What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-12 · 98 added, 89 removed, 181 unchanged (51% of the section changed)

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our ability to manage our growth;

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

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, on the companies in which we hold investments;

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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 second quarter of 2020 and suspended the employer’s 401K match.

For the first six 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.

We also implemented workforce reductions during 2020.

For the first nine months of 2021, the impact to our business, particularly customer orders, is not known with certainty.

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 delivery times within our supply chain.

While we cannot be certain of the progression or duration of these shortages, 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.

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Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition.

Second Quarter and Six Months Summary

Overall, our financial and operating results for the three and six months ended June 30, 2021, improved compared with the same periods of last year.

For the second quarter 2021, sales increased 14.1% from the second quarter last year and 32.4% from the immediately preceding quarter.

The improvement in sales for the second quarter brought sales for the six-months ended June 30, 2021, within 4.5% of last year’s six month period.

Gross profit margins as a percentage of sales for the second quarter and six-month periods of 2021 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and a less favorable sales mix.

Selling, general and administrative (“SG&A”) expenses for the second quarter of 2021 were within 4.3% of SG&A expenses for the second quarter last year, while SG&A expenses for the six-month period ended June 30, 2021, decreased 6.4% from the same period last year.

These factors yielded operating losses for the three and six months ended June 30, 2021, that increased slightly from the comparable periods last year.

During the second quarter we closed a public offering of our common stock, raising net proceeds of approximately $11.6 million with the issuance of approximately 4.2 million common shares.

For the second quarter of 2021, our sales increased 14.1% to approximately $11.3 million, compared with approximately $9.9 million for the same quarter last year.

For the six months ended June 30, 2021, sales totaled approximately $19.9 million, compared with approximately $20.8 million for the same period last year.

Gross profit margins as a percentage of sales for the second quarter of 2021 were approximately 37.2%, compared with 43.6% for the second quarter last year.

For the six-month period ended June 30, 2021, gross profit margins as a percentage of sales were approximately 36.7%, compared with 39.5% for the same period last year.

SG&A expenses for the second quarter of 2021 totaled approximately $4.6 million, compared with approximately $4.4 million for the same quarter last year.

SG&A expenses for the first six months of 2021 decreased 6.4% to approximately $8.5 million, compared with approximately $9.1 million for the same period last year.

For the second quarter of 2021, we recognized an operating loss of approximately $342,000, compared with approximately $36,000 for the same quarter last year.

For the six-month period ended June 30, 2021, our operating loss totaled approximately $1.2 million, compared with approximately $0.9 million for the same period last year.

For the second quarter of 2021, we recognized an unrealized gain totaling approximately $2.3 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 of approximately $200,000 on the investment for the second quarter last year.

For the six-month period ended June 30, 2021, we recognized an unrealized gain of approximately $2.5 million, compared with an unrealized loss of $506,000 for last year’s six-month period.

Net income for the three months ended June 30, 2021, was approximately $1.7 million ($0.13 per basic and $0.12 per diluted share), compared with a net loss of approximately $302,000 ($0.02 per basic and diluted share) for the same quarter last year.

For the six months ended June 30, 2021, our net income totaled approximately $1.0 million ($0.08 per basic and diluted share), compared with a net loss of approximately $1.5 million ($0.12 per basic and diluted share) for the same period last year.

As of June 30, 2021, working capital totaled approximately $25.0 million, of which approximately $22.9 million was comprised of cash, cash equivalents and trade receivables, reflecting the cash received from or closed public offering of our common stock.

As of December 31, 2020, working capital totaled approximately $15.1 million, of which approximately $13.3 million was comprised of cash, cash equivalents and trade receivables.

Third Quarter and Nine months Summary

Customer demand and orders for our products were strong during the three months ended September 30, 2021.

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.

For the third quarter 2021, sales were materially flat compared with the third quarter last year 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.

Gross profit margins as a percentage of sales for the third quarter and nine-month periods of 2021 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and a less favorable sales mix.

Selling, general and administrative (“SG&A”) expenses for the nine-month period ended September 30, 2021, decreased 1.7% from 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.

For the third quarter of 2021, we recognized an operating loss of approximately $370,000, compared with operating income of approximately $1.2 million (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 quarter of 2021, we recognized an unrealized loss totaling approximately $2.2 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 of approximately $291,000 on the investment for the third 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, was approximately $2.6 million ($0.15 per basic and diluted share), compared with net income of approximately $790,000 ($0.06 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, working capital totaled approximately $25.6 million, of which approximately $21.7 million was comprised of cash, cash equivalents and trade receivables, reflecting the cash received from or closed public offering of our common stock.

As of December 31, 2020, working capital totaled approximately $16.2 million (as adjusted), of which approximately $13.3 million was comprised of cash, cash equivalents and trade receivables.

Results of Operations

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Percentage of Sales

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Nine months Ended

September 30,

September 30, 2020*

September 30,

Cost of products

Selling, general and administrative expenses

Other income (expense)

Income (loss) before income taxes

Other (expense) income

(Loss) income before income taxes

Income tax (expense) benefit

For the second quarter ended June 30, 2021, net sales increased 14.1% to approximately $11.3 million, compared with approximately $9.9 million for the same quarter last year.

Sales for the six months ended June 30, 2021, totaled approximately $19.9 million, compared with approximately $20.8 million for the six-month period last year.

The increase in sales for the three months ended June 30, 2021, was attributed primarily to certain federal legacy customers combined with demand from western region state public safety agencies.

While customer demand during the quarter was strong, second quarter shipments and sales were impacted by supply chain constraints that delayed our ability to convert product orders into shipments.

Although these factors may continue to create delays during the next several quarters, we anticipate being able to fulfill customer requirements.

Net (loss) income

* 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.

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.

Customer demand and orders for our products were particularly strong during the third quarter.

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 orders were carried in backlog, and we anticipate fulfilling many of them during the fourth quarter of 2021.

Although supply chain factors may continue to create delays 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.

In the second half of 2020, we launched the first model in our new BKR Series of APCO Project 25 land mobile radio products and solutions, the BKR 5000.

The BKR Series is envisioned as a comprehensive line of new products with additional new models planned for later this year, including products with multi-band capability.

Sales for the three and nine months ended September 30, 2021, was attributed primarily to certain federal and state wildland fire and public safety agencies, as well as demand from dealers.

During the third quarter we realized increasing sales of the BKR 5000, the first model in our new BKR Series of APCO Project 25 land mobile radio products and solutions that was launched in the second half of 2020.

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.

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The current funnel of sales prospects includes potential new customers in federal, state, and local public safety agencies.

We believe the reorganization and our sales funnel better positions us to capture new sales opportunities moving forward.

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 in coming months and quarters remain uncertain, such effects have the potential to adversely impact our customers and our supply chain.

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Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the second quarter ended June 30, 2021 were approximately 37.2%, compared with 43.6% for the same quarter last year.

For the six-month period ended June 30, 2021, gross profit margins were approximately 36.7%, compared with 39.5% for the same period last year.

Gross profit margins as a percentage of sales for the third quarter ended September 30, 2021, were approximately 32.8%, compared with 41.6% (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 second quarter of 2021 decreased compared with the same period last year primarily due to a less favorable mix of product sales and increased material and freight costs.

For the six months ended June 30, 2021, gross profit margins reflect a less favorable mix of product sales compared with the same period last year and were adversely impacted by one-time inventory reserves in the first quarter related to our legacy product line, the KNG series.

Gross profit margins for the third quarter and nine months ended September 30, 2021, decreased compared with the same period last year primarily due to increased material and freight costs a less favorable mix 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.

We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs.

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During recent quarters, 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, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and extended lead times within our supply chain.

While, generally, 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.

While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years.

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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 second quarter ended June 30, 2021, totaled approximately $4.6 million (40.2% of sales), compared with approximately $4.4 million (43.9% of sales) for the same quarter last year.

For the six months ended June 30, 2021, SG&A expenses decreased by $581,000, or 6.4%, to approximately $8.5 million (42.8% of sales), compared with approximately $9.1 million (43.7% of sales), for the six-month period last year.

Engineering and product development expenses for the second quarter of 2021 totaled approximately $2.3 million (20.3% of sales), compared with approximately $2.0 million (20.2% of sales) for the same quarter of last year.

For the six months ended June 30, 2021, engineering and product development expenses totaled approximately $4.1 million (20.7% of sales), compared with approximately $4.1 million (19.5% of sales) for the six-month period last year.

The increase in engineering expenses for the second quarter was primarily timing related, as expenses for the six-month period were comparable with the same period last year.

SG&A expenses for the third quarter ended September 30, 2021, totaled approximately $4.5 million (35.7% of sales), compared with approximately $4.2 million (32.6% 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 quarter of 2021 totaled approximately $2.0 million (16.1% of sales), compared with approximately $2.0 million (15.8% of sales) for the same quarter of last year.

For the nine months ended September 30, 2021, engineering and 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 of the BKR series, a new line of portable and mobile radios, has continued with most ongoing development being performed by our internal engineering team.

Development of the BKR Series, including our planned multiband product, is the primary focus of our engineering team.

Development of the BKR Series is the primary 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 effects of the COVID-19 pandemic in coming months.

Marketing and selling expenses for the second quarter of 2021 totaled approximately $1.1 million (9.5% of sales), compared with approximately $1.0 million (9.7% of sales) for the second quarter last year, primarily reflecting increased commissions attributed to sales growth.

For the six months ended June 30, 2021, marketing and selling expenses declined approximately $457,000, or 18.5%, to approximately $2.0 million (10.1% of sales), compared with approximately $2.5 million (11.9% of sales).

The decreases for the six-month period are attributed to reductions in sales and go-to-market employment, as well as other sales, marketing, and go-to-market related expenses.

Other general and administrative expenses for the second quarter 2021 totaled approximately $1.2 million (10.5% of sales), compared with approximately $1.4 million (14.0% of sales) for the same quarter last year.

For the six months ended June 30, 2021, general and administrative expenses totaled approximately $2.4 million (12.1% of sales), compared with approximately $2.6 million (12.5% of sales) for the six-month period last year.

Marketing and selling expenses for the third quarter of 2021 totaled approximately $1.0 million (8.2% of sales), compared with approximately $0.9 million (7.3% of sales) for the third 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 reductions in sales and go-to-market employment, as well as other sales, marketing, and go-to-market related expenses.

Other general and administrative expenses for the third quarter 2021 totaled approximately $1.4 million (11.4% of sales), compared with approximately $1.2 million (9.6% 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.

Other general and administrative expenses for both periods last year included severance and expenses related to employment reductions.

Operating Loss

The operating loss for the second quarter ended June 30, 2021, totaled approximately $342,000 (3.0% of sales), compared with approximately $36,000 (0.4% of sales) for last year’s second quarter.

For the six months ended June 30, 2021, our operating loss totaled approximately $1.2 million (6.1% of sales), compared with approximately $884,000 (4.2% of sales) for the six-month period last year.

The operating loss for the first six months is attributed primarily to sales mix combined with increased material costs, which adversely impacted gross profit margins.

The operating loss for the third quarter ended September 30, 2021, totaled approximately $370,000 (2.9% of sales), compared with operating income of approximately $1.2 million (9.0% of sales), (as adjusted), for last year’s third 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 is attributed primarily to sales mix combined with increased material costs, which adversely impacted gross profit margins.

These factors were partially offset by SG&A expense reductions.

Other (Expense) Income

We recorded net interest expense of approximately $14,000 for the second quarter ended June 30, 2021, compared with approximately $6,000 for the second quarter of last year.

For the six months ended June 30, 2021, net interest expense totaled approximately $18,000, compared with net interest income of approximately $3,000 for the six-month period last year.

We recorded net interest expense of approximately $19,000 for the third 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, compared with approximately $4,000 for the nine-month period last year.

Net interest expense was primarily the result of lower average cash balances and equipment financing.

For the second quarter ended June 30, 2021, we recognized an unrealized gain of approximately $2.3 million on our investment in FGF, compared with an unrealized loss of approximately $200,000 for the second quarter last year.

For the six months ended June 30, 2021, we recognized an unrealized gain of approximately $2.5 million on our investment in FGF, compared with an unrealized loss of approximately $506,000 for the same period last year.

We recorded an income tax expense of $184 for the six months ended June 30, 2021, compared with an income tax expense of $28 for the same period last year.

For the third quarter ended September 30, 2021, we recognized an unrealized loss of approximately $2.2 million 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 for the same period last year.

We recorded an income tax expense of $0 and $184,000 for the three and nine months ended September 30, 2021, compared with income tax expense of $2,000 and $30,000 for the same period last year.

Our income tax provision is based on management’s estimate of the effective tax rate for the full year.

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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.

As of June 30, 2021, 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.

As of September 30, 2021, 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.

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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 June 30, 2021.

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.

Liquidity and Capital Resources

For the six months ended June 30, 2021, net cash used in operating activities totaled approximately $2.9 million, compared with cash provided by operating activities of approximately $3.6 million for the same period last year.

Cash used in operating activities for the six months ended June 30, 2021, was primarily related to increased inventory, increases in accounts receivable, and an unrealized gain on securities, which were partially offset by net income, increased accounts payable and depreciation and amortization.

For the first six months of 2021, we had net income of approximately $1.0 million, compared with a net loss of approximately $1.5 million for the same period last year.

Gross inventories increased during the six months ended June 30, 2021, by approximately $3.0 million, compared with a decrease of approximately $3.9 million for the same period last year.

The increase for the six-month period was primarily attributable to extended supplier lead-times and planned new product introductions.

Accounts receivable increased approximately $744,000 during the six months ended June 30, 2021, primarily due to the timing of sales that were consummated later in the quarter that had not yet completed their collection cycle.

For the same period last year, accounts receivable decreased approximately $381,000 as a result of collections.

The unrealized gain on securities for the six months ended June 30, 2021, totaled approximately $2.5 million, compared with an unrealized loss of approximately $506,000 for the same period last year.

For the nine months ended September 30, 2021, net cash used in operating activities totaled approximately $3.6 million, compared with cash provided by operating activities of approximately $3.5 million (as adjusted) for the same period last year.

Cash used in operating activities for the nine months ended September 30, 2021, was primarily related to a net loss, increased inventory, increases in accounts receivable, and an unrealized gain on securities, which were partially offset by increased accounts payable and depreciation and amortization.

For the first nine months of 2021, we had a net loss of approximately $1.4 million, compared with a net loss of approximately $1.0 million (as adjusted) for the same period last year.

Gross inventories increased during the nine months ended September 30, 2021, by approximately $6.1 million (as adjusted), compared with a decrease of approximately $5.1 million (as adjusted) for the same period last year.

The increase for the nine-month period was primarily attributable to extended supplier lead-times and planned new product introductions.

Accounts receivable increased approximately $1.2 million during the nine months ended September 30, 2021, primarily due to the timing of sales that were consummated later in the quarter that had not yet completed their collection cycle.

For the same period last year, accounts receivable increased approximately $1.8 million.

The unrealized gain on securities for the nine months ended September 30, 2021, totaled approximately $310,000, compared with an unrealized loss of approximately $797,000 for the same period 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 for the six months ended June 30, 2021, increased approximately $1.2 million, compared with a decrease of approximately $838,000 for the same period last year, primarily due to purchases from suppliers.

Depreciation and amortization totaled approximately $681,000 for the six months ended June 30, 2021, compared with approximately $661,000 for the same period last year.

Accounts payable for the nine months 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 amortization totaled approximately $1.0 million for the nine months ended September 30, 2021, compared with approximately $1.0 million for the same period last year.

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

Cash used in investing activities for the six months ended June 30, 2021, totaled approximately $1.5 million, primarily for manufacturing equipment.

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 six months ended June 30, 2021, cash of approximately $13.2 million was provided by financing activities.

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 six months ended June 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.

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 $501,000 and $502,000 to pay quarterly dividends for the six months ended June 30, 2021 and 2020, respectively.

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.

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BK Technologies, Inc.

was in compliance with all covenants under the Credit Agreement as of June 30, 2021, and the date of filing this report.

As of June 30, 2021, and the date of filing this report, approximately $1.5 million in borrowings were outstanding under the Credit Agreement.

was in compliance with all covenants under the Credit Agreement as of September 30, 2021, and the date of filing this report.

As of September 30, 2021, and the date of filing this report, approximately $1.5 million in borrowings were outstanding 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.

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The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16,000 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

Our cash and cash equivalents balance at June 30, 2021, was approximately $15.7 million.

Our cash and cash equivalents balance at September 30, 2021, was approximately $14.1 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.

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

There were no changes to our critical accounting policies during the quarter ended June 30, 2021, as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Except as discussed below under “Change in Accounting Principle”, 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 31, 2020.

Change in Accounting Principle

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.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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-Q

Item 2. Management’s Discussion and Analysis