What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-11 · 94 added, 99 removed, 183 unchanged (51% of the section changed)

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

Some of these factors and risks have been, and may further be, exacerbated by the COVID-19 pandemic and general economic conditions such as inflation.

Some of these factors and risks have been, and may further be, exacerbated by the COVID-19 pandemic and general economic conditions, including the ongoing military conflict in Ukraine, such as inflationary pressures and disruptions in the global supply chain.

We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report.

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

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

Generally, BK Technologies-branded products serve the government markets including but not limited to emergency response, public safety, United States Department of Agriculture, United States Department of Homeland Security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises.

We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, Project 25 (P25) compliant radio at a lower cost relative to comparable offerings.

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

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

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

Available Information

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Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

The impact to our business in 2022, particularly customer orders, is not known with any certainty.

The impact to our business in 2022, particularly customer orders, is not known with certainty.

Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased costs and inventory levels for certain components used in our products.

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

Second Quarter and Six Months Summary

Customer demand and orders for our products continued to be strong during the three and six months ended June 30, 2022.

Third Quarter and Nine Months Summary

Customer demand and orders for our products continued to be strong during the three and nine months ended September 30, 2022.

Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders.

Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during subsequent quarters this year.

Overall, our revenues for the three months ended June 30, 2022, improved compared with the same period of last year.

For the second quarter 2022, sales increased 6.8% from the second quarter last year and 83.9% from the immediately preceding quarter.

The improvement in sales for the second quarter brought sales for the six-months ended June 30, 2022, within 6.0% of the same six-month period last year.

Gross profit margins as a percentage of sales for the second quarter and six-month periods of 2022 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and lower production volumes due to material shortages.

Selling, general and administrative (“SG&A”) expenses for the second quarter of 2022 were 18.7% higher than the SG&A expenses for the second quarter last year, while SG&A expenses for the six-month period ended June 30, 2022, increased 21.1% compared to the same period last year.

The State of Florida and our headquarters location in West Melbourne, Florida, was also impacted by hurricane Ian in the last week of September, which impacted our ability to ship product to our customers.

Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during subsequent quarters.

Overall, our revenues for the three months ended September 30, 2022, declined somewhat compared with the same period of last year.

For the third quarter 2022, sales decreased 5.6% from the third quarter last year and 1.6% from the immediately preceding quarter.

The decline in sales for the third quarter brought sales for the nine-months ended September 30, 2022, within 5.9% of the same nine-month period last year.

Gross profit margins as a percentage of sales for the third quarter and nine-month periods of 2022 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and lower production volumes due to certain electronic component shortages.

Selling, general and administrative (“SG&A”) expenses for the third quarter of 2022 were 2.8% higher than the SG&A expenses for the third quarter last year, while SG&A expenses for the nine-month period ended September 30, 2022, increased 14.7% compared to the same period last year.

The increase in general and administrative expenses is attributed primarily to corporate and headquarters staffing and strategic initiatives.

These factors yielded operating losses for the three and six month periods ended June 30, 2022, that increased primarily due to supply chain material challenges comparable to the same periods last year.

During the second quarter of 2021 we closed a public offering of our common stock, raising net proceeds of approximately $11.6 million with the issuance of approximately 4.2 million common shares.

For the second quarter of 2022, our sales increased 6.8% to approximately $12.1 million, compared with approximately $11.3 million for the same quarter last year.

For the six months ended June 30, 2022, sales totaled approximately $18.7 million, compared with approximately $19.9 million for the same period last year.

Gross profit margins as a percentage of sales for the second quarter of 2022 were approximately 14.2%, compared with 38.4% for the second quarter last year, as adjusted.

For the six-month period ended June 30, 2022, gross profit margins as a percentage of sales were approximately 17.1%, compared with 37.6% when compared to the same periods last year, as adjusted.

SG&A expenses for the second quarter of 2022 totaled approximately $5.4 million, compared with approximately $4.6 million for the same quarter last year.

SG&A expenses for the first six months of 2022 increased 21.1% to approximately $10.3 million, compared with approximately $8.5 million for the same period last year.

For the second quarter of 2022, we recognized an operating loss of approximately $3.7 million, compared with approximately $0.2 million for the same quarter last year, as adjusted.

For the six-month period ended June 30, 2022, our operating loss totaled approximately $7.1 million, compared with approximately $1.1 million for the same period last year, as adjusted.

For the second quarter of 2022, we recognized an unrealized loss totaling approximately $0.6 million on our investment in FG Financial made through FGI 1347 Holdings, LP, a consolidated variable interest entity.

This compares with an unrealized gain of approximately $2.3 million on the investment for the second quarter last year.

For the six-month period ended June 30, 2022, we recognized an unrealized loss of approximately $1.1 million, compared with an unrealized gain of $2.5 million for last year’s six-month period.

Net loss for the three months ended June 30, 2022, was approximately $4.3 million ($0.26 per basic and diluted share), compared with a net income of approximately $1.8 million ($0.14 per basic and $0.13 diluted share) for the same quarter last year, as adjusted.

For the six months ended June 30, 2022, our net loss totaled approximately $8.3 million ($0.49 per basic and diluted share), compared with a net income of approximately $1.2 million ($0.09 per basic and diluted share) for the same period last year, as adjusted.

As of June 30, 2022, working capital totaled approximately $17.4 million, of which approximately $12.4 million was comprised of cash, cash equivalents and trade receivables.

As of December 31, 2021, working capital totaled approximately $25.2 million (as adjusted), of which approximately $18.8 million was comprised of cash, cash equivalents and trade receivables.

These factors yielded operating losses for the three and nine month periods ended September 30, 2022, that increased primarily due to supply chain material challenges compared to the same periods last year.

For the third quarter of 2022, our sales decreased 5.6% to approximately $11.9 million, compared with approximately $12.6 million for the same quarter last year.

For the nine months ended September 30, 2022, sales totaled approximately $30.6 million, compared with approximately $32.5 million for the same period last year.

Gross profit margins as a percentage of sales for the third quarter of 2022 were approximately 18.8%, compared with 32.8% for the third quarter last year.

For the nine-month period ended September 30, 2022, gross profit margins as a percentage of sales were approximately 17.8%, compared with 35.7% when compared to the same periods last year.

SG&A expenses for the third quarter of 2022 totaled approximately $4.6 million, compared with approximately $4.5 million for the same quarter last year.

SG&A expenses for the first nine months of 2022 increased 14.7% to approximately $15.0 million, compared with approximately $13.0 million for the same period last year.

For the third quarter of 2022, we recognized an operating loss of approximately $2.4 million, compared with an operating loss of approximately $0.4 million for the same quarter last year.

For the nine-month period ended September 30, 2022, our operating loss totaled approximately $9.5 million, compared with approximately $1.4 million for the same period last year.

For the third quarter of 2022, we recognized a net realized and unrealized gain totaling approximately $76 thousand on our investment in FG Financial Group, Inc.

made through FG Financial Holdings, LLC.

This compares with an unrealized loss of approximately $2.2 million on the investment in FG Financial Group, Inc.

made through FG 1347 Holdings, LP for the third quarter last year.

For the nine-month period ended September 30, 2022, we recognized net realized and unrealized losses of approximately $1.0 million, compared with an unrealized gain of $310 thousand for last year’s nine-month period.

Net loss for the three months ended September 30, 2022, was approximately $2.4 million ($0.14 per basic and diluted share), compared with a net loss of approximately $2.6 million ($0.15 per basic and diluted share) for the same quarter last year.

For the nine months ended September 30, 2022, our net loss totaled approximately $10.7 million ($0.63 per basic and diluted share), compared with a net loss of approximately $1.4 million ($0.10 per basic and diluted share) for the same period last year.

As of September 30, 2022, working capital totaled approximately $14.6 million, of which approximately $9.4 million was comprised of cash, cash equivalents and trade receivables.

As of December 31, 2021, working capital totaled approximately $25.2 million, of which approximately $18.8 million was comprised of cash, cash equivalents and trade receivables.

Results of Operations

As an aid to understanding our operating results for the periods covered by this report, the following table shows selected items from our condensed consolidated statements of operations expressed as a percentage of sales:

Percentage of Sales

Three Months Ended

Percentage of Sales

Six Months Ended

June 30, 2022

June 30, 2021*

June 30, 2022

June 30, 2021*

Percentage of Sales Three Months Ended

Percentage of Sales Nine Months Ended

Sept 30, 2022

Sept 30, 2021

Sept 30, 2022

Sept 30, 2021

Cost of products

Selling, general and administrative expenses

Other income (expense)

Income (loss) before income taxes

Other income (expense), net

Loss before income taxes

Income tax (expense) benefit

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

For the second quarter ended June 30, 2022, net sales increased 6.8% to approximately $12.1 million, compared with approximately $11.3 million for the same quarter last year.

Sales for the six months ended June 30, 2022, totaled approximately $18.7 million, compared with approximately $19.9 million for the six-month period last year.

Customer demand and orders for our products continued to be strong, driving record bookings for the second quarter of 2022.

For the third quarter ended September 30, 2022, net sales decreased 5.6% to approximately $11.9 million, compared with approximately $12.6 million for the same quarter last year.

Sales for the nine months ended September 30, 2022, totaled approximately $30.6 million, compared with approximately $32.5 million for the nine-month period last year.

Customer demand and orders for our products continued to be strong, driving record bookings for the third quarter of 2022.

Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue.

Consequently, unshipped orders were carried in backlog, and we anticipate fulfilling many of the orders in backlog during subsequent quarters this year.

Consequently, unshipped orders were carried in backlog, and we anticipate fulfilling a portion of the orders in backlog during fourth quarter this year.

We are taking steps to manage delays in the supply chain, including carrying additional inventory of material and components with limited supplies.

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The precise impact to sales and shipments for the remainder of 2022, however, cannot be quantified.

Sales for the three months ended June 30, 2022, was attributed primarily to certain state and local public safety opportunities, as well as federal wildland fire related agencies.

From a product perspective, the primary contributor to orders and shipments during the second quarter was our BKR 5000 portable radio and related accessories.

Sales for the three months ended September 30, 2022 were attributed primarily to certain state and local public safety opportunities, as well as federal wildland fire related agencies.

From a product perspective, the primary contributor to orders and shipments during the third quarter was our BKR 5000 portable radio and related accessories.

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

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Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the second quarter ended June 30, 2022 were approximately 14.2%, compared with 38.4% for the same quarter last year.

For the six-month period ended June 30, 2022, gross profit margins were approximately 17.1%, compared with 37.6% for the same period last year.

Gross profit margins as a percentage of sales for the third quarter ended September 30, 2022 were approximately 18.8%, compared with 32.8% for the same quarter last year.

For the nine-month period ended September 30, 2022, gross profit margins were approximately 17.8%, compared with 35.7% for the same period last year.

Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing.

Gross profit margins for the quarter ended June 30, 2022, decreased compared with the same period last year primarily due to increased material costs, including electronic components, as well as escalated freight costs, which yielded sub-optimal absorption of manufacturing overhead costs.

Gross profit margins for the quarter ended September 30, 2022 decreased compared with the same period last year, primarily due to increased material costs, including electronic components, as well as escalated freight costs, which yielded sub-optimal absorption of manufacturing overhead costs.

During recent quarters, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies, extended lead times and higher costs for certain components used in our products.

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While the progression and duration of these shortages is not known with certainty, we are monitoring a number of critical components for product cost improvement, but the shortages may last for several quarters.

The impact on our operations of such shortages and increased product costs is uncertain, but could potentially impact our future sales, manufacturing operations and financial results.

The impact on our operations of such shortages and increased product costs is uncertain, but could potentially impact our future sales, gross profit margins, manufacturing operations and financial results.

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

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SG&A expenses consist of marketing, sales, commissions, engineering, product development, management information systems, accounting, headquarters, and non-cash share-based employee compensation expenses.

SG&A expenses for the second quarter ended June 30, 2022, totaled approximately $5.4 million (44.6% of sales), compared with approximately $4.6 million (40.2% of sales) for the same quarter last year.

For the six months ended June 30, 2022, SG&A expenses increased by $1.8 million, or 21.1%, to approximately $10.3 million (55.2% of sales), compared with approximately $8.5 million (42.8% of sales), for the six-month period last year.

Engineering and product development expenses for the second quarter of 2022 totaled approximately $2.3 million (18.9% of sales), compared with approximately $2.3 million (20.3% of sales) for the same quarter of last year.

For the six months ended June 30, 2022, engineering and product development expenses totaled approximately $4.6 million (24.6% of sales), compared with approximately $4.1 million (20.7% of sales) for the six-month period last year.

SG&A expenses for the third quarter ended September 30, 2022, totaled approximately $4.6 million (38.9% of sales), compared with approximately $4.5 million (35.7% of sales) for the same quarter last year.

For the nine months ended September 30, 2022, SG&A expenses increased by $2.0 million, or 14.6%, to approximately $15.0 million (48.9% of sales), compared with approximately $13.0 million (40.1% of sales), for the nine-month period last year.

Engineering and product development expenses for the third quarter of 2022 totaled approximately $2.1 million (17.9% of sales), compared with approximately $2.0 million (16.1% of sales) for the same quarter of last year.

For the nine months ended September 30, 2022, engineering and product development expenses totaled approximately $6.7 million (22.0% of sales), compared with approximately $6.2 million (18.9% of sales) for the nine-month period last year.

The increase in engineering expenses is attributed primarily to ongoing product design and development activities, particularly prototyping, for the new BKR series radios.

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The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential effects of the COVID-19 pandemic in coming months and quarters.

Marketing and selling expenses for the second quarter of 2022 totaled approximately $1.1 million (9.1% of sales), compared with approximately $1.1 million (9.4% of sales) for the second quarter last year, primarily reflecting increases in staffing, travel and go-to-market activities in support of anticipated sales growth from new products and customer.

For the six months ended June 30, 2022, marketing and selling expenses increased approximately $0.1 million, or 3.6%, to approximately $2.1 million (11.1% of sales), compared with approximately $2.0 million (10.1% of sales).

The increases for the six-month period ended June 30, 2022 are primarily reflecting increases in staffing, travel and go-to-market activities in support of anticipated sales growth from new products and customers.

Other general and administrative expenses for the second quarter 2022 totaled approximately $2.0 million (16.4% of sales), compared with approximately $1.2 million (10.5% of sales) for the same quarter last year.

For the six months ended June 30, 2022, general and administrative expenses totaled approximately $3.6 million (19.4% of sales), compared with approximately $2.6 million (12.5% of sales) for the six-month period last year.

The increase in general and administrative expenses for the three and six month period ending June 30, 2022 is attributed primarily to corporate and headquarters staffing and strategic initiatives.

Marketing and selling expenses for the third quarter of 2022 totaled approximately $1.1 million (8.7% of sales), compared with approximately $1.0 million (8.2% of sales) for the third quarter last year.

For the nine months ended September 30, 2022, marketing and selling expenses increased approximately $0.1 million, or 2.4%, to approximately $3.1 million (10.2% of sales), compared with approximately $3.0 million (9.3% of sales).

The increase for the nine-month period ended September 30, 2022 are primarily reflecting increases in reflect activities in support of anticipated sales growth from new products and customers.

Other general and administrative expenses for the third quarter 2022 totaled approximately $1.4 million (12.2% of sales), compared with approximately $1.4 million (11.4% of sales) for the same quarter last year.

For the nine months ended September 30, 2022, general and administrative expenses totaled approximately $5.1 million (16.6% of sales), compared with approximately $3.8 million (11.8% of sales) for the nine-month period last year.

The increase in general and administrative expenses for the three and nine month period ending September 30, 2022 is attributed primarily to corporate and headquarters staffing and strategic initiatives.

Operating Loss

The operating loss for the second quarter ended June 30, 2022, totaled approximately $3.7 million (30.4% of sales), compared with approximately $0.2 million (1.8% of sales) for last year’s second quarter, as adjusted.

For the six months ended June 30, 2022, our operating loss totaled approximately $7.1 million (38.1% of sales), compared with approximately $1.1 million (5.3% of sales) for the six-month period last year, as adjusted.

The operating loss for the quarter ended June 30, 2022 is attributed primarily to increased product costs, which adversely impacted gross profit margins and increased operating expenses.

The operating loss for the six months ended June 30, 2022 is primarily attributed to increased product costs and a decrease in sales, which adversely impacted gross profit margins and increased operating expenses.

The operating loss for the third quarter ended September 30, 2022, totaled approximately $2.4 million (20.1% of sales), compared with approximately $370 thousand (2.9% of sales) for last year’s third quarter.

For the nine months ended September 30, 2022, our operating loss totaled approximately $9.5 million (31.1% of sales), compared with approximately $1.4 million (4.4% of sales) for the nine-month period last year.

The operating loss for the quarter ended September 30, 2022 is attributed primarily to increased product costs, which adversely impacted gross profit margins and increased operating expenses.

The operating loss for the nine months ended September 30, 2022 is primarily attributed to increased product costs and a decrease in sales, which adversely impacted gross profit margins and increased operating expenses.

Other (Expense) Income

We recorded net interest expense of approximately $24,000 for the second quarter ended June 30, 2022, compared with approximately $14,000 for the second quarter of last year.

For the six months ended June 30, 2022, net interest expense totaled approximately $39,000, compared with net interest income of approximately $18,000 for the six-month period last year.

We recorded net interest expense of approximately $30,000 for the third quarter ended September 30, 2022, compared with approximately $19,000 for the third quarter of last year.

For the nine months ended September 30, 2022, net interest expense totaled approximately $70,000, compared with net interest expense of approximately $37,000 for the nine-month period last year.

Net interest expense was primarily the result of equipment financing, our revolving credit facility and lower average cash balances.

For the second quarter ended June 30, 2022, we recognized an unrealized loss of approximately $0.6 million on our investment in FGF, compared with an unrealized gain of approximately $2.3 million for the second quarter last year.

For the six months ended June 30, 2022, we recognized an unrealized loss of approximately $1.1 million on our investment in FGF, compared with an unrealized gain of approximately $2.5 for the same period last year.

We recorded no tax provision or benefit for the quarter ended and for the six months ended June 30, 2022, compared with an income tax expense of $184,000 for the quarter and the same six month period last year.

For the third quarter ended September 30, 2022, we recognized a net realized and unrealized gain of approximately $0.1 million on our investment in FG Financial, compared with an unrealized loss of approximately $2.2 million in FG Financial Group, Inc.

made through FG 1347 Holdings, LP for the third quarter last year.

For the nine months ended September 30, 2022, we recognized realized and unrealized losses of approximately $1.0 million on our investment, compared with an unrealized gain of approximately $0.3 for the same period last year.

We recorded no tax expense or benefit for the quarter ended and for the nine months ended September 30, 2022, compared with no income tax provision for the third quarter and an income tax expense of $184,000 for the nine month period last year.

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

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

As of June 30, 2022, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.

As of September 30, 2022, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.

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

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

Accordingly, we established a valuation allowance of $2.69 million and $0.6 million as of June 30, 2022 and December 31, 2021.

Accordingly, we established a valuation allowance of $3.0 million and $0.6 million as of September 30, 2022 and December 31, 2021.

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

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

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

Liquidity and Capital Resources

For the six months ended June 30, 2022, net cash used in operating activities totaled approximately $5.3 million, compared with cash used by operating activities of approximately $2.8 million (as adjusted) for the same period last year.

Cash used in operating activities for the six months ended June 30, 2022, was primarily related to a net loss and increased inventory, which were partially offset by increased accounts payable, a decrease in accounts receivable and an unrealized loss in marketable securities.

For the first six months of 2022, we had a net loss of approximately $8.3 million, compared with a net income of approximately $1.2 million (as adjusted) for the same period last year.

Gross inventories increased during the six months ended June 30, 2022 by approximately $5.6 million, compared with approximately $3.2 million (as adjusted) for the same period last year.

For the nine months ended September 30, 2022, net cash used in operating activities totaled approximately $6.9 million, compared with cash used by operating activities of approximately $3.6 million for the same period last year.

Cash used in operating activities for the nine months ended September 30, 2022, was primarily related to a net loss and increased inventory, which were partially offset by increased accounts payable, a decrease in accounts receivable and an unrealized loss in marketable securities.

For the first nine months of 2022, we had a net loss of approximately $10.7 million, compared with a net loss of approximately $1.4 million for the same period last year.

Gross inventories increased during the nine months ended September 30, 2022 by approximately $9.4 million, compared with approximately $6.0 million for the same period last year.

The increases for inventories were attributed primarily to increased purchases to account for the limited material and component availability combined with extended supplier lead-times and planned new product introductions.

Prepaid expenses decreased during the six months ended June 30, 2022 by approximately $0.4 million, compared with a decrease of $12,000 for the same period last year.

Accounts receivable decreased approximately $1.7 million during the six months ended June 30, 2022, compared with an increase of approximately $0.7 million for the same period last year.

The decrease was primarily due to customer collections during the six months ended June 30, 2022.

Accounts payable for the six months ended June 30, 2022, increased approximately $3.9 million, compared with an increase of approximately $1.2 million for the same period last year, primarily due to increased material and component purchases from suppliers related in-part to delays and shortages within our supply chain.

Depreciation and amortization totaled approximately $0.7 million for the six months ended June 30, 2022, compared with approximately $0.7 million for the six same period last year.

Prepaid expenses increased during the nine months ended September 30, 2022 by approximately $77,000, compared with an increase of $63,000 for the same period last year.

Accounts receivable decreased approximately $2.9 million during the nine months ended September 30, 2022, compared with an increase of approximately $1.2 million for the same period last year.

The decrease was primarily due to lower revenues and higher customer collections during the nine months ended September 30, 2022.

Accounts payable for the nine months ended September 30, 2022, increased approximately $7.4 million, compared with an increase of approximately $2.4 million for the same period last year, primarily due to increased material and component purchases from suppliers related in-part to delays and shortages within our supply chain.

Depreciation and amortization totaled approximately $1.1 million for the nine months ended September 30, 2022, compared with approximately $1.0 million for the same period last year.

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

The unrealized loss on securities for the six months ended June 30, 2022, totaled approximately $1.1 million, compared with an unrealized gain of approximately $2.5 million for same period last year.

For additional information pertaining to our investment in securities, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investment in Securities) to the condensed consolidated financial statements included in this report.

Cash used in investing activities for the six months ended June 30, 2022, totaled approximately $0.7 million, compared with approximately $1.5 million for the same period last year.

The loss on investments for the nine months ended September 30, 2022, totaled approximately $1.0 million, compared with an unrealized gain of approximately $310 thousand for same period last year.

For additional information pertaining to our investments, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investments) to the condensed consolidated financial statements included in this report.

Cash used in investing activities for the nine months ended September 30, 2022, totaled approximately $1.0 million, compared with approximately $1.9 million for the same period last year.

The cash used for both periods was attributed primarily to the purchase of engineering and manufacturing related equipment.

For the six months ended June 30, 2022, cash of approximately $1.3 million was provided by financing activities, compared with cash provided by financing activities of approximately $13.2 million for the same period last year.

During the six months ended June 30, 2022 we paid quarterly dividends, utilizing approximately $1.0 million, while for the same period last year, we paid a quarterly dividend of approximately $0.5 million.

During the six months ended June 30, 2022, we received proceeds of approximately $2.5 million from our revolving credit facility and notes payable compared to $3.5 million for the same period last year.

This was partially offset by loan and revolving credit facility repayments of approximately $0.1 million for the six months ended June 30, 2022 compared to $1.4 million for the same period last year.

For the six months ended June 30, 2021, we closed a public offering of our common stock, generating net proceeds of approximately $11.6 million.

For the nine months ended September 30, 2022, cash of approximately $1.3 million was provided by financing activities, compared with cash provided by financing activities of approximately $12.8 million for the same period last year.

During the nine months ended September 30, 2022 we paid quarterly dividends, utilizing approximately $1.5 million, while for the same period last year, we paid a quarterly dividend of approximately $0.8 million.

During the nine months ended September 30, 2022, we received proceeds of approximately $3.0 million from our revolving credit facility and notes payable compared to $3.5 million for the same period last year.

This was partially offset by loan and revolving credit facility repayments of approximately $0.2 million for the nine months ended September 30, 2022 compared to $1.5 million for the same period last year.

For the nine months ended September 30, 2021, we closed a public offering of our common stock, generating net proceeds of approximately $11.6 million.

On January 31, 2022, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, 2023.

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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.

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

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

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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%.

Our cash and cash equivalents balance at June 30, 2022, was approximately $5.9 million.

Our cash and cash equivalents balance at September 30, 2022, was approximately $4.0 million.

We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Credit Agreement, are sufficient to meet our working capital requirements for the foreseeable future.

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

There were no changes to our critical accounting policies during the six months ended June 30, 2022.

Change in Accounting Principle During 2021

As disclosed in Note 1 and 4, on July 1, 2021, we changed inventory accounting to burden the material at the time of purchase receipts.

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

This change resulted in a net increase of approximately $1.3 million in inventory and retained earnings 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 months ended June 30, 2022.

There were no changes to our critical accounting policies during the nine months ended September 30, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis