What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-11 · 163 added, 153 removed, 267 unchanged (54% of the section changed)

3 unchanged sentences

( In thousands, except share data)

September 30,

Current assets:

6 unchanged sentences

Right-of-use (ROU) asset

Investment in securities

Deferred tax assets, net

15 unchanged sentences

Total liabilities

Commitments and contingencies Stockholders’ equity:

Commitments and contingencies

Stockholders’ equity:

Preferred stock;

5 unchanged sentences

50,000,000 authorized shares;

18,368,863 and 18,298,999 issued and 16,918,463 and 16,848,599 outstanding shares at June 30, 2022, and December 31, 2021, respectively

18,434,697 and 18,298,999 issued and 16,984,297 and 16,848,599 outstanding shares at September 30, 2022, and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Treasury stock, at cost, 1,450,400 shares at June 30, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 1,450,400 shares at September 30, 2022, and December 31, 2021, respectively

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021*

June 30, 2022

June 30, 2021*

Nine Months Ended

September 30,

Cost of products

3 unchanged sentences

Other (expense) income:

Net interest (expense) income

(Loss) gain on investment in securities

Net interest expense

Loss on disposal of property, plant and equipment

Gain (loss) on investments

Other expense

Total other (expense) income

(Loss) income before income taxes

Loss before income taxes

Provision for income tax

Net (loss) income

Net (loss) income per share-basic:

Net (loss) income per share-diluted:

Net loss per share-basic:

Net loss per share-diluted:

Weighted average shares outstanding-basic

1 unchanged sentence

See notes to condensed consolidated financial statements.

* The amounts for the three and six months ended June 30, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements

BK TECHNOLOGIES CORPORATION

1 unchanged sentence

( In thousands ) ( Unaudited )

Six Months Ended

June 30, 2022

June 30, 2021*

Nine Months Ended

September 30,

Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Adjustments to reconcile net loss net cash used in operating activities:

Inventories allowances

3 unchanged sentences

Share-based compensation expense-restricted stock units

Loss (gain) on investment in securities

Loss (gain) on investments

Changes in operating assets and liabilities:

16 unchanged sentences

Repayment of the credit facility and notes payable

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

6 unchanged sentences

See notes to condensed consolidated financial statements.

* The amounts for the six months ended June 30, 2021 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the Condensed Consolidated Financial Statements

BK TECHNOLOGIES CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(In thousands, except share and per share data and percentages or as otherwise noted)

Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited.

The condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited.

The condensed consolidated balance sheet at December 31, 2021, has been derived from the Company’s audited consolidated financial statements at that date.

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These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 17, 2022, as amended by filing Form 10-K/A with the SEC on April 29, 2022.

The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the operating results for a full year.

The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

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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.

made through FGI 1347 Holdings, LP, a consolidated VIE.

Through September 30, 2022 the Company was the sole limited partner in FGI 1347 Holdings, LP, ("1347 LP"), a consolidated VIE.

As disclosed in Note 6, the Company ceased to be the limited partner of 1347 LP as of September 30, 2022.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities.

As of June 30, 2022, and December 31, 2021, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investments, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities.

As of September 30, 2022, and December 31, 2021, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

Through September 14, 2022, the Company held an investment in common stock of FG Financial Group, Inc.

made via 1347 LP.

The Company used observable market data assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing its investment in FGF Financial Group Inc.

Effective September 14,2022, the Company has an investment in Series B Common interests of FG Financial Holdings, LLC (“FG Holdings”).

As further discussed in Note 6, the Company records the investment according to guidance provided by ASC 820 “Fair Value Measurement”, as the Company does not have a controlling financial interest in, nor exerts significant influence over he activities of FG Holdings.

The investment in Series B common interests of FG Holdings is reported using net asset value (“NAV”) of interests held by the Company at period-end.

The NAV is calculated using the fair value of the underlying stock of FGF held by FG Holdings, plus uninvested cash, less liabilities, further adjusted through allocations based on distribution preferences, as defined in the operating agreement of FG Holdings.

The NAV is used as a practical expedient and has not been classified within the fair value hierarchy.

The Company incurred operating losses and reported negative cash flows from operations during 2022 and 2021.

The Company’s operating results have been negatively impacted by the worldwide shortages of materials, in particular semiconductors and integrated circuits, extended lead times, and increased costs and inventory levels for certain components.

The Company's current credit facility expires on January 31, 2023.

The Company is in the process of negotiating a new credit facility (see Note 13).

Management believes that cash and cash equivalents currently available, combined with anticipated cash to be generated from operations, and borrowing ability are sufficient to meet the Company’s working capital requirements in the foreseeable future.

The Company generally relies on cash from operations, commercial debt, and equity offerings, to the extent available, to satisfy its liquidity needs and to meet its payment obligations The Company may engage in public or private offerings of equity or debt securities to maintain or increase its liquidity and capital resources (see Note 13).

However, financial and economic conditions, including those resulting from the COVID-19 pandemic and the current geopolitical tension, could impact our ability to raise capital or debt financing, if needed, on acceptable terms or at all.

Recent Accounting Pronouncements

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Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress.

The Company believes that this method improves financial reporting by better reflecting the current value of inventory on the consolidated balance sheets, by providing better matching of revenues and expenses.

This change resulted in a net increase of approximately $ 1,300 in inventory and a net decrease of $ 1,300 in accumulated deficit as of July 1, 2021.

The accounting change did not have a material effect on the loss from operations, net loss, or earnings per share for the three and six months ended June 30, 2022.

Significant Events and Transactions

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $ 0.03 per share of the Company’s common stock on June 30, 2022, to stockholders of record as of July 25, 2022.

These dividends will be paid on August 8, 2022.

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $ 0.03 per share of the Company’s common stock on September 30, 2022, to stockholders of record as of October 25, 2022.

These dividends will be paid on November 8, 2022

On June 30, 2022, the Company’s Board of Directors declared a quarterly dividend of $ 0.03 per share of the Company’s common stock to stockholders of record as of July 25, 2022.

These dividends were paid on August 8, 2022.

On April 6, 2022, the Company’s Board of Directors declared a quarterly dividend of $ 0.03 per share of the Company’s common stock to stockholders of record as of May 2, 2022.

1 unchanged sentence

Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $ 50 on gross trade receivables of $ 6,569 and $ 8,279 at June 30, 2022 and December 31, 2021, respectively.

The allowance for doubtful accounts on trade receivables was approximately $ 50 on gross trade receivables of $ 5,429 and $ 8,279 at September 30, 2022 and December 31, 2021, respectively.

This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

2 unchanged sentences

Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress.

The fiscal 2021 financial statements have been retrospectively adjusted to apply the new inventory change method.

The cumulative effect of this change on periods prior to those presented herein resulted in a net decrease in accumulated deficit of approximately $ 1,104 as of January 1, 2021.

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 increase in inventory and a net decrease in accumulated deficit of approximately $ 1,104 as of December 31, 2020.

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

September 30,

Finished goods

2 unchanged sentences

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value.

The allowances were approximately $ 1,214 at June 30, 2022, compared with approximately $ 1,288 at December 31, 2021.

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

As Originally

in Accounting Principle

Condensed Income Statements

Cost of goods sold:

Three months ended June 30, 2021

Income before income taxes:

Three months ended June 30, 2021

Net income per share-basic:

Three months ended June 30, 2021

Net income per share-diluted:

Three months ended June 30, 2021

Cost of goods sold:

Six months ended June 30, 2021

Income before income taxes:

Six months ended June 30, 2021

Net income per share-basic and diluted:

Six months ended June 30, 2021

Condensed Statements of Cash Flows

Net income for six months ended June 30, 2021

Inventories allowance

The Company has recorded no income tax expense for the three and six months ended June 30, 2022, compared with an income tax expense of $ 184 for the same periods last year.

The allowances were approximately $ 1,214 at September 30, 2022, compared with approximately $ 1,288 at December 31, 2021.

The Company has recorded no tax expense or benefit for the three and nine months ended September 30, 2022, compared with an income tax expense of $ 0 and $ 184 for the same periods last year.

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

1 unchanged sentence

As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

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

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

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years.

2 unchanged sentences

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets.

Accordingly, the Company established a valuation allowance of $ 2,693 and $ 610 as of June 30, 2022 and December 31, 2021, respectively.

Accordingly, the Company established a valuation allowance of $ 2,989 and $ 610 as of September 30, 2022 and December 31, 2021, respectively.

The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.

If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2022.

Investment in Securities

The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner.

FGI 1347 Holdings, LP (“1347 LP”), was established for the purpose of investing in securities.

Affiliates of Fundamental Global Investors, LLC (“FG”), serve as the general partner and the investment manager of 1347 LP, and the Company is the sole limited partner.

As the sole limited partner, the Company is entitled to 100 % of net assets held by 1347 LP.

The general partner of 1347 LP is entitled to reimbursement of certain costs, fees, and expenses arising in connection with 1347 LP’s operations, as provided by the partnership agreement, upon approval by the Company’s Board of Directors.

FG Financial Group

As of June 30, 2022, the Company indirectly held approximately $ 53 in cash and 477,282 shares of FG Financial Group, Inc.

FGF) (“FGF”), with fair value of $ 697 , through an investment in 1347 LP.

If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of September 30, 2022.

The Company held an investment in a limited partnership, FGI 1347 Holdings' LP (“1347 LP”), of which the Company was the sole limited partner.

1347 LP, was established for the purpose of investing in securities, and its sole primary asset was shares of FG Financial Group, Inc.

FGF) (“FGF”).

These shares were purchased in March and May 2018 for approximately $ 3,741 .

For the three and six months ended June 30, 2022, the Company recognized unrealized losses on the investment of approximately $ 602 and $ 1,098 , respectively, compared with unrealized gains of $ 2,262 and $ 2,467 , respectively for the same periods last year.

There have been no costs, fees, and expenses paid to the general partner or its affiliates for any periods, including the three and six months ended June 30, 2022 and 2021.

As of June 30, 2022, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 5,431,498 shares of FGF’s common stock, representing approximately 58.5 % of FGF’s outstanding shares.

Affiliates of Fundamental Global GP, LLC (“FG”), a significant stockholder of the Company, served as the general partner and the investment manager of 1347 LP, and the Company was the sole limited partner.

As the sole limited partner, the Company was entitled to 100 % of net assets held by 1347 LP.

FG has not received any management fees or performance fees or expense reimbursement for its services to the limited partnership arising in connection with 1347 LP’s operations, as provided by the partnership agreement, upon approval by the Company’s Board of Directors.

The Company accounted for the investment in FGF, made through 1347 LP, as a consolidated VIE.

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.

On September 14, 2022, FG contributed all of the shares of FGF held by 1347 LP to FG Holdings, with an approximate value of $ 945 , based on the published price of FGF stock, in exchange for Series B Common Interests of FG Holdings, with an equivalent value.

The Company recognized a gain of $ 76 , and a loss of $ 850 for the three and nine months ended September 30, 2022.

FG Holdings structure provides for preferred A interests, which accrue preferred return of eight percent per annum, and also receive an additional 20% of any positive profits of FG Holdings, as defined.

The investment in the Series B common interests of FG Holdings is measured using the NAV practical expedient in accordance with ASC 820 Fair Value Measurement and has not been classified within the fair value hierarchy.

FG Holdings invests in common and preferred stock of FGF (specific company/growth objective).

FG Holdings structure provides for Series A preferred interests, which accrue return of eight percent per annum and receive 20% of positive profits with respect to the total return in the capital provided by the holders of Series A preferred interests.

There is no defined redemption frequency, and the Company cannot redeem or transfer its investment without a prior written consent of FG Holdings managers, who are FG affiliates.

Distributions may be made to members at such times and amounts as determined by the managers, and shall be based on the most recent NAV.

The Company does not have any unfunded commitments related to this investment.

On September 30, 2022, Series B Common Interests of FG Holdings were distributed in-kind to the Company as the sole limited partner of 1347 LP, and the Company consented to withdraw from 1347 LP, as the limited partner.

As a result, the Company recognized a loss on deconsolidation of 1347 LP of approximately $43.

As of September 30, 2022, the members and affiliates of FG Holdings, beneficially owned in the aggregate 5,640,467 shares of FGF’s common stock, representing approximately 60.3 % of FGF’s outstanding shares.

Additionally, FG and its affiliates constitute the largest stockholder of the Company.

Kyle Cerminara, Chairman 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.

, a manager and majority Series B member in FG Holdings.

Cerminara also serves as Chairman of the Board of Directors of FGF.

Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three and six months ended June 30, 2022 and 2021, are as follows:

Common Stock Shares

Common Stock Amount

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

Balance at December 31, 2021

8 unchanged sentences

Balance at June 30, 2022

Common Stock Shares

Common Stock Amount

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Common stock dividends ($0.03 per share)

Balance at September 30, 2022

Balance at December 31, 2020*

4 unchanged sentences

Balance at March 31, 2021*

Common stock issued, net of issuance cost

Common stock issued, net of issuance costs

Share-based compensation expense-stock options

1 unchanged sentence

Balance at June 30, 2021*

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

Income (Loss) Per Share

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Common stock dividends ($0.02 per share)

Balance at September 30, 2021

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

Loss Per Share

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

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021*

June 30, 2022

June 30, 2021*

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

Denominator for basic (loss) income per share weighted average shares

Nine Months Ended

September 30,

Net loss for basic and diluted earnings per share

Denominator for basic loss per share weighted average shares

Effect of dilutive securities:

Options and restricted stock units

Denominator for diluted (loss) income per share weighted average shares

Basic (loss) income per share

Diluted (loss) income per share

Approximately 1,014,000 stock options and 102,791 restricted stock units for the three and six months ended June 30, 2022, respectively, and 444,000 stock options and 0 restricted stock units for the three and six months ended June 30, 2021, respectively, were excluded from the calculation because they were anti-dilutive.

Denominator for diluted loss per share weighted average shares

Basic loss per share

Diluted loss per share

Approximately 1,101,500 stock options and 205,644 restricted stock units for the three and nine months ended September 30, 2022, respectively, and 681,500 stock options and 171,316 restricted stock units for the three and nine months ended September 30, 2021, respectively, were excluded from the calculation because they were anti-dilutive.

Non-Cash Share-Based Employee Compensation

The Company has an employee and non-employee director share-based incentive compensation plan.

Related to these programs, the Company recorded non-cash share-based employee compensation expense of $ 51 and $ 136 for the three and six months ended June 30, 2022, respectively, compared with $ 33 and $ 65 , for the same periods last year.

Related to these programs, the Company recorded non-cash share-based employee compensation expense of $ 69 and $ 205 for the three and nine months ended September 30, 2022, respectively, compared with $ 150 and $ 215 , for the same periods last year.

The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses.

1 unchanged sentence

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of stock option grants under this plan.

The non-cash share-based employee compensation expense recorded in the three and six months ended June 30, 2022, was calculated using certain assumptions.

The non-cash share-based employee compensation expense recorded in the three and nine months ended September 30, 2022, was calculated using certain assumptions.

Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

A summary of activity under the Company’s stock option plans during the six months ended June 30, 2022, is presented below:

Stock Options

Exercise Price ($) Per Share

Remaining Contractual Life (Years)

Grant Date Fair Value ($) Per Share

Aggregate Intrinsic Value ($)

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

Fair Value ($)

As of January 1, 2022

Period activity

As of June 30, 2022

As of September 30, 2022

Restricted Stock Units

On September 30, 2022, the Company granted 9,600 restricted stock units to Joshua Horowitz for strategic advisory service compensation.

These restricted stock units were fully vested and settled on the date of grant.

On August 12, 2022, 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 $ 300 ), 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 of Directors for election by stockholders, other than for good reason, as determined by the Board of Directors in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

On July 1, 2022, the Company, at the direction of the Board of Directors, granted on a pro rata basis for 2022 compensation 18,715 and 11,062 restricted stock units to former directors Michael Dill and Inez Tenenbaum, respectively.

These restricted stock units were fully vested and settled on the date of grant.

On June 30, 2022, the Company granted 3,200 restricted stock units to Joshua Horowitz for strategic advisory service compensation.

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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.

On August 24, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $ 40 per award (resulting in total aggregate grant-date fair value of $ 240 ), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

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

On August 24, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $ 40 per award (resulting in total aggregate grant-date fair value of $ 240 ), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board of Directors for election by stockholders, other than for good reason, as determined by the Board of Directors in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

On July 30, 2021, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $ 50 per award (resulting in total aggregate grant-date fair value of $ 250 ), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board of Directors for election by stockholders, other than for good reason, as determined by the Board of Directors 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, 2021, and issued 24,505 shares of common stock to Mr.

There were 102,791 and 137,055 restricted stock units outstanding as of June 30, 2022, and December 31, 2021, respectively.

The Company recorded non-cash restricted stock unit compensation expense of $ 171 and $ 241 for the three and six months ended June 30, 2022, respectively, compared with $ 25 and $ 128 , respectively for the same periods last year.

There were 205,644 and 137,055 restricted stock units outstanding as of September 30, 2022, and December 31, 2021, respectively.

The Company recorded non-cash restricted stock unit compensation expense of $ 126 and $ 367 for the three and nine months ended September 30, 2022, respectively, compared with $ 34 and $ 162 , respectively for the same periods last year.

A summary of non-vested restricted stock under the Company’s non-employee director share-based incentive compensation plan is as follows:

Weighted Average

Price per Share

Unvested at January 1, 2022

Vested and issued

Cancelled/forfeited

Unvested at September 30, 2022

Commitments and Contingencies

5 unchanged sentences

Where a loss is not probable or the amount of the loss is not estimable, the Company does not accrue legal reserves, consistent with applicable accounting guidance.

There were no pending material claims or legal matters as of June 30, 2022.

Covid 19 and Geo Political Tension

There were no pending material claims or legal matters as of September 30, 2022.

Covid 19 and Geopolitical Tension

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced in Wuhan, China, which spread globally and was declared a pandemic by the World Health Organization in March 2020.

The pandemic may have the potential of adversely impacting our business and financial performance in the future.

The extent of the potential impact 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.

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.

From that time, additional variants have surfaced.

The COVID-19 pandemic continues to evolve, impacting the global economy, causing market instability and uncertainty in the labor market.

The full extent of the impact of the COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be predicted at this time.

We will continue to monitor the COVID-19 pandemic as well as resulting legislative and regulatory changes to manage our response and assess and mitigate potential adverse impacts to our business.

Even as the COVID-19 pandemic subsides, we may continue to experience an adverse impact to our business as a result of its national and global economic impact, including any recession that may occur in the future.

Additionally, U.S.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.

and global markets and supply chains are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.

Purchase Commitments

As of June 30, 2022, the Company had purchase commitments for inventory totaling approximately $ 9,394 .

As of September 30, 2022, the Company had purchase commitments for inventory totaling approximately $ 13,276 .

Significant Customers

Sales to United States government agencies represented approximately $ 5,316 ( 43.9 %) and $ 6,965 ( 37.3 %) of the Company’s net total sales for the three and six months ended June 30, 2022, respectively, compared with approximately $ 4,749 ( 41.9 %) and $ 6,865 ( 34.5 %), for the same periods last year.

Accounts receivable from agencies of the United States government were $ 2,554 as of June 30, 2022, compared with approximately $ 3,279 at the same date last year.

Sales to United States government agencies represented approximately $ 4,196 ( 35.2 %) and $ 11,161 ( 36.4 %) of the Company’s net total sales for the three and nine months ended September 30, 2022, respectively, compared with approximately $ 6,371 ( 50.5 %) and $ 13,237 ( 39.4 %), for the same periods last year.

Accounts receivable from agencies of the United States government were $ 1,545 as of September 30, 2022, compared with approximately $ 5,197 at the same date last year.

BK Technologies, Inc.

9 unchanged sentences

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 ).

As of June 30, 2022, the interest rate was 3.344 %.

As of September 30, 2022, the interest rate was 4.87 9%.

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.

10 unchanged sentences

BK Technologies, Inc.

was in compliance with all covenants under the Credit Agreement as of June 30, 2022, and the date of filing this report.

As of June 30, 2022, the Company had an outstanding balance of $ 3,958 , and a net balance availability of $ 1,042 under the Credit Agreement.

was in compliance with all covenants under the Credit Agreement as of September 30, 2022, and the date of filing this report.

As of September 30, 2022, the Company had an outstanding balance of $ 4,458 , and a net balance availability of $ 542 under the Credit Agreement.

As of the date of filing this report, the Company had an outstanding balance of $4,458, and a net balance availability of $542 under the Credit Agreement.

7 unchanged sentences

The Master Loan Agreement is payable in 60 equal monthly principal and interest payments of approximately $ 8 beginning on October 25, 2019 , matures on September 25, 2024 , and bears a fixed interest rate of 5.11 %.

Current balances of notes payable at June 30, 2022 and December 31, 2021, are set forth in the table below:

June 30, 2022

December 31, 2021

Note payable-US.

Note payable-JP Morgan Chase Bank

Long-term balances of notes payable at June 30, 2022 and December 31, 2021, are set forth in the table below:

June 30, 2022

December 31, 2021

Note payable-US.

Note payable-JP Morgan Chase Bank

The following table summarizes the notes payable principle repayments subsequent to September 30, 2022:

September 30,

Remaining three months of 2022

Total payments

The Company accounts for its leasing arrangements in accordance with Topic 842, “Leases”.

14 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30,

Operating lease cost

4 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30,

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

4 unchanged sentences

Other information related to operating leases was as follows:

June 30, 2022

September 30,

Weighted average remaining lease term (in years)

Weighted average discount rate

Maturity of lease liabilities as of June 30, 2022, were as follows:

June 30, 2022

Remaining six months of 2022

Maturity of lease liabilities as of September 30, 2022, were as follows:

September 30,

Remaining three months of 2022

Total payments

2 unchanged sentences

Subsequent events

On July 14, 2022, the Company granted 87,500 incentive stock options of the 2017 Incentive Compensation Plan, to a number of non-management employees.

The options contained a 5 year vesting term, beginning on July 14, 2023 and on each anniversary date of the grant thereafter.

On July 1, 2022, the Company issued 18,715 and 11,062 restricted stock units to Michael Dill and Inez Tenenbaum, respectively, former directors of the Company for services performed.

These restricted stock units were fully vested and settled on the date of grant.

On October 27, 2022, the Company entered into a Letter of Intent (the “LOI”) with Alterna Capital Solutions, LLC for a one-year Line of Credit with total maximum funding up to $ 15 million, with an interest rate of Prime plus 1.85 % and other monthly administrative fees.

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

The Company plans to use the funds obtained from the Line of Credit to replace the existing JPMorgan Chase Bank Line of Credit agreement described in Footnote 11 of these condensed consolidated financial statements and for working capital for the business.

The Company cannot guarantee that the transaction contemplated by the LOI will be consummated on the terms proposed in the LOI as described above, if at all.

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

What changed 10-Q

Item 1. Financial Statements