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, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-32644

BK TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		83-4064262
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7100 Technology Drive

West Melbourne, Florida 32904

(Address of principal executive offices and Zip Code)

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

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

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, par value $.60 per share		BKTI		NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated ~~filer~~Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

There were ~~16,814,336~~16,864,599 shares of common stock, $0.60 par value, of the registrant outstanding at ~~November~~May 6, ~~2021.~~2022.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION			3

Item 1.	FINANCIAL ~~STATEMENTS~~STATEMENTS.	3

Item 2.2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~OPERATIONS.	18	17

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	27	26

Item 4.	CONTROLS AND ~~PROCEDURES~~PROCEDURES.	27	26

PART II - OTHER INFORMATION			27

Item 1A.	RISK ~~FACTORS~~FACTORS.	28	27

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS~~PROCEEDS.	28	27

Item 6.	~~EXHIBITS~~EXHIBITS.	29	28

~~SIGNATURES~~SIGNATURES.			30	29

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	September 30, 2021			December 31, 2020 *			March 31, 2022			December 31, 2021
	(Unaudited)						(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	14,087		$	6,826		$	6,357		$	10,580
Trade accounts receivable, net		7,646			6,466			4,763			8,229
Inventories, net		15,981			10,545			21,091			16,978
Prepaid expenses and other current assets		1,941			1,878			2,538			1,634
Total current assets		39,655			25,715			34,749			37,421

Property, plant and equipment, net		4,454			3,566			4,559			4,556
Right-of-use (ROU) asset		2,497			2,887			2,299			2,399
Investment in securities		2,324			2,014			1,299			1,795
Deferred tax assets, net		4,116			4,300			4,116			4,116
Other assets		88			112			97			98
Total assets	$	53,134		$	38,594		$	47,119		$	50,385

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	7,520		$	5,119		$	7,254		$	5,883
Accrued compensation and related taxes		1,522			1,635			1,450			1,099
Accrued warranty expense		666			791			512			533
Accrued other expenses and other current liabilities		836			307			551			938
Dividends payable		336			250			0			505
Short-term lease liability		437			525			457			447
Credit facility		1,470			0			1,458			1,470
Notes payable-current portion		264			82			269			267
Deferred revenue		992			757			1,085			1,045
Total current liabilities		14,043			9,466			13,036			12,187

Notes payable, net of current portion		673			247			537			605
Long-term lease liability		2,385			2,702			2,151			2,269
Deferred revenue		2,789			2,551			2,558			2,706
Total liabilities		19,890			14,966			18,282			17,767
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding		0			0			0			0
Common stock; $.60 par value; 20,000,000 authorized shares; 18,264,736 and 13,962,366 issued and 16,814,336 and 12,511,966 outstanding shares at September 30, 2021, and December 31, 2020, respectively		10,958			8,377
Common stock; $.60 par value; 50,000,000 authorized shares; 18,314,999 and 18,298,999 issued and 16,864,599 and 16,848,599 outstanding shares at March 31, 2022, and December 31, 2021, respectively								10,989			10,979
Additional paid-in capital		35,701			26,346			36,007			35,862
Accumulated deficit		(8,013	)		(5,693	)		(12,757	)		(8,821	)
Treasury stock, at cost, 1,450,400 shares at September 30, 2021, and December 31, 2020, respectively		(5,402	)		(5,402	)
Treasury stock, at cost, 1,450,400 shares at March 31, 2022, and December 31, 2021, respectively								(5,402	)		(5,402	)
Total stockholders’ equity		33,244			23,628			28,837			32,618
Total liabilities and stockholders’ equity	$	53,134		$	38,594		$	47,119		$	50,385

See notes to condensed consolidated financial statements.

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

Table of Contents

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Operations

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

Three Months Ended

Nine Months Ended

September 30,
2021

September 30,
2020 *

September 30,
2021

September 30,
2020 *

Sales, net

$ 12,626

$ 12,760

$ 32,526

$ 33,586

Expenses

Cost of products

8,488

7,448

20,914

20,316

Selling, general and administrative

4,508

4,158

13,034

13,265

Total expenses

12,996

11,606

33,948

33,581

Operating (loss) income

(370 )

1,154

(1,422 )

5

Other (expense) income:

Net interest (expense) income

(19 )

(6 )

(37 )

(4 )
Loss on disposal of property, plant and equipment

(6 )

0

(6 )

0

(Loss) gain on investment in securities

(2,157 )

(291 )

310

(797 )
Other expense

(14 )

(65 )

(59 )

(144 )
Total other (expense) income

(2,196 )

(362 )

208

(945 )

(Loss) income before income taxes

(2,566 )

792

(1,214 )

(940 )

Income tax expense

0

(2 )

(184 )

(30 )

Net (loss) income

$ (2,566 )

$ 790

$ (1,398 )

$ (970 )

Net (loss) income per share-basic:

$ (0.15 )

$ 0.06

$ (0.10 )

$ (0.08 )
Net (loss) income per share-diluted:

$ (0.15 )

$ 0.06

$ (0.10 )

$ (0.08 )
Weighted average shares outstanding-basic

16,795,356

12,505,096

14,307,847

12,518,587

Weighted average shares outstanding-diluted

16,795,356

12,517,493

14,307,847

12,518,587

Three Months Ended

March 31,
2022

March 31,
2021*

Sales, net

$ 6,585

$ 8,564

Expenses

Cost of products

5,113

5,444

Selling, general and administrative

4,916

3,973

Total operating expenses

10,029

9,417

Operating loss

(3,444 )

(853 )

Other (expense) income:

Net interest (expense)

(15 )

(4 )
(Loss) gain on investment in securities

(496 )

205

Other income (expense)

19

(18 )
Total other (expense) income

(492 )

183

Loss before income taxes

(3,936 )

(670 )

Provision for income taxes

0

0

Net loss

$ (3,936 )

$ (670 )

Net loss per share-basic and diluted

$ (0.23 )

$ (0.05 )
Weighted average shares outstanding-basic and diluted

16,848,777

12,517,412

See notes to condensed consolidated financial statements.

* The amounts ~~as of September 30, 2020, and~~for the ~~amounts prior to July 1,~~three months ended March 31, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements.

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BK TECHNOLOGIES CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)

Nine Months Ended

Three Months Ended

September 30,
2021

September 30,
2020 *

March 31,
2022

March 31,
2021*

Operating activities

Net loss

$ (1,398 )

$ (970 )

$ (3,936 )

$ (670 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Inventories allowances

572

142

48

300

Deferred tax expense

184

101

Depreciation and amortization

1,033

1,005

342

298

Share-based compensation expense-stock options

215

94

85

32

Share-based compensation expense-restricted stock units

162

112

70

103

(Gain) loss on investment in securities

(310 )

797

Loss (gain) on investment in securities

496

(205 )
Changes in operating assets and liabilities:

Trade accounts receivable

(1,180 )

(1,814 )

3,466

1,900

Inventories

(6,008 )

5,098

(4,161 )

(1,394 )
Prepaid expenses and other current assets

(63 )

278

(904 )

57

Other assets

24

75

1

(6 )
ROU asset and lease liability

(15 )

222

ROU asset and lease liabilities

(8 )

(4 )
Accounts payable

2,401

(2,182 )

1,371

299

Accrued compensation and related taxes

(113 )

157

351

(315 )
Accrued warranty expense

(125 )

(337 )

(21 )

(73 )
Deferred revenue

473

566

(108 )

(138 )
Accrued other expenses and other current liabilities

529

181

(387 )

(145 )
Net cash (used in) provided by operating activities

(3,619 )

3,525

(3,295 )

39

Investing activities

Purchases of property, plant, and equipment

(1,921 )

(742 )

(345 )

(1,031 )
Net cash used in investing activities

(1,921 )

(742 )

(345 )

(1,031 )

Financing activities

Proceeds from common stock issuance, net of costs

11,559

0

Cash dividends paid

(836 )

(752 )

(505 )

(250 )
Repurchase of common stock

0

(269 )
Proceeds from the credit facility and notes payable

3,543

2,196

Proceeds from the credit facility

0

800

Repayment of the credit facility and notes payable

(1,465 )

(2,253 )

(78 )

(21 )
Net cash provided by (used in) financing activities

12,801

(1,078 )
Net cash (used in) provided by financing activities

(583 )

529

Net change in cash and cash equivalents

7,261

1,705

(4,223 )

(463 )
Cash and cash equivalents, beginning of period

6,826

4,676

10,580

6,826

Cash and cash equivalents, end of period

$ 14,087

$ 6,381

$ 6,357

$ 6,363

Supplemental disclosure

Cash paid for interest

$ 37

$ 18

$ 15

$ 4

Non-cash financing activity

Common stock issued under restricted stock units

$ 184

$ 128

$ 40

$ 84

See notes to condensed consolidated financial statements.

* The amounts ~~as of September 30, 2020, and~~for the ~~amounts prior to July 1,~~three months ended March 31, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements.

5
Table of Contents

BK TECHNOLOGIES CORPORATION
Notes to Condensed Consolidated Financial Statements
Unaudited
(In thousands, except share and per share data and percentages)

1. Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of ~~September 30, 2021,~~March 31, 2022, the condensed consolidated statements of operations ~~for the three and nine months ended September 30, 2021 and 2020,~~ and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), 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, ~~2020,~~2021, has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, as filed with the Securities and Exchange Commission (“SEC”) on March ~~3, 2021.~~17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

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

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

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

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

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

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

6
Table of Contents

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

~~Recently Adopted Accounting Pronouncements~~
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements. The amendments in the ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the ASU. The Company adopted this guidance as of January 1, 2020, and the adoption did not have an impact on its consolidated financial statements.
Recent Accounting Pronouncements

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

Change in Accounting Principle

As disclosed in Note 4, on July 1, 2021, the Company changed its accounting ~~to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the~~for inventory ~~was issued to work in progress. This change resulted in a net increase of approximately $1,300 in inventory and a net decrease of $1,300 in accumulated deficit as of July 1, 2021.~~
~~The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three and nine months ended September 30, 2021.~~
~~2. Significant Events and Transactions~~
Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock on September 23, 2021, to stockholders of record as of October 7, 2021. These dividends were paid on October 18, 2021.
~~3. Allowance for Doubtful Accounts~~
The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $7,696 and $6,516 at September 30, 2021, and December 31, 2020, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.
~~4. Inventories, Net~~
~~On July 1, 2021, the Company changed its accounting~~ to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress. The Company believes that this method improves financial reporting by better reflecting the current value of inventory on the consolidated balance sheets, by providing better matching of revenues and expenses. This change resulted in a net increase of approximately $1,300 in inventory and a net decrease of $1,300 in accumulated deficit as of July 1, 2021.
The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three months ended March 31, 2022.
2. Significant Events and Transactions
Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.03 per share of the Company’s common stock on April 6, 2022, to stockholders of record as of May 2, 2022. These dividends will be paid on May 16, 2022.
3. Allowance for Doubtful Accounts
The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $4,813 and 8,279 at March 31, 2022, and December 31, 2021, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.
4. Inventories, Net
On July 1, 2021, the Company changed its accounting for inventory to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress.

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4. Inventories, Net - continued
The fiscal ~~2020~~2021 financial statements have been retrospectively adjusted to apply the new inventory ~~change.~~change method. The cumulative effect of this change on periods prior to those presented herein resulted in a net decrease in accumulated deficit of approximately ~~$1,158~~$1,104 as of January 1, ~~2020.~~2021.

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

September 30,
2021

December 31,
2020

(as adjusted)

March 31,
2022

December 31,
2021

Finished goods

$ 2,565

$ 2,206

$ 2,465

$ 2,335

Work in process

4,342

3,672

6,274

4,527

Raw materials

9,074

4,667

12,352

10,116

$ 15,981

$ 10,545

$ 21,091

$ 16,978

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately ~~$1,160~~$1,214 at ~~September 30, 2021,~~March 31, 2022, compared with approximately ~~$588 (as adjusted)~~$1,288 at December 31, ~~2020.~~2021.

As a result of the retrospective application of this change in accounting method, the following financial statement line items within the accompanying fiscal ~~2020~~2021 Condensed Consolidated financial statements were adjusted as follows:

As
Originally
Reported
($)

Effect of
Change
($)

As Reported
under Change
in Accounting Principle
($)

Consolidated Balance Sheets

Assets

Inventories, net as of December 31, 2020

9,441

1,104

10,545

Liabilities & Shareholders’ Equity

Accumulated deficit as of December 31, 2020

(6,797 )

1,104

(5,693 )
Consolidated Income Statements

Cost of goods sold:

Three months ended September 30, 2020

7,560

(112 )

7,448

Nine months ended September 30, 2020

20,163

153

20,316

Income (loss) before income taxes:

Three months ended September 30, 2020

680

112

792

Nine months ended September 30, 2020

(787 )

(153 )

(940 )
Net income (loss):

Three months ended September 30, 2020

678

112

790

Nine months ended September 30, 2020

(817 )

(153 )

(970 )
Net (loss) income per share-basic and diluted:

Three months ended September 30, 2020

0.05

0.01

0.06

Nine months ended September 30, 2020

(0.07 )

(0.01 )

(0.08 )
Consolidated Statements of Cash Flows

Net loss as of September 30, 2020

(817 )

(153 )

(970 )
Inventories allowance

117

25

142

Inventories

4,970

128

5,098

As
Originally
Reported
($)

Effect of
Change
($)

As Reported
under Change
in Accounting Principle
($)

Condensed Income Statements

Cost of goods sold:

Three months ended March 31, 2021

5,468

(24 )

5,444

Loss before income taxes:

Three months ended March 31, 2021

(694 )

24

(670 )
Net loss:

Three months ended March 31, 2021

(694 )

24

(670 )
Net loss income per share-basic and diluted:

Three months ended March 31, 2021

(0.06 )

0.01

(0.05 )
Condensed Statements of Cash Flows

Net loss as of March 31, 2021

(694 )

24

(670 )
Inventories allowance

289

11

300

Inventories

(1,359 )

(35 )

(1,394 )

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5. Income Taxes

The Company has not recorded income tax ~~expense of $0 and $184~~provision or benefit for the three ~~and nine~~ months ended ~~September 30, 2021, respectively, compared with an income tax expense of $2~~March 31, 2022 and ~~$30 for the same periods last year.~~2021.

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

As of ~~September 30, 2021,~~March 31, 2022, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

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

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, the Company established a valuation allowance of ~~$98.~~$1,480 and $610 as of March 31, 2022 and December 31, 2021, respectively. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of ~~September 30, 2021.~~March 31, 2022.

6. Investment in Securities

1347 LP

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

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

FG Financial Group

As of ~~September 30, 2021,~~March 31, 2022, the Company indirectly held approximately ~~$63~~$62 in cash and 477,282 shares of FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq: FGF) (“FGF”), with fair value of ~~$2,324,~~$1,299, through an investment in 1347 LP.  These shares were purchased in March and May 2018 for approximately $3,741.  For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the Company recognized unrealized loss of ~~$2,157 and unrealized gains of $310, respectively,~~$496 on the investment, compared with unrealized ~~losses~~gain of ~~$291 and $797, respectively~~$205 for the same ~~periods~~period last year. There have been no costs, fees, and expenses paid to the general partner or its affiliates for any periods, including the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.
9
Table of Contents
6. Investment in Securities -continued

As of ~~September 30, 2021,~~March 31, 2022, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 3,032,765 shares of FGF’s common stock, representing approximately 60.0% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, a member of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of FG and serves as Chairman of the Board of Directors of Ballantyne Strong, Inc. Mr. Cerminara also serves as Chairman of the Board of Directors of FGF.

9
~~Table of Contents~~
7. Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 *,~~2021*, are as follows:

Common
Stock
Shares

Common
Stock
Amount

Additional
Paid-In
Capital

Accumulated
Deficit

Treasury
Stock

Total

Balance at December 31, 2021

18,298,999

$ 10,979

$ 35,862

$ (8,821 )

$ (5,402 )

$ 32,618

Common stock issued under restricted stock units

16,000

10

(10 )

0

0

0

Share-based compensation expense-stock options

—

0

85

0

0

85

Share-based compensation expense-restricted stock units

—

0

70

0

0

70

Net loss

—

0

0

(3,936 )

0

(3,936 )
Balance at March 31, 2022

18,314,999

$ 10,989

$ 36,007

$ (12,757 )

$ (5,402 )

$ 28,837

Common
Stock
Shares

Common
Stock
Amount

Additional
Paid-In
Capital

Accumulated
Deficit

Treasury
Stock

Total

Common Stock
Shares

Common Stock
Amount

Additional Paid-In Capital

Accumulated
Deficit

Treasury
Stock

Total

Balance at December 31, 2020*

13,962,366

$ 8,377

$ 26,346

$ (5,693 )

$ (5,402 )

$ 23,628

13,962,366

$ 8,377

$ 26,346

$ (5,693 )

$ (5,402 )

$ 23,628

Common stock issued under restricted stock units

24,505

15

(15 )

0

0

0

24,505

15

(15 )

0

0

0

Share-based compensation expense-stock options

—

0

32

0

0

32

—

0

32

0

0

32

Share-based compensation expense-restricted stock units

—

0

103

0

0

103

—

0

103

0

0

103

Common stock dividends ($0.02 per share)

—

0

0

(251 )

0

(251 )

—

0

0

(251 )

0

(251 )
Net loss*

—

0

0

(670 )

0

(670 )

—

0

0

(670 )

0

(670 )
Balance at March 31, 2021*

13,986,871

8,392

26,466

(6,614 )

(5,402 )

22,842

13,986,871

$ 8,392

$ 26,466

$ (6,614 )

$ (5,402 )

$ 22,842

Common stock issued, net of issuance costs

4,249,250

2,549

9,010

0

0

11,559

Share-based compensation expense-stock options

—

0

33

0

0

33

Share-based compensation expense-restricted stock units

—

0

25

0

0

25

Net income*

—

0

0

1,838

0

1,838

Balance at June 30, 2021*

18,236,121

10,941

35,534

(4,776 )

(5,402 )

36,297

Common stock issued under restricted stock units

28,615

17

(17 )

0

0

0

Share-based compensation expense-stock options

—

0

150

0

0

150

Share-based compensation expense-restricted stock units

—

0

34

0

0

34

Common stock dividends ($0.02 per share)

—

0

0

(671 )

0

(671 )
Net loss

—

0

0

(2,566 )

0

(2,566 )
Balance at September 30, 2021

18,264,736

$ 10,958

$ 35,071

$ (8,013 )

$ (5,402 )

$ 33,244

*              The amounts as of December 31, 2020, and for the period ended March 31, 2021, have been adjusted to reflect the change in inventory accounting method as described in Notes 1 and 4 of the Condensed Consolidated Financial Statements.
The balances as of December 31, 2020, March 31, 2021, and June 30, 2021, and the amounts for the three months ended March 31, 2021, and June 30, 2021, have been adjusted to reflect the change in inventory accounting method as described in Notes 1 and 4 of the Condensed Consolidated Financial Statements

10
~~Table of Contents~~
~~7. Stockholders’ Equity - continued~~

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

Change in inventory accounting method

—

—

—

1,158

—

1,158

Balance as of January 1, 2020 *

13,929,381

8,357

26,095

(4,885 )

—

24,434

Share-based compensation expense-stock options

—

0

30

0

0

30

Share-based compensation expense-restricted stock units

—

0

21

0

0

21

Common stock dividends ($0.02 per share)

—

0

0

(250 )

0

(250 )
Net loss *

—

0

0

(1,466 )

0

(1,466 )
Repurchase of common stock

—

0

0

0

(243 )

(243 )
Balance at March 31, 2020 *

13,929,381

8,357

26,146

(6,601 )

(5,376 )

22,526

Common stock issued under restricted stock units

14,439

9

(9 )

0

0

0

Share-based compensation expense-stock options

—

0

30

0

0

30

Share-based compensation expense-restricted stock units

—

0

68

0

0

68

Common stock dividends ($0.02 per share)

—

0

0

(252 )

0

(252 )
Net loss *

—

0

0

(294 )

0

(294 )
Repurchase of common stock

—

0

0

0

(26 )

(26 )
Balance at June 30, 2020 *

13,943,820

8.366

26,235

(7,147 )

(5,402 )

22,052

Common stock issued under restricted stock units

18,546

11

(11 )

0

0

0

Share-based compensation expense-stock options

—

0

34

0

0

34

Share-based compensation expense-restricted stock units

—

0

23

0

0

23

Common stock dividends ($0.02 per share)

—

0

0

(250 )

0

(250 )
Net income *

—

0

0

790

0

790

Balance at September 30, 2020 *

13,962,366

$ 8,377

$ 26,281

$ (6,607 )

$ (5,402 )

$ 22,649

*
The balances as of January 1, 2020, March 31, 2020, June 30, 2020, and September 30, 2020, and the amounts for the three months ended March 31, 2020, June 30, 2020, and September 30, 2020, have been adjusted to reflect the change in inventory accounting method as described in Notes 1 and 4 of the Condensed Consolidated Financial Statements.
11
Table of Contents

8. Income (Loss) Per Share

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

Three Months Ended

Nine Months Ended

Three Months Ended

September 30,
2021

September 30,
2020 *

September 30,
2021

September 30,
2020 *

March 31,
2022

March 31,
2021*

Numerator:

Net (loss) income for basic and diluted earnings per share

$ (2,566 )

$ 790

$ (1,398 )

$ (970 )
Net loss for basic and diluted earnings per share

$ (3,936 )

$ (670 )
Denominator for basic loss per share weighted average shares

16,795,356

12,505,096

14,307,847

12,518,587

16,848,777

12,517,412

Effect of dilutive securities:

Options and restricted stock units

0

12,397

0

0

0

0

Denominator for diluted loss per share weighted average shares

16,795,356

12,517,493

14,307,847

12,518,587

16,848,777

12,517,412

Basic income (loss) per share

$ (0.15 )

$ 0.06

$ (0.10 )

$ (0.08 )
Diluted income (loss) per share

$ (0.15 )

$ 0.06

$ (0.10 )

$ (0.08 )
Basic and diluted loss per share

$ (0.23 )

$ (0.05 )

Approximately ~~681,500~~909,000 stock options and ~~171,316~~137,055 restricted stock units for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, respectively, and ~~480,900 and 505,900~~489,000 stock options and ~~0 and 147,038~~122,533 restricted stock units for the three ~~and nine~~ months ended ~~September 30, 2020,~~March, 2021, respectively, were excluded from the calculation because they were anti-dilutive.

*
*              The amounts for ~~2020 and the amounts prior to July 1,~~ 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1and 4 to Condensed Consolidated Financial Statements.
12
~~Table of Contents~~

9. Non-Cash Share-Based Employee Compensation

The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of ~~$150 and $215~~$85 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared with ~~$34 and $94, respectively,~~$32 for the same period last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of stock option grants under this plan. The non-cash share-based employee compensation expense recorded in the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.
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Table of Contents
9. Non-Cash Share-Based Employee Compensation - continued

A summary of activity under the Company’s stock option plans during the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, is presented below:

As of January 1, 2021

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 ($)

Stock
Options

Wgt. Avg.
Exercise
Price ($)
Per Share

Wgt. Avg.
Remaining
Contractual
Life (Years)

Wgt. Avg.
Grant Date
Fair Value
($) Per Share

Aggregate
Intrinsic Value
($)

As of January 1, 2022
As of January 1, 2022
Outstanding

489,000

3.96

7.23

1.51

20,000

676,500

3.68

7.33

1.41

4,500

Vested

185,800

4.15

5.65

1.55

20,000

361,600

3.80

6.66

1.44

4,500

Nonvested

303,200

3.84

8.20

1.49

—

314,900

3.53

8.10

1.39

0

Period activity

Issued

202,500

3.08

—

1.16

—

237,500

2.38

—

0.78

0

Exercised

—

0

—

0

—

0

0

—

0

0

Forfeited

—

0

—

0

—

0

0

—

0

0

Expired

10,000

4.55

—

1.06

—

5,000

4.95

—

1.05

—

As of September 30, 2021

As of March 31, 2022

Outstanding

681,500

3.69

7.57

1.41

15,000

909,000

3.33

7.87

1.25

49,050

Vested

359,600

3.82

6.88

1.44

15,000

461,933

3.67

6.87

1.37

20,833

Nonvested

321,900

3.54

8.34

1.38

0

447,067

2.98

8.89

1.13

28,217

Restricted Stock Units
On March 31, 2022, the Company granted 16,000 restricted stock units to Joshua Horowitz for strategic advisory service compensation. These restricted stock units were fully vested on the date of grant.
On December 17, 2021, upon the resignation of former director John Struble, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Struble’s unvested restricted stock units granted September 6, 2018, September 6, 2019, August 24, 2020, and July 30, 2021, and issued 34,264 shares of common stock to Mr. Struble.
On August 24, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $240), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

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

On March 4, 2021, upon the resignation of former director Lewis Johnson, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Johnson’s unvested restricted stock units granted September 6, 2018, September 6, 2019, and August 24, ~~2020,~~2021, and issued 24,505 shares of common stock to Mr. Johnson.

On August 24, 2020, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $240), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

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Table of Contents
9. Non-Cash Share-Based Employee Compensation - continued

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

On September 6, 2019, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $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 stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.
On September 6, 2018, the Company granted to each non-employee director restricted stock units with a 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 stockholders, 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 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.
There were ~~171,316 and 147,038~~137,055 restricted stock units outstanding as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, respectively.~~2021.

The Company recorded non-cash restricted stock unit compensation expense of ~~$34 and $162~~$70 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared with ~~$23 and $112, respectively~~$103 for the same period last year.

10. Commitments and Contingencies
Legal Matters

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, it records a liability in its consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not accrue legal reserves, consistent with applicable accounting guidance. There were no pending material claims or legal matters as of ~~September 30, 2021.~~March 31, 2022.
COVID-19

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

Purchase Commitments

As of ~~September 30, 2021,~~March 31, 2022, the Company had purchase commitments for inventory totaling approximately ~~$13,142.~~$12,533.
14
~~Table of Contents~~

Significant Customers

Sales to United States government agencies represented approximately ~~$6,371 (50.5%) and $13,237 (39.4%~~$1,650 (25.05%) of the Company’s net total sales for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared with approximately ~~$8,476 (66.4%~~$2,116 (24.71%) ~~and $19,321 (57.5%), respectively,~~ for the same period last year. Accounts receivable from agencies of the United States government were ~~$5,197~~$1,314 as of ~~September 30, 2021,~~March 31, 2022, compared with approximately ~~$3,261~~$1,490 at the same date last year.

11. Debt

BK Technologies, Inc. (“BK Inc.”), a wholly owned subsidiary of the Company, entered into a $5,000 Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”) on January 30, ~~2020.~~2021. The Credit Agreement provides for a revolving line of credit of up to $5,000, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc., pursuant to the terms of the Continuing Security Agreement with JPMC. The Company and each subsidiary of BK Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. On January ~~26, 2021, the Company extended this~~31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, ~~2022.~~2023.
13
Table of Contents
11. Debt - continued

Borrowings under the Credit Agreement will bear interest at athe secured overnight financing rate ~~per annum equal to one-month LIBOR or zero if the LIBOR is less than zero)~~ plus a margin of ~~1.90% (1.973% as of September 30, 2021)~~2.0%. The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, ~~2020,~~2022, with all outstanding principal and interest to be payable in full at maturity (January 31, ~~2022)~~2023). As of March 31, 2022, the interest rate was 2.398%.

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

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

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of ~~September 30, 2021,~~March 31, 2022, and the date of filing this report. As of ~~September 30, 2021,~~March 31, 2022, the Company had an outstanding balance of $1,458, and a net balance availability of $2,727 under the Credit Agreement. As of the date of filing this report, the Company had an outstanding balance of ~~$1,470,~~$2,458, and a net balance availability of ~~$3,530~~$2,542 under the Credit Agreement.

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

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

1514
Table of Contents

11. Debt - continued
Current balances of ~~note~~notes payable at ~~September 30, 2021,~~March 31, 2022, and December ~~30, 2020,~~31, 2021, are set forth in the table below:

September 30,
2021

December 31,
2020

March 31,
2022

December 31,
2021

Note payable-US. Bank

$ 84

$ 82

$ 87

$ 86

Note payable-JP Morgan Chase Bank

180

0

182

181

$ 264

$ 82

$ 269

$ 267

Long-term balances of ~~note~~notes payable at ~~September 30, 2021,~~March 31, 2022, and December ~~30, 2020,~~31, 2021, are set forth in the table below:

September 30,
2021

December 31,
2020

March 31,
2022

December 31,
2021

Note payable-US. Bank

$ 183

$ 247

$ 139

$ 161

Note payable-JP Morgan Chase Bank

490

0

398

444

$ 673

$ 247

$ 537

$ 605

12. Leases

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

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

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

In February ~~2020,~~2021, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, ~~2020.~~2021. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent 12-month period.

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

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12. Leases - continued
Lease costs consisted of the following:

Three Months Ended

Nine Months Ended

Three Months Ended

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

March 31,
2022

March 31,
2021

Operating lease cost

$ 136

$ 158

$ 438

$ 445

$ 136

$ 166

Short-term lease cost

0

0

0

2

0

0

Variable lease cost

33

33

98

96

33

32

Total lease cost

$ 169

$ 191

$ 536

$ 543

$ 169

$ 198

Supplemental cash flow information related to leases was as follows:

Three Months Ended

Nine months Ended

Three Months Ended

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

March 31,
2022

March 31,
2021

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

Operating cash flows (fixed payments)

$ 143

$ 141

$ 495

$ 384

$ 143

$ 211

Operating cash flows (liability reduction)

$ 104

$ 102

$ 375

$ 267

$ 108

$ 171

ROU assets obtained in exchange for lease obligations:

Operating leases

$ 0

$ 419

$ 14

$ 454

$ 0

$ 14

Other information related to operating leases was as follows:

~~September 30,~~March 31,
~~2021~~2022

Weighted average remaining lease term (in years)

~~5.44~~4.95
Weighted average discount rate

5.50 %
Maturities of lease liabilities as of March 31, 2022, were as follows:

~~Maturity of lease liabilities as of September 30, 2021, were as follows:~~

September 30,
2021

March 31,
2022

Remaining three months of 2021

$ 144

2022

582

Remaining nine months of 2022

$ 438

2023

595

595

2024

608

608

2025

618

618

2026

479

Thereafter

722

243

Total payments

3,269

2,981

Less: imputed interest

(447 )

(373 )
Total liability

$ 2,822

Total present value of lease liabilities

$ 2,608

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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, ~~2020,~~2021, and in our subsequent filings with the Securities and Exchange Commission, and include, among others, the following:

·
changes or advances in technology;

·
the success of our land mobile radio product line;

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

·
competition in the land mobile radio industry;

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

·
the availability, terms and deployment of capital;

·
reliance on contract manufacturers and suppliers;

·
risks associated with fixed-price contracts;

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

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

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

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

·
our ability to manage our growth;

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

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

·
impact of our capital allocation strategy;

·
risks related to maintaining our brand and reputation;

·
impact of government regulation;

·
rising health care costs;

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

·
our inventory and debt levels;

·
protection of our intellectual property rights;

·
fluctuation in our operating results and stock price;

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

·
any infringement claims;

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

·
availability of adequate insurance coverage;

·
maintenance of our NYSE American listing;

·
risks related to being a holding company; and

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

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

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

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report and the MD&A, consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on March ~~3, 2021.~~17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022.

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Executive Overview

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

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

Holding Company Reorganization

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

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

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

Impact of COVID-19 Pandemic and Recent Capital Markets Disruption

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. ~~The challenges posed by~~In response to the COVID-19 pandemic, on the global economy increased significantly in the first several months of 2020. 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. We are considered an “essential business” that is supporting first responders and our manufacturing operations have remained open throughout the pandemic. Wewe implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing, wearing face masks, and remote work practices. Among other things, we have invested in employee safety equipment, additional cleaning supplies and measures, adjusted production lines and workplaces as necessary and adapted new processes for interactions with our suppliers and customers to safely manage our operations. Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing.

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

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~~In planning for~~Furthermore, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the ~~possible disruption~~Donetsk and Luhansk regions of ~~our business, we took steps~~Ukraine and subsequent military interventions in Ukraine have led to ~~reduce expenses throughout the Company. This included suspending all Company travel for a period of time, as well as our participation in trade shows~~sanctions and other ~~business meetings, instituting strict inventory control~~penalties being levied by the United States, European Union and ~~decreasing expenditures. We~~other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system. Additional potential sanctions and penalties have also ~~implemented workforce reductions during 2020. For~~been proposed and/or threatened. Russian military actions and the ~~first nine months~~resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of ~~2021, the~~liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
The impact to our business in 2022, particularly customer orders, is not known with any certainty. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been delays and ~~longer~~long delivery times within our supply chain. While ~~we cannot be certain of~~ the progression orand duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, ~~inventory levels,~~ manufacturing operations and financial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 and ongoing geopolitical conflicts and related sanctions are reflected in our results of operations, we cannot at this time separate the direct ~~COVID-19~~ impacts of these matters from other factors that cause our performance to vary from quarter to quarter. The ultimate duration and impact of the COVID-19 pandemic, the ongoing geopolitical conflicts and related sanctions on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, the duration of the ongoing conflict in Ukraine and additional sanctions related thereto, and the related length of ~~its~~the impact on the global economy, which are uncertain and cannot be predicted at this time. Even after the COVID-19 pandemic has subsided and geopolitical tensions subside, we may continue to experience an adverse impact to our business as a result of ~~its~~the national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic, the ongoing geopolitical conflict and ~~its~~related sanctions, and their negative effects on global economic conditions.

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

~~Third~~First Quarter ~~and Nine months~~ Summary

Customer demand and orders for our products ~~were~~continued to be strong during the three months ended ~~September 30, 2021.~~March 31, 2022. Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders. Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during ~~the fourth quarter of 2021.~~subsequent quarters this year.

For the ~~third~~first quarter ~~2021,~~2022, sales ~~were materially flat~~decreased approximately $2.0 million (23.1%), compared with the ~~third~~first quarter last ~~year~~year. While customer orders were strong during the quarter, factors within our supply chain and increased 11.4% from the immediately preceding quarter. The improvement in sales for the third quarter brought sales for the nine-months ended September 30, 2021, within 3.2% of last year’s nine-month period. Grossmanufacturing operations, including component availability and extended lead-times, limited our ability to convert orders into shipments and revenue recognition. Additionally, gross profit margins as a percentage of sales for the ~~third~~first quarter ~~and nine-month periods~~ of ~~2021~~2022 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and ~~a less favorable sales mix.~~lower manufacturing volumes. Selling, general and administrative (“SG&A”) expenses for the ~~nine-month~~three-month period ended ~~September 30, 2021, decreased 1.7% from~~March 31, 2022, increased approximately $0.9 million (23.7%) compared with the same ~~period last year.~~
~~For the third~~ quarter of 2021, our sales totaled approximately $12.6 million, compared with approximately $12.8 million for the same quarter last year. For the nine months ended September 30, 2021, sales totaled approximately $32.5 million, compared with approximately $33.6 million for the same period last year.
Gross profit margins as a percentage of sales for the third quarter of 2021 were approximately 32.8%, compared with 41.6% (as adjusted) for the third quarter last year. For the nine-month period ended September 30, 2021, gross profit margins as a percentage of sales were approximately 35.7%, compared with 39.5% (as adjusted) for the same period last year.
SG&A expenses for the third quarter of 2021 totaled approximately $4.5 million, compared with approximately $4.2 million for the same quarter last year. SG&A expenses for the first nine months of 2021 totaled approximately $13.0 million, compared with approximately $13.3 million for the same period last year.

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For the ~~third~~first quarter of ~~2021,~~2022, our sales totaled approximately $6.6 million, compared with approximately $8.6 million for the same quarter last year.
Gross profit margins as a percentage of sales for the first quarter of 2022 were approximately 22.4%, compared with 36.4% (as adjusted) for the first quarter last year.
SG&A expenses for the first quarter of 2022 totaled approximately $4.9 million, compared with approximately $4.0 million for the same quarter last year.
For the first quarter of 2022, we recognized an operating loss of approximately ~~$370,000,~~$3.4 million, compared with ~~operating income of~~ approximately ~~$1.2 million~~$853,000 (as adjusted) for the same quarter last year. For the nine-month period ended September 30, 2021, our operating loss totaled approximately $1.4 million (as adjusted), compared with operating income of approximately $5,000 (as adjusted) for the same period last year.

For the ~~third~~first quarter of ~~2021,~~2022, we recognized an unrealized loss totaling approximately ~~$2.2~~$0.5 million on our investment in FGF Financial (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated variable interest entity. This compares with an unrealized ~~loss~~gain of approximately ~~$291,000~~$205,000 on the investment for the ~~third~~first quarter ~~last year. For the nine-month period ended September 30, 2021, we recognized an unrealized gain of approximately $310,000, compared with an unrealized loss of $797,000 for the same period~~ last year.

Net loss for the three months ended ~~September 30, 2021,~~March 31, 2022, was approximately ~~$2.6~~$3.9 million ($~~0.15~~0.23 per basic and diluted share), compared with ~~net income of~~ approximately ~~$790,000~~$670,000 ($~~0.06~~0.05 per basic and diluted share), (as adjusted), for the same quarter last year. For the nine months ended September 30, 2021, our net loss totaled approximately $1.4 million ($0.10 per basic and diluted share), compared with a net loss of approximately $970,000 ($0.08 per basic and diluted share), (as adjusted), for the same period last year.

As of ~~September 30, 2021,~~March 31, 2022, working capital totaled approximately ~~$25.6~~$21.7 million, of which approximately ~~$21.7~~$11.1 million was comprised of cash, cash equivalents and trade ~~receivables, reflecting the cash received from or closed public offering of our common stock.~~receivables. As of December 31, ~~2020,~~2021, working capital totaled approximately ~~$16.2~~$25.2 million (as adjusted), of which approximately ~~$13.3~~$18.8 million was comprised of cash, cash equivalents and trade receivables.

Results of Operations

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

Percentage of Sales
Three Months Ended

Percentage of Sales
Nine months Ended

September 30,
2021

September 30, 2020*

September 30,
2021

September 30,
2020 *

Sales

100.0 %

100.0 %

100.0 %

100.0 %
Cost of products

(67.2 )

(58.4 )

(64.3 )

(60.5 )
Gross margin

32.8

41.6

35.7

39.5

Selling, general and administrative expenses

(35.7 )

(32.6 )

(40.1 )

(39.5 )
Other (expense) income

(17.4 )

(2.8 )

0.7

(2.8 )
(Loss) income before income taxes

(20.3 )

6.2

(3.7 )

(2.8 )
Income tax (expense) benefit

(0.0 )

(0.0 )

(0.6 )

(0.1 )
Net (loss) income

(20.3 )%

6.2 %

(4.3 )%

(2.9 )%
Percentage of Sales
Three Months Ended
March 31,
2022
March 31,
2021*
Sales
100.0 %
100.0 %
Cost of products
(77.6 )
(63.6 )
Gross margin
22.4
36.4
Selling, general and administrative expenses
(74.7 )
(46.4 )
Other (expense) income
(7.5 )
2.2
(Loss) income before income taxes
(59.8 )
(7.8 )
Income tax (expense) benefit
(0.0 )
(0.0 )
Net (loss) income
(59.8 )%
7.8 %

* The amounts for ~~2020 and the amounts prior to July 1,~~ 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to Condensed ~~Consolidated~~ Financial Statements.
~~Net Sales~~
For the third quarter ended September 30, 2021, net sales totaled approximately $12.6 million, compared with approximately $12.8 million for the same quarter last year. Sales for the nine months ended September 30, 2021, totaled approximately $32.5 million, compared with approximately $33.6 million for the nine-month period last year.

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Net Sales
For the first quarter ended March 31, 2022, net sales totaled approximately $6.6 million, compared with approximately $8.6 million for the same quarter last year.
Customer demand and orders for our products ~~were particularly~~continued to be strong, ~~during~~driving record bookings for the ~~third quarter.~~first quarter of 2022.  Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue.  ~~Accordingly, as of the end of the third quarter, these~~Consequently, unshipped orders were carried in backlog, and we anticipate fulfilling many of ~~them~~the orders in backlog during subsequent quarters this year.  We are taking steps to manage delays in the ~~fourth quarter~~supply chain, including carrying additional inventory of ~~2021.~~material and components with limited supplies.  Although supply chain factors may continue to ~~create delays~~impact shipments during the next several quarters, we anticipate being able to fulfill customer requirements.  The precise impact to sales and shipments for future quarters, however, cannot be quantified.

Sales for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, was attributed primarily to certain ~~federal~~state and ~~state wildland fire and~~local public safety ~~agencies,~~opportunities, as well as ~~demand from dealers. During~~federal wildland fire related agencies. From a product perspective, the ~~third~~primary contributor to orders and shipments during the first quarter ~~we realized increasing sales of the~~was our BKR 5000 ~~the first model in our new BKR Series of APCO Project 25 land mobile~~portable radio ~~products~~ and ~~solutions that was launched in the second half of 2020.~~
related accessories. The BKR Series is envisioned as a comprehensive line of new products, which will include new models in coming quarters. The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain and the COVID-19 pandemic. BKR Series products, we believe, should increase our addressable market by expanding the number of federal and other public safety customers that may purchase our products. However, the timing and size of orders from agencies at all levels can be unpredictable and subject to budgets, priorities, and other factors. Accordingly, we cannot assure that sales will occur under particular contracts, or that our sales prospects will otherwise be realized.

~~Last year we reorganized our sales resources to focus more effectively on target markets and customers where we can realize sales success. The current funnel of sales prospects includes potentialnew customers in federal, state, and local public safety agencies. We believe the reorganization and our sales funnel better position us to capture new sales opportunities moving forward.~~
While the potential impacts of material shortages, lead-times, ~~and~~ the COVID-19 pandemic, and ongoing geopolitical conflict and related sanctions in coming months and quarters remain uncertain, such effects have the potential to adversely impact our customers and our supply chain. Such negative effects on our customers and suppliers could adversely affect our future sales, operations, and financial results.

Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the ~~third~~first quarter ended ~~September 30, 2021,~~March 31, 2022, were approximately ~~32.8%~~22.4%, compared with ~~41.6%~~36.4% (as adjusted) for the same quarter ~~last year. For the nine-month period ended September 30, 2021, gross profit margins were approximately 35.7%, compared with 39.5% (as adjusted) for the same period~~ last year.

Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing. Gross profit margins for the ~~third~~first quarter ~~and nine months~~ ended ~~September 30, 2021,~~March 31, 2022, decreased compared with the same period last year primarily due to increased material ~~and~~costs, including electrical components, as well as escalated freight costs, combined with a ~~less favorable mix~~decline in overall manufacturing volumes, which yielded sub-optimal absorption of ~~product sales. For the nine-month period ended September 30, 2021, gross profit margins also reflect one-time inventory reserves in earlier quarters related to our legacy product line, the KNG series.~~manufacturing overhead costs.

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

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

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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, 2021,~~March 31, 2022, totaled approximately ~~$4.5~~$4.9 million ~~(35.7%~~(74.7% of sales), compared with approximately ~~$4.2~~$4.0 million ~~(32.6%~~(46.4% of sales) for the same quarter last year. For the nine months ended September 30, 2021, SG&A expenses decreased by $231,000, or 1.7%, to approximately $13.0 million (40.1% of sales), compared with approximately $13.3 million (39.5% of sales), for the nine-month period last year.

Engineering and product development expenses for the ~~third~~first quarter of ~~2021~~2022 totaled approximately ~~$2.0~~$2.3 million ~~(16.1%~~(35.1% of sales), compared with approximately ~~$2.0~~$1.8 million ~~(15.8%~~(21.3% of sales) for the same quarter of last year. ~~For the nine months ended September 30, 2021,~~The increase in engineering ~~and~~expenses is attributed primarily to ongoing product development expenses totaled approximately $6.2 million (18.9% of sales), compared with approximately $6.1 million (18.1% of sales) for the nine-month period last year. Engineering expenses for both periods were comparable with the same periods last year. Expenses for the design and development ofactivities, particularly prototyping, for the new BKR series ~~a new line~~radios. Most of ~~portable and mobile radios, has continued with most ongoing development~~these activities are being performed by our internal engineering ~~team. Development of the BKR Series is the~~team and are their primary focus, combined with sustaining engineering support of our ~~engineering team.~~existing products. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential effects of the COVID-19 pandemic in coming ~~months.~~months and quarters.

Marketing and selling expenses for the ~~third~~first quarter of ~~2021~~2022 totaled approximately $1.0 million ~~(8.2%~~(15.2% of sales), compared with approximately $0.9 million ~~(7.3%~~(11.0% of sales) for the ~~third~~first quarter last year, primarily reflecting increased commissions attributed to sales growth. For the nine months ended September 30, 2021, marketing and selling expenses declined approximately $346,000, or 10.2%, to approximately $3.0 million (9.4% of sales), compared with approximately $3.4 million (10.1% of sales). The decreases for the nine-month period are attributed to reductionsincreases in ~~sales~~staffing, travel and go-to-market ~~employment, as well as other~~activities in support of anticipated sales ~~marketing,~~growth from new products and ~~go-to-market related expenses.~~customers.

~~Other general~~General and administrative expenses for the ~~third~~first quarter ~~2021~~2022 totaled approximately ~~$1.4~~$1.6 million ~~(11.4%~~(24.3% of sales), compared with approximately $1.2 million ~~(9.6%~~(14.1% of sales) for the same quarter last year. For the nine months ended September 30, 2021, general and administrative expenses totaled approximately $3.8 million (11.8% of sales), compared with approximately $3.8 million (11.4% of sales) for the nine-month period last year. OtherThe increase in general and administrative expenses for ~~both periods last year included severance~~the quarter is attributed primarily to corporate and ~~expenses related to employment reductions.~~headquarters staffing and strategic initiatives.

Operating Loss

The operating loss for the ~~third~~first quarter ended ~~September 30, 2021,~~March 31, 2022, totaled approximately ~~$370,000 (2.9%~~$3.4 million (52.3% of sales), compared with ~~operating income of~~ approximately ~~$1.2 million (9.0%~~$853,000 (10.0% of sales), (as adjusted), for last year’s ~~third~~first quarter. For the nine months ended September 30, 2021, our operating loss totaled approximately $1.4 million (4.4% of sales), compared with operating income of approximately $5,000 (0.0% of sales) (as adjusted) for the nine-month period last year. The operating loss for the first ~~nine months~~quarter is attributed primarily to a decrease in sales ~~mix~~ combined with increased ~~material~~product costs, which adversely impacted gross profit ~~margins. These factors were partially offset by SG&A expense reductions.~~margins, and increased operating expenses.

Other (Expense) Income

We recorded net interest expense of approximately ~~$19,000~~$15,000 for the ~~third~~first quarter ended ~~September 30, 2021, compared with approximately $6,000 for the third quarter of last year. For the nine months ended September 30, 2021, net interest expense totaled approximately $37,000,~~March 31, 2022, compared with approximately $4,000 for the ~~nine-month period~~first quarter of last year. Net interest expense was primarily the result of equipment financing, our revolving credit facility and lower average cash ~~balances and equipment financing.~~balances.
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For the ~~third~~first quarter ended ~~September 30, 2021,~~March 31, 2022, we recognized an unrealized loss of approximately ~~$2.2 million~~$496,000 on our investment in FGF, compared with an unrealized ~~loss of approximately $291,000 for the third quarter last year. For the nine months ended September 30, 2021, we recognized an unrealized~~ gain of approximately ~~$310,000 on our investment in FGF, compared with an unrealized loss of approximately $797,000~~$205,000 for the ~~same period~~first quarter last year.

Income Taxes

We recorded ~~an income~~no tax ~~expense of $0 and $184,000~~provision or benefit for the ~~three and nine months~~first quarter ended ~~September 30, 2021, compared with income tax expense of $2,000 and $30,000 for the same period last year.~~March 31, 2022 or 2021.

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

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As of ~~September 30, 2021,~~March 31, 2022, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.

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

Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets.  Accordingly, we established a valuation allowance of ~~$98,000.~~$1.48 million and $610,000 as of March 31, 2022 and December 31, 2021.  We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future.  If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of ~~September 30, 2021.~~March 31, 2022.

Liquidity and Capital Resources

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, net cash used in operating activities totaled approximately ~~$3.6~~$3.3 million, compared with cash provided by operating activities of approximately ~~$3.5 million~~$39,000 (as adjusted) for the same ~~period~~quarter last year. Cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was primarily related to a net loss, increased inventory ~~increases in accounts receivable,~~ and ~~an unrealized gain on securities,~~increased prepaid expenses, which were partially offset by decreased accounts receivable, increased accounts ~~payable and depreciation and amortization.~~payable.

For the first ~~nine months~~quarter of ~~2021,~~2022, we had a net loss of approximately ~~$1.4~~$3.9 million, compared with a net loss of approximately ~~$1.0 million~~$670,000 (as adjusted) for the same ~~period~~quarter last year. Gross inventories increased during the ~~nine months~~quarter ended ~~September 30, 2021,~~March 31, 2022, by approximately ~~$6.1~~$4.2 million, ~~(as adjusted),~~ compared with ~~a decrease of~~ approximately ~~$5.1~~$1.4 million (as adjusted) for the same ~~period~~quarter last year. Prepaid expenses increased during the first quarter by approximately $904,000, compared with a decrease of $57,000 for last year’s first quarter. The ~~increase~~increases for ~~the nine-month period was~~both inventories and prepaid expenses were attributed primarily ~~attributable~~ to limited material and component availability combined with extended supplier lead-times and planned new product introductions. Accounts receivable ~~increased~~decreased approximately ~~$1.2~~$3.5 million during the ~~nine months~~first quarter ended ~~September 30, 2021,~~March 31, 2022, compared with a decrease of approximately $1.9 million for last year’s first quarter. The decrease was primarily due to customer collections combined with decreased sales during the ~~timing of sales that were consummated later in~~first quarter. Accounts payable for the first quarter ~~that had not yet completed their collection cycle. For the same period last year, accounts receivable~~ended March 31, 2022, increased approximately ~~$1.8 million.~~$1.4 million, compared with an increase of approximately $299,000 for the last year’s first quarter, primarily due to increased material and component purchases from suppliers related in-part to delays and shortages within our supply chain. Depreciation and amortization totaled approximately $342,000 for the first quarter ended March 31, 2022, compared with approximately $298,000 for last year’s first quarter. Depreciation and amortization are primarily related to manufacturing and engineering equipment. The unrealized ~~gain~~loss on securities for the ~~nine months~~first quarter ended ~~September 30, 2021,~~March 31, 2022, totaled approximately ~~$310,000,~~$496,000, compared with an unrealized ~~loss~~gain of approximately ~~$797,000~~$205,000 for the ~~same period~~first quarter last year. For additional information pertaining to our investment in securities, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investment in Securities) to the condensed consolidated financial statements included in this report. ~~Accounts payable~~
Cash used in investing activities for the ~~nine months~~first quarter ended September 30, 2021, increased approximately $2.4 million, compared with a decrease of approximately $2.2 million for the same period last year, primarily due to purchases from suppliers. Depreciation and amortizationMarch 31, 2022, totaled approximately ~~$1.0 million for the nine months ended September 30, 2021,~~$345,000, compared with approximately $1.0 million for last year’s first quarter. The cash used for both periods was attributed primarily to the ~~same period~~purchase of engineering and manufacturing related equipment.
For the first quarter ended March 31, 2022, cash of approximately $583,000 was used in financing activities, compared with cash provided by financing activities of approximately $529,000 for last ~~year. Depreciation~~year’s first quarter. During the first quarter of 2022 we paid a quarterly dividend, utilizing approximately $505,000, while for last year’s first quarter, we paid a quarterly dividend of approximately $250,000, and ~~amortization are primarily related to manufacturing and engineering equipment.~~we received cash of approximately $779,000 from debt, net of repayments totaling approximately $21,000.

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Cash used in investing activities for the nine months ended September 30, 2021, totaled approximately $1.9 million, primarily for manufacturing equipment. For the same period last year, cash used in investing activities totaled approximately $742,000, primarily for engineering and manufacturing related equipment.
For the nine months ended September 30, 2021, cash of approximately $12.8 million was provided by financing activities. In June we closed a public offering of our common stock, generating net proceeds of approximately $11.6 million. During the nine months ended September 30, 2021, we received proceeds of approximately $3.5 million from our revolving credit facility and from financing related to the purchase of manufacturing equipment. This was partially offset by loan repayments of approximately $1.5 million. For the same period last year, we received proceeds totaling approximately $2.2 million under the Paycheck Protection Program, which were repaid in full within the same period. We used cash of approximately $836,000 and $752,000 to pay quarterly dividends for the nine months ended September 30, 2021and 2020, respectively. During the first quarter of 2020, we also used approximately $269,000 for stock repurchases.

On January ~~26, 2021,~~31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, ~~2022.~~2023.

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

Borrowings under the Credit Agreement will bear interest at athe secured overnight financing rate ~~per annum equal to one-month LIBOR (or zero if the LIBOR is less than zero)~~ plus a margin of ~~1.90%~~2.0%. The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2022, with all outstanding principal and interest to be payable in full at ~~maturity.~~maturity (January 31, 2023).

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

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

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of ~~September 30, 2021,~~March 31, 2022, and the date of filing this report. As of ~~September 30, 2021,~~March 31, 2022, the Company had an outstanding balance of $1,458, and a net balance availability of $2,727 under the Credit Agreement. As of the date of filing this report, ~~approximately $1.5 million in borrowings were~~the Company had an outstanding balance of $2,458 , and a net balance availability of $2,542 under the Credit Agreement.

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

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Our cash and cash equivalents balance at ~~September 30, 2021,~~March 31, 2022, was approximately ~~$14.1~~$6.4 million. We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Credit Agreement, are sufficient to meet our working capital requirements for the foreseeable future. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all. We also face other risks that could impact our business, liquidity, and financial condition. For a description of these risks, see “Item 1A. Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, and “Item 1A. Risk Factors” below in this report.

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Critical Accounting Policies and Estimates

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

~~Except as discussed below under “Change in Accounting Principle”, there~~There were no changes to our critical accounting policies during the quarter ended ~~September 30, 2021, as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December~~March 31, ~~2020.~~2022.

Change in Accounting Principle During 2021

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

The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

During the three months ended ~~September 30, 2021,~~March 31, 2022, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION
Item 1A. RISK FACTORS

~~Item 1A “Risk Factors”~~As of the date of this filing, except as set forth herein, there have been no material changes to the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020, includes a detailed discussion~~2021, filed with the SEC on March 17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022 (the “2021 Form 10-K”). The Risk Factors set forth in the 2021 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the ~~Company’s risk factors as set forth below. However, many of~~risks described in the ~~risk factors disclosed in Item 1A of our Annual Report may be further heightened or exacerbated by the impact of the COVID-19 pandemic.~~
~~The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and~~2021 Form 10-K, could ~~further~~ materially adversely affect our business, financial condition or future results and the actual outcome of ~~operations~~matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and ~~cash flow.~~
In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020. In responseuncertainties not currently known 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 recommendationsus or that we currently deem to practice social distancing. We are considered an “essential business” that is supporting first responders and our manufacturing operations have remained open throughout the pandemic. We implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing, wearing face masks, and remote work practices. Among other things, we have invested in employee safety equipment, additional cleaning supplies and measures, adjusted production lines and workplaces as necessary and adapted new processes for interactions with our suppliers and customers to safely manage our operations. Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing.
~~In planning for the possible disruption of~~be immaterial also may materially adversely affect our business, we took steps to reduce expenses throughout the Company. This included suspending all Company travel for a period of time, as well as our participation in trade shows and other business meetings, instituting strict inventory control and decreasing expenditures. We also implemented workforce reductions during the third quarter of 2020 and suspended the employer’s 401K match. For the first nine months of 2021, the impact to our business, particularly customer orders, is unknown with any certainty. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times and increased costs for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and longer delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. 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. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.
We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations. We may also experience fluctuations in our quarterly results, in part, due to our sales to federal and state agencies that participate in wildland fire-suppression efforts, which may be greater during the summer season when forest fire activity is heightened. In some years, these factors may cause an increase in sales for the second and third quarters, compared with the first and fourth quarters of the same fiscal year. Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial conditionand/or operating results.

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

Dividend Restrictions

On January ~~26, 2021,~~31, 2022, BK Technologies, Inc., our wholly owned operating subsidiary, extended its Credit Agreement with JPMC. The Credit Agreement contains limitations and covenants that may limit BK Technologies, Inc.’s ability to take certain actions, including paying dividends to the Company.

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

Period

Total Number of
Shares Purchased

Average Price
Paid Per Share

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

Approximate
Dollar Value of
Shares that May
Still be Purchased
Under the Plans or
Programs

January 1–31, 2022

—

$ —

—

$ 5,000,000

February 1–28, 2022

—

—

—

$ 5,000,000

March 1–31, 2022

—

—

—

$ 5,000,000

Quarter Ended March 31, 2022

—

$ —

—

$ 5,000,000

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Item 6. EXHIBITS

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

Exhibit Index

Exhibit
Number

Description

Exhibit 31.1

Certification of Principal Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2

Certification of Principal Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit ~~32.1~~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~~32.2**

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)
Exhibit 101.INS

XBRL Instance Document
Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF

XBRL Taxonomy Definition Linkbase Document
Exhibit 104

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

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BK TECHNOLOGIES CORPORATION

(The “Registrant”)

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

~~Date: November 11, 2021~~
~~By:~~
~~/s/~~ John M. Suzuki

~~John M. Suzuki~~
Chief Executive Officer
(Principal executive officer and duly
authorized officer)

Date: ~~November 11, 2021~~May 12, 2022
By:
/s/ William P. Kelly

William P. Kelly
Executive Vice President and
Chief Financial Officer
(Principal financial and accounting
officer and duly authorized officer)

3029

	Three Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020 *			September 30, 2021			September 30, 2020 *

Sales, net	$	12,626		$	12,760		$	32,526		$	33,586
Expenses
Cost of products		8,488			7,448			20,914			20,316
Selling, general and administrative		4,508			4,158			13,034			13,265
Total expenses		12,996			11,606			33,948			33,581

Operating (loss) income		(370	)		1,154			(1,422	)		5

Other (expense) income:
Net interest (expense) income		(19	)		(6	)		(37	)		(4	)
Loss on disposal of property, plant and equipment		(6	)		0			(6	)		0
(Loss) gain on investment in securities		(2,157	)		(291	)		310			(797	)
Other expense		(14	)		(65	)		(59	)		(144	)
Total other (expense) income		(2,196	)		(362	)		208			(945	)

(Loss) income before income taxes		(2,566	)		792			(1,214	)		(940	)

Income tax expense		0			(2	)		(184	)		(30	)

Net (loss) income	$	(2,566	)	$	790		$	(1,398	)	$	(970	)

Net (loss) income per share-basic:	$	(0.15	)	$	0.06		$	(0.10	)	$	(0.08	)
Net (loss) income per share-diluted:	$	(0.15	)	$	0.06		$	(0.10	)	$	(0.08	)
Weighted average shares outstanding-basic		16,795,356			12,505,096			14,307,847			12,518,587
Weighted average shares outstanding-diluted		16,795,356			12,517,493			14,307,847			12,518,587

	Three Months Ended
	March 31, 2022			March 31, 2021*

Sales, net	$	6,585		$	8,564
Expenses
Cost of products		5,113			5,444
Selling, general and administrative		4,916			3,973
Total operating expenses		10,029			9,417

Operating loss		(3,444	)		(853	)

Other (expense) income:
Net interest (expense)		(15	)		(4	)
(Loss) gain on investment in securities		(496	)		205
Other income (expense)		19			(18	)
Total other (expense) income		(492	)		183

Loss before income taxes		(3,936	)		(670	)

Provision for income taxes		0			0

Net loss	$	(3,936	)	$	(670	)

Net loss per share-basic and diluted	$	(0.23	)	$	(0.05	)
Weighted average shares outstanding-basic and diluted		16,848,777			12,517,412

	September 30, 2021		December 31, 2020
			(as adjusted)		March 31, 2022		December 31, 2021
Finished goods	$	2,565	$	2,206	$	2,465	$	2,335
Work in process		4,342		3,672		6,274		4,527
Raw materials		9,074		4,667		12,352		10,116
	$	15,981	$	10,545	$	21,091	$	16,978

	As Originally Reported ($)			Effect of Change ($)			As Reported under Change in Accounting Principle ($)
Consolidated Balance Sheets
Assets
Inventories, net as of December 31, 2020		9,441			1,104			10,545
Liabilities & Shareholders’ Equity
Accumulated deficit as of December 31, 2020		(6,797	)		1,104			(5,693	)
Consolidated Income Statements
Cost of goods sold:
Three months ended September 30, 2020		7,560			(112	)		7,448
Nine months ended September 30, 2020		20,163			153			20,316
Income (loss) before income taxes:
Three months ended September 30, 2020		680			112			792
Nine months ended September 30, 2020		(787	)		(153	)		(940	)
Net income (loss):
Three months ended September 30, 2020		678			112			790
Nine months ended September 30, 2020		(817	)		(153	)		(970	)
Net (loss) income per share-basic and diluted:
Three months ended September 30, 2020		0.05			0.01			0.06
Nine months ended September 30, 2020		(0.07	)		(0.01	)		(0.08	)
Consolidated Statements of Cash Flows
Net loss as of September 30, 2020		(817	)		(153	)		(970	)
Inventories allowance		117			25			142
Inventories		4,970			128			5,098

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total

Balance at December 31, 2021		18,298,999	$	10,979	$	35,862		$	(8,821	)	$	(5,402	)	$	32,618
Common stock issued under restricted stock units		16,000		10		(10	)		0			0			0
Share-based compensation expense-stock options		—		0		85			0			0			85
Share-based compensation expense-restricted stock units		—		0		70			0			0			70
Net loss		—		0		0			(3,936	)		0			(3,936	)
Balance at March 31, 2022		18,314,999	$	10,989	$	36,007		$	(12,757	)	$	(5,402	)	$	28,837

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2019		13,929,381	$	8,357	$	26,095		$	(6,043	)	$	(5,133	)	$	23,276
Change in inventory accounting method		—		—		—			1,158			—			1,158
Balance as of January 1, 2020 *		13,929,381		8,357		26,095			(4,885	)		—			24,434
Share-based compensation expense-stock options		—		0		30			0			0			30
Share-based compensation expense-restricted stock units		—		0		21			0			0			21
Common stock dividends ($0.02 per share)		—		0		0			(250	)		0			(250	)
Net loss *		—		0		0			(1,466	)		0			(1,466	)
Repurchase of common stock		—		0		0			0			(243	)		(243	)
Balance at March 31, 2020 *		13,929,381		8,357		26,146			(6,601	)		(5,376	)		22,526
Common stock issued under restricted stock units		14,439		9		(9	)		0			0			0
Share-based compensation expense-stock options		—		0		30			0			0			30
Share-based compensation expense-restricted stock units		—		0		68			0			0			68
Common stock dividends ($0.02 per share)		—		0		0			(252	)		0			(252	)
Net loss *		—		0		0			(294	)		0			(294	)
Repurchase of common stock		—		0		0			0			(26	)		(26	)
Balance at June 30, 2020 *		13,943,820		8.366		26,235			(7,147	)		(5,402	)		22,052
Common stock issued under restricted stock units		18,546		11		(11	)		0			0			0
Share-based compensation expense-stock options		—		0		34			0			0			34
Share-based compensation expense-restricted stock units		—		0		23			0			0			23
Common stock dividends ($0.02 per share)		—		0		0			(250	)		0			(250	)
Net income *		—		0		0			790			0			790
Balance at September 30, 2020 *		13,962,366	$	8,377	$	26,281		$	(6,607	)	$	(5,402	)	$	22,649

As of January 1, 2021	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 ($)
												Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value ($) Per Share		Aggregate Intrinsic Value ($)
As of January 1, 2022											As of January 1, 2022
Outstanding		489,000		3.96		7.23		1.51		20,000			676,500		3.68		7.33		1.41		4,500
Vested		185,800		4.15		5.65		1.55		20,000			361,600		3.80		6.66		1.44		4,500
Nonvested		303,200		3.84		8.20		1.49		—			314,900		3.53		8.10		1.39		0

Period activity
Issued		202,500		3.08		—		1.16		—			237,500		2.38		—		0.78		0
Exercised		—		0		—		0		—			0		0		—		0		0
Forfeited		—		0		—		0		—			0		0		—		0		0
Expired		10,000		4.55		—		1.06		—			5,000		4.95		—		1.05		—

As of September 30, 2021
As of March 31, 2022
Outstanding		681,500		3.69		7.57		1.41		15,000			909,000		3.33		7.87		1.25		49,050
Vested		359,600		3.82		6.88		1.44		15,000			461,933		3.67		6.87		1.37		20,833
Nonvested		321,900		3.54		8.34		1.38		0			447,067		2.98		8.89		1.13		28,217

	~~September 30,~~March 31, ~~2021~~2022
Weighted average remaining lease term (in years)		~~5.44~~4.95
Weighted average discount rate		5.50	%
Maturities of lease liabilities as of March 31, 2022, were as follows:

	September 30, 2021			March 31, 2022
Remaining three months of 2021	$	144
2022		582
Remaining nine months of 2022				$	438
2023		595			595
2024		608			608
2025		618			618
2026					479
Thereafter		722			243
Total payments		3,269			2,981
Less: imputed interest		(447	)		(373	)
Total liability	$	2,822
Total present value of lease liabilities				$	2,608

	·	changes or advances in technology;

	·	the success of our land mobile radio product line;

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

	·	competition in the land mobile radio industry;

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

	·	the availability, terms and deployment of capital;

	·	reliance on contract manufacturers and suppliers;

	·	risks associated with fixed-price contracts;

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

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

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

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

	·	our ability to manage our growth;

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

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

	·	impact of our capital allocation strategy;

	·	risks related to maintaining our brand and reputation;

	·	impact of government regulation;

	·	rising health care costs;

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

	·	our inventory and debt levels;

	·	protection of our intellectual property rights;

	·	fluctuation in our operating results and stock price;

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

	·	any infringement claims;

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

	·	availability of adequate insurance coverage;

	·	maintenance of our NYSE American listing;

	·	risks related to being a holding company; and

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

	Percentage of Sales Three Months Ended						Percentage of Sales Nine months Ended
	September 30, 2021			September 30, 2020*			September 30, 2021			September 30, 2020 *
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products		(67.2	)		(58.4	)		(64.3	)		(60.5	)
Gross margin		32.8			41.6			35.7			39.5
Selling, general and administrative expenses		(35.7	)		(32.6	)		(40.1	)		(39.5	)
Other (expense) income		(17.4	)		(2.8	)		0.7			(2.8	)
(Loss) income before income taxes		(20.3	)		6.2			(3.7	)		(2.8	)
Income tax (expense) benefit		(0.0	)		(0.0	)		(0.6	)		(0.1	)
Net (loss) income		(20.3	)%		6.2	%		(4.3	)%		(2.9	)%

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Still be Purchased Under the Plans or Programs

January 1–31, 2022		—	$	—		—	$	5,000,000
February 1–28, 2022		—		—		—	$	5,000,000
March 1–31, 2022		—		—		—	$	5,000,000

Quarter Ended March 31, 2022		—	$	—		—	$	5,000,000

Exhibit Number		Description

Exhibit 31.1		Certification of Principal Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2		Certification of Principal Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit ~~32.1~~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~~32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)
Exhibit 101.INS		XBRL Instance Document
Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF		XBRL Taxonomy Definition Linkbase Document
Exhibit 104		Cover Page Interactive Data File (embedded within the Inline XBRL document) (filed herewith)

	BK TECHNOLOGIES CORPORATION
	(The “Registrant”)

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

~~Date: November 11, 2021~~	~~By:~~	~~/s/~~ John M. Suzuki
		~~John M. Suzuki~~ Chief Executive Officer
		(Principal executive officer and duly authorized officer)

Date: ~~November 11, 2021~~May 12, 2022	By:	/s/ William P. Kelly
		William P. Kelly
		Executive Vice President and
		Chief Financial Officer
		(Principal financial and accounting officer and duly authorized officer)