BK Technologies Corp 10-K

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information. Our common stock trades on the NYSE American under the symbol “BKTI.” (b) Holders. On March 1, 2022, there were 539 holders of record of our common stock. (c) Dividends. We currently pay quarterly cash dividends. 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. We receive dividends from our wholly-owned subsidiary, BK Technologies, Inc., to fund the quarterly cash dividends to our stockholders. The Credit Agreement permits BK Technologies, Inc. to pay dividends to us if there is no default, and if the payment of the dividend would not result in a default, under the Credit Agreement. (d) Issuer Purchases of Equity Securities. Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2) 01/01/20-01/31/20 36,155 $ 2.94 36,155 81,787 02/01/20-02/29/20 20,963 $ 2.72 20,963 60,824 03/01/20-03/31/20 44,695 $ 1.72 44,695 16,129 04/01/20-04/30/20 16,129 $ 1.63 16,129 - Total 117,942 $ 2.25 117,942 (1) Average price paid per share of common stock repurchased is the executed price, including commissions paid to brokers. (2) The Company had a repurchase program of up to one million shares of the Company’s common stock pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act. The repurchase program was initially announced in May 2016, expanded in June 2017 and was completed in April 2020. On December 17, 2021 a share repurchase program was authorized under which the Company may repurchase up to an aggregate of $5 million of its common shares. Share repurchases under this program were authorized to begin immediately. 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. 20 Table of Contents Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Summary BK Technologies Corporation is a holding company, with a wholly-owned operating subsidiary, BK Technologies, Inc. We design, manufacture and market American-made two-way land mobile radios, repeaters, base stations and related components and subsystems. All operating activities are undertaken by BK Technologies, Inc. Customer demand and orders for our products were strong during 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 first half of 2022. For 2021, sales grew approximately 2.8% to approximately $45.4 million, compared with $44.1 million for the prior year. The growth was attributed primarily to state and local public safety agencies as well as the first model in our BKR line of products. Gross profit margins as a percentage of sales in 2021 were 35.8%, compared with 40.8% (as adjusted) for the prior year, generally reflecting increases in material, component and freight costs. Selling, general and administrative (“SG&A”) expenses for 2021 totaled approximately $17.5 million (38.5% of sales), compared with $17.0 million (38.6% of sales) last year. We recognized an operating loss in 2021 of approximately $1.2 million, which was attributed primarily to increased product costs and operating expenses. For the prior year we recognized operating income of approximately $994,000 (as adjusted). In 2021 we recognized other expenses, net totaling approximately $318,000, primarily attributed to an unrealized loss from our investment in FGF, made through FGI 1347 Holdings, LP, a consolidated variable interest entity. This compares with other expense of $797,000 last year, which was also primarily related to an unrealized loss from the investment in FGF. For 2021 the pretax loss totaled approximately $1.5 million, compared with pretax income of approximately $197,000 (as adjusted) for the prior year. We recognized a tax expense of approximately $187,000 for 2021, compared with approximately $3,000 for the prior year. Our income tax expense for both years was largely non-cash as a result of deferred items. The net loss for 2021 totaled approximately $1.7 million ($0.11 per basic and diluted share), compared with net income of approximately $194,000 ($0.02 per basic and diluted share) (as adjusted) last year. As of December 31, 2021, working capital totaled approximately $25.2 million, of which $18.8 million was comprised of cash, cash equivalents and trade receivables. This compares with working capital totaling approximately $16.2 million (as adjusted) at 2020 year-end, which included $13.3 million of cash, cash equivalents and trade receivables. During 2021, we paid four quarterly dividends, utilizing cash of approximately $1.2 million. Impact of COVID-19 Pandemic and Supply Chain 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 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. 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. 21 Table of Contents In planning for the possible disruption of 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. The impact to our business in 2021, 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 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. For additional risks relating to the COVID-19 pandemic, see Item 1A. Risk Factors in Part II of this report. 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, 2021 2020 (as adjusted) Sales 100.0 % 100.0 % Cost of products (64.2 ) (59.2 ) Gross margin 35.8 40.8 Selling, general and administrative expenses (38.5 ) (38.6 ) Other (expense) income, net (0.7 ) (1.8 ) (Loss) income before income taxes (3.3 ) 0.4 Income tax expense (0.4 ) (0.0 ) Net Income (loss) (3.7 )% 0.4 % Fiscal Year 2021 Compared With Fiscal Year 2020 Sales, net For 2021, net sales increased approximately $1.2 million to approximately $45.4 million, compared with approximately $44.1 million last year. Customer demand and orders for our products were strong in 2021. Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue. Accordingly, as of December 31, 2021, these orders were carried in backlog, and we anticipate fulfilling many of them during the first half of 2022. 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 in any particular quarter, however, cannot be quantified. 22 Table of Contents Sales for the year ended December 31, 2021, were attributed primarily to federal, state and municipal public safety agencies, some of which were new customers. Also, 2021 was the first full year for the sale 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 additional 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. As of the end of 2021, 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 and the COVID-19 pandemic in coming months and quarters is uncertain. Such effects have the potential to adversely impact our customers and our supply chain, which 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 2021, were approximately 35.8%, compared with 40.8% (as adjusted) for the prior 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 year ended December 31, 2021, decreased compared with the same period last year primarily due to increased material, component and freight costs related primarily to supply chain factors, as well as one-time inventory reserves 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. 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 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, 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, 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, 2021, totaled approximately $17.5 million (38.5% of sales), compared with approximately $17.0 million (38.6% of sales) for the prior year. 23 Table of Contents Engineering and product development expenses for 2021 totaled approximately $8.1 million (17.9% of sales), compared with approximately $7.9 million (17.8% of sales) for the prior year. 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 effects of the COVID-19 pandemic in coming months. Marketing and selling expenses for the year ended December 31, 2021, totaled approximately $4.0 million (8.9% of sales), compared with approximately $4.2 million (9.5% of sales) for the prior year. The decrease in marketing and selling expenses for the year are attributed to staff-related and other sales and go-to-market expenses, which were partially offset by increased commissions. General and administrative expenses for the year ended December 31, 2021, totaled approximately $5.4 million (11.7% of sales), compared with approximately $4.9 million (11.2% of sales) for the prior year. The increase in general and administrative expenses for the year is attributed primarily to corporate management and headquarters related expenses. Operating (Loss) Income For the year ended December 31, 2021, our operating loss totaled approximately $1.2 million (2.6% of sales), compared with operating income of approximately $1.0 million (2.3% of sales), (as adjusted), for the prior year. The operating loss for the year is attributed primarily to increased material and other cost of sales, which adversely impacted gross profit margins, and increased general and administrative expenses. Other (Expense) Income Interest (Expense) Income We recorded net interest expense of approximately $53,000 for the year ended December 31, 2021, compared with approximately $8,000 for the prior year. Net interest expense was attributed primarily to equipment financing and our revolving credit facility. Gain/Loss on Investment in Securities For the year ended December 31, 2021, we recognized an unrealized loss of approximately $220,000 on our investment in FGF, compared with an unrealized loss of approximately $620,000 for the prior year. Income Tax/(Expense) Benefit We recorded an income tax expense of $187,000 for the year ended December 31, 2021, compared with income tax expense of $3,000 for the prior year. 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, 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. 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 $610,000. 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, 2021. 24 Table of Contents Liquidity and Capital Resources For the year ended December 31, 2021, net cash used in operating activities totaled approximately $6.3 million, compared with cash provided by operating activities of approximately $4.4 million (as adjusted) for the prior year. Cash used in operating activities for the year was primarily related to a net loss, increased inventory, and increases in accounts receivable, which were partially offset by increased accounts payable and depreciation and amortization. For 2021, we had a net loss of approximately $1.7 million, compared with net income of approximately $194,000 (as adjusted) for the prior year. Net inventories increased during the year ended December 31, 2021, by approximately $6.4 million (as adjusted), compared with a decrease of approximately $4.1 million (as adjusted) for the prior year. The increase was primarily attributable to extended supply-chain lead times, which impacted material purchases and sales shipments, as well as material for planned new product introductions. Accounts receivable increased approximately $1.8 million during the year ended December 31, 2021, primarily due to the timing of sales that were consummated later in the year that had not yet completed their collection cycle. For the same period last year, accounts receivable increased approximately $2.5 million. Accounts payable for the year ended December 31, 2021, increased approximately $0.8 million, compared with a decrease of approximately $191,000 for the prior year, primarily due to the timing of purchases from suppliers. Depreciation and amortization totaled approximately $1.4 million for the year ended December 31, 2021, compared with approximately $1.3 million for the prior year. Depreciation and amortization are primarily related to manufacturing and engineering equipment. Cash used in investing activities for the year ended December 31, 2021, totaled approximately $2.3 million, primarily for manufacturing and engineering related equipment. For the prior year, cash used in investing activities totaled approximately $946,000, primarily for engineering and manufacturing related equipment. For the year ended December 31, 2021, cash of approximately $12.4 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 year, we received proceeds of approximately $5.7 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 $3.7 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 $1.2 million and $1.0 million to pay quarterly dividends for the years ended December 31, 2021 and 2020, respectively. During the first quarter of 2020, we also used approximately $269,000 for stock repurchases. On January 31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, 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 the secured overnight financing rate plus a margin of 2.0%. The line of credit is to be repaid in monthly payments of interest only, payable in arrears, with all outstanding principal and interest to be payable in full at maturity. The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20 million at any fiscal quarter end. 25 Table of Contents 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 December 31, 2021, and the date of filing this report. As of December 31, 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. 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%. Our cash and cash equivalents balance at December 31, 2021, was approximately $10.6 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 supply chain delays or interruptions and 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 this report. 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 was 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 an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. Critical Accounting Policies and Estimates Our revenue recognition process and our more subjective accounting estimation processes affect our reported revenues and current assets and are, therefore, critical in assessing our financial and operating status. The processes for determining the allowance for collection of trade receivables, allowance for slow-moving, excess and obsolete inventory, allowance for product warranty, and income taxes involve certain assumptions that, if incorrect, could create an adverse impact on our operations and financial position. Allowance for Doubtful Accounts The allowance for doubtful accounts was approximately $50,000 on gross trade receivables of approximately $8.3 million as of December 31, 2021, as compared with $50,000 on gross trade receivables of approximately $6.5 million as of December 31, 2020. This allowance is used to state trade receivables at a net realizable value or the amount that we estimate will be collected on our gross receivables as of December 31, 2021 and 2020. Because the amount that we will actually collect on the receivables outstanding as of December 31, 2021 and 2020 cannot be known with certainty, we rely on prior experience. Our historical collection losses have typically been infrequent, with write-offs of trade receivables being significantly less than 1% of sales during past years. Accordingly, we have maintained a general allowance of up to approximately 5% of the gross trade receivables balance in order to allow for future collection losses that arise from customer accounts that do not indicate the inability to pay but turn out to have such an inability. Currently, our general allowance on trade receivables is approximately 0.6% of gross receivables. As revenues and total receivables increase, the allowance balance may also increase. We also maintain a specific allowance for customer accounts that we know may not be collectible due to various reasons, such as bankruptcy and other customer liquidity issues. We analyze our trade receivables portfolio based on the age of each customer’s invoice. In this way, we can identify those accounts that are more likely than not to have collection problems. We may reserve a portion or all of the customer’s balance. As of December 31, 2021 and 2020, we had no specific allowance on trade receivables. 26 Table of Contents Slow-moving, Excess and Obsolete Inventory The allowance for slow-moving, excess and obsolete inventory was approximately $1.3 million and $588,000 (as adjusted) at December 31, 2021 and 2020, 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 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. Income Taxes 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. 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, as amended, and 21E of 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. Forward-looking statements include, but are not limited to, the following: changes or advances in technology; the success of our LMR 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; competition in the LMR industry; general economic and business conditions, including federal, state and local government budget deficits and spending limitations and any impact from a prolonged shutdown of the U.S. Government; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contacts; 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 consummate, acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation; impact of our capital allocation strategy; risks related to maintaining our brand and reputation; impact of government regulation; rising health care costs; our business with manufacturers located in other countries, including changes in the U.S. Government and foreign governments’ trade and tariff policies; 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; 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 of future sales of shares of our common stock. 27 Table of Contents 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 “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. Item 6A. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. Item 7. Financial Statements and Supplementary Data See the Consolidated Financial Statements included in this report. 28 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders BK Technologies Corporation West Melbourne, Florida Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of BK Technologies Corporation (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As disclosed in Notes 1 and 2 to the consolidated financial statement, effective July 1, 2021, the Company elected to change its method of accounting for inventory to apply material burden to purchased material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time of the inventory was issued to work in progress. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for slow-moving, excess, and obsolete inventory As disclosed in Note 1 of the Company’s consolidated financial statements, the Company records an estimated allowance for slow-moving, excess, and obsolete inventory to state the Company’s inventories at the lower of cost or net realizable value. The Company relies on, among other things, past usage/sales experience, future sales forecasts, and its strategic business plan to develop the estimate. As a result of management’s assessment, the Company recorded an allowance for slow-moving, excess, and obsolete inventory of approximately $1,288,000 as of December 31, 2021. F-1 Table of contents Auditing management’s estimate of the allowance for slow-moving, excess, and obsolete inventory involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating future inventory turnover and sales. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording inventory at the lower of cost or net realizable value. We tested the accuracy and completeness of the underlying data used in calculating the allowance, including testing of a sample of inventory usage transactions, and recomputed the allowance calculation. We also evaluated the Company’s ability to accurately estimate the assumptions used to develop the estimate by comparing historical allowance amounts to the history of actual inventory write-offs. Furthermore, we reviewed management’s business plan and forecasts of future sales, including expected changes in technology and product lines. Assessment of Realizability of deferred tax assets As disclosed in Note 8 of the Company’s consolidated financial statements, the Company records and measures net deferred tax assets based on estimated realizability. 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. The Company recorded approximately $4,116,000 in net deferred tax assets after recording a valuation allowance of approximately $610,000 as of December 31, 2021. Auditing management’s assessment of the realizability of deferred tax assets involved subjective estimation and high degree of auditor judgment in determining whether sufficient future taxable income, including projected pre-tax income, will be generated to support the realization of the existing deferred tax assets before expiration. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s projections of pre-tax income, and related entity-level controls. We also evaluated the assumptions used by the Company to develop projections of future taxable income, and tested the completeness and accuracy of the underlying data used in the projections, including comparing the projections of pre-tax income with the actual results of prior periods. In addition, we analyzed the nature of items giving rise to deferred tax assets and considered related expiration dates, as applicable. Furthermore, we evaluated management’s business plan and analysis of current economic and industry trends, including the impact of the COVID-19 pandemic, and compared projections of future pre-tax income to other forecasted financial information prepared by management. /s/ MSL, P.A. We have served as the Company’s auditor since 2015. Orlando, Florida March 17, 2022 F-2 Table of contents BK TECHNOLOGIES CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2021 December 31, 2020 * ASSETS Current assets: Cash and cash equivalents $ 10,580 $ 6,826 Trade accounts receivable, net 8,229 6,466 Inventories, net 16,978 10,545 Prepaid expenses and other current assets 1,634 1,878 Total current assets 37,421 25,715 Property, plant and equipment, net 4,556 3,566 Right-of-use (ROU) asset 2,399 2,887 Investment in securities 1,795 2,014 Deferred tax assets, net 4,116 4,300 Other assets 98 112 Total assets $ 50,385 $ 38,594 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 5,883 $ 5,119 Accrued compensation and related taxes 1,099 1,635 Accrued warranty expense 533 791 Accrued other expenses and other current liabilities 938 307 Dividends payable 505 250 Short-term lease liability 447 525 Credit facility 1,470 - Notes payable-current portion 267 82 Deferred revenue 1,045 757 Total current liabilities 12,187 9,466 Notes payable, net of current portion 605 247 Long-term lease liability 2,269 2,702 Deferred revenue 2,706 2,551 Total liabilities 17,767 14,966 Commitments and contingencies Stockholders’ equity: Preferred stock; $ 1.00 par value; 1,000,000 authorized shares; none issued or outstanding - - Common stock; $. 60 par value; 50,000,000 authorized shares; 18,298,999 and 13,962,366 issued and 16,848,599 and 12,511,966 outstanding shares at December 31, 2021, and 2020, respectively 10,979 8,377 Additional paid-in capital 35,862 26,346 Accumulated deficit ( 8,821 ) ( 5,693 ) Treasury stock, at cost, 1,450,400 shares at December 31, 2021 and 2020 ( 5,402 ) ( 5,402 ) Total stockholders’ equity 32,618 23,628 Total liabilities and stockholders’ equity $ 50,385 $ 38,594 See notes to 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 2 to the Consolidated Financial Statements F-3 Table of contents BK TECHNOLOGIES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2021 2020 * Sales, net $ 45,364 $ 44,139 Expenses Cost of products 29,103 26,109 Selling, general and administrative 17,457 17,036 Total expenses 46,560 43,145 Operating (loss) income ( 1,196 ) 994 Other (expense) income: Net interest (expense) ( 53 ) ( 8 ) Gain on disposal of property, plant, and equipment 40 - (Loss) on investment in securities ( 219 ) ( 620 ) Other (expense) ( 86 ) ( 169 ) Total other (expense) ( 318 ) ( 797 ) (Loss) income before income taxes ( 1,514 ) 197 Income tax (expense) ( 187 ) ( 3 ) Net (loss) income $ ( 1,701 ) $ 194 Net (loss) income per share-basic $ ( 0.11 ) $ 0.02 Net (loss) income per share-diluted $ ( 0.11 ) $ 0.02 Weighted average shares outstanding-basic 14,941 12,553 Weighted average shares outstanding-diluted 14,941 12,561 See notes to consolidated financial statements. * The amounts for the year ended December 31, 2020, have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements F-4 Table of contents BK TECHNOLOGIES CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share and per share data) 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 Common stock issued-restricted stock units 32,985 20 ( 20 ) - - - Share-based compensation expense-stock options - - 129 - - 129 Shared-based compensation expense-restricted stock units - - 142 - - 142 Dividends declared ($0.08 per share) - - - ( 1,002 ) - ( 1,002 ) Net income - - - 194 - 194 Repurchased of common stock - - - - ( 269 ) ( 269 ) Balance at December 31, 2020* 13,962,366 8,377 26,346 ( 5,693 ) ( 5,402 ) 23,628 Common stock issued net of issuance cost 4,249,250 2,549 9,010 - - 11,559 Common stock issued-restricted stock units 87,383 53 ( 53 ) - Share-based compensation expense-stock options - - 253 - - 253 Shared-based compensation expense-restricted stock units - - 306 - - 306 Dividends declared ($0.09 per share) - - - ( 1,427 ) - ( 1,427 ) Net loss - - - ( 1,701 ) - ( 1,701 ) Balance at December 31, 2021 18,298,999 $ 10,979 $ 35,862 $ ( 8,821 ) $ ( 5,402 ) $ 32,618 See notes to consolidated financial statements. * The amounts for the year ended December 31, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements. F-5 Table of contents BK TECHNOLOGIES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2021 2020 * Operating activities Net (loss) income $ ( 1,701 ) $ 194 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Inventory allowance 700 194 Deferred tax expense 184 73 Depreciation and amortization 1,394 1,344 Share-based compensation expense -stock options 253 129 Share-based compensation expense-restricted stock units 306 142 Unrealized loss on investment in securities 219 620 (Gain) on sale of equipment ( 40 ) - Changes in operating assets and liabilities: Trade accounts receivable ( 1,763 ) ( 2,502 ) Inventories ( 7,133 ) 3,932 Prepaid expenses and other current assets 244 ( 145 ) Other assets 14 84 ROU Assets and Lease Liabilities ( 23 ) 250 Accounts payable 764 ( 191 ) Accrued compensation and related taxes ( 536 ) 364 Accrued warranty expense ( 258 ) ( 457 ) Deferred revenue 443 585 Accrued other expenses and other current liabilities 631 ( 172 ) Net cash (used in) provided by operating activities ( 6,302 ) 4,444 Investing activities Proceeds from the sale of property, plant, and equipment 72 0 Purchases of property, plant and equipment ( 2,416 ) ( 946 ) Net cash used in investing activities ( 2,344 ) ( 946 ) Financing activities Dividends paid ( 1,172 ) ( 1,002 ) Repurchase of common stock - ( 269 ) Proceeds from issuance of common stock, net of costs 11,559 - Proceeds from credit facility and notes payable 5,743 2,196 Repayment of credit facility and notes payable ( 3,730 ) ( 2,273 ) Net cash provided by (used in) financing activities 12,400 ( 1,348 ) Net change in cash and cash equivalents 3,754 2,150 Cash and cash equivalents, beginning of year 6,826 4,676 Cash and cash equivalents, end of year $ 10,580 $ 6,826 Supplemental disclosure Interest paid $ 53 $ 22 Non-cash financing activity Common Stock issued under restricted stock units $ 298 $ 128 See notes to consolidated financial statements. * The amounts for the year ended December 31, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements. F-6 Table of contents 1. Summary of Significant Accounting Policies Description of Business BK Technologies Corporation (collectively with its subsidiaries, the “Company”) is a holding company. The primary business of its wholly-owned operating subsidiary, BK Technologies, Inc., is the designing, manufacturing and marketing of wireless communications equipment primarily consisting of two-way land mobile radios and related products, which are sold in two primary markets: (1) the government and public safety market, and (2) the business and industrial market. The Company has only one reportable business segment. 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 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. Principles of Consolidation The accounts of the Company have been included in the accompanying consolidated 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 (see Note 6). Inventories Inventories are stated at the lower of cost (determined by the average cost method) or net realizable value. Freight costs are classified as a component of cost of products in the accompanying consolidated statements of operations. The allowance for slow-moving, excess, and obsolete inventory is used to state the Company’s inventories at the lower of cost or net realizable value. Because the amount of inventory that will actually be recouped through sales cannot be known with certainty at any particular time, the Company relies on past sales experience, future sales forecasts, and its strategic business plans. Generally, in analyzing inventory levels, inventory is classified as having been used or unused during the past year. The Company then establishes an allowance based upon several factors, including, but not limited to, business forecasts, inventory quantities and historic usage profile. F-7 Table of contents 1. Summary of Significant Accounting Policies (Continued) 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. Property, Plant and Equipment Property, plant and equipment is carried at cost less accumulated depreciation. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations for the period. Depreciation and amortization are generally computed on the straight-line method using lives of 3 to 10 years for machinery and equipment and 5 to 8 years for leasehold improvements. Impairment of Long-Lived Assets Management regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value, which considers the discounted future net cash flows. No long-lived assets were considered impaired at December 31, 2021 and 2020. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. The Company also records an additional allowance based on certain percentages of the Company’s aged receivables, which are determined based on historical experience and the Company’s assessment of the general financial conditions affecting the Company’s customer base. If the Company’s actual collections experience changes, revisions to the Company’s allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believes the allowance for doubtful accounts as of December 31, 2021 and 2020 is adequate. 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”), which replaced previous revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under accounting principles generally accepted in the United States of America (“GAAP”). These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate: Step 1: Identify the contract with the customer; F-8 Table of contents 1. Summary of Significant Accounting Policies (Continued) Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; and Step 5: Recognize revenue as the Company satisfies a performance obligation. ASC 606 provides that sales revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. 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. Customary payment terms are granted to customers, based on credit evaluations. Currently, the Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with GAAP. Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses. Income Taxes The Company accounts for income taxes using the asset and liability method specified by GAAP. 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 the Company’s 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 impairment of tax assets is more likely than not. In determining whether a tax asset is realizable, the Company considers, 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 the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to increase the valuation allowance related to its deferred tax assets in the future. Concentration of Credit Risk The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. At December 31, 2021 and 2020, accounts receivable from governmental customers were approximately $ 1,500 and $ 2,102 , respectively. Generally, receivables are due within 30 days. Credit losses relating to customers have been consistently within management’s expectations. The Company primarily maintains cash balances at one financial institution. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250 . From time to time, the Company has had cash in financial institutions in excess of federally insured limits. As of December 31, 2021, the Company had cash and cash equivalents in excess of FDIC limits of $ 10,401 . Manufacturing and Raw Materials The Company relies upon a limited number of manufacturers to produce its products and on a limited number of component suppliers. Some of these manufacturers and suppliers are in other countries. Approximately 32.4 % of the Company’s material, subassembly and product procurements in 2021 were sourced internationally, of which approximately 31.0 % were sourced from seven suppliers. For 2020, approximately 53.0 % of the Company’s material, subassembly and product procurements were sourced internationally, of which approximately 48.0 % were sourced from three suppliers. Purchase orders denominated in U.S. dollars are placed with these suppliers from time to time and there are no guaranteed supply arrangements or commitments. F-9 Table of contents 1. Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include accounts receivable allowances, inventory obsolescence allowance, warranty allowance, and income tax accruals. Actual results could differ from those estimates. 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, and other liabilities. As of December 31, 2021 and 2020, 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. Shipping and Handling Costs Shipping and handling costs are classified as a part of cost of products in the accompanying consolidated statements of operations. Amounts billed to a customer, if any, for shipping and handling are reported as revenue. Advertising and Promotion Costs The cost for advertising and promotion is expensed as incurred. Advertising and promotion expenses are classified as part of selling, general and administrative (“SG&A”) expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2021 and 2020, such expenses totaled $ 243 and $ 214 , respectively. Engineering, Research and Development Costs Included in SG&A expenses for the years ended December 31, 2021 and 2020 are engineering, research and development costs of $ 8,203 and $ 7,869 , respectively. Share-Based Compensation The Company accounts for share-based arrangements in accordance with GAAP, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. F-10 Table of contents 1. Summary of Significant Accounting Policies (Continued) Restricted Stock Units 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 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, 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. 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 issued 10,389 shares of common stock. 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 September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested. On April 24, 2020, upon the resignation of Mr. Turner, the Company accelerated the vesting of Mr. Turner’s unvested restricted stock units granted September 6, 2018 and issued 4,050 shares of common stock. F-11 Table of contents 1. Summary of Significant Accounting Policies (Continued) Earnings (Loss) Per Share Earnings (loss) per share amounts are computed and presented for all periods in accordance with GAAP. Comprehensive Income (loss) Comprehensive income (loss) was equal to net income (loss) for the years ended December 31, 2021 and 2020. Product Warranty The Company offers two-year standard warranties to its customers, depending on the specific product and terms of the customer purchase agreement. The Company’s typical warranties require it to repair and replace defective products during the warranty period at no cost to the customer. At the time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on historical experience. The Company periodically assesses the adequacy of its recorded liability for product warranties and adjusts the amount as necessary. 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. 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 an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. Change in Accounting Principle As disclosed in Note 2, 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. 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 year ended December 31, 2021. F-12 Table of contents 2. 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. 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. The fiscal 2020 financial statements have been retrospectively adjusted to apply the new inventory change. 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 as of January 1, 2020. Inventories, which are presented net of allowance for slow-moving, excess, and obsolete inventory, consisted of the following: December 31, 2021 2020 (as adjusted) Finished goods $ 2,335 $ 2,206 Work in process 4,527 3,672 Raw materials 10,116 4,667 $ 16,978 $ 10,545 Changes in the allowance for slow-moving, excess, and obsolete inventory are as follows: Years Ended December 31, 2021 2020 (as adjusted) Balance, beginning of year $ 588 $ 823 Charged to cost of sales 700 194 Disposal of inventory - ( 429 ) Balance, end of year $ 1,288 $ 588 For the year ended December 31, 2020, the Company wrote off obsolete inventory that had been fully allowed for previously, which had no material impact to the Company’s consolidated balance sheets or consolidated statements of operations. As a result of the retrospective application of this change in accounting method, the following financial statement line items within the accompanying fiscal 2020 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: Year ended December 31, 2020 26,055 54 26,109 Income before income taxes: Year ended December 31, 2020 251 ( 54 ) 197 Net income: Year ended December 31, 2020 248 ( 54 ) 194 Net income per share-basic and diluted: Year ended December 31, 2020 0.02 - 0.02 Consolidated Statements of Cash Flows Net income as of December 31, 2020 248 ( 54 ) 194 Inventories allowance 126 68 194 Change in inventories 3,946 ( 14 ) 3,932 F-13 Table of contents 3. Allowance for Doubtful Accounts Changes in the allowance for doubtful accounts are composed of the following: Years Ended December 31, 2021 2020 Balance, beginning of year $ 50 $ 50 Provision for doubtful accounts - - Uncollectible accounts written off - - Balance, end of year $ 50 $ 50 4. Property, Plant and Equipment, net Property, plant and equipment, net include the following: December 31, 2021 2020 Leasehold improvements $ 586 $ 727 Machinery and equipment 14,120 11,971 Gross Property, Plant, and Equipment 14,706 12,698 Less accumulated depreciation and amortization ( 10,150 ) ( 9,132 ) Property, plant and equipment, net $ 4,556 $ 3,566 Depreciation and amortization expense relating to property, plant and equipment for the years ended December 31, 2021 and 2020 was approximately $ 1,394 and $ 1,344 , respectively. During the year ended 31, 2020, the company removed from its records approximately $ 1,400 of fully depreciated machinery and equipment. F-14 Table of contents 5. Debt On January 13, 2020, BK Technologies, Inc., our wholly-owned operating subsidiary (“BK Technologies, Inc.”), executed Credit Agreement (the “Original Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”) and a Line of Credit Note in favor of JPMC in an aggregate principal amount of up to $ 5,000,000 (the “Original Note”), each dated as of January 13, 2020. The Original Note had a maturity date of January 31, 2021. On January 26, 2021, BK Technologies, Inc. and JPMC entered into a Note Modification Agreement (the “ Modification ”), to modify the Original Note to, among other things, extend the maturity date of the Original Note to January 31, 2022. Borrowings under the Credit Agreement bore interest at a rate per annum equal to one-month LIBOR (or zero if the LIBOR was less than zero) plus a margin of 1.90 % (2.00 as of December 31, 2021). Then, on January 21, 2022, BK Technologies, Inc. and JPMC entered into a First Amendment to Credit Agreement (the “Amendment”) to, among other things, extend the maturity date to January 31, 2023. Also on January 31, 2022, BK Technologies, Inc. delivered to JPMC a related Line of Credit Note (the “Note” and collectively with the Original Credit Agreement, as modified by the Modification and the Amendment , the “Credit Agreement”), in replacement, renewal and extension of the Original Note, as previously modified, which has a maturity date of January 31, 2023. 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 the Lender. The Company and each subsidiary of BK Technologies, Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. Borrowings under the Credit Agreement will bear interest at the secured overnight financing rate plus a margin of 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 (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 $ 20,000 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 December 31, 2021 and the date of filing this report. As of December 31, 2021, the Company had an outstanding balance of $ 1,470 , and a net balance availability of $ 3,530 . As of the date of filing this report, the Company had an outstanding balance of $ 1,470 , and a net balance availability of $ 2,556,000 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 BK Technologies Corporation, and U.S. Bank Equipment Finance, a division of U.S. Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $ 425 to finance various items of equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 monthly principal and interest payments of approximately $ 8 beginning on October 25, 2019 and maturing on September 25, 2024, and bears a fixed interest rate of 5.11 %. Current balances of note payable at December 31, 2021 and 2020, respectively, are set forth in the table below: December 31, 2021 December 31, 2020 Note payable-US. Bank $ 86 $ 82 Note payable-JP Morgan Chase Bank 181 - $ 267 $ 82 F-15 Table of contents Long-term balances of note payable at December 31, 2021 and 2020, respectively, are set forth in the table below: December 31, 2021 December 31, 2020 Note payable-US. Bank $ 161 $ 247 Note payable-JP Morgan Chase Bank 444 - $ 605 $ 247 6. Investment in Securities The Company has an investment in a limited partnership, FGI 1347 Holdings, LP (“1347 LP”), of which the Company is the sole limited partner. FGI 1347 Holdings, LP was established for the purpose of investing in securities. As of December 31, 2021, the Company indirectly held approximately $63 in cash and 477,282 shares of FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq: FGF) with fair value of $ 1,795 , through an investment in FGI 1347 Holdings, LP. These shares were purchased in March and May 2018 for approximately $ 3,741 . During the years ended December 31, 2021 and 2020, the Company recognized a loss of approximately $ 219 and $ 620 , respectively, due to changes in the unrealized loss on investment 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. There were no fees paid to the general partner or its affiliates for the years ended December 31, 2021 or 2020. As of December 31, 2021, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 3,632,765 shares of FGF’s common stock, representing approximately 55.9 % of FGF’s outstanding shares. FG with its affiliates is 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. 7. 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 June 30, 2027. Rental, maintenance and tax expenses for this facility were approximately $ 556 and $ 510 in 2021 and 2020, respectively. F-16 Table of contents In February 2020, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2020. Annual rental, maintenance and tax expenses for the facility were approximately $ 208 and $ 169 in 2021 and 2020, respectively. 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 expense of approximately $ 53 . The original term of the lease was through December 31, 2021. Lease costs consist of the following: December 31, 2021 2020 Operating lease cost $ 573 $ 610 Short-term lease cost - 2 Variable lease cost 131 129 Total lease cost $ 704 $ 741 Supplemental cash flow information related to leases was as follows: December 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows (fixed payments) $ 639 $ 521 Operating cash flows (liability reduction) 481 367 ROU assets obtained in exchange for lease obligations: Operating leases 14 454 Other information related to operating leases was as follows: December 31, 2021 Weighted average remaining lease term (in years) 5.19 Weighted average discount rate 5.50 % Maturity of lease liabilities as of December 31, 2021 were as follows: Year ending December 31, 2022 $ 582 2023 595 2024 608 2025 618 2026 479 Thereafter 243 Total payments 3,125 Less: imputed interest ( 409 ) Total liability $ 2,716 F-17 Table of contents 8. Income Taxes The income tax expense (benefit) is summarized as follows: Years Ended December 31, 2021 2020 Current: Federal $ 0 $ ( 72 ) State 3 3 3 ( 69 ) Deferred: Federal 184 ( 43 ) State 0 116 184 72 $ 187 $ 3 A reconciliation of the statutory U.S. income tax rate to the effective income tax rate follows: Years Ended December 31, 2021 2020 Statutory U.S. income tax rate ( 21.00 )% 21.00 % State taxes, net of federal benefit ( 0.16 )% 6.0 % Permanent differences ( 1.31 )% 3.45 % Change in valuation allowance ( 26.32 )% 38.83 % Change in net operating loss carryforwards and tax credits 16.72 % ( 67.58 )% Prior period adjustment and other 19.72 % ( 0.50 )% Effective income tax rate ( 12.35 )% 1.20 % F-18 Table of contents 8. Income Taxes (Continued) The components of the deferred income tax assets (liabilities) are as follows: Years Ended December 31, 2021 2020 Deferred tax assets: Operating loss carryforwards $ 984 $ 1,238 R&D Tax Credit 2,233 1,952 Section 263A costs 38 203 Amortization 18 21 Unrealized loss 442 391 Asset reserves: Bad debts 11 11 Inventory allowance 292 118 Accrued expenses: Non-qualified stock options 127 175 Compensation 116 64 Warranty 971 927 Deferred tax assets 5,235 5,098 Less valuation allowance (610 ) (98 ) Total deferred tax assets 4,625 5,000 Deferred tax liabilities: Depreciation ( 509 ) (700 ) Total deferred tax liabilities ( 509 ) (700 ) Net deferred tax assets (before unrealized gain) 4,116 4,300 Deferred tax liability: unrealized gain - - Net deferred tax assets $ 4,116 $ 4,300 As of December 31, 2021, the Company had a net deferred tax asset of approximately $ 4,625 (net of valuation allowance) offset by deferred tax liabilities of $ 509 derived from accelerated tax depreciation. This asset is primarily composed of net operating loss carryforwards (“NOLs”), research and development tax credits, and deferred revenue, net of a valuation allowance of approximately $ 610 . The NOLs total approximately $ 3,554 for federal and $ 6,751 for state purposes, with expirations starting in 2022 for state purposes. State NOLs of $2 expired in 2021. During 2020, the Company generated $ 199 of federal NOLs and during 2021, the Company expects to generate $ 16 in additional federal NOLs. The deferred tax asset amounts are based upon management’s conclusions regarding, among other considerations, the Company’s current and anticipated customer base, contracts, and product introductions, certain tax planning strategies, and management’s estimates of future earnings based on information currently available, as well as recent operating results during 2021, 2020, and 2019. GAAP requires that all positive and negative evidence be analyzed to determine if, based on the weight of available evidence, the Company is more likely than not to realize the benefit of the deferred tax asset. Management’s analysis of all available evidence, both positive and negative, provides support that the Company does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Accordingly, as of December 31, 2021, a valuation allowance has been established totaling approximately $610. F-19 Table of contents 8. Income Taxes (Continued) Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax asset may be necessary. If future losses are incurred, it may be necessary to record an additional valuation allowance related to the Company’s net deferred tax asset recorded as of December 31, 2021. It cannot presently be estimated what, if any, changes to the valuation of the Company’s deferred tax asset may be deemed appropriate in the future. The 2021 federal and state NOLs and tax credit carryforwards could be subject to limitation if, within any three-year period prior to the expiration of the applicable carryforward period, there is a greater than 50% change in ownership of the Company by any stockholder with 5% or greater ownership. The Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by GAAP. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on January 1, 2022, the Company is not aware of any uncertain tax positions that would require additional liabilities or which such classification would be required. The amount of unrecognized tax positions did not change as of December 31, 2021, and the Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. Penalties and tax-related interest expense, of which there were no material amounts for the years ended December 31, 2021 and 2020, are reported as a component of income tax expense (benefit). The Company files federal income tax returns, as well as multiple state and local jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its allowances for income taxes reflect the most probable outcome. The Company adjusts these allowances, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The calendar years 2018, 2019, and 2020 are still open to IRS examination under the statute of limitations. The last IRS examination on the Company’s 2007 calendar year was closed with no change. 9. Income (Loss) Per Share The following table sets forth the computation of basic and diluted loss per share: Years Ended December 31, 2021 2020 (as adjusted) Numerator: Net (loss) income from continuing operations numerator for basic and diluted earnings per share $ ( 1,701 ) $ 194 Denominator: Denominator for basic income (loss) per share weighted average shares 14,941,028 12,552,889 Effect of dilutive securities: Stock options — 8,440 Denominator for diluted income (loss) per share weighted average shares 14,941,028 12,561,329 Basic (loss) income per share $ ( 0.11 ) $ 0.02 Diluted (loss) income per share $ ( 0.11 ) $ 0.02 F-20 Table of contents 9. Income (Loss) Per Share (Continued) Approximately 676,500 stock options and 137,055 restricted stock units for the year ended December 31, 2021 and 464,000 stock options and 139,233 restricted stock units for the year ended December 31, 2020, were excluded from the calculation because they were anti-dilutive. 10. Share-Based Employee Compensation The Company has an employee and non-employee director incentive compensation equity plan. Related to these programs, the Company recorded $ 253 and $ 129 of share-based employee compensation expense during the years ended December 31, 2021 and 2020, respectively, which is included as a component of cost of products and SG&A expenses in the accompanying consolidated statements of operations. No amount of share-based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2021 and 2020 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time, commensurate with the expected life of the stock options. The dividend yield assumption is based on the Company’s expectations of dividend payouts at the grant date. In 2021, the Company paid dividends on January 19, for a dividend declared in 2020, April 26, August 9 and October 18. In December 2021, the Company’s Board of Directors also declared a quarterly dividend that was paid on January 24, 2022. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant. FY 2021 FY 2020 Expected Volatility 52.3 % 52.1 % Expected Dividends 3.0 % 2.0 % Expected Term (in years) 6.5 6.5 Risk-Free Rate 0.80 % 0.49 % Estimated Forfeitures 0.0 % 0.0 % F-21 Table of contents 10. Share-Based Employee Compensation (Continued) A summary of stock option activity under the Company’s equity compensation plans as of December 31, 2021, and changes during the year ended December 31, 2021, are 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 ($) Outstanding 489,000 3.96 7.23 1.51 24,000 Vested 185,800 4.15 5.65 1.55 24,000 Nonvested 303,200 3.84 8.20 1.49 — Period activity Issued 202,500 3.08 — 1.16 — Exercised — — — — — Forfeited 5,000 5.10 — 1.37 — Expired 10,000 4.55 — 1.06 — As of December 31, 2021 Outstanding 676,500 3.68 7.33 1.41 4,500 Vested 361,600 3.80 6.66 1.44 4,500 Nonvested 314,900 3.53 8.10 1.39 — Outstanding: Range of Exercise Prices ($) Per Share Stock Options Outstanding Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) 2.23 3.83 447,500 3.23 8.06 4.07 5.10 229,000 4.55 5.91 676,500 3.68 7.33 Exercisable: Range of Exercise Prices ($) Per Share Stock Options Exercisable Wgt. Avg. Exercise Price ($) Per Share 2.23 3.83 211,000 3.20 4.07 5.10 150,600 4.66 361,600 3.80 The weighted-average grant-date fair value per option granted during the years ended December 31, 2021 and 2020 was $ 1.16 and $ 1.27 , respectively. There were no stock options exercised during the years ended December 31, 2021 and 2020. In connection with the restricted stock units granted to non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued, utilizing the most current information available to the Company at the date of the consolidated financial statements. The Company estimates the fair value of the restricted stock unit awards based upon the market price of the underlying common stock on the date of grant. As of December 31, 2021 and 2020, there was approximately $ 802 and $ 872 , respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including stock options and restricted stock units. This compensation cost is expected to be recognized approximately over four years. F-22 Table of contents 11. Significant Customers Sales to the U.S. Government represented approximately 35.5 % and 50.5 % of the Company’s total sales for the years ended December 31, 2021 and 2020, respectively. These sales were primarily to the various government agencies, including those within the United States Department of Defense, the United States Forest Service, the United States Department of Interior, and the United States Department of Homeland Security. 12. Retirement Plan The Company sponsors a participant contributory retirement 401(k) plan, which is available to all employees. The Company’s contribution to the plan is either a percentage of the participant’s contribution (50% of the participant’s contribution up to a maximum of 6%) or a discretionary amount. In the second quarter of 2020, the Company suspended the contribution match to the participant contributory retirement 401(k) plan to reduce costs and to better position the Company in an uncertain business environment due in part to the COVID-19 pandemic. The Company's contribution match was reinstated in January 2021. For the years ended December 31, 2021 and 2020, total contributions made by the Company were $ 160 and $ 60 , respectively. 13. Commitments and Contingencies Royalty Commitment In 2002, the Company entered into a technology license related to its development of digital products. Under this agreement, the Company is obligated to pay a royalty for each product sold that utilizes the technology covered by this agreement. The Company paid $ 114 and $ 120 for the years ended December 31, 2021 and 2020, respectively. The agreement has an indefinite term, and can be terminated by either party under certain conditions. Purchase Commitments The Company has purchase commitments for inventory totaling $ 12,610 as of December 31, 2021. Self-Insured Health Benefits The Company maintains a self-insured health benefit plan for its employees. This plan is administered by a third party. As of December 31, 2021, the plan had a stop-loss provision insuring losses beyond $90 per employee per year and an aggregate stop-loss of $1,180. As of December 31, 2021 and 2020, the Company recorded an accrual for estimated claims in the amount of approximately $ 97 and $ 116 , respectively, in accrued other expenses and other current liabilities on the Company’s consolidated balance sheets. This amount represents the Company’s estimate of incurred but not reported claims as of December 31, 2021 and 2020. Liability for Product Warranties Changes in the Company’s liability for its standard two-year product warranties during the years ended December 31, 2021 and 2020 are as follows: Balance at Beginning of Year Warranties Issued Warranties Settled Balance at End of Year 2021 $ 791 $ 169 $ ( 427 ) $ 533 2020 $ 1,248 $ 166 $ ( 623 ) $ 791 Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. There were no pending material claims or legal matters as of December 31, 2021. F-23 Table of contents 13. Commitments and Contingencies (Continued) Consulting Services Agreement On June 24, 2020, the Company entered into a Financial and Consulting Services Agreement (the “Itasca Agreement”) with Itasca Financial LLC (“Itasca”), pursuant to which Itasca agreed to advise the Company on aspects of its strategic direction. In exchange for Itasca’s services, the Company agreed to pay Itasca a retainer fee of $ 50,000 , payable in two installments of $ 25,000 , and a monthly fee of $ 20,000 . On December 15, 2020, the parties agreed to terminate the agreement and to waive the provision for a termination fee. This description of the Agreement is a summary only and is qualified by reference to full text of Itasca Agreement, which is filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 5, 2020. Total fees incurred by the Company in connection with the Agreement during the year ended December 31, 2020 were $ 70,000 . 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. Although we believe the pandemic has not had a material adverse impact on our business through 2021, it may have the potential of 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 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. 14. Capital Program In May 2016, the Company implemented a capital return program that included a stock repurchase program and a quarterly dividend. Under the program, the Company’s Board of Directors approved the repurchase of up to 500,000 shares of the Company’s common stock pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. In June 2017, the Board of Directors approved an increase in the Company’s capital return program, authorizing the repurchase of 500,000 shares of the Company’s common stock in addition to the 500,000 shares originally authorized, for a total repurchase authorization of one million shares, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The repurchase program was completed in April 2020. On December 17, 2021 a share repurchase program was authorized under which the Company may repurchase up to an aggregate of $ 5 million of its common shares. Share repurchases under this program were authorized to begin immediately. 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. Pursuant to the capital return program, during 2020, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $ 0.02 per share on March 2, June 10, September 14 and December 9. The dividends were payable to stockholders of record as of March 31, 2020, July 6, 2020, October 5, 2020 and January 4, 2021, respectively. These dividends were paid on April 13, 2020, July 20, 2020, October 19, 2020 and January 19, 2021. Pursuant to the capital return program, during 2021, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $ 0.02 per share on March 16, July 8, September 23, and $ 0.03 per share on December 17. The dividends were payable to stockholders of record as of April 12 2021, July 26, 2021, October 7, 2021and January 10, 2022, respectively. These dividends were paid on April 26, 2021, August 9, 2021, October 18, 2021, and January 24, 2022. F-24 Table of contents Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 8A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e)) as of December 31, 2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2021. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to a change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the consolidated financial statements will not be prevented or detected. Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021, and concluded that our internal control over financial reporting was effective as of December 31, 2021. In making the assessment of internal control over financial reporting, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Changes in Internal Control over Financial Reporting 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 occurred during the fourth fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 8B. Other Information None. Item 8C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 29 Table of Contents PART III Item 9. Directors, Executive Officers and Corporate Governance Information about our Directors and Executive Officers will be contained in the “Proposal 1: Election of Directors” and “Corporate Governance-Board of Directors Independence” sections of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. The disclosure of delinquent filers under Section 16(a) of the Exchange Act, if any, will be contained in the “Miscellaneous-Delinquent Section 16(a) Reports” section of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. We have a separately-designated standing audit committee. Information about our audit committee and the audit committee financial expert will be contained in the “Corporate Governance-Meetings and Committees of the Board of Directors” section of our definitive proxy statement, to be filed in connection with our 2021 annual meeting of stockholders, and is incorporated herein by reference. We have adopted the Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, and the Code of Ethics for the CEO and Senior Financial Officers (the “Code of Ethics”) containing additional specific policies. The Code of Conduct and the Code of Ethics are posted on our Internet website, www.bktechnologies.com, under the “Investor Relations” tab, and are available free of charge, upon request to Corporate Secretary, 7100 Technology Drive, West Melbourne, Florida 32904; telephone number: (321) 984-1414. Any amendment to, or waiver from, the codes applicable to our directors and executive officers will be disclosed in a current report on Form 8-K within four business days following the date of the amendment or waiver unless the rules of the NYSE American then permit website posting of such amendments and waivers, in which case we would post such disclosures on our Internet website. Item 10. Executive Compensation The information required by this item will be contained in the “Executive Compensation,” “Summary Compensation Table for 2020-2021,” “Outstanding Equity Awards at 2021 Fiscal Year-End,” “Retirement Benefits for 2020,” “Potential Payments Upon Termination or in Connection With a Change of Control,” “Director Compensation for 2020” and “Corporate Governance-Meetings and Committees of the Board of Directors-Compensation Committee” sections of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be contained in the “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” sections of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. Item 12. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be contained in the “Transactions with Related Persons” and “Corporate Governance-Board of Directors Independence” sections of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. Item 13. Principal Accounting Fees and Services The information required by this item will be contained in the “Fees Paid to Our Independent Registered Public Accounting Firm” and “Corporate Governance-Meetings and Committees of the Board of Directors-Audit Committee” sections of our definitive proxy statement, to be filed in connection with our 2022 annual meeting of stockholders, and is incorporated herein by reference. 30 Table of Contents PART IV Item 14. Exhibits and Financial Statement Schedules (a) The following documents are filed as a part of this report: 1. Consolidated Financial Statements listed below: Page Report of Independent Registered Public Accounting Firm (Firm ID - 569 ) F-1 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-3 Consolidated Statements of Operations - years ended December 31, 2021 and 2020 F-4 Consolidated Statements of Changes in Stockholders’ Equity - years ended December 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows - years ended December 31, 2021 and 2020 F-6 Notes to Consolidated Financial Statements F-7 (b) Exhibits: Number Exhibit 2.1 Articles of Merger, filed with the Nevada Secretary of State on March 28, 2019 (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 3.1* Articles of Incorporation 3.1.1* Certificate of Amendment to Articles of Incorporation 3.2 Bylaws (incorporated by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 4.1* Description of the Company’s Registered Securities 4.2 Form of Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 10.1+ 2007 Incentive Compensation Plan (incorporated by reference from Annex G to the Company’s Definitive Proxy Statement on Schedule 14A filed April 5, 2007, relating to the 2007 annual stockholders’ meeting) 10.2+ Amendment to the 2007 Incentive Compensation Plan, effective as of March 17, 2017 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 21, 2017) 10.3+ Form of 2007 Incentive Compensation Plan Stock Option Agreement (incorporated by reference from Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012) 10.4+ 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 4.5 to the Company’s Registration Statement on Form S-8 filed June 15, 2017) 10.5+ Omnibus Amendment to Incentive Compensation Plans, dated as of March 28, 2019, by and between BK Technologies, Inc. and BK Technologies Corporation (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 10.6*+ Amendment No. 1 to 2017 Incentive Compensation Plan dated December 17, 2021 10.7+ Form of Stock Option Agreement under the 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed June 15, 2017) 10.8+ Form of Restricted Share Agreement under the 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed June 15, 2017) 10.9+ Form of Restricted Stock Unit Agreement under the 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 4.8 to the Company’s Registration Statement on Form S-8 filed June 15, 2017) 10.10+ Form of Non-Employee Director Restricted Share Unit Agreement under the 2017 Incentive Compensation Plan (September 2018) (Incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed November 7, 2018) 10.11+ Form of Stock Option Agreement under the BK Technologies Corporation 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 31 Table of Contents 10.12+ Form of Restricted Share Agreement under the BK Technologies Corporation 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 10.13+ Form of Restricted Stock Unit Agreement under the BK Technologies Corporation 2017 Incentive Compensation Plan (incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K12B filed March 28, 2019) 10.14+ Relocation Agreement, dated December 31, 2019, between the Company and Henry R. (Randy) Willis (incorporated by reference from Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018) 10.15+ Employment Agreement, executed March 20, 2019, by and between BK Technologies, Inc. and Timothy A. Vitou (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 21, 2019) 10.16+ Employment Agreement, executed March 20, 2019, by and between BK Technologies, Inc. and William P. Kelly (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 21, 2019) 10.17+ Employment Agreement, executed March 20, 2019, by and between BK Technologies, Inc. and Randy Willis (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 21, 2019) 10.18+ Employment Agreement, dated October 31, 2019, by and between BK Technologies, Inc. and Branko Avanic (incorporated by reference from Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed March 4, 2020) 10.19+ Employment Agreement, dated July 19, 2021, by and between BK Technologies, Inc., and John M. Suzuki (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 20, 2021) 10.20 Credit Agreement, executed as of January 30, 2020, by and between JPMorgan Chase Bank, N.A., as lender, and BK Technologies, Inc., as borrower (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 30, 2020) 10.21* Line of Credit Note, executed as of January 31, 2022, by BK Technologies, Inc., as borrower, for the benefit of JPMorgan Chase Bank, N.A., as lender 10.22 Continuing Guaranty, executed as of January 30, 2020, by and among JPMorgan Chase Bank, N.A., as lender, and BK Technologies Corporation and RELM Communications, Inc., as guarantors (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2020) 10.23 Continuing Security Agreement, executed as of January 30, 2020, by and between JPMorgan Chase Bank, N.A., as lender, and BK Technologies, Inc., as pledgor (incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed January 30, 2020) 21* Subsidiaries of the Company 23.1* Consent of MSL, P.A. relating to the Company’s Registration Statements on Form S-8 (Registration No. 333-218765 and Registration No. 333-147354) and Form S-3 (Registration No. 333-251307) 24 Power of Attorney (included on signature page) 31.1* Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification 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) 32.2** Certification 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) 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF* XBRL Taxonomy Definition Linkbase Document * Included with this filing. ** Furnished herewith (not filed). + Management contract or compensatory plan or arrangement. (c) Consolidated Financial Statement Schedules: All schedules have been omitted because they are inapplicable or not material, or the information called for thereby is included in the Consolidated Financial Statements and notes thereto. Item 15. Form 10-K Summary None. 32 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: /s/ John M. Suzuki John M. Suzuki Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints John M. Suzuki and William P. Kelly, and each of them, his attorneys-in-fact, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign this annual report on Form 10-K and any and all amendments to this report on Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ E. Gray Payne Chairman of the Board March 17, 2022 E. Gray Payne /s/ John M. Suzuki Chief Executive Officer (Principal Executive Officer) and Director March 17, 2022 John M. Suzuki /s/ William P. Kelly Executive Vice President and Chief Financial Officer March 17, 2022 William P. Kelly (Principal Financial Officer and Principal Accounting Officer) /s/ D. Kyle Cerminara Director March 17, 2022 D. Kyle Cerminara /s/ Michael R. Dill Director March 17, 2022 Michael R. Dill /s/ Charles T. Lanktree Director March 17, 2022 Charles T. Lanktree /s/ R. Joseph Jackson Director March 17, 2022 R. Joseph Jackson /s/ Inez M. Tennenbaum Director March 17, 2022 Inez M. Tennenbaum 33