BK Technologies Corp 10-K/A

Item 8. Financial Statements and Supplementary Data See the Consolidated Financial Statements included in this report. 33 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. F-1 Table of Contents 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. 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. F-7 Table of Contents 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. 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. F-8 Table of Contents 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; 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 . F-9 Table of Contents 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. 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 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. Earnings (Loss) Per Share Earnings (loss) per share amounts are computed and presented for all periods in accordance with GAAP. F-11 Table of Contents 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. F-13 Table of Contents 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-14 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. 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. F-15 Table of Contents 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-16 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. 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. F-17 Table of Contents 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-18 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-19 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. 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. F-20 Table of Contents 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 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. F-21 Table of Contents 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 % 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 ($) Outstanding 489,000 3.96 7.23 1.51 24,000 Vested 185,800 4.15 5.65 1.55 24,000 Nonvested 303,200 3.84 8.20 1.49 — Period activity Issued 202,500 3.08 — 1.16 — Exercised — — — — — Forfeited 5,000 5.10 — 1.37 — Expired 10,000 4.55 — 1.06 — As of December 31, 2021 Outstanding 676,500 3.68 7.33 1.41 4,500 Vested 361,600 3.80 6.66 1.44 4,500 Nonvested 314,900 3.53 8.10 1.39 — F-22 Table of Contents Outstanding: Range of Exercise Prices ($) 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. 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. F-23 Table of Contents 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. 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. F-24 Table of Contents 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-25 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.