted share) (as adjusted), for the same quarter last year.

 

As of March 31, 2022, working capital totaled approximately $21.7 million, of which approximately $11.1 million was comprised of cash, cash equivalents and trade receivables. As of December 31, 2021, working capital totaled approximately $25.2 million (as adjusted), of which approximately $18.8 million was comprised of cash, cash equivalents and trade receivables.

 

Results of Operations

 

As an aid to understanding our operating results for the periods covered by this report, the following table shows selected items from our condensed consolidated statements of operations expressed as a percentage of sales:

 

 

 

Percentage of Sales

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021*

 

Sales

 

 

100.0 %

 

 

100.0 %

Cost of products

 

 

(77.6 )

 

 

(63.6 )

Gross margin

 

 

22.4

 

 

 

36.4

 

Selling, general and administrative expenses

 

 

(74.7 )

 

 

(46.4 )

Other (expense) income

 

 

(7.5 )

 

 

2.2

 

(Loss) income before income taxes

 

 

(59.8 )

 

 

(7.8 )

Income tax (expense) benefit

 

 

(0.0 )

 

 

(0.0 )

Net (loss) income

 

 

(59.8 )%

 

 

7.8 %

 

* The amounts for 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to Condensed Financial Statements.

 

 
21

Table of Contents

 

Net Sales

 

For the first quarter ended March 31, 2022, net sales totaled approximately $6.6 million, compared with approximately $8.6 million for the same quarter last year.

  

 Customer demand and orders for our products continued to be strong, driving record bookings for the first quarter of 2022.  Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue.  Consequently, unshipped orders were carried in backlog, and we anticipate fulfilling many of the orders in backlog during subsequent quarters this year.  We are taking steps to manage delays in the supply chain, including carrying additional inventory of material and components with limited supplies.  Although supply chain factors may continue to impact shipments during the next several quarters, we anticipate being able to fulfill customer requirements.  The precise impact to sales and shipments for future quarters, however, cannot be quantified.

 

Sales for the three months ended March 31, 2022, was attributed primarily to certain state and local public safety opportunities, as well as federal wildland fire related agencies. From a product perspective, the primary contributor to orders and shipments during the first quarter was our BKR 5000 portable radio and related accessories. The BKR Series is envisioned as a comprehensive line of new products, which will include new models in coming quarters. The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain and the COVID-19 pandemic. BKR Series products, we believe, should increase our addressable market by expanding the number of federal and other public safety customers that may purchase our products. However, the timing and size of orders from agencies at all levels can be unpredictable and subject to budgets, priorities, and other factors. Accordingly, we cannot assure that sales will occur under particular contracts, or that our sales prospects will otherwise be realized.

 

While the potential impacts of material shortages, lead-times, the COVID-19 pandemic, and ongoing geopolitical conflict and related sanctions in coming months and quarters remain uncertain, such effects have the potential to adversely impact our customers and our supply chain. Such negative effects on our customers and suppliers could adversely affect our future sales, operations, and financial results.

 

Cost of Products and Gross Profit Margin

 

Gross profit margins as a percentage of sales for the first quarter ended March 31, 2022, were approximately 22.4%, compared with 36.4% (as adjusted) for the same quarter last year.

 

Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing. Gross profit margins for the first quarter ended March 31, 2022, decreased compared with the same period last year primarily due to increased material costs, including electrical components, as well as escalated freight costs, combined with a decline in overall manufacturing volumes, which yielded sub-optimal absorption of manufacturing overhead costs.

 

We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs. While we anticipate continuing to do so in the future, we have increased, and are continuing to increase, our utilization of U.S.-based resources, which provides greater security and control over our production. We believe that our current manufacturing capabilities and contract relationships or comparable alternatives will continue to be available to us. Although in the future we may encounter new product cost and competitive pricing pressures, the extent of their impact on gross margins, if any, is uncertain.

 

During recent quarters, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and higher costs for certain components used in our products. Accordingly, we have experienced delivery delays and increased costs within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages and increased product costs is uncertain, but could potentially impact our future sales, manufacturing operations and financial results.

 

 
22

Table of Contents

 

Selling, General and Administrative Expenses

 

SG&A expenses consist of marketing, sales, commissions, engineering, product development, management information systems, accounting, headquarters, and non-cash share-based employee compensation expenses.

 

SG&A expenses for the first quarter ended March 31, 2022, totaled approximately $4.9 million (74.7% of sales), compared with approximately $4.0 million (46.4% of sales) for the same quarter last year.

 

Engineering and product development expenses for the first quarter of 2022 totaled approximately $2.3 million (35.1% of sales), compared with approximately $1.8 million (21.3% of sales) for the same quarter of last year. The increase in engineering expenses is attributed primarily to ongoing product design and development activities, particularly prototyping, for the new BKR series radios. Most of these activities are being performed by our internal engineering team and are their primary focus, combined with sustaining engineering support of our existing products. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential effects of the COVID-19 pandemic in coming months and quarters.

 

Marketing and selling expenses for the first quarter of 2022 totaled approximately $1.0 million (15.2% of sales), compared with approximately $0.9 million (11.0% of sales) for the first quarter last year, primarily reflecting increases in staffing, travel and go-to-market activities in support of anticipated sales growth from new products and customers.

 

General and administrative expenses for the first quarter 2022 totaled approximately $1.6 million (24.3% of sales), compared with approximately $1.2 million (14.1% of sales) for the same quarter last year. The increase in general and administrative expenses for the quarter is attributed primarily to corporate and headquarters staffing and strategic initiatives.

 

Operating Loss

 

The operating loss for the first quarter ended March 31, 2022, totaled approximately $3.4 million (52.3% of sales), compared with approximately $853,000 (10.0% of sales), (as adjusted), for last year’s first quarter. The operating loss for the first quarter is attributed primarily to a decrease in sales combined with increased product costs, which adversely impacted gross profit margins, and increased operating expenses.

 

Other (Expense) Income

 

We recorded net interest expense of approximately $15,000 for the first quarter ended March 31, 2022, compared with approximately $4,000 for the first quarter of last year. Net interest expense was primarily the result of equipment financing, our revolving credit facility and lower average cash balances.

 

For the first quarter ended March 31, 2022, we recognized an unrealized loss of approximately $496,000 on our investment in FGF, compared with an unrealized gain of approximately $205,000 for the first quarter last year.

 

Income Taxes

 

We recorded no tax provision or benefit for the first quarter ended March 31, 2022 or 2021.

 

Our income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision (benefit) in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, we may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

 

 
23

Table of Contents

 

As of March 31, 2022, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.

 

In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years. We analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon our conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

 

Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets.  Accordingly, we established a valuation allowance of $1.48 million and $610,000 as of March 31, 2022 and December 31, 2021.  We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future.  If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of March 31, 2022.

 

Liquidity and Capital Resources

 

For the three months ended March 31, 2022, net cash used in operating activities totaled approximately $3.3 million, compared with cash provided by operating activities of approximately $39,000 (as adjusted) for the same quarter last year. Cash used in operating activities for the three months ended March 31, 2022, was primarily related to a net loss, increased inventory and increased prepaid expenses, which were partially offset by decreased accounts receivable, increased accounts payable.

 

For the first quarter of 2022, we had a net loss of approximately $3.9 million, compared with a net loss of approximately $670,000 (as adjusted) for the same quarter last year. Gross inventories increased during the quarter ended March 31, 2022, by approximately $4.2 million, compared with approximately $1.4 million (as adjusted) for the same quarter last year. Prepaid expenses increased during the first quarter by approximately $904,000, compared with a decrease of $57,000 for last year’s first quarter. The increases for both inventories and prepaid expenses were attributed primarily to limited material and component availability combined with extended supplier lead-times and planned new product introductions. Accounts receivable decreased approximately $3.5 million during the first quarter ended March 31, 2022, compared with a decrease of approximately $1.9 million for last year’s first quarter. The decrease was primarily due to customer collections combined with decreased sales during the first quarter. Accounts payable for the first quarter ended March 31, 2022, increased approximately $1.4 million, compared with an increase of approximately $299,000 for the last year’s first quarter, primarily due to increased material and component purchases from suppliers related in-part to delays and shortages within our supply chain. Depreciation and amortization totaled approximately $342,000 for the first quarter ended March 31, 2022, compared with approximately $298,000 for last year’s first quarter. Depreciation and amortization are primarily related to manufacturing and engineering equipment. The unrealized loss on securities for the first quarter ended March 31, 2022, totaled approximately $496,000, compared with an unrealized gain of approximately $205,000 for the first quarter last year. For additional information pertaining to our investment in securities, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investment in Securities) to the condensed consolidated financial statements included in this report.

 

Cash used in investing activities for the first quarter ended March 31, 2022, totaled approximately $345,000, compared with approximately $1.0 million for last year’s first quarter. The cash used for both periods was attributed primarily to the purchase of engineering and manufacturing related equipment.

 

For the first quarter ended March 31, 2022, cash of approximately $583,000 was used in financing activities, compared with cash provided by financing activities of approximately $529,000 for last year’s first quarter. During the first quarter of 2022 we paid a quarterly dividend, utilizing approximately $505,000, while for last year’s first quarter, we paid a quarterly dividend of approximately $250,000, and we received cash of approximately $779,000 from debt, net of repayments totaling approximately $21,000.

 

 
24

Table of Contents

 

 

On January 31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, 2023.

 

BK Technologies, Inc., our wholly owned subsidiary, entered into the $5 million Credit Agreement with JPMC. The Credit Agreement provides for a revolving line of credit of up to $5 million, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc. pursuant to the terms of the Continuing Security Agreement with JPMC. BK Technologies Corporation and each subsidiary of BK Technologies, Inc., are guarantors of the obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty.

 

Borrowings under the Credit Agreement will bear interest at the secured overnight financing rate plus a margin of 2.0%. The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2022, with all outstanding principal and interest to be payable in full at maturity (January 31, 2023).

 

The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20 million at any fiscal quarter end.

 

The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

 

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of March 31, 2022, and the date of filing this report. As of March 31, 2022, the Company had an outstanding balance of $1,458, and a net balance availability of $2,727 under the Credit Agreement. As of the date of filing this report, the Company had an outstanding balance of $2,458 , and a net balance availability of $2,542 under the Credit Agreement.

 

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743,000 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16,000 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

 

Our cash and cash equivalents balance at March 31, 2022, was approximately $6.4 million. We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Credit Agreement, are sufficient to meet our working capital requirements for the foreseeable future. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all. We also face other risks that could impact our business, liquidity, and financial condition. For a description of these risks, see “Item 1A. Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and “Item 1A. Risk Factors” below in this report.

 

 
25

Table of Contents

 

Critical Accounting Policies and Estimates

 

In response to the Securities and Exchange Commission’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, we have selected for disclosure our revenue recognition process and our accounting processes involving significant judgments, estimates and assumptions. These processes affect our reported revenues and current assets and are, therefore, critical in assessing our financial and operating status. We regularly evaluate these processes in preparing our financial statements. The processes for revenue recognition, allowance for collection of trade receivables, allowance for excess or obsolete inventory, and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances. These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.

 

There were no changes to our critical accounting policies during the quarter ended March 31, 2022.

 

Change in Accounting Principle During 2021

 

As disclosed in Note 1 and 4, on July 1, 2021, we changed inventory accounting to burden the material at the time of purchase receipts. Prior to July 1, 2021, we applied the material burden at the time the inventory was issued to work in progress. This change resulted in a net increase of approximately $1.3 million in inventory and retained earnings as of July 1, 2021.

 

The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three months ended March 31, 2022.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, the Company is not required to include the disclosure under this Item.

 

Item 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including each of such officers as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

During the three months ended March 31, 2022, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
26

Table of Contents

 

PART II - OTHER INFORMATION

Item 1A. RISK FACTORS

 

As of the date of this filing, except as set forth herein, there have been no material changes to the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022 (the “2021 Form 10-K”). The Risk Factors set forth in the 2021 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2021 Form 10-K, could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Dividend Restrictions

 

On January 31, 2022, BK Technologies, Inc., our wholly owned operating subsidiary, extended its Credit Agreement with JPMC. The Credit Agreement contains limitations and covenants that may limit BK Technologies, Inc.’s ability to take certain actions, including paying dividends to the Company.

 

Share Repurchase Program

 

On December 21, 2021, the Company announced that the Board has authorized a share repurchase program which permits the Company to purchase up to an aggregate of $5 million of its common shares. The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations. The actual timing, manner and number of shares repurchased under the program will be determined by management and the Board of Directors at their discretion, and will depend on several factors, including the market price of the Company’s common shares, general market and economic conditions, alternative investment opportunities, and other business considerations in accordance with applicable securities laws and exchange rules. The authorization of the share repurchase program does not require BK Technologies to acquire any particular number of shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The following table provides information about purchases made by us of our common stock for each month included in the first quarter of 2022:

 

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period

 

Total Number of

Shares Purchased

 

 

Average Price

Paid Per Share

 

 

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs

 

 

Approximate

Dollar Value of

Shares that May

Still be Purchased

Under the Plans or

Programs

 

 

 

 

 

January 1–31, 2022

 

 

 

 

$

 

 

 

 

 

$ 5,000,000

 

February 1–28, 2022

 

 

 

 

 

 

 

 

 

 

$ 5,000,000

 

March 1–31, 2022

 

 

 

 

 

 

 

 

 

 

$ 5,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended March 31, 2022

 

 

 

 

$

 

 

 

 

 

$ 5,000,000

 

 

 
27

Table of Contents

 

Item 6. EXHIBITS

 

Exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index below.

 

Exhibit Index

 

Exhibit

Number

 

Description

 

 

 

Exhibit 31.1

 

Certification of Principal Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

 

Certification of Principal Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1**

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)

Exhibit 32.2**

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)

Exhibit 101.INS

 

XBRL Instance Document

Exhibit 101.SCH

 

XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 101.DEF

 

XBRL Taxonomy Definition Linkbase Document

Exhibit 104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document) (filed herewith)

 

** Furnished herewith.

 

 
28

Table of Contents

 

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.

 

 

BK TECHNOLOGIES CORPORATION

 

(The “Registrant”)

 

       
Date: May 12, 2022 By: /s/John M. Suzuki     

 

 

John M. Suzuki

 

 

 

Chief Executive Officer

 

 

 

(Principal executive officer and duly

authorized officer)

 

     

Date: May 12, 2022

By:

/s/ William P. Kelly

 

 

 

William P. Kelly

 

 

 

Executive Vice President and

 

 

 

Chief Financial Officer

 

 

 

(Principal financial and accounting

officer and duly authorized officer)

 

 

 
29

                                                                                          

 

BK Technologies (AMEX:BKTI)
Historical Stock Chart
From May 2022 to Jun 2022 Click Here for more BK Technologies Charts.
BK Technologies (AMEX:BKTI)
Historical Stock Chart
From Jun 2021 to Jun 2022 Click Here for more BK Technologies Charts.