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Item 5. Market for Registrant’s Common Equity

2025-03-27 compared with 2024-03-14 · 308 added, 16 removed, 17 unchanged (95% of the section changed)

3 unchanged sentences

On March 1, 2025, there were 139 holders of record of our common stock.

During 2022, pursuant to our capital return program, we declared and paid three quarterly dividends.

The dividends declared in April, June and September 2022 were $0.03 per share.

The Company announced the indefinite suspension of its quarterly cash dividend program in March 2023.

The declaration and payment of cash dividends, if any, is subject to the discretion of the Board of Directors.

The Board’s final determination as to whether to declare and pay dividends is based upon its consideration of our operating results, financial condition and anticipated capital requirements, as well as such other factors it may deem relevant.

Past performance is no guarantee of future results.

1 unchanged sentence

Issuer Purchases of Equity Securities.

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.

On December 21, 2021, the Company announced that the Board had 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.

1 unchanged sentence

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 authorization of the share repurchase program does not require BK to acquire any particular number of shares and repurchases may be suspended or terminated at any time at the Company’s discretion.

The Company has not purchased shares of our common stock under this program in 2024 and 2023.

ISSUER PURCHASES OF EQUITY SECURITIES

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

Total Number of Shares

Approximate Dollar Value

Purchased as Part of

of Shares that May Still be

Total Number of

Average Price Paid

Publicly Announced

Purchased Under the

Shares Purchased

Plans or Programs

October 1-31, 2024

1 unchanged sentence

December 1-31, 2024

On January 31, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), relating to the sale of shares of our Common Stock.

In accordance with the terms of the Sales Agreement, we may offer and sell shares of our Common Stock from time to time up to an aggregate offering price of $15,000,000 through or to the Sales Agent, acting as sales agent or principal.

After adjusting for the Reverse Stock Split, the number of shares issuable under the terms of the Sales Agreement is 845,070 shares of our Common Stock.

The Company intends to use the net proceeds from the offering primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.

As of December 31, 2023, the Company sold approximately $50,000.

On December 27, 2023, the Company notified the Sales Agent that it was terminating the Sales Agreement as of December 29, 2023, as per the terms of the Sales Agreement.

The Company’s “shelf” registration statement on Form S-3 that was filed with the SEC on December 11, 2020, and amended December 21, 2020, expired on December 29, 2023.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our security holders and to the public.

This report, including any information incorporated by reference in 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, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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.

We also may make forward-looking statements in other documents that are filed or furnished with the SEC.

In addition, we may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.

Forward-looking statements include, but are not limited to, the following:

changes or advances in technology;

the success of our SaaS and Radio business lines and the products offered thereunder;

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

competition in the LMR industry;

general economic and business conditions, including high inflation and its impacts, high interest rates, labor and supply shortages and disruptions, federal, state and local government budget deficits and spending limitations, any impact from a prolonged shutdown of the U.S.

Government, the effects of natural disasters, changes in climate, severe weather events, geopolitical events, acts of war or terrorism, global health crises and other catastrophic events, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments;

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 for, and to consummate, acquisition, disposition or investment transactions, impact of our capital allocation strategy;

risks related to maintaining our brand and reputation;

impact of government regulation;

impact of 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;

our inventory and debt levels;

our ability to comply with the terms, including financial covenants, of our outstanding debt, including increasing fluctuating interest rates;

protection of our intellectual property rights;

fluctuation in our operating results and stock price;

any infringement claims;

data security breaches, cyber-attacks and other factors impacting our technology systems or third-party information technology systems upon which we rely;

widespread outages, interruptions or other failures of operational, communication, or other systems;

availability of adequate insurance coverage;

environmental, social and governance matters;

maintenance of our NYSE American listing;

risks related to being a holding company;

our ability to remediate the material weakness in our internal control over financial reporting;

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

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, many of which are outside of our control, 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.

Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made.

We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws.

You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in “Part I—Item 1A.

Risk Factors” and elsewhere in this report and in our subsequent filings with the SEC.

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.

Executive Summary

BK Technologies Corporation (NYSE American:

BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides public safety grade communications products and services designed to make first responders safer and more efficient.

All operating activities described herein are undertaken by our operating subsidiary.

In business for over 70 years, BK operates two business units through its operating subsidiary, BK Technologies, Inc.:

Radio and SaaS.

The Radio business unit designs, manufactures and markets wireless communications products consisting of two-way land mobile radios (“LMRs”).

Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile).

Generally, BK Technologies-branded products serve government markets including but not limited to emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises.

We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, P25 compliant radio at a lower cost relative to comparable offerings.

The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over public cellular networks.

Our BKRplay branded smartphone application offers multiple services designed to make the first responder safer and more efficient.

When tethered to our radios, the combined solution offers an enhanced user experience with a more unique capability which increases the sales reach of our radios.

As we move forward into 2025, we plan to expand the SaaS business unit to include public safety solutions that provide for improved interoperability, intended to make the first responder safer and more efficient when operating in the field.

We intend the new Solutions business to build a portfolio of solutions under a new brand, BK ONE.

BK ONE will include SaaS solutions such as InteropONE as well as other future software and hardware applications.

We were incorporated under the laws of the State of Nevada on October 24, 1997.

We are the resulting corporation from the reincorporation merger of our predecessor, Adage, Inc., a Pennsylvania corporation, which reincorporated from Pennsylvania to Nevada effective as of January 30, 1998.

Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.”

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.

BK Technologies Corporation’s only significant assets are the outstanding equity interests in BK Technologies, Inc.

and any other future subsidiaries of BK Technologies Corporation.

The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility.

Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414.

Customer demand and orders for our products were strong during 2023 and 2024.

Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue in 2022 and were carried in backlog of $27.0 million as of December 31, 2022, that were fulfilled during 2023.

The increase in sales for the year ended December 31, 2024, was primarily attributed to sales of the BKR9000 portable LMR products to federal, state and municipal public safety agencies, some of which were new customers.

For 2024, sales grew approximately 3.4% to approximately $76.6 million, compared with $74.1 million for the prior year.

Gross profit margins as a percentage of sales in 2024 were 37.9%, compared with 30.0% for the prior year, generally reflecting efficiencies from the transition of production to East West Manufacturing, LLC and cost reduction efforts in 2023 and 2024.

Selling, general and administrative (“SG&A”) expenses for 2024 totaled approximately $21.2 million (27.7% of sales), compared with $23.0 million (31.1% of sales) last year.

We recognized an operating income of approximately $7.8 million in 2024, which was attributed primarily to increased gross margins related to the transition of production of our radio products to East West Manufacturing, LLC.

For the year 2023 we recognized an operating loss of approximately $0.8 million.

In 2024 we recognized other expenses, net totaling approximately $0.5 million, primarily attributed to net interest expense and net realized losses from our investment in FG Financial Holdings, LLC an entity related to the former Chairman of our Board of Directors.

This compares with other expense of $1.4 million last year, which was also primarily related to an unrealized loss from the previous investment in FG Financial Group, Inc.

and net interest expense.

For 2024 the pretax income totaled approximately $7.4 million, compared with a pretax loss of approximately $2.2 million for the year 2023.

We recognized a tax benefit of $1.0 million in 2024 and a tax expense $0.1 million in 2023.

The net income for 2024 totaled approximately $8.4 million ($2.35 per basic and $2.25 per diluted share), compared with net loss of approximately $2.2 million ($0.65 per basic and diluted share) for the year 2023.

As of December 31, 2024, working capital totaled approximately $23.0 million, of which $14.4 million was comprised of cash, cash equivalents and trade receivables.

This compares with working capital totaling approximately $16.8 million at 2023 year-end, which included $11.4 million of cash, cash equivalents and trade receivables.

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.

Results of Operations

As an aid to understanding our operating results, the following table shows items from our consolidated statements of operations expressed as a percentage of sales:

Percent of Sales

for Years Ended December 31,

Cost of products

Selling, general and administrative expenses

Other (expense) income, net

Income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Fiscal Year 2024 Compared with Fiscal Year 2023

For 2024, net sales increased approximately $2.5 million to approximately $76.6 million, compared with approximately $74.1 million for the prior year.

Customer demand and orders for our products were $84.6 million and $65.2 million in 2024 and 2023, respectively.

The BKR Series is envisioned as a comprehensive line of new products, which will include additional models in coming quarters and years.

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, labor shortages, wage pressures, high inflation, and other force majeure events.

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 we will be able to develop additional BKR Series products on the anticipated timelines, or at all, or that sales will occur under particular contracts, or that our sales prospects will otherwise be realized.

As of the end of 2024, our current backlog of customer orders and the funnel of sales prospects is healthy and includes potential new customers in federal, state, and local public safety agencies.

We believe the BKR Series products, our expanded sales force, and our sales funnel, position us well to capture new sales opportunities moving forward.

The impacts of material shortages, lead-times, labor shortages, wage pressures, high inflation, the ongoing military conflicts in Ukraine and the Middle East and other geopolitical events in coming months and quarters is uncertain.

Such effects have adversely impacted and have the potential to 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 2024 were approximately 37.9%, compared with 30.0% for the year 2023.

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 year ended December 31, 2024, increased compared with the same period last year primarily due to efficiencies from the transition of production of our radio products to East West Manufacturing LLC, as well as sales mix and material cost improvements related to cost reduction efforts.

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 contract manufacturing resources, which provides increased flexibility for our production capacity to meet increased demand.

We completed the transition of our West Melbourne, Florida manufacturing activities to East West Manufacturing, LLC's facilities during the third quarter of 2024.

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 costs and competitive pricing pressures, the extent of their impact on gross margins, if any, is uncertain.

During the last three years, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies and extended lead times for certain components used in our products.

While we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been delays, extended lead times and increased costs within our supply chain that improved through fiscal year 2023 and had significantly less impact on our operations for 2024.

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.

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 year ended December 31, 2024, totaled approximately $21.2 million (27.7% of sales), compared with approximately $23.0 million (31.1% of sales) for the prior year.

Engineering and product development expenses for 2024 totaled approximately $7.8 million (10.2% of sales), compared with approximately $9.3 million (12.6% of sales) for the prior year.

For 2024, the Company also capitalized approximately $1.3 million of costs related to the development of the all-band BKR9500 mobile radio.

Engineering and product development expenses are primarily related to the continued design and development of BKR Series, a new line of portable and mobile radios.

These development activities are the main focus of our engineering team.

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 economic effects of the conflicts in Ukraine and the Middle East in coming quarters.

Marketing and selling expenses for the year ended December 31, 2024, totaled approximately $6.2 million (8.1% of sales), compared with approximately $6.1 million (8.2% of sales) for the year 2023.

Marketing and selling expenses for 2024 remained consistent with 2023 levels reflecting steady staff-related and other sales and go-to-market expenses for 2024.

General and administrative expenses for the year ended December 31, 2024, totaled approximately $7.2 million (9.4% of sales), compared with approximately $7.6 million (10.3% of sales) for the year 2023.

General and administrative expenses for 2024 were consistent with the prior year and were primarily attributed to corporate management and headquarters-related expenses.

Operating income

For the year ended December 31, 2024, our operating income totaled approximately $7.8 million (10.2% of sales), compared with operating loss of approximately $0.8 million (1.0% of sales), for the year 2023.

The improvement in operating income for the year is primarily attributed to increased gross margins, related to the transition of manufacturing production to East West Manufacturing LLC throughout the year 2024, as well as sales mix and material cost improvements related to cost reduction efforts.

Other (Expense) Income

Interest (Expense) Income

We recorded net interest expense of approximately $266,000 for the year ended December 31, 2024, compared with approximately $575,000 for the year 2023.

Net interest expenses were attributed primarily to outstanding debt on our credit facility, with the decrease in 2024 due to lower average debt balances and the full repayment of the credit facility in September 2024.

Gain/Loss on Investments

For the year ended December 31, 2024, we recognized a realized loss of approximately $91,000 on our investment in FG Financial Holdings, LLC compared with an unrealized loss on investments of approximately $740,000 for the year 2023.

Income Tax (Expense) Benefit

We recorded $9 84,000 income tax benefit and $54,000 income tax expense for the years ended December 31, 2024 and 2023, respectively.

Our income tax provision is based on the effective tax rate for the year.

The tax expense in any period may 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 fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

As of December 31, 2024, our net deferred tax assets totaled approximately $6.8 million and were primarily derived from capitalized research and development expenses 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, except for the capital loss carryforward of approximately $802,000, we will have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets.

Accordingly, we recorded a decrease in the valuation allowance of approximately $3,596,000 as of December 31, 2024.

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 December 31, 2024.

Liquidity and Capital Resources

For the year ended December 31, 2024, net cash provided by operating activities totaled approximately $11.4 million, compared with cash provided by operating activities of approximately $1.7 million for the prior year.

Cash provided by operating activities for 2024 was primarily related to net income, a decrease in inventories, an increase in deferred revenues, an increase in accrued other expenses and other current liabilities and depreciation and amortization, which were partially offset by a decrease in accounts payable, increases in prepaid expenses and other current assets and capitalized product development costs.

For 2024, we had a net income of $8.4 million, compared with net loss of approximately $2.2 million for the prior year.

Net inventories decreased during the year ended December 31, 2024, by approximately $5.9 million, compared with an increase of approximately $2.4 million for the year 2023.

The decrease was primarily attributable to reductions in work in progress and raw materials related to the transition of production to East West Manufacturing, LLC.

Accounts payable for the year ended December 31, 2024, decreased approximately $3.5 million, compared with a decrease of approximately $3.1 million for the year 2023, primarily due to the reduction in purchases of materials for production in 2024.

Prepaid expenses and other current assets increased $3.0 million compared to an increase of $0.3 million for the year 2023.

The increase is primarily due to a contractual deposit payment to East West Manufacturing LLC as a result of the transition of the production of our products.

Capitalization of product development costs for 2024 were $1.3 million, related to the development of the BKR multi-band mobile product.

Accounts receivable decreased approximately $0.4 million during the year ended December 31, 2024, primarily attributed to increased collections compared to the prior year.

For the same period last year, accounts receivable decreased approximately $2.7 million.

Depreciation and amortization totaled approximately $1.7 million for the year ended December 31, 2024, compared with approximately $1.6 million for the year 2023.

Depreciation and amortization are primarily related to manufacturing and engineering equipment.

Cash used in investing activities for the year ended December 31, 2024, totaled approximately $1.2 million, primarily for manufacturing and engineering related equipment.

For the year 2023, cash used in investing activities totaled approximately $2.1 million, primarily for purchases of engineering and manufacturing related equipment.

For the year ended December 31, 2024, cash of approximately $6.6 million was used in financing activities.

During the year, we received proceeds of approximately $46.4 million from the IPSA with Alterna Capital Solutions, LLC described below.

This was offset by credit facility repayments of $52.9 million and equipment loan repayments of approximately $71,000.

For the year 2023, we received proceeds of approximately $74.9 million from our IPSA revolving credit facility with Alterna Capital Solutions, LLC described below, that was partially offset by credit facility repayments of $74.4 million and note payable repayments of approximately $535,000.

On November 6, 2023, we entered into a Master Supply Agreement with East West Manufacturing, LLC (EWMSA), that included a private offering of 77,520 shares of our common stock, generating net proceeds of $1.0 million.

As a part of the EWMSA, the Company also issued a warrant for the purchase of an additional 135,300 shares of our common stock for $15.00 per share.

The warrant has a five (5) year exercise term.

Net proceeds for the issuance of the warrant generated $1.0 million, which was paid by a $950,000 reduction in accounts payable and $50,000 in cash.

On October 30, 2024, the Company's subsidiary, BK Technologies, Inc.

entered into a Revolving Loan Commitment (“RLC”) with Fifth Third Bank, National Association, (“Fifth Third”) The Fifth Third RLC provides for a one-year revolving line of credit with a maximum commitment of $6 million, with an accordion feature, if certain conditions are met, for up to an additional $4 million of borrowing capacity, totaling a maximum commitment of $10 million.

Each advance shall accrue interest on the outstanding principal amount thereof at a rate of SOFR plus 2.5% per annum.

Each advance may be prepaid at any time without penalty and the entire line of credit commitment may be permanently terminated by BK Technologies, Inc.

at any time upon 10 days’ prior written notice to the lender without penalty.

The RLC has a borrowing base equal to the sum of (i) 80% of eligible commercial accounts receivable, plus (ii) 50% of federal government accounts receivable, plus (iii) the lesser of (a) the sum of (i) and (ii) and (b) 50% of eligible finished goods inventory.

The Company has not utilized funding and there were no borrowings under the RLC agreement as of December 31, 2024, and as of the date of filing this report.

BK Technologies, Inc.'s repayment obligations under the RLC are guaranteed by the Company and Relm Communications, Inc.

and secured by a pledge of essentially all of the assets of the Company, BK Technologies, Inc.

and Relm Communications, Inc.

The loan parties are subject to customary negative covenants, including with respect to their ability to incur additional indebtedness, encumber and dispose of their assets and enter into affiliate transactions.

BK Technologies, Inc.

must also comply with:

(i) a maximum total funded debt ratio of 2.00 to 1.00;

(ii) a fixed charge coverage ratio of 1.2 to 1.0 as measured on a rolling twelve-month basis, each measured at the end of each fiscal quarter.

The Fifth Third RLC agreement provided for customary events of default, including:

(1) failure to pay principal, interest or fees under the RLC when due and payable;

(2) failure to comply with other covenants and agreements contained in the Revolving Loan Commitment agreement and the other documents executed in connection therewith;

(3) the making of false or inaccurate representations and warranties;

(4) defaults 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, Fifth Third Bank may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the RLC agreement.

On November 22, 2022, the Company’s subsidiaries (BK Technologies, Inc.

and RELM Communications, Inc.) entered into an Invoice Purchase and Security Agreement (the “IPSA”) with Alterna Capital Solutions, LLC (“Alterna”) for a one-year line of credit with total maximum funding up to $15 million, with an interest rate of Prime plus 1.85% and other monthly administrative fees.

In November 2023, the IPSA was extended for one year.

The IPSA line of credit was an accounts receivable and inventory financing facility, with the borrowing base of up to 85% of eligible accounts receivable and up to 75% of net orderly liquidation value of inventory, not to exceed 100% of eligible accounts receivable.

The IPSA was paid in full in September 2024 and terminated in October 2024.

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JP Morgan Chase Bank, N.A.

(JPMC), as a lender, entered into a Master Loan Agreement in the amount of $743,000 to finance various items of manufacturing equipment (the “JPMC Credit Agreement”).

This note payable was paid in full on June 27, 2023.

On September 25, 2019, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and U.S.

Bank Equipment Finance, a division of U.S.

Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $425,000 to finance various items of equipment.

The loan was collateralized by the equipment purchased using the proceeds.

The Master Loan Agreement was payable in 60 monthly principal and interest payments of approximately $8,000 beginning on October 25, 2019 and maturing on September 25, 2024, and bore a fixed interest rate of 5.11%.

This note payable was paid in full on June 24, 2024.

Our cash and cash equivalents balance at December 31, 2024, was approximately $7.1 million.

We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Fifth Third RLC, 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 supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, geopolitical events, and other force majeure events, 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 this report.

Recent Accounting Pronouncements

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

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The new standard became effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company evaluated the requirements of ASU 2023-07 and determined that there is only one reportable segment:

Land Mobile Radio (LMR) Products and Solutions and included required disclosures in Note 1 to the consolidated financial statements.

Critical Accounting Policies and Estimates

Our critical accounting policies include 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 determining the allowance for credit losses on trade receivables, allowance for excess or obsolete inventory, and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances.

These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.

There were no changes to our critical accounting policies during the twelve months ended December 31, 2024.

Revenue Recognition

The Company recognizes revenues in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and the additional related ASUs (“ASC 606”).

ASC 606 provides that sales revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

The Company generally satisfies performance obligations upon shipment of the product or service to the customer.

This is consistent with the time in which the customer obtains control of the product or service.

For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period.

Some contracts include installation services, which are completed in a short period of time and the revenue is recognized when the installation is complete.

Currently, the Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event.

Allowance for Credit Losses

The allowance for credit losses was approximately $50,000 on gross trade receivables of approximately $7.4 million as of December 31, 2024, as compared with $50,000 on gross trade receivables of approximately $7.9 million as of December 31, 2023.

The Company records an allowance for credit losses for its financial instruments, which are primarily composed of trade accounts receivable.

The measurement and recognition of credit losses involves the use of judgment and represents management’s estimate of expected lifetime credit losses based on historical experience and trends, current conditions, and forecasts.

The Company’s assessment of expected credit losses includes consideration of historical credit loss experience, the aging of account balances, customer concentrations, customer credit-worthiness, current and expected economic, market and industry factors affecting the Company’s customers, including their financial condition.

The Company evaluates its experience with historical losses and then applies this historical loss ratio to financial assets with similar characteristics.

The Company may also establish an allowance for credit losses for specific receivables when it is probable that the receivable will not be collected and the loss can be reasonably estimated.

If the Company’s actual collections experience changes, revisions to the allowance may be required.

Amounts are written off against the allowance when all attempts to collect a receivable have failed, and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate.

Based on information available, management believes the allowance for credit losses as of December 31, 2024 and 2023 is adequate.

Slow Moving, Excess or Obsolete Inventory

The allowance for slow moving, excess or obsolete inventory was approximately $1.7 million and $1.8 million at December 31, 2024 and 2023, respectively.

The allowance for slow-moving, excess and obsolete inventory is used to state our inventories at the lower of cost or net realizable value.

Because the amount of inventory that we will actually recoup through sales cannot be known with certainty at any particular time, we rely on past sales experience, future sales forecasts and our strategic business plans.

Generally, in analyzing our inventory levels, we classify inventory as having been used or unused during the past year and establish an allowance based upon several factors, including, but not limited to, business forecasts, inventory quantities and historical usage profile.

Supplemental to the aforementioned analysis, specific inventory items are reviewed individually by management.

Based on the review, considering business levels, future prospects, new products and technology changes, management, using its business judgment, may adjust the valuation of specific inventory items to reflect an accurate valuation estimate.

Management also performs a determination of net realizable value for all finished goods with a selling price below cost.

For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell.

Allowance for Product Warranty

We offer two-year or five-year standard warranties to our customers, depending on the specific product and terms of the customer purchase agreement.

Our typical warranties require us to repair and replace defective products during the warranty period at no cost to the customer.

At the time the product revenue is recognized, we record a liability for estimated costs under our warranties.

The costs are estimated based on historical experience.

We periodically assess the adequacy of our recorded liability for product warranties and adjust the amount as necessary.

We account for income taxes using the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized.

The effect of changes in net deferred tax assets and liabilities is recognized on our consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized.

Valuation allowances are provided to the extent that it is more likely than not that some portion, or all, of deferred tax assets will not be realized.

In determining whether a tax asset is realizable, we consider, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results and certain tax planning strategies.

If we fail to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, we may be required to increase the valuation allowance related to our deferred tax assets in the future.

The Company recognizes a position in its financial statements when that tax position, based solely on its technical merit, is more likely than not to be sustained upon examination by the relevant taxing authority.

Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statutes of limitations.

Derecognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity