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 ~~September 30, 2019~~March 31, 2020

☐ 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)	(I.R.S. Employer 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 ~~12,658,543~~12,493,420 shares of common stock, $0.60 par value, of the registrant outstanding at ~~October 25, 2019.~~May 4, 2020.

PART I - FINANCIAL INFORMATION

~~Item~~Item 1. FINANCIAL STATEMENTS

BKBK TECHNOLOGIES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	September 30, 2019	December 31, 2018	March 31, 2020	December 31, 2019
	(Unaudited)		(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$8,825	$11,268	$4,946	$4,676
Trade accounts receivable, net	2,871	5,721	4,590	3,964
Inventories, net	14,450	11,466	10,937	13,513
Prepaid expenses and other current assets	1,792	2,401	1,802	1,733
Total current assets	27,938	30,856	22,275	23,886

Property, plant and equipment, net	4,134	2,729	3,775	3,964
Right-of-use (ROU) asset	2,558	—	2,791	2,885
Investment in securities	2,105	1,919	2,329	2,635
Deferred tax assets, net	3,911	3,495	4,373	4,373
Other assets	223	192	169	197
Total assets	$40,869	$39,191	$35,712	$37,940

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$6,854	$5,595	$4,836	$5,310
Accrued compensation and related taxes	1,160	2,014	1,045	1,271
Accrued warranty expense	1,390	1,546	1,099	1,248
Accrued other expenses and other current liabilities	512	292	402	479
Dividends payable	253	256	250	252
Short-term lease liability	263	—	393	369
Note payable-current portion	77	—	78	78
Deferred revenue	281	180	462	369
Total current liabilities	10,790	9,883	8,565	9,376

Note payable, net of current portion	348	—	309	328
Long-term lease liability	2,295	—	2,511	2,606
Deferred revenue	2,419	1,596	2,685	2,354
Total liabilities	15,852	11,479	14,070	14,664
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; 20,000,000 authorized shares; 13,929,381 and 13,882,937 issued; and 12,672,056 and 12,817,829 outstanding shares at September 30, 2019 and December 31, 2018, respectively	8,357	8,330
Common stock; $.60 par value; 20,000,000 authorized shares; 13,929,381 issued and 12,495,110 and 12,596,923 outstanding shares at March 31, 2020 and December 31, 2019, respectively			8,357	8,357
Additional paid-in capital	26,037	25,867	26,146	26,095
Accumulated deficit	(4,482)	(2,393)	(7,485)	(6,043)
Treasury stock, at cost, 1,257,325 and 1,065,108 shares at September 30, 2019 and December 31, 2018, respectively	(4,895)	(4,092)
Treasury stock, at cost, 1,434,271 and 1,332,458 shares at March 31, 2020 and December 31, 2019, respectively			(5,376)	(5,133)
Total stockholders’ equity	25,017	27,712	21,642	23,276
Total liabilities and stockholders’ equity	$40,869	$39,191	$35,712	$37,940

See notes to condensed consolidated financial statements.

BKBK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Operations

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

					Three Months Ended
	Three Months Ended		Nine Months Ended		March 31, 2020	March 31, 2019
	September 30, 2019	September 30, 2018	September 30, 2019	September 30, 2018
Sales, net	$11,805	$13,302	$32,743	$38,704	$10,889	$7,644
Expenses
Cost of products	6,699	7,839	19,499	22,519	6,994	5,207
Selling, general and administrative	4,811	4,585	15,247	13,229	4,743	4,755
Total expenses	11,510	12,424	34,746	35,748	11,737	9,962

Operating income (loss)	295	878	(2,003)	2,956
Operating loss					(848)	(2,318)

Other (expense) income:
Net interest income	33	28	134	63	9	55
(Loss) gain on investment in securities	(258)	(191)	186	(1,392)	(306)	592
Other expense	(85)	(48)	(98)	(274)	(47)	(2)
Total other (expense) income	(310)	(211)	222	(1,603)	(344)	645

(Loss) income before income taxes	(15)	667	(1,781)	1,353
Loss before income taxes					(1,192)	(1,673)

Income tax benefit (expense)	253	(17)	454	(200)
Income tax benefit					—	355

Net income (loss)	$238	$650	$(1,327)	$1,153
Net loss					$(1,192)	$(1,318)

Net income (loss) per share-basic and diluted:	$0.02	$0.05	$(0.10)	$0.09
Net loss per share-basic and diluted:					$(0.09)	$(0.10)
Weighted average shares outstanding-basic	12,696,273	13,479,759	12,725,793	13,538,116	12,555,108	12,761,713
Weighted average shares outstanding-diluted	12,709,057	13,501,587	12,725,793	13,563,990	12,555,108	12,761,713

See notes to condensed consolidated financial statements.

BKBK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Nine Months Ended		Three Months Ended
	September 30, 2019	September 30, 2018	March 31, 2020	March 31, 2019
Operating activities
Net (loss) income	$(1,327)	$1,153
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net loss			$(1,192)	$(1,318)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Inventories allowances	112	(31)	38	19
Deferred tax benefit	(416)	195	—	(355)
Depreciation and amortization	896	702	320	256
Share-based compensation expense	110	66	30	31
Restricted stock unit compensation expense	85	111	21	41
(Gain) loss on investment in securities	(186)	1,392	306	(592)
Changes in operating assets and liabilities:
Trade accounts receivable	2,850	(1,883)	(626)	676
Inventories	(3,096)	3,700	2,538	(715)
Prepaid expenses and other current assets	609	(869)	(69)	(143)
Other assets	(31)	31	28	1
Lease liability			23	—
Accounts payable	1,259	(2,475)	(474)	602
Accrued compensation and related taxes	(854)	288	(226)	(951)
Accrued warranty expense	(156)	45	(149)	(88)
Deferred revenue	924	963	424	296
Accrued other expenses and other current liabilities	220	(745)	(77)	(68)
Net cash provided by operating activities	999	2,643
Net cash provided by (used in) operating activities			915	(2,308)

Investing activities
Purchases of property, plant and equipment	(2,301)	(1,067)	(131)	(829)
Investment in securities	—	(3,741)
Proceeds from sale of available-for-sale securities	—	8,335
Net cash (used in) provided by investing activities	(2,301)	3,527
Net cash used in investing activities			(131)	(829)

Financing activities
Proceeds from note payable	425	—
Cash dividends paid			(252)	(256)
Repurchase of common stock			(243)	(337)
Proceeds from issuance of common stock	2	—	—	2
Cash dividends declared and paid	(765)	(815)
Repurchase of common stock	(803)	(1,153)
Repayment of debt			(19)	—
Net cash used in financing activities	(1,141)	(1,968)	(514)	(591)

Net change in cash and cash equivalents	(2,443)	4,202	270	(3,728)
Cash and cash equivalents, beginning of period	11,268	7,147	4,676	11,268
Cash and cash equivalents, end of period	$8,825	$11,349	$4,946	$7,540

Supplemental disclosure
Cash paid for interest	$2	$—	$5	$—
Income tax paid	$—	$—
Non-cash financing activity
Restricted stock units issued	$168	$140

See notes to condensed consolidated financial statements.

BKBK TECHNOLOGIES CORPORATION

Notes to Condensed Consolidated Financial Statements

Unaudited

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

Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of ~~September 30, 2019,~~March 31, 2020, the condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its 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. In the opinion of management, all adjustments, which include normal, recurring adjustments, necessary for a fair presentation have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, ~~2018~~2019 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. ~~It is suggested that these~~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, ~~2018,~~2019, as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the operating results for a full year.

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. The Company elected the modified retrospective method upon adoption, with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate:

Step 1: Identify the contract with the customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations; and

Step 5: Recognize revenue as the Company satisfies a performance obligation.

ASC 606 provides that sales revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We generally satisfy performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time, and the revenue is recognized when the installation is complete. Customary payment terms are granted to customers, based on credit evaluations. Currently, the Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event.

The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with GAAP. Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses.

Principles of 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 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE.

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses 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 or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market ~~participants~~participant would use in pricing ~~the~~ investment in securities.~~There were no transfers of investment in securities between Level 1 and Level 2 during the three and nine months ended September 30, 2019 or 2018.~~

~~Available-For-Sale Securities~~

On January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments,” which amended the guidance in U.S. GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc. (Nasdaq: ITI), which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sales of approximately $849.

Recently Adopted Accounting Pronouncements

In February 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2016-02 “Leases,” which amended leasing guidance by requiring companies to recognize a right-of-use (“ROU”) asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance became effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of ROU assets and lease liabilities on the condensed consolidated financial statements. Based on the Company’s lease portfolio as of September 30, 2019, which consisted solely of operating leases, the Company recognized approximately $2,558 of ROU assets and lease liabilities on its consolidated financial statements. Refer to Note 12 (Leases) for further details on leases.

In August 2018, the ~~SEC adopted~~FASB issued ASU 2018-13, “Disclosure Framework–Changes to the ~~final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,~~Disclosure Requirements for Fair Value Measurement,” ~~amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded~~which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the ~~analysis~~removal of ~~stockholders’ equity for interim financial statements. Under the~~certain disclosure requirements. The amendments ~~an analysis of changes in each caption of stockholders’ equity presented~~ in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule becameASU are effective for all ~~filings made on or~~entities for fiscal years, and interim periods within those fiscal years, beginning after ~~November 5, 2018. Given~~December 15, 2019. Early adoption is permitted upon issuance of the effective date and the proximity to most filers’ quarterly reports, the SEC permitted deferring the presentation of interim changes in stockholders’ equity in Forms 10-Q until the quarter that began after the date of adoption, November 5, 2018.ASU. The Company adopted this ~~rule in~~guidance as of January 1, 2020, and the ~~first quarter of 2019, and its~~ adoption did not have ~~a material~~an impact on its consolidated financial statements. ~~Note 7 (Stockholders’ Equity) of the Notes to these condensed consolidated financial statements summarizes changes in stockholders’ equity.~~

Recent Accounting Pronouncements

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

Significant Events and Transactions

In February 2020, the Company announced that its operating subsidiary received orders totaling approximately $2,800 from the U.S. Forest Service (“USFS”). The orders were for KNG-Series Digital P-25 portable radios, mobile radios, and base stations, as well as related accessories, and were fulfilled in the first quarter of 2020.

In March 2020, the Company announced that its operating subsidiary received an order totaling approximately $2,100 from the USFS. The order was for KNG-Series Digital P-25 mobile radios and related accessories. The order was fulfilled during the first and second quarters of 2020.

In March 2020, Fundamental Global Investors, LLC, on behalf of the funds managed by it, entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “10b5-1 Plan”), for the purchase of up to one million shares of common stock of the Company. The 10b5-1 Plan became effective on April 2, 2020 and will terminate on April 2, 2021 or such earlier date as set forth in the 10b5-1 Plan. Transactions under the 10b5-1 Plan, if any, will be reported to the Securities and Exchange Commission in accordance with applicable securities laws, rules and regulations. D. Kyle Cerminara, the Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC, and Lewis M. Johnson, the President, Co-Founder and Partner of Fundamental Global Investors, LLC, are both members of the Company’s Board of Directors. In addition, John W. Struble, Chairman of the Company's Board of Directors, serves as a consultant to Fundamental Global Management, LLC, an affiliate of Fundamental Global Investors, LLC. Fundamental Global Investors, LLC, with its affiliates, is the Company’s largest stockholder.

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock on ~~September 12, 2019~~March 2, 2020 to stockholders of record as of ~~October 1, 2019.~~March 31, 2020. These dividends were paid on ~~October 15, 2019.~~

In August 2019, the Transportation Security Administration (“TSA”) of the U.S. Department of Homeland Security notified the Company of its intent to exercise its fourth one-year option, extending the contract with the Company for an additional year to September 27,April 13, 2020. The option provides for the purchase of up to $2,000 of the Company’s products. Concurrent with the extension, the TSA placed a firm delivery order for equipment and services totaling approximately $1,800, of which $211 was shipped in September, and the remainder is anticipated to be fulfilled in the fourth quarter of 2019. The original contract awarded in September 2015 totaled $26,200, with $15,500 in firm delivery orders and $10,700 in annual option exercises.

Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of ~~$2,921~~$4,640 and ~~$5,771~~$4,014 at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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.

Inventories, net

The components of inventories, net of allowances for slow-moving, excess or obsolete inventory, ~~consist~~consisted of the following:

	September 30, 2019	December 31, 2018	March 31, 2020	December 31, 2019
Finished goods	$3,867	$2,004	$2,680	$3,864
Work in process	7,035	5,750	4,725	6,122
Raw materials	3,548	3,712	3,532	3,527
	$14,450	$11,466	$10,937	$13,513

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 ~~$741~~$861 at ~~September 30, 2019,~~March 31, 2020, compared with approximately ~~$629~~$823 at December 31, ~~2018.~~2019.

Income Taxes

The Company has not recorded anincome tax expense or benefit for the three months ended March 31, 2020, compared with income tax benefit of approximately ~~$253 and $454 for the three and nine months ended September 30, 2019, respectively, compared with an income tax expense of approximately $17 and $200, respectively,~~$355 for the same ~~periods~~period last year.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision 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, 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 ~~September 30, 2019,~~March 31, 2020, the Company’s net deferred tax assets totaled approximately ~~$3,911,~~$4,373 and were primarily derived from research and development tax credits, ~~accrued expenses~~deferred revenue, and net operating loss ~~carryforwards (“NOLs”).~~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 has the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. 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 a valuation allowance related to the deferred tax assets recognized as of ~~September 30, 2019.~~March 31, 2020.

Investment in Securities

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 was established for the purpose of investing in securities.

As of ~~September 30, 2019,~~March 31, 2020, the Company indirectly held approximately ~~$197~~$170 in cash and 477,282 shares of 1347 Property Insurance Holdings, Inc. (Nasdaq: PIH) with fair value of ~~$2,105,~~$2,329, through an investment in FGI 1347 Holdings, LP. These shares were purchased in March and May 2018 for approximately $3,741. For the three months ended ~~September 30, 2019,~~March 31, 2020, the Company recognized an unrealized loss on the investment of approximately ~~$258,~~$306, compared with an unrealized ~~loss~~gain of ~~$191~~$592 for the same period last year. ~~For the nine months ended September 30,~~As of March 31, 2020 and December 31, 2019, the ~~Company recognized an unrealized gain on the investment of approximately $186, compared with an~~ unrealized loss ~~of $1,392, which~~on investment was ~~comprised of a $543 loss on the PIH investment, along with~~ ~~a loss on the sale of securities totaling~~ approximately ~~$849,~~ ~~for the same period last year.~~$1,412 and $1,106, respectively.

Affiliates of Fundamental Global Investors, LLC serve as the general partner and the investment manager of FGI 1347 Holdings, LP, and the Company is the sole limited partner. As of ~~September 30, 2019,~~May 4, 2020, the Company and the affiliates of Fundamental Global Investors, LLC, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate ~~2,714,362~~3,042,593 shares of PIH’s common stock, including 100,000 shares of common stock subject to a call option, representing approximately ~~45.1%~~50.1% of PIH’s outstanding shares. In addition, Capital Wealth Advisors, Inc., an affiliate of Fundamental Global, held 64,710 shares of PIH’s common stock for the accounts of individual investors, which represents approximately 1.1% of PIH’s outstanding shares. Fundamental Global with its affiliates is the largest stockholder of the Company. Mr. Kyle Cerminara, ~~Chairman~~a director of the ~~Company’s Board of Directors,~~Company, is Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as ~~Chief Executive Officer~~Chairman of the Board of Directors of Ballantyne Strong and as principal executive officer and Chairman of the Board of Directors of ~~Ballantyne Strong.~~PIH. Mr. Lewis M. Johnson, ~~Co-Chairman~~a director of the ~~Company’s Board of Directors,~~Company, is President, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Co-Chairman of the Board of Directors of Ballantyne ~~Strong. Messrs. Cerminara~~Strong and ~~Johnson also serve as~~of PIH. Mr. John Struble, the Chairman ~~and Co-Chairman, respectively,~~ of the Company’s Board of Directors, serves as a consultant to an affiliate of ~~PIH.~~

Fundamental Global.

Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ are as follows:

	Common Stock Shares	Common Stock Amount	Additional Paid-In Capital	Accumulated Deficit	Other Comprehensive Income	Treasury Stock	Total	Common Stock Shares	Common Stock Amount	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock	Total
Balance at December 31, 2017	13,844,584	$8,307	$25,642	$(5,450)	$4,318	$(810)	$32,007
Balance at December 31, 2018								13,882,937	$8,330	$25,867	$(2,393)	$(4,092)	$27,712
Stock options exercised and issued								1,000	—	2	—		2
Share-based compensation expense	—		21	—			21	—		31	—		31
Restricted stock unit compensation expense	—		34	—			34	—		41	—		41
Dividends declared ($0.02 per share)	—			(271)	—		(271)	—			(254)	—	(254)
Net loss	—			(443)	—		(443)	—			(1,318)	—	(1,318)
Effect of adoption of ASU 2016-01	—			4,318	(4,318)	—
Repurchase of common stock	—					(357)		—				(337)
Balance at March 31, 2018	13,844,584	8,307	25,697	(1,846)	—	(1,167)	30,991
Restricted stock units issued	38,353	23	(23)	—
Share-based compensation expense	—		17	—			17
Restricted stock unit compensation expense	—		39	—			39
Dividends declared ($0.02 per share)	—			(271)	—		(271)
Net income	—			946	—		946
Effect of adoption of ASU 2016-01	—
Repurchase of common stock	—					(259)
Balance at June 30, 2018	13,882,937	8,330	25,730	(1,171)	—	(1,426)	31,463
Restricted stock units issued	—
Share-based compensation expense	—		28	—			28
Restricted stock unit compensation expense	—		38	—			38
Dividends declared ($0.02 per share)	—			(268)	—		(268)
Net income	—			650	—		650
Effect of adoption of ASU 2016-01	—
Repurchase of common stock	—					(537)
Balance at September 30, 2018	13,882,937	$8,330	$25,796	$(789)	$—	$(1,963)	$31,374
Balance at March 31, 2019								13,883,937	$8,330	$25,941	$(3,965)	$(4,429)	$25,877

	Common Stock Shares	Common Stock Amount	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock	Total
Balance at December 31, 2019	13,929,381	$8,357	$26,095	$(6,043)	$(5,133)	$23,276
Share-based compensation expense	—	—	30	—	—	30
Restricted stock unit compensation expense	—	—	21	—	—	21
Dividends declared ($0.02 per share)	—	—	—	(250)	—	(250)
Net loss	—	—	—	(1,192)	—	(1,192)
Repurchase of common stock	—	—	—	—	(243)	(243)
Balance at March 31, 2020	13,929,381	$8,357	$26,146	$(7,485)	$(5,376)	$21,642

Common Stock Shares

Common Stock Amount

Additional Paid-In Capital

Accumulated Deficit

Treasury Stock

Total

Balance at December 31, 2018
  13,882,937
$8,330
$25,867
$(2,393)
$(4,092)
$27,712
Stock options exercised and issued
  1,000
  —
  2
  —
  —
  2
Share-based compensation expense
  —
  —
  31
  —
  —
  31
Restricted stock unit compensation expense
  —
  —
  41
  —
  —
  41
Dividends declared ($0.02 per share)
  —
  —
  —
  (254)
  —
  (254)
Net loss
  —
  —
  —
  (1,318)
  —
  (1,318)
Repurchase of common stock
  —
  —
  —
  —
  (337)
  (337)
Balance at March 31, 2019
  13,883,937
  8,330
  25,941
  (3,965)
  (4,429)
  25,877
Restricted stock units issued
  38,353
  23
  (23)
  —
  —
  —
Share-based compensation expense
  —
  —
  37
  —
  —
  37
Restricted stock unit compensation expense
  —
  —
  33
  —
  —
  33
Dividends declared ($0.02 per share)
  —
  —
  —
  (255)
  —
  (255)
Net loss
  —
  —
  —
  (247)
  —
  (247)
Repurchase of common stock
  —
  —
  —
  —
  (213)
  (213)
Balance at June 30, 2019
  13,922,290
  8,353
  25,988
  (4,467)
  (4,642)
  25,232
Restricted stock units issued
  7,091
  4
  (4)
  —
  —
  —
Share-based compensation expense
  —
  —
  42
  —
  —
  42
Restricted stock unit compensation expense
  —
  —
  11
  —
  —
  11
Dividends declared ($0.02 per share)
  —
  —
  —
  (253)
  —
  (253)
Net income
  —
  —
  —
  238
  —
  238
Repurchase of common stock
  —
  —
  —
  —
  (253)
  (253)
Balance at September 30, 2019
  13,929,381
$8,357
$26,037
$(4,482)
$(4,895)
$25,017

Loss ~~per~~Per Share

The following table sets forth the computation of basic and diluted ~~(loss) income~~loss per share:

	Three Months Ended		Nine Months Ended		Three Months Ended
	September 30, 2019	September 30, 2018	September 30, 2019	September 30, 2018	March 31, 2020	March 31, 2019
Numerator:
Net (loss) income (numerator for basic and diluted income per share)	$238	$650	$(1,327)	$1,153
Net loss (numerator for basic and diluted loss per share)					$(1,192)	$(1,318)
Denominator:
Denominator for basic (loss) income per share weighted average shares	12,696,273	13,479,759	12,725,793	13,538,116
Denominator for basic loss per share weighted average shares					12,555,108	12,761,713
Effect of dilutive securities:
Options and restricted stock units	12,784	21,828	—	25,874	—
Denominator:
Denominator for diluted (loss) income per share weighted average shares	12,709,057	13,501,587	12,725,793	13,563,990
Basic (loss) income per share	$0.02	$0.05	$(0.10)	$0.09
Diluted (loss) income per share	$0.02	$0.05	$(0.10)	$0.09
Denominator for diluted loss per share weighted average shares					12,555,108	12,761,713
Basic loss per share					$(0.09)	$(0.10)
Diluted loss per share					$(0.09)	$(0.10)

Approximately ~~431,829 and 20,364~~448,400 stock options and 0 ~~and 7,943~~ restricted stock units for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, and ~~434,500~~537,500 stock options and ~~11,322~~148,598 restricted stock units ~~granted~~ for the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, were excluded from the calculation because they were anti-dilutive.

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 ~~$42 and $110~~$30 for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared with ~~$28 and $66, respectively,~~$31 for the same ~~periods~~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 a stock option grant. The non-cash share-based employee compensation expense recorded in the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 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, ~~2018.~~2019.

A summary of activity under the Company’s stock option plans during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 is presented below:

As of January 1, 2019	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 ($)
As of January 1, 2020						Stock Options	Wgt. Avg. Exercise Price ($) Per Share	Wgt. Avg. Remaining Contractual Life (Years)	Wgt. Avg. Grant Date Fair Value ($) Per Share	Aggregate Intrinsic Value ($)
Outstanding	460,500	4.22	—	1.76	—	569,500	4.16	6.82	1.75	24,000
Vested	156,900	4.03	—	2.05	—	214,800	4.12	4.20	1.95	24,000
Nonvested	303,600	4.32	—	1.61	—	354,700	4.18	8.40	1.63	—

Period activity
Issued	120,000	4.12	—	2.11	—	—
Exercised	1,000	1.89	—	0.71	—	—
Forfeited	28,000	4.45	—	1.49	—	56,100	4.11	—	1.74	—
Expired	—					65,000	4.07	—	2.88	—

As of September 30, 2019
As of March 31, 2020
Outstanding	551,500	4.19	6.93	1.85	28,250	448,400	4.18	7.34	1.59	—
Vested	219,800	4.12	4.55	1.94	28,250	201,400	4.21	6.22	1.55	—
Nonvested	331,700	4.24	8.51	1.80	—	247,000	4.15	8.26	1.62	—

Restricted Stock Units

On September 6, 2019, the Company granted to each non-employee director restricted stock units with a ~~grant~~grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $280), 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 shareholders, 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 September 6, 2018, the Company granted to each non-employee director restricted stock units with a ~~grant~~grant-date fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which 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 shareholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units vest in full as of the director’s last date of service as a director of the Company. On September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested.

On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 4, 2019.

On June 15, 2017, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 15, 2018.

The Company recorded non-cash restricted stock unit compensation expense of ~~$11 and $85~~$21 for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared with ~~$38 and $111, respectively,~~$41 for the same ~~periods~~period last year.

10.

Commitments and Contingencies

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 ~~September 30, 2019.~~March 31, 2020.

Purchase Commitments

As of ~~September 30, 2019,~~March 31, 2020, the Company had purchase ~~orders to suppliers of~~commitments for inventory totaling approximately ~~$6,196.~~$7,062.

Significant Customers

Sales to United States government agencies represented approximately ~~$8,585 (72.7%) and $18,006 (55.0%~~$6,576 (60.4%) of the Company’s net total sales for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared with approximately ~~$7,110 (53.5%~~$5,401 (70.7%) ~~and $15,879 (41.0%), respectively,~~ for the same ~~periods~~period last year. Accounts receivable from agencies of the United States government were ~~$1,937~~$2,832 as of ~~September 30, 2019,~~March 31, 2020, compared with approximately ~~$3,440~~$4,225 at the same date last year.

11.

Debt

On January 30, 2020, BK Technologies, 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"). 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. The line of credit will expire on January 31, 2021. 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 Technologies, Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty.

Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR (or zero if the LIBOR is less than zero) plus a margin of 1.90%. The line of credit is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2020, with all outstanding principal and interest to be payable in full at maturity.

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, 2020 and the date of filing this report. As of March 31, 2020 and the date of filing this report, there were no borrowings outstanding under the Credit Agreement.

On September 25, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation, 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 ~~has a term~~is payable in 60 equal monthly principal and interest payments of ~~five years~~approximately $8 beginning on October 25, 2019 and maturing on September 25, 2024, and bears a fixed interest rate of 5.11%.

On March 28, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation, RELM Communications, Inc., a wholly-owned subsidiary of BK Technologies, Inc., and Silicon Valley Bank, as lender (“SVB”), entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”). The Loan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its secured revolving credit facility (the “Credit Facility”) was maintained.

Pursuant to the Loan and Security Agreement, the Credit Facility continues to provide BK Technologies, Inc. with a maximum borrowing availability of $1,000 and BK Technologies, Inc. continues to be subject to substantially the same customary borrowing terms and conditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5,000 during any twelve-month period, is permitted so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. Any borrowings under the Credit Facility will bear interest at the variable interest rate equal to 25 basis points above ~~The Wall Street Journal~~ ~~prime rate. The maturity date of the Credit Facility has been extended to December 26, 2019.~~

The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of “Quick Assets” to the sum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00; provided that “Net Cash” (defined as the difference between unrestricted cash on deposit with SVB minus any outstanding advances under the Credit Facility) is required to be at least $1,000; and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of no greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations are collateralized by substantially all of its assets, principally accounts receivable and inventory.

BK Technologies, Inc. was in compliance with all covenants under the Loan and Security Agreement as of the date of filing this report. As of September 30, 2019 and the date of filing this report, there were no borrowings outstanding under the Credit Facility.

12.

Leases

The Company adopted ASU No. 2016-02, “Leases” (Topic 842) on January 1, 2019 and applied the modified retrospective approach to adoption whereby the standard is applied only to the current and future periods. 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 June 30, 2027. Annual rental, maintenance and tax expenses for the facility are approximately $491.

The Company also leases 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, to accommodate a portion of the Company’s engineering team. In November 2019, this lease was amended to extend the lease term until December 31, 2021. Annual rental, maintenance and tax expenses for the facility are approximately $121.

Lease costs consist of the following:

			Three Months Ended
	Three Months Ended September 30, 2019	Nine Months Ended September 30, 2019	March 31, 2020	March 31, 2019
Operating lease cost	$134	$402	$143	$134
Short-term lease cost	6	16	2	4
Variable lease cost	31	94	32	32
Total lease cost	$171	$512	$177	$170

Supplemental cash flow information related to leases was as follows:

Three Months
Ended
September 30, 2019

Nine Months
Ended
September 30, 2019

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

Operating cash flows (fixed payments)
$118
$354
Operating cash flows (liability reduction)
  78
  234



Right-of-use assets obtained in exchange for lease obligations:


Operating leases
  —
  2,840

	Three Months Ended
	March 31, 2020	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$122	$118
Operating cash flows (liability reduction)	82	78

ROU assets obtained in exchange for lease obligations:
Operating leases	9	2,840

Other information related to operating leases was as follows:

	~~September 30,~~ ~~2019~~March 31, 2020
Weighted average remaining lease term (in years)	~~7.61~~6.81
Weighted average discount rate	5.50%

Maturity of lease liabilities as of ~~September 30, 2019 are~~March 31, 2020 were as follows:

	September 30, 2019	March 31, 2020
Remaining three months of 2019	$118
2020	401
Remaining nine months of 2020		$541
2021	431	526
2022	439	444
2023	448	451
2024		461
Thereafter	1,379	1,074
Total payments	3,216	3,497
Less: imputed interest	658	593
Total liability	$2,558	$2,904

In February 2020, 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, 2020. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent twelve-month period. The Company will record the ROU asset and related lease liability for this lease upon its commencement.

13.

Subsequent Events

~~Item~~On April 13, 2020, BK Technologies, Inc., a wholly-owned operating subsidiary of the Company, received approval and funding pursuant to a promissory note evidencing an unsecured loan in the amount of approximately $2,196 (the “Loan”) under the Paycheck Protection Program (or “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The Company intended to use the Loan for qualifying expenses in accordance with the terms of the CARES Act. At the time the Company applied for the Loan, it believed it qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that created uncertainty regarding the qualification requirements for a PPP loan. On April 24, 2020, out of an abundance of caution, the Board determined to repay the Loan and the Company initiated repayment of the full amount of the Loan to the lender.

On May 4, 2020, the Company implemented workforce reductions of approximately 18% to reduce costs and to better position the Company in an uncertain business environment resulting from the COVID-19 pandemic. The Company incurred approximately $221 in severance costs relating to these workforce reductions, which will be recognized in the second quarter of 2020 and will be paid over the next five months.

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, ~~2018~~2019 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;~~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;

●

competition in the land mobile radio industry;

●

general economic and business conditions, including federal, state and local government budget deficits and spending limitations, ~~and~~ any impact from a prolonged shutdown of the U.S. ~~Government;~~Government, and the ongoing effects of the COVID-19 pandemic;

●

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;~~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;

●

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

●

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;~~policies, as well as any further impact resulting from the COVID-19 pandemic;

●

our inventory and debt levels;

●

protection of our intellectual property rights;

●

fluctuation in our operating ~~results;~~results and stock price;

●

acts of war or terrorism, natural disasters and other catastrophic ~~events;~~events, such as the COVID-19 pandemic;

●

any infringement claims;

●

data security breaches, ~~cyber attacks~~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 of 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”) 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, ~~2018.~~2019.

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 under two brand names: BK Radio and RELM. Generally, BK Radio-branded products serve the government and public safety market, while RELM-branded products serve the business and industrial market.

Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.,” and our common stock began trading on the NYSE American stock exchange under the new ticker symbol “BKTI” on June 5, 2018. Our stockholders approved the name change at the Annual Meeting of Stockholders held on June 4, 2018.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. The holding company has the same directors and executive officers as its predecessor, BK Technologies, Inc.

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.

~~Third~~Impact of COVID-19 Pandemic

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. The challenges posed by the COVID-19 pandemic on the global economy increased significantly as the first quarter progressed. In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. While we are considered an “essential business” that is supporting first responders and our manufacturing operations currently remain open, we have implemented certain policies at our offices in accordance with best practices, such as implementing social distancing orders and remote work policies. Consistent with these policies, in the event our business is disrupted in coming weeks and months, we have taken steps to reduce expenses throughout the Company, including suspending all Company travel and participation in trade shows and other business meetings. We have also implemented workforce reductions and reduced employment and related expenses by approximately 18%. During the first quarter, there was limited impact to customer orders as reflected by the increase in sales for the first quarter of 2020 compared with the first quarter last year. Also, while some of our supply chain partners were temporarily closed for a period of time during the first quarter, most of these facilities have been reopened to varying degrees. Although we have in some cases experienced delays and increased freight costs, we have been able to procure the materials necessary to manufacture products and fulfill customer orders. Depending on the progression of the pandemic, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted. Continued progression of the pandemic could result in a decline in customer orders and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, we anticipate that our results of operations in future periods may be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions. For additional risks relating to the COVID-19 pandemic, see Item 1A. Risk Factors in Part II of this report.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Among other things, the CARES Act includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. On April 13, 2020, we received an unsecured Loan (as defined below) in the amount of $2,196,335 under the Paycheck Protection Program (or “PPP”) established under the CARES Act, as further discussed below under “Liquidity and Capital Resources.” We intended to use the Loan for qualifying expenses in accordance with the terms of the CARES Act. At the time of application, we believed we qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that created uncertainty regarding the qualification requirements for a PPP loan. On April 24, 2020, out of an abundance of caution, the Board determined to repay the Loan, and we initiated repayment of the full amount of the Loan to the lender.

On May 4, 2020, the Company implemented workforce reductions of approximately 18% to reduce costs and to better position the Company in an uncertain business environment resulting from the COVID-19 pandemic. The Company incurred approximately $221,000 in severance costs relating to these workforce reductions, which will be recognized in the second quarter of 2020 and will be paid over the next five months.

Our stock repurchase program terminated in April 2020 and has not been renewed.

First Quarter Summary

Overall, our financial and operating results for the three ~~and nine~~ months ended ~~September 30, 2019 were below those for~~March 31, 2020 improved from the same ~~periods~~period of last year. For the ~~third~~first quarter of ~~2019,~~2020, sales ~~declined 11.3%,~~increased significantly from last year’s first quarter, while gross profit margins as a percentage of sales for the first quarter of 2020 also improved compared with the same quarter of last year. Selling, general and administrative expenses remained substantially unchanged compared with last year’s ~~third~~first quarter. ~~Sales for the nine months ended September 30, 2019 were 15.4% below sales for the same period~~These factors combined to yield an operating loss that declined significantly from last ~~year, which was largely attributed to sales in~~year’s first quarter operating loss. Additionally, during the first quarter of ~~2019. Gross profit margins for the third quarter of 2019 improved~~2020, we reduced inventory by approximately $2.5 million, which was a primary factor enabling us to generate positive cash flow from ~~the prior quarter of 2019 for the second consecutive quarter.~~ operations.

For the nine month period of 2019, improved gross profit margins for the second and third quarters were adversely impacted by lower gross profit margins in the first quarter, which were driven by reduced sales and manufacturing levels. Engineering and product development expenses for the third quarter of 2019 declined 23.5% from the preceding quarter, and were 15.9% higher than last year’s third quarter. For the nine month period of 2019, engineering expenses increased 31.4%, compared with the same period last year. During the third quarter of 2019, we recognized operating income for the second consecutive quarter, following an operating loss in the first quarter of ~~2019. For the nine month period of 2019, we recognized an operating loss, compared with operating income for the same period last year.~~

~~For the third quarter of 2019,~~2020, our sales ~~decreased 11.3%~~increased $3.2 million (42.5%) to approximately ~~$11.8~~$10.9 million, ~~compared with approximately $13.3~~from $7.6 million for the ~~same~~first quarter ~~last year. For the nine months ended September 30, 2019, sales decreased 15.4% to approximately $32.7 million, compared with $38.7 million for the same period~~ last year.

Gross profit margins as a percentage of sales for the ~~third~~first quarter of ~~2019~~2020 were approximately ~~43.3%~~35.8%, compared with ~~41.1%~~31.9% for the ~~third~~first quarter ~~last year. For the nine month period ended September 30, 2019, gross profit margins as a percentage of sales were 40.4%, compared with 41.8% for the same period~~ last year.

Selling, general and administrative expenses (“SG&A”) for the ~~third~~first quarter of ~~2019 totaled~~2020 decreased to approximately ~~$4.8~~$4.7 million (40.8% of sales), declining approximately $870,000 (15.3%) from the preceding quarter. Comparatively, SG&A expenses for the third quarter last year totaled approximately $4.6 million (34.5% of sales). SG&A expenses for the nine months ended September 30, 2019 totaled approximately $15.2 million (46.6%(43.6% of sales), compared with approximately ~~$13.2~~$4.8 million ~~(34.2%~~(62.2% of sales) for ~~the same period~~ last ~~year.~~year’s first quarter.

For the ~~third~~first quarter of ~~2019, we recognized~~2020, our operating ~~income of~~loss was approximately ~~$295,000,~~$848,000, which was 63.4% lower, compared with ~~approximately $878,000 for the same~~last year’s first quarter ~~last year and compared with approximately $20,000 for the preceding quarter.~~ operating loss of $2.3 million.

For the ~~nine month period~~first quarter of ~~2019,~~2020, we reported an ~~operating~~unrealized loss of ~~approximately $2.0 million, compared with operating income of approximately $3.0 million for the same period last year.~~

~~For the third quarter of 2019, we recognized an unrealized loss totaling $258,000~~$306,000 on our investment in 1347 Property Insurance Holdings, Inc. (“PIH”), made through FGI 1347 Holdings, LP, a consolidated VIE. This compares with an unrealized ~~loss~~gain of ~~$191,000~~$592,000 on the investment for the ~~third~~first quarter of last year.For the nine months ended September 30, 2019, we recognized an unrealized gain on the investment of approximately $186,000, compared with an unrealized loss of $1.4 million, which was comprised of a $543,000 loss on the PIH investment, along with ~~a loss on the sale of securities totaling approximately $849,000,~~ ~~for the same period last year.~~

Net ~~income~~loss for the three months ended ~~September 30, 2019~~March 31, 2020 was approximately ~~$238,000~~$1.2 million ($~~0.02~~0.09 per basic and diluted share), compared with a net ~~income~~loss of approximately ~~$650,000~~$1.3 million ($~~0.05~~0.10 per basic and diluted share) for the same quarter last year. For the nine months ended September 30, 2019, net loss totaled approximately $1.3 million ($0.10 per basic and diluted share), compared with net income of approximately $1.2 million ($0.09 per basic and diluted share) for the same period last year.

As of ~~September 30, 2019,~~March 31, 2020, working capital totaled approximately ~~$17.1~~$13.7 million, of which approximately ~~$11.7~~$9.5 million was comprised of cash, cash equivalents and trade receivables. As of December 31, ~~2018,~~2019, working capital totaled approximately ~~$21.0~~$14.5 million, of which approximately ~~$17.0~~$8.6 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		Percentage of Sales Nine Months Ended		Percentage of Sales Three Months Ended
	September 30, 2019	September 30, 2018	September 30, 2019	September 30, 2018	March 31, 2020	March 31, 2019
Sales	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Cost of products	(56.7)	(58.9)	(59.6)	(58.2)	(64.2)	(68.1)
Gross margin	43.3	41.1	40.4	41.8	35.8	31.9
Selling, general and administrative expenses	(40.8)	(34.5)	(46.6)	(34.2)	(43.6)	(62.2)
Other income (expense)	(2.6)	(1.6)	0.7	(4.1)
(Loss) income before income taxes	(0.1)	5.0	(5.5)	3.5
Income tax (expense) benefit	2.1	(0.1)	1.4	(0.5)
Net (loss) income	2.0%	4.9%	(4.1)%	3.0%
Other (expense) income					(3.2)	8.4
Loss before income taxes					(11.0)	(21.9)
Income tax benefit					—	4.7
Net loss					(11.0)%	(17.2)%

Net Sales

For the ~~third~~first quarter ended ~~September 30, 2019,~~March 31, 2020, net sales ~~totaled~~increased 42.5% ($3.2 million) to approximately ~~$11.8~~$10.9 million, compared with approximately ~~$13.3~~$7.6 million for the ~~same~~first quarter ~~last year. Sales for the nine months ended September 30, 2019 totaled approximately $32.7 million, compared with approximately $38.7 million for the nine month period~~of last year.

~~Net~~The increase in net sales ~~for~~was attributed primarily to strong demand from federal customers such as the ~~three~~U.S. Forest Service and ~~nine month periods ended September 30, 2019 were approximately 11.3% and 15.4% below~~ the ~~respective comparable periods last year. The decreases in sales were primarily attributed to state and international public safety agencies in California and Canada, respectively. Third quarter~~U.S. Bureau of ~~2019 sales improved relative to~~Land Management, among others. During the first quarter ~~this year, which~~of 2020, there was ~~adversely impacted by~~limited impact to our sales from the COVID-19 outbreak. Furthermore, sales for last year’s first quarter were unusually low, reflecting the federal government shutdown ~~and sluggish sales to state and local government agency customers and which also contributed to our decrease~~early in ~~net sales for~~ the nine months ended September 30, 2019 as compared to the same period for 2018. Sales for the third quarter of 2019 were primarily driven by sales to federal legacy customers, including previously announced orders from the U.S. Forest Service. For the nine month period of 2019, such sales were supplemented by sales to state public safety agencies, including a previously announced order from the state of California, which was fulfilled during the second quarter of 2019.quarter.

During the first quarter of 2020, we reorganized our sales resources to more effectively focus on target markets and customers where we believe we can maximize our sales success. Our funnel of sales prospects for coming quarters includes potential new customers in federal, state and local public safety agencies. ~~In recent quarters,~~We believe the reorganization and our current sales ~~and marketing resources have been strengthened, and we believe they are positioned~~funnel better position us to ~~capitalize on these~~capture new sales opportunities moving forward.

While the potential impacts of the COVID-19 outbreak in coming months and quarters are uncertain, such effects have the potential to materially adversely impact our customers, which could reduce customer orders, and our supply chain, which could impair our ability to fulfill customer requirements in a timely manner, or at all. Such negative effects on our customers and suppliers could materially adversely affect our future business, operations and financial results.

The anticipated launch of our BKR Series product line, which was planned for 2019, was delayed. The initial product in this line is currently anticipated to be available in the second quarter of 2020, with additional models expected to be introduced in the future. Introduction of our BKR Series products could be delayed by various factors, including potential impacts related to the COVID-19 pandemic. BKR Series products, we believe, should increase our addressable market by expanding the number of federal and other customers that may purchase our products. However, the timing and size of orders from agencies at all levels can be unpredictable and subject to the influence of 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.

Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the ~~third~~first quarter ended ~~September 30, 2019~~March 31, 2020 improved to approximately ~~43.3%~~35.8%, compared with ~~41.1%~~31.9% for the ~~same~~first quarter ~~last year. For the nine month period ended September 30, 2019, gross profit margins were approximately 40.4%, compared with 41.8% for the same period~~of 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. ~~For the third quarter of 2019, the improvement in~~Although gross profit margins ~~reflected a more favorable~~for the first quarter of 2020 increased compared with the first quarter of last year, they were below typical levels as the mix of product sales ~~and improved unit~~was more heavily weighted toward lower margin products compared with the first quarter last year. Also, freight costs ~~and pricing. For~~associated with the ~~nine month period,~~procurement of certain materials increased during the first quarter, due in part to COVID-19 impact on our supply chain. Additionally, in concert with our inventory reduction program, more customer orders were fulfilled with inventory on-hand. Consequently, gross profit margins were ~~adversely~~ impacted by ~~the first quarter, during which we experienced~~ lower manufacturing volumes resulting in suboptimal utilization and absorption of manufacturing and support expenses. ~~Anticipated sales growth and the expected production and sale of new products should favorably impact overall gross~~Gross profit margins for the first quarter last year were adversely impacted by extraordinarily low sales and manufacturing levels resulting in ~~the future.~~under-absorption of support and overhead expenses.

We ~~continue to~~ utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor ~~costs.~~costs, and anticipate continuing to do so in the future. To better position our operations in an uncertain business environment, in April 2020 we reduced manufacturing operations employment by approximately 21% as well as other related expenses. We ~~anticipate~~believe that our current manufacturing capabilities and contract ~~manufacturing~~ relationships or comparable alternatives will continue to be available to usus. Although in the ~~future. We~~future we may encounter new product cost and competitive pricing pressures, ~~in the future. However,~~ the extent of their impact on gross margins, if any, is uncertain.

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 ~~third~~first quarter ended ~~September 30, 2019 totaled~~March 31, 2020 decreased slightly ($12,000, or 0.3%) to approximately $4.7 million (43.6% of sales), compared with approximately $4.8 million ~~or 40.8%~~(62.2% of ~~sales, compared with approximately $4.6 million, or 34.5% of sales,~~sales) for the ~~third~~first quarter last year. ~~Compared~~Consistent with ~~the preceding quarter of 2019,~~employment and expense reductions in our manufacturing operations, we reduced SG&A employment by approximately 15%, as well as other expenses ~~declined approximately 15.3%, or $870,000. For the nine months ended September 30, 2019, SG&A expenses totaled approximately $15.2 million, or 46.6% of~~in sales, ~~compared with approximately $13.2 million, or 34.2% of sales, for the nine month period last year.~~go-to-market, engineering and headquarters.

Engineering and product development expenses for the ~~third~~first quarter of ~~2019 totaled~~2020 decreased 4.8%, or $104,000, to approximately ~~$2.4~~$2.0 million ~~(20.1%~~(18.8% of ~~total~~ sales), compared with approximately $2.1 million ~~(15.9%~~(28.1% of ~~total~~ sales) for the same quarter of last year. ~~For the nine months ended September 30, 2019, engineering and product~~Product development expenses ~~totaled approximately $7.6 million (23.3% of total sales), compared with approximately $5.8 million (15.0% of total sales) for the nine month period last year.~~

~~The increases for both the three and nine month periods were attributed~~related to ~~new product development. Earlier this year, we started initiatives to develop a~~an anticipated new line of portable and mobile radios with enhanced features, ~~that are anticipated~~the BKR Series, decreased as development activities migrated away from external resources to ~~succeed~~ our ~~current KNG line starting~~new internal engineering team. This team is also involved with our multiband radio development, which was reevaluated in the ~~first half of next year. Additionally, expenses related to the development of our multi-band product increased compared with the same periods last year. During the third~~fourth quarter of ~~2019, we added a seasoned engineering executive to~~2019. Design improvements identified by the ~~senior management staff with a primary focus on evaluating, directing and completing the multi-band initiative. In October 2019, this executive was promoted to Chief Technical Officer.~~reevaluation are in process. The ~~evaluation identified design changes that we believe should improve the product’s functionality and performance. As a result of implementing these changes, the~~ precise date for introducing the ~~multi-band~~multiband product in the market is ~~uncertain; however, it is anticipated to~~uncertain and may be further delayed by COVID-19 related impacts in ~~the second half of 2020.~~

coming months.

Marketing and selling expenses for the ~~third~~first quarter of ~~2019~~2020 totaled approximately ~~$1.4~~$1.5 million ~~(11.5%~~(13.8% of sales), compared with approximately $1.4 million ~~(10.2%~~(18.4% of sales) for the ~~third~~first quarter last year. ~~For the nine months ended September 30, 2019, marketing and selling expenses totaled approximately $4.0 million (12.3% of sales), compared with approximately $4.2 million (10.9% of sales). Sales~~The increase is attributed to sales incentive commission expenses ~~decreased as a result~~resulting from sales growth compared to the first quarter of ~~lower sales, which were partially offset by expenses associated with additional sales staff and marketing initiatives.~~last year.

General and administrative expenses for the ~~third~~first quarter ~~of 2019 totaled approximately $1.1 million (9.1% of total sales),~~2020 were materially unchanged compared with last year’s first quarter, totaling approximately ~~$1.1 million (8.3% of total sales) for the third quarter last year. For the nine months ended September 30, 2019, general and administrative expenses totaled approximately $3.6~~$1.2 million (11.0% of sales) and $1.2 million (15.7% of sales), respectively. The decrease in G&A as a percentage of sales reflects the 42.5% growth in sales for the first quarter of 2020 compared with ~~approximately $3.2 million (8.2% of sales) for the nine month period~~ last year. The increase in general and administrative expenses for the nine month period was primarily attributed to corporate headquarters, including our holding company reorganization, and upgrading our information technology security and capabilities.year’s first quarter.

Operating Income (Loss)

~~Operating income~~The operating loss for the ~~third~~first quarter ended ~~September 30, 2019 totaled~~March 31, 2020 improved 63.4% from the last year’s first quarter, totaling approximately ~~$295,000 (2.5%~~$848,000 (7.8% of sales), compared with ~~operating income of approximately $878,000 (6.6%~~$2.3 million (30.3% of sales) for the ~~same~~first quarter last year. For the nine months ended September 30, 2019, our operating loss totaled approximately $2.0 million (6.1% of sales), compared with operating income of approximately $3.0 million (7.6% of sales) for the nine month period last year. The ~~decline in operating income for the third quarter, and the~~reduced operating loss for the ~~nine month period,~~first quarter of ~~2019~~2020 was primarily attributed to ~~lower~~ sales ~~combined with increased product development~~growth and gross profit margin improvements, while maintaining consistent SG&A expenses.

Other (Expense) Income

We recorded net interest income of approximately ~~$33,000~~$9,000 for the ~~third~~first quarter ended ~~September 30, 2019,~~March 31, 2020, compared with approximately ~~$28,000~~$55,000 for the ~~third~~first quarter of last year. For the nine months ended September 30, 2019, net interest income totaled approximately $134,000, compared with approximately $63,000 for the nine month period last year. Interest income primarily increasedyear, as a result of ~~more favorable interest rates, compared with~~lower cash balances.

During the prior year’s periods. Interest expense may be incurred from time to time on outstanding borrowings under the Credit Facility (defined below) and earn interest income on our cash balances. The interest rate on such Credit Facility asfirst quarter of ~~September 30, 2019 was~~ ~~The Wall Street Journal~~ ~~prime rate plus 25 basis points (5.25% as of September 30, 2019). We~~2020, we had no outstanding borrowings under the Credit ~~Facility as of September 30, 2019. In addition,~~Agreement (defined below), and therefore did not incur any interest expense on any outstanding borrowings under the Credit Agreement.

Additionally, on September 25, 2019, through a wholly-owned subsidiary, we entered into a Master Loan Agreement with U.S. Bank Equipment Finance, a division of U.S. Bank National Association, in the amount of $425,000, to finance various items of equipment. The loan is collateralized by equipment. The agreement has a term of five years and bears a fixed interest rate of 5.11%.

For the three months ended ~~September 30, 2019,~~March 31, 2020, we recognized an unrealized loss of approximately ~~$258,000~~$306,000 on our investment in ~~1347~~ ~~Property Insurance Holdings, Inc. (Nasdaq: PIH),~~PIH, compared ~~to an unrealized loss of $191,000 for the same period last year. For the nine months ended September 30, 2019, we recognized~~with an unrealized gain of approximately $186,000 on the same investment. For the nine months ended September 30, 2018, we recognized an unrealized loss of $1.4 million, which was comprised of a $543,000 loss on the PIH investment, along with a loss on the sale of securities totaling approximately $849,000.$592,000 for last year’s first quarter.

For the three months ended September 30, 2019, we recognized other expense totaling approximately $85,000, compared with approximately $48,000 for the third quarter last year. For the nine months ended September 30, 2019, we recognized other expenses totaling approximately $98,000, compared with approximately $274,000 for the nine month period last year. Other expenses in 2018 were primarily attributed to the disposal of assets related to a discontinued product initiative and exchange losses related to sales under a Canadian dollar-denominated contract.

Income Taxes

We ~~recorded~~did not record income tax expense or benefit for the three months ended March 31, 2020, compared with an income tax benefit of ~~approximately $253,000~~$355,000 for the ~~three months ended September 30, 2019, compared with income tax expense of approximately $17,000 for the third~~first quarter last year. For the nine months ended September 30, 2019, we recorded an income tax benefit of approximately $454,000, compared with income tax expense of approximately $200,000 for the nine month period last year.

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. ~~For 2019, we generally expect our effective tax rate to be slightly lower than last year.~~

As of ~~September 30, 2019,~~March 31, 2020, our net deferred tax assets totaled approximately ~~$3.9~~$4.4 million, and were primarily derived from research and development tax credits, operating loss carryforwards and ~~accrued expenses.~~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 have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. 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 ~~September 30, 2019.~~

March 31, 2020.

Liquidity and Capital Resources

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, net cash provided by operating activities totaled approximately ~~$1.0~~$0.9 million, compared with cash ~~provided by~~used in operating activities of approximately ~~$2.6~~$2.3 million for the same period of last year. Cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, was primarily related to a decrease in ~~accounts receivable,~~inventory and an unrealized loss on our investment in PIH, which were partially offset by a net loss, an increase in accounts ~~payable~~receivable and ~~an increase in~~ depreciation and amortization, ~~which was partially offset by an increase in inventory,~~and a decrease in accounts payable, as well as accrued compensation and ~~unrealized gains on investment and a net loss.~~related taxes.

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we had a net loss of approximately ~~$1.3~~$1.2 million, compared with ~~net income of~~ approximately ~~$1.2~~$1.3 million for the same period last year. Accrued compensation decreased approximately $854,000 for the 2019 period, which was primarily attributed to the payment of sales and management incentive compensation. For the same period last year, accrued compensation increased approximately $288,000. Net inventories ~~increased~~decreased during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 by approximately ~~$3.1~~$2.5 million, compared with ~~a decrease~~an increase of approximately ~~$3.7 million~~$715,000 for the same period last of year. The ~~increase~~decrease for the ~~nine month period~~first quarter of ~~2019~~2020 was primarily attributable to ~~material purchases, combined with a decrease~~an increase in ~~sales.~~sales and our inventory reduction program. Unrealized ~~gains~~losses on securities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 totaled approximately ~~$186,000,~~$306,000, compared with ~~losses~~gains of approximately ~~$1.4 million~~$592,000 for ~~the same period~~ last ~~year.~~year’s first quarter. For additional information pertaining to our investment in securities, refer to Notes 1 (Condensed Consolidated Financial Statements) and 6 (Investment in Securities) to the condensed consolidated financial statements included in this report. Accounts receivable increased approximately $626,000 during the first quarter ended March 31, 2020, compared with a decrease of approximately $676,000 for last year’s first quarter. The increase in accounts receivable was attributable to sales later in the first quarter of 2020 that had not completed their collection cycle. Depreciation and amortization totaled approximately $320,000 for the first quarter ended March 31, 2020, compared with approximately $256,000 for the first quarter last year. Accounts payable for the first quarter ended March 31, 2020, decreased approximately ~~$2.9 million during the nine months ended September 30, 2019,~~$474,000, compared with an increase of approximately ~~$1.9 million~~$602,000 for the same period last year. The decrease in accounts receivable was attributable to collections. Accounts payable for the nine months ended September 30, 2019, increased approximately $1.3 million, compared with a decreasefirst quarter of ~~approximately $2.5 million for the same period~~ last year, primarily due to ~~timing of~~ payments to material ~~suppliers. Depreciation and amortization totaled approximately $896,000 for~~suppliers during the ~~nine months ended September 30, 2019, compared with approximately $702,000 for the same period last year.~~first quarter of 2020.

Cash used in investing activities for the ~~nine months~~first quarter ended ~~September 30, 2019~~March 31, 2020 totaled approximately ~~$2.3 million~~$131,000 and was attributed to purchases of property, plant and equipment. For the same period last year, cash ~~provided by~~used in investing activities totaled approximately ~~$3.5 million, primarily comprised of proceeds from the sale of available-for-sale securities totaling approximately $8.3 million, which~~$829,000, and was ~~partially offset by an investment in FGI 1347 Holdings, LP of approximately $3.7 million and~~also attributed to purchases of property, plant and ~~equipment totaling approximately $1.1 million.~~equipment.

For the ~~nine months~~first quarter ended ~~September 30, 2019,~~March 31, 2020, approximately ~~$1.1 million~~$514,000 was used in financing activities, primarily related to our capital return program, which included quarterly dividends totaling approximately ~~$0.8 million~~$252,000 and stock repurchases totaling approximately ~~$0.8 million, partially offset by $0.4 million received from U.S. Bank Equipment Finance~~$243,000. We also utilized $19,000 for the ~~purchase~~repayment of ~~manufacturing equipment items, pursuant to the Master Loan Agreement, described below.~~debt. For the ~~same period~~first quarter last year, approximately ~~$0.8 million~~$256,000 was used to pay dividends and approximately ~~$1.2 million~~$337,000 was used for stock repurchases.

On April 13, 2020, BK Technologies, Inc., our wholly-owned operating subsidiary, received approval and funding pursuant to a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $2,196,335 (the “Loan”) under the PPP. The PPP was established under the CARES Act and is administered by the U.S. Small Business Administration (“SBA”). The Loan was made through JPMorgan Chase Bank, N.A. (“JPMC”). We intended to use the Loan for qualifying expenses in accordance with the terms of the CARES Act. At the time of application, we believed we qualified to receive the funds pursuant to the PPP.

On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance that created uncertainty regarding the qualification requirements for a PPP loan. On April 24, 2020, out of an abundance of caution, the Board determined to repay the Loan and we initiated repayment of the full amount of the Loan to the lender.

On May 4, 2020, the Company implemented workforce reductions of approximately 18% to reduce costs and to better position the Company in an uncertain business environment resulting from the COVID-19 pandemic. The Company incurred approximately $221,000 in severance costs relating to these workforce reductions, which will be recognized in the second quarter of 2020 and will be paid over the next five months.

On January 30, 2020, BK Technologies, Inc., our wholly-owned subsidiary, entered into a $5.0 million Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMC. The Credit Agreement provides for a revolving line of credit of up to $5.0 million, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. The line of credit will expire on January 31, 2021. 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. We and each subsidiary of BK Technologies, Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty.

On September 25, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation, 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 $425,000 to finance ~~manufacturing~~ items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement has a term of five years and bears ana fixed interest rate of 5.11%.

On March 28, 2019, BK Technologies, Inc., our wholly-owned subsidiary, and RELM Communications, Inc., a wholly-owned subsidiary of BK Technologies, Inc., entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”). The Loan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its secured revolving credit facility (the “Credit Facility”) was maintained.

Pursuant to the Loan and Security Agreement, the Credit Facility continues to provide BK Technologies, Inc. with a maximum borrowing availability of $1.0 million, and BK Technologies, Inc. continues to be subject to substantially the same customary borrowing terms and conditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5.0 million during any twelve-month period, is permitted so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. Any borrowings under the Credit Facility will bear interest at the variable interest rate equal to 25 basis points above ~~The Wall Street Journal~~
~~prime rate. The maturity date of the Credit Facility has been extended to December 26, 2019.~~

The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of “Quick Assets” to the sum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00; provided that “Net Cash” (defined as the difference between unrestricted cash on deposit with SVB minus any outstanding advances under the Credit Facility) is required to be at least $1.0 million; and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of no greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations are collateralized by substantially all of its assets, principally accounts receivable and inventory.

Our cash and cash equivalents balance at ~~September 30, 2019~~March 31, 2020 was approximately ~~$8.8~~$4.9 million. We believe these funds, combined with our cost-saving initiatives, anticipated cash generated from operations and borrowing availability under our Credit ~~Facility,~~Agreement, are sufficient to meet our working capital requirements for the foreseeable future. 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, ~~2018~~2019 and “Item 1A. Risk Factors” below in this report.

Critical Accounting Policies

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, software development 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 ~~September 30, 2019,~~March 31, 2020, as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

~~Item~~Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our President (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act ~~Rules~~Rule 13a-15(e) ~~or 15d-15(e)~~) as of ~~September 30, 2019.~~March 31, 2020. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective as of ~~September 30, 2019.~~March 31, 2020.

Changes in Internal Control over Financial Reporting

During the three months ended ~~September 30, 2019,~~March 31, 2020, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by ~~paragraph (d) of~~ Exchange Act ~~Rules 13a-15 or 15d-15~~Rule 13a-15(d) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

~~Item~~Item 1A. RISK FACTORS

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors as disclosed in our Annual Report, except as ~~follows:~~set forth below. However, many of the risk factors disclosed in Item 1A of our Annual Report have been, and we expect will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.

~~As a holding company, BK Technologies Corporation is dependent on the operations~~The COVID-19 pandemic and ~~funds of its subsidiaries~~

On March 28, 2019, we completed a reorganization pursuant to which BK Technologies Corporation became a holding company with no business operations of its own. BK Technologies Corporation’s only significant assets are the outstanding equity interests in BK Technologies, Inc.ensuing governmental responses has negatively impacted, and any other future subsidiaries of BK Technologies Corporation. As a result, we rely on cash flows from subsidiaries to meet our obligations, including payment of dividends to our stockholders. Additionally, our subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to BK Technologies Corporation, as the new holding company. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility. The anticipated benefits of this reorganization may not be obtained if circumstances prevent us from taking advantage of the opportunities that we expect it may afford us. As a result, we may incur the costs of a holding company structure without realizing the anticipated benefits, which could further materially adversely affect, our ~~reputation,~~business, financial condition, results of operations and ~~operating results.~~cash flow.

~~Item~~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. We expect the COVID-19 pandemic to have a material adverse impact on our business and financial performance. The extent of the impact of the COVID-19 pandemic on our business and financial performance, including our ability to execute our near-term and long-term business strategies and initiatives, such as the launch of products in the BKR Series, in the expected time frame, will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted. In addition, the pandemic has significantly increased economic and demand uncertainty and caused a worldwide economic downturn, and it is possible that it could cause a global recession.

In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Although many governmental measures have had specific expiration dates, some of those measures have already been extended more than once; as a result, there is considerable uncertainty regarding the duration of such measures and potential future measures. Measures providing for business shutdowns generally exclude certain essential services, and those essential services commonly include critical infrastructure and the businesses that support that critical infrastructure, which includes our business. While our manufacturing operations currently remain open, these measures have impacted and may further impact our workforce and operations, as well as those of our customers, vendors and suppliers.

We have modified our business practices, including restricting employee travel, modifying employee work locations, implementing social distancing and enhanced sanitary measures in our facilities, and cancelling attendance at events and conferences. Many of our suppliers, vendors and service providers have made similar modifications. A large part of our workforce is currently working from home, and the resources available to employees working remotely may not enable them to maintain the same level of productivity and efficiency, and these and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers. In light of the economic downturn generated by the COVID-19 pandemic, we have restructured our operations, including, among other things, reducing our workforce by approximately 18%. We will incur costs as a result of the workforce reduction, and there can be no assurance that we will be able to rehire our workforce in the event our business experiences a subsequent recovery. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19, in which case our employees may become sick, our ability to perform critical functions could be harmed, and our business and operations could be negatively impacted. The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of COVID-19 on our suppliers, third-party service providers, and/or customers.

In addition, we have experienced delays and cost increases, and may continue to do so, in obtaining and transporting supplies. Since the outbreak, some of our supply chain partners were temporarily closed for a period of time.Most of these facilities have been reopened to varying degrees. Although we have in some cases experienced delays and increased freight costs, we have, to date, been able to procure the materials necessary to manufacture products and fulfill customer orders, which may not continue to be the case in the event the pandemic worsens or continues for an extended period of time. Depending on the progression of the pandemic, our ability to obtain necessary supplies and ship finished products to customers may continue to be disrupted.

Further, our current and potential customers’ businesses could be disrupted or they could seek to limit spending, either of which could negatively impact the willingness or ability of our customers to place new, or any, orders with us and ultimately adversely affect our revenues, as well as negatively impact the payment of accounts receivable and collections and potentially lead to write-downs or write-offs.

The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, we expect that our results of operations, including revenues, in future periods will be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

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

Issuer Purchases of Equity Securities

Period

Total Number of Shares Purchased

Average Price Paid Per Share (1)

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)

Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2)

07/01/19-07/31/19
  21,369
$4.13
  21,369
  235,057
08/01/19-08/31/19
  25,822
$3.99
  25,822
  209,235
09/01/19-09/30/19
  15,960
$3.67
  15,960
  193,275
Total
  63,151
$3.93
  63,151

Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2)
01/01/20-01/31/20	36,155	$2.94	36,155	81,787
02/01/20-02/29/20	20,963	$2.72	20,963	60,824
03/01/20-03/31/20	44,695	$1.72	44,695	16,129
Total	101,813	$2.36	101,813

(1)

Average price paid per share of common stock repurchased is the executed price, including commissions paid to brokers.

(2)

The Company has a repurchase program of up to 1 million shares of the Company’s common stock that can be purchased, from time to time, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act. The repurchase program was initially announced in May 2016 and expanded in June ~~2017~~2017. The program terminated in April 2020 and has ~~no termination date.~~not been renewed.

Dividend Restrictions

On January 30, 2020, BK Technologies, Inc., our wholly-owned operating subsidiary, entered into the Credit Agreement with JPMC. The Credit Agreement contains limitations and covenants that may limit BK Technologies, Inc.’s ability to take certain actions, including pay dividends to us.

~~Item~~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 3.1		Articles of Merger, filed with the Nevada Secretary of State on March 28, 2019 (Incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
Exhibit 3.2		Articles of Incorporation of BK Technologies Corporation (Incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
Exhibit 3.3		Bylaws of BK Technologies Corporation (Incorporated by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
Exhibit 10.1		~~First Amendment, approved October 30, 2019, to Employment~~Credit Agreement, executed ~~March 20, 2019,~~as of January 30, 2020, by and between JPMorgan Chase Bank, N.A., as lender, and BK Technologies, Inc. ~~and James R. Holthaus~~, as borrower (Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed ~~October 31, 2019)~~ January 30, 2020)
Exhibit 10.2		Line of Credit Note, executed as of January 30, 2020, by BK Technologies, Inc., as borrower, for the benefit of JPMorgan Chase Bank, N.A., as lender (Incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 30, 2020)
Exhibit 10.3		Continuing Guaranty, executed as of January 30, 2020, by and among JPMorgan Chase Bank, N.A., as lender, and BK Technologies Corporation and RELM Communications, Inc., as guarantors (Incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2020)
Exhibit 10.4		Continuing Security Agreement, executed as of January 30, 2020, by and between JPMorgan Chase Bank, N.A., as lender, and BK Technologies, Inc., as pledgor (Incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed January 30, 2020)
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

~~SIGNATURES~~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: ~~November 6, 2019~~May 13, 2020	By:/s/ Timothy A. Vitou
	Timothy A. Vitou President (Principal executive officer and duly authorized officer)

Date: ~~November 6, 2019~~May 13, 2020	By:/s/ William P. Kelly
	William P. Kelly Executive Vice President and Chief Financial Officer (Principal financial and accounting officer and duly authorized officer)

2627