BK Technologies Corp. is a holding company, which engages in the provision of two-way radio communications equipment. It offers product to the fire, EMS, police, federal, and municipalities agencies. The company was founded on October 24, 1997 and is headquartered in West Melbourne, FL.
Our industry is characterized by rapidly changing technology and our success is dependent on our ability to adapt to such changes
We depend heavily on sales to the U.S. Government
Our business is partially dependent on U.S. Government contracts, which are highly regulated and subject to terminations and oversight audits by U.S. Government representatives that could result in adverse findings and negatively impact our business
Our business is subject to the economic, political, and other risks of manufacturing products in foreign countries
The coronavirus could adversely impact our ability to obtain necessary materials and ship finished products to customers, which could negatively impact our results of operations and cash flow.
We carry substantial quantities of inventory, and inaccurate estimates of necessary inventory could materially harm our business, financial condition and operating results
We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs or hedge our risks associated with currency fluctuations
Our investment strategy may not be successful, which could adversely impact our financial condition
Fundamental Global Investors, LLC, with its affiliates, is our largest stockholder, and its interests may differ from the interests of our other stockholders
If we are unable to maintain our brand and reputation, our business, results of operations and prospects could be materially harmed
We face a number of risks related to challenging economic conditions
The terms of the credit agreement with JPMorgan Chase Bank, N.A., contain restrictive covenants that may limit our operating flexibility
We depend on a limited number of manufacturers and on a limited number of suppliers of components to produce our products, and the inability to obtain adequate and timely delivery of supplies and manufactured products could have a material adverse effect on us
We may not be able to manage our growth
Retention of our executive officers and key personnel is critical to our business
We rely on a combination of contract, trademark and trade secret laws to protect our intellectual property rights, and failure to effectively utilize or successfully assert these rights could negatively impact us
The insurance that we maintain may not fully cover all potential exposures
Our stock price is vulnerable to significant fluctuations, including due to our fluctuating quarterly operating results
Natural disasters, acts of war or terrorism and other catastrophic events beyond our control could have a material adverse effect on our operations and financial condition
A security breach or other significant disruption of our information technology systems, or those of our distributors, manufacturers, suppliers and other partners, caused by cyber attack or other means, could have a negative impact on our operations, sales and results of operations
The risk of noncompliance with U.S. and foreign laws and regulations applicable to us could materially adversely affect us
We may not be able to maintain our NYSE American listing
Any infringement claim against us could have a material adverse effect on our business, financial condition and results of operations
We have deferred tax assets that we may not be able to utilize under certain circumstances
We may be unable to obtain components and parts that are verified to be Democratic Republic of Congo (“DRC”) conflict-free, which could result in reputational damage
As a holding company, BK Technologies Corporation is dependent on the operations and funds of its subsidiaries
Future sales of shares of our common stock may negatively affect our stock price and impair our ability to raise equity capital
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. All operating activities are undertaken by BK Technologies, Inc.
Generally, our financial and operating results for 2019 declined from the preceding year. Sales for 2019 were approximately 18.8% below sales for 2018, while gross profit margins as a percentage of sales decreased primarily due to lower sales and manufacturing levels, which also contributed to higher inventory levels at the end of 2019. Additionally, operating expenses increased, which was largely attributed to product development and engineering expenses related to development of an anticipated new line of products, including a multiband radio. The combination of these factors resulted in an operating loss for 2019, and the use of approximately $2.5 million in cash in operating activities.