What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-17 · 68 added, 77 removed, 141 unchanged (51% of the section changed)

BK Technologies Corporation (NYSE American:

BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides two-way radio communications equipment of high quality and reliability.

BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides public safety grade communications products and services which make first responders safer and more efficient.

All operating activities described herein are undertaken by our operating subsidiary.

In business for over 70 years, BK designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”), repeaters, base stations and related components and subsystems.

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

Repeaters expand the range of two-way LMRs, enabling them to operate over a wider area.

Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal and reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception.

We employ both analog and digital technologies in our products.

Our digital technology is compliant with the Project 25 standard (“P-25”) for digital LMR equipment.

The P-25 has been adopted by representatives from the Association of Public-Safety Communications Officials-International (“APCO”), the National Association of State Technology Directors (“NASTD”), the United States (“U.S.”) Federal Government and other public safety user organizations.

Our P-25 digital products and our analog products function in the very high frequency (“VHF”) (136MHz - 174MHz), ultra-high frequency (“UHF”) (380MHz - 470MHz, 450MHz - 520MHz), and 700-800 MHz bands.

Our P-25 KNG and KNG2 Series mobile and portable digital radios have been validated under the P-25 Compliance Assessment Program (“CAP”) as being P-25 compliant and interoperable with the communications network infrastructure of six of our competitors.

Since we do not provide our own communications network infrastructure, we believe CAP validation provides confidence for federal, state and local emergency response agencies that our products are a viable and attractive alternative for use on the infrastructure of our competitors.

We offer products under the brand name BK Technologies.

Generally, BK Technologies-branded products serve the government and public safety markets.

BK Technologies, BKR and BK Radio-branded products consist of high-specification, P-25 compliant, LMR equipment with extensive features and capabilities designed for professional radio users primarily in government, public safety and military applications.

We believe that our products and solutions provide superior value to a wide array of customers with demanding requirements, including, for example, emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various commercial enterprises.

Our two-way radio products excel in applications with harsh and hazardous conditions.

They provide high-specification performance, durability and reliability at a lower cost relative to comparable offerings.

In business for over 70 years, BK consists of two business units:

Radio and SaaS.

The Radio business unit designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”).

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.

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.

The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over the public cellular networks.

Our BKRplay branded smartphone application offers multiple services which make the first responder safer and more efficient.

When tethered to our radios, the combined solution offers an enhanced user experience with more unique capability which increases the sales reach of our radios.

We were incorporated under the laws of the State of Nevada on October 24, 1997.

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A copy of any of these materials may be obtained, free of charge, upon request from our investor relations department.

All reports that the Company files with or furnishes to the SEC also are available free of charge via the SEC’s website at http://www.sec.gov.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information filed by the Company at http://www.sec.gov.

All reports that the Company files with or furnishes to the SEC also are available free of charge via the SEC’s website.

Significant Events

During 2021, pursuant to our capital return program, we declared and paid four quarterly dividends.

The dividend declared in December 2021 was $0.03 per share, while the dividends declared in March, July and September 2021 were $0.02 per share.

We have paid twenty-three consecutive quarterly dividends.

During 2022, pursuant to our capital return program, we declared and paid three quarterly dividends.

The dividends declared in April, June and September 2022 were $0.03 per share.

On December 17, 2021, a share repurchase program was authorized under which we may repurchase up to an aggregate of $5 million of its common shares.

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ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.

The net proceeds from the offering have been and will be primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.

The net proceeds from the offering have been used primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.

Industry Overview

LMR communications consist of hand-held (portable) and vehicle-mounted (mobile) two-way radios commonly used by the public safety sector (e.g., police, fire, and emergency responders), military and commercial business concerns (e.g., corporate disaster recovery, hotels, airports, farms, transportation service providers, and construction firms), and government agencies within the U.S.

LMR systems are constructed to meet an organization’s specific communications needs.

The cost of a complete system can vary widely, depending on the size and configuration.

Likewise, the cost of radio sets can range from under $100 for a basic analog portable, to thousands of dollars for a fully featured P-25 digital unit.

Typically, there are no recurring airtime usage charges.

Accordingly, LMR usage patterns are considerably different from those for cellular and other wireless communications tools.

LMR usage often consists of direct radio-to-radio communications outside of the range of a communication network with one-to-many members of a group.

Also, LMR functions with push-to-talk operation (i.e., no call set-up or dialing a phone number is required).

LMR communications often consist of multiple short (five second) transmissions between multiple members of a group.

For the public safety sector, this is known as Mission Critical Voice.

The average useful life of a unit can vary, depending upon the application in which the unit is deployed and its handling.

LMR end user communications devices consist of hand-held (portable) and vehicle-mounted (mobile) two-way radios commonly used by the public safety sector (e.g., police, fire, and emergency medical responders), military and commercial business concerns (e.g., corporate disaster recovery, hotels, airports, farms, transportation service providers, and construction firms), and government agencies within the U.S.

LMR systems are constructed to meet an organization’s specific communications needs typically over an operating area which exceeds the direct mode (radio to radio) communications range.

The cost of a complete LMR system can vary widely, depending on the size and configuration.

Likewise, the cost of end user LMR radios can range from under $100 for a basic analog portable, to thousands of dollars for a fully featured P25 digital unit.

LMR systems are the most widely used and longest-used form of wireless dispatch communications in the U.S., having been first placed in service in 1921.

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This effectively meant that the industry had to migrate to digital technology.

Responding to the mandate, the APCO, the NASTD, the U.S.

Federal Government and the Telecommunications Industry Association (“TIA”), in concert with several LMR manufacturers, including BK, recommended a standard for digital LMR devices that would meet the FCC spectrum-efficiency requirements and provide solutions to several problems experienced primarily by public safety users.

The standard is called P-25.

Responding to the mandate, the Association of Public-Safety Communications Officials-International (“APCO”), the National Association of State Technology Directors (“NASTD”), the United States (“U.S.”) Federal Government and the Telecommunications Industry Association (“TIA”), in concert with several LMR manufacturers, including BK, recommended a standard for digital LMR devices that would meet the FCC spectrum-efficiency requirements and provide solutions to several problems experienced primarily by public safety users.

The standard is called Project 25 (“P25”).

The primary objectives of P25 are to:

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Radio users in the business and industrial market utilize alternative digital technologies (e.g., Digital Mobile Radio) and analog LMR products.

Presently, the market is dominated by one supplier, Motorola Solutions, Inc., which offers a broader range of products than we do, including multiband radios.

Presently, the market is dominated by one supplier, Motorola Solutions, Inc., which offers a broader range of products than we do.

However, the open architecture of the P25 standard is designed to eliminate the ability of one or more suppliers to lock out competitors.

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P25 provides an environment in which users will increasingly have a wider selection of LMR suppliers, including smaller suppliers such as BK.

Description of Products and P-25 CAP Compliance

We design, manufacture, and market wireless communications equipment consisting of two-way LMRs, repeaters, base stations and related components and subsystems.

We do not provide complete, integrated, communications systems and infrastructure.

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

Repeaters expand the range of two-way LMRs, enabling them to communicate over a wider area.

Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal, reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception.

We employ both analog and digital technologies in our products.

Our digital products are compliant with P-25 specifications.

Our P-25 digital products and our analog products function in the VHF (136MHz - 174MHz), UHF (380MHz - 470MHz, 450MHz - 520MHz), and 700-800 MHz bands.

Our P-25 KNG, KNG2 and BKR Series mobile and portable digital radios have been validated under the P-25 CAP as being P-25 compliant and interoperable with the communications network infrastructure of six of our competitors.

The P-25 CAP is a voluntary program that allows LMR equipment suppliers to formally demonstrate their products’ compliance with P-25 requirements.

Today, public safety communications includes both LMR and cellular technologies.

LMR is typically used when mission critical or life safety voice communications is required or in direct mode (radio-to-radio) communications applications.

Cellular (LTE or 5G) is typically used to support broadband data applications in the field.

Since the introduction of broadband data LTE cellular technology by US cellular carriers in 2010, the industry has seen a rapid growth of public safety mobile applications which have made the first responder safer and more efficient.

As cellular coverage continues to improve terrestrially and soon from low earth orbit satellites, the opportunity to further extend mobile applications from public safety vehicles to the first responder’s smartphone opens a new era of services and opportunities.

Description of Radio Products and P25 CAP Compliance

We offer products under the company brand name BK Technologies.

Our KNG Series and BKR Series radios operate in both the P25 digital and analog modes of operations in the Federal Communications Commission (“FCC”) licensed bands;

very high frequency (“VHF”) (136MHz - 174MHz), ultra-high frequency (“UHF”) (380MHz - 470MHz, 450MHz - 520MHz), and 700-800 MHz bands.

Our P25 digital technology is compliant with the Project 25 standard for digital LMR equipment.

P25 has been adopted by representatives from APCO, NASTD, the United States (“U.S.”) Federal Government and other public safety user organizations.

The Department of Homeland Security’s P25 Compliance Assessment Program (“CAP”) is a voluntary program that allows LMR equipment suppliers to formally demonstrate their products’ compliance with P25 requirements.

The purpose of the program is to provide federal, state and local emergency response agencies with evidence that the communications equipment they are purchasing satisfies the P25 standard for performance, conformance and interoperability.

The program is a result of legislation passed by the U.S.

Congress to improve communication interoperability for first responders and is a partnership of the U.S Department of Homeland Security (“DHS”)’s Command, Control and Interoperability Division, the National Institute of Standards and Technology, radio equipment manufacturers and the emergency response community.

Congress to improve communication interoperability for first responders and is a partnership of the U.S Department of Homeland Security (“DHS”)’s Command, Control and Interoperability Division, the National Institute of Standards and Technology (“NIST”), radio equipment manufacturers and the emergency response community.

Both the KNG and BKR series radios have been validated under the CAP as being P25 compliant.

Description of Software-as-a-Service (SaaS) Offerings

BK’s first SaaS service, InteropONE, was introduced in October 2022 at the International Association of Chiefs of Police (IACP) conference.

InteropONE is a Push-to-talk-Over-Cellular (PTTOC) SaaS service which provides emergency incident commanders the capability to dynamically establish group push-to-talk communications between at-large smartphone users directly from their smartphone.

There are several PTTOC services available today from cellular carriers and other service providers.

While these services provide supplementary features and coverage to LMR networks, PTTOC subscribers to a specific service cannot communicate to PTTOC subscribers of another service provider without deployment of pre-configured, complex, and expensive interoperability gateways.

InteropONE addresses this interoperability gap by enabling emergency management personnel to quickly bring together any person with a smartphone regardless of which carrier they subscribed to or whether the smartphone user subscribes to a PTTOC service.

This capability is vitally important for effectively managing unplanned incidents that may involve groups of people that don’t normally collaborate.

The Company expects to launch the service in the first quarter of 2023.

BKRplay is BK’s public safety smartphone application which provides access to the InteropONE service, as well as a host of other capabilities which make the first responder safer and more efficient.

Built around an intelligent interface between a smartphone and our BK radio, BKRplay services deliver an enhanced customer experience which increases the sales reach of our radios.

BKRplay is available to download free of charge from the Google Play or Apple App stores.

Description of Markets

Government and Public Safety Market

The government and public safety market includes military, fire, rescue, law enforcement, homeland security and emergency responder personnel, both domestic and international.

In most instances, BK Radio-branded products serve this market and are sold either directly to end-users or through two-way communications dealers.

Sales to government and public safety users represented substantially all of our sales for 2021 and 2020.

The government and public safety market includes military, fire, rescue, law enforcement, homeland security and emergency medical responder personnel, both domestic and international.

Government and public safety users currently use products that employ either P25 digital or analog technology.

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The evolution of the standard and compliant digital products is explained in the preceding “Industry Overview” section.

Business and Industrial Market

This market includes enterprises of all sizes that require fast and affordable push-to-talk communication among a discrete group of users, such as corporate disaster recovery, hotels, construction firms, schools and transportation service providers.

Users in this market continue to predominantly utilize analog products.

We offer products to this market under the RELM brand name.

Our sales in this market may be direct to end-users or to dealers and distributors who then resell the products.

Our sales to this market represented approximately 3% of our total sales for 2021 and 8% for 2020.

In most instances, our KNG and BKR-branded products serve this market and are sold either directly to end-users or through two-way communications dealers.

The BKRplay smartphone application and InteropONE POC service have been designed to service this market and are expected to be sold directly to end-users or through SaaS resellers.

Sales to government and public safety users represented substantially all of our sales for 2022 and 2021.

Engineering, Research and Development

Our engineering and product development activities are conducted by a team of 31 employees.

Their primary development focus has been the design of a new line of next-generation P-25 digital products, the BKR Series, which are in the process of supplanting our KNG and KNG2 products.

The first product in this line was introduced in August 2020, with additional models planned.

The first models in the KNG line were introduced in 2008 and are included on our primary federal contract vehicles.

Subsequently, we added UHF and 700-800MHz products, as well as P-25 Phase II TDMA (Time Division Multiple Access) trunking.

The KNG2 Series was introduced in 2016.

Our KNG, KNG2, and BKR products also provide encrypted operation for secured communication, GPS location and network authentication capabilities.

Their primary development focus has been the design of a new line of next-generation P25 digital products, the BKR Series, which are in the process of supplanting our KNG products.

The first product in this line, the VHF BKR5000 portable radio was introduced in August 2020.

The second product, the all-band BKR9000 portable radio is scheduled to be released in 2023.

Our KNG and BKR products also provide P25 compliant encrypted operation for secured communication, GPS location and network authentication capabilities.

A segment of our engineering team is responsible for product specifications based on customer requirements and participates in quality assurance activities.

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For 2022 and 2021, our engineering and development expenses were approximately $9.6 million and $8.1 million, respectively.

The increase was primarily attributed to engineering staff expenses, which are focused on new BKR product development initiatives.

The increased expenditures in 2022 were primarily attributed to engineering staff expenses, which are focused on new BKR product development initiatives.

Intellectual Property

We presently have no U.S.

patents in force, however, we have 6 pending U.S.

We presently have two U.S.

patents in force, and we have four pending U.S.

patent applications.

We have registered federal trademarks related to the names “BK Technologies,” “BK Radio” and “Radios for Heroes” and have applied for registration of “BKR.” We rely on trade secret laws and employee and third-party nondisclosure agreements to protect our intellectual property rights.

We have registered U.S.

trademarks related to the names “BK Technologies,” “BK Radio” and “Radios for Heroes” and have applied for registration of “BKR”, “BKRplay”, and “InteropONE”.

We rely on trade secret laws and employee and third-party nondisclosure agreements to protect our intellectual property rights.

Manufacturing and Raw Materials

Our manufacturing strategy is to utilize the highest quality and most cost-effective resources available for every aspect of our manufacturing.

Our Made in America manufacturing strategy is to utilize the highest quality and most cost-effective resources available for every aspect of our manufacturing.

Consistent with that strategy, we have successfully utilized a hybrid of Florida-based internal manufacturing capability in concert with outside contract arrangements for different manufacturing processes.

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Our outside manufacturing contract arrangements have been managed and updated to meet our present requirements, including increasing relationships with American concerns.

This hybrid approach has been instrumental in controlling our product costs, allowing us to be competitive and manage our product costs.

This hybrid approach has been instrumental in ramping up our production capacity while controlling our product costs and managing our product quality.

Contract manufacturers produce various subassemblies and products on our behalf.

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We believe that, in certain circumstances, the use of experienced, high-quality, high-volume manufacturers can provide greater manufacturing specialization and expertise, higher levels of flexibility and responsiveness, and faster delivery of product, all of which contribute toward product cost control.

To ensure that products manufactured by others meet our quality standards, our production and engineering team works closely with our contract manufacturers in all key aspects of the production process.

To ensure that products manufactured by others meet our quality standards, our production and engineering teams work closely with our contract manufacturers in all key aspects of the production process.

We establish product specifications, select the components and, in some cases, the suppliers.

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We rely upon a limited number of both American and foreign suppliers for several key products and components.

Approximately 31% of our material, subassembly and product procurements in 2021 were sourced from seven suppliers.

Approximately 61% of our material, subassembly and product procurements in 2022 were sourced from nine suppliers.

We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements.

In addition, certain components are obtained from single sources.

During 2021 and 2020, our operations were not materially impaired due to delays from single-source suppliers.

However, the absence of a single-source component could potentially delay the manufacture of finished products.

During the first half of 2022, our operations were materially impaired due to delays from single-source suppliers.

We manage the risk of such delays by securing secondary sources, where possible, and redesigning products in response to component shortages or obsolescence.

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Federal Government agencies.

Our products are regulated by the FCC in the U.S.

Our radio products are regulated by the FCC in the U.S.

and similar agencies in other countries where we offer our products.

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Our employees are not represented by any collective bargaining agreements, nor has there ever been a labor-related work stoppage.

We believe our relations with our employees are good.

We strive to develop and maintain good relations with our employees and believe our relations with our employees are good.

The Company complies with all applicable state, local and international laws governing nondiscrimination in employment in every location in which the Company operates.

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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-K

Item 1. Business