What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-16 compared with 2022-03-17 · 30 added, 33 removed, 301 unchanged (17% of the section changed)

Risk Factors.

Various portions of this report contain forward-looking statements that involve risks and uncertainties.

1 unchanged sentence

We undertake no obligation to revise or update any forward‑looking statements contained herein to reflect subsequent events or circumstances or the occurrence of unanticipated events.

We face many risks and uncertainties, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in BK.

We describe certain of these risks and uncertainties in this section, although we may be adversely affected by other risks or uncertainties that are not presently known to us, that we have failed to appreciate, or that we currently consider immaterial.

These risk factors should be read in conjunction with the MD&A in Part II, Item 7 of this Annual Report on Form 10-K, and the Consolidated Financial Statements and notes thereto.

This Annual Report on Form 10-K is qualified in its entirety by these risk factors.

We depend on the success of our LMR product line

92 unchanged sentences

Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.

The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and could further materially adversely affect, our business, financial condition, results of operations and cash flow.

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

The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020.

Any outbreak or worsening of an outbreak of contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations, financial condition and results of operations.

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

In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing.

6 unchanged sentences

We also implemented workforce reductions during the third quarter of 2020 and suspended the employer’s 401K match.

The impact to our business in 2021, particularly customer orders, is not known with any certainty.

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

However, we received record customer orders of approximately $71 million in 2022.

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

8 unchanged sentences

However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

The impact of any future outbreak of contagious disease, or a worsening or resurgence of COVID-19, is not readily ascertainable, is uncertain and cannot be predicted, but could have an adverse impact on the Company’s business, financial condition and results of operations.

We carry substantial quantities of inventory, and inaccurate estimates of necessary inventory could materially harm our business, financial condition and operating results

10 unchanged sentences

We may invest part of our cash balances in public companies.

For example, as of December 31, 2021, we held 477,282 shares of the common stock of FG Financial Group, Inc.

(formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq:

For example, as of December 31, 2022, we held an investment interest in the equity of FG Financial Group, Inc.

FGF) (“FGF”).

through FG Financial Holdings, LLC (“FG Holdings”).

These types of investments carry more risk than holding our cash balances as bank deposits or, for example, such conservative investments as treasury bonds or money market funds.

8 unchanged sentences

As of December 31, 2022, FG and its affiliates, owners and managers together hold approximately 16% of the Company’s outstanding shares of common stock.

Kyle Cerminara, Chief Executive Officer, Co-Founder, and Partner of FG and Chairman of Ballantyne Strong, Inc., is a member of our Board of Directors.

Kyle Cerminara, Chief Executive Officer, Co-Founder, and Partner of FG, is a member of our Board of Directors.

As a result of its ownership position FG could exert influence over matters submitted for stockholder approval, including the election of our directors and other corporate actions such as significant stock issuances, reorganizations, mergers and asset sales, and over our business, operations and management, including our strategic plans for the business.

26 unchanged sentences

From time to time, we also have cash in financial institutions in excess of federally insured limits, which funds might be at risk of loss should such financial institutions face financial difficulties.

The terms of the credit agreement with JPMorgan Chase Bank, N.A., contain restrictive covenants that may limit our operating flexibility

On January 13, 2020, BK Technologies, Inc., our wholly-owned operating subsidiary (“BK Technologies, Inc.”), executed Credit Agreement (the “Original Credit Agreement”) with JPMorgan Chase Bank, N.A.

(“JPMC”) and a Line of Credit Note in favor of JPMC in an aggregate principal amount of up to $5,000,000 (the “Original Note”), each dated as of January 13, 2020.

The Original Note had a maturity date of January 31, 2021.

On January 26, 2021, BK Technologies, Inc.

and JPMC entered into a Note Modification Agreement (the “ Modification ”), to modify the Original Note to, among other things, extend the maturity date of the Original Note to January 31, 2022.

Then, on January 21, 2022, BK Technologies, Inc.

and JPMC entered into a First Amendment to Credit Agreement (the “Amendment”) to, among other things, extend the maturity date to January 31, 2023.

Also on January 31, 2022, BK Technologies, Inc.

delivered to JPMC a related Line of Credit Note (the “Note” and collectively with the Original Credit Agreement, as modified by the Modification and the Amendment , the “Credit Agreement”), in replacement, renewal and extension of the Original Note, as previously modified, which has a maturity date of January 31, 2023.

The Credit Agreement provides for a revolving line of credit through January 31, 2023.

The Credit Agreement contains limitations and covenants that may limit BK Technologies, Inc.’s ability to take certain actions, including pay dividends to us, enter into liens, indebtedness, loans and guarantees, acquisitions and mergers, or sales of assets, and engage in stock repurchases.

It also contains one financial covenant requiring BK Technologies, Inc.

to maintain a tangible net worth of at least $20.0 million at any fiscal quarter end.

We are a guarantor of BK Technologies, Inc.’s obligations under the Credit Agreement.

Events beyond our control, including changes in general business and economic conditions, may impair BK Technologies, Inc.’s ability to comply with these covenants, and a breach of any covenants may result in an event of default.

Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

BK Technologies, Inc.

may be unable to repay any accelerated indebtedness, and we may not be able to repay any indebtedness pursuant to the guarantee or refinance any accelerated indebtedness on favorable terms, or at all.

In general, the occurrence of any event of default under the Credit Agreement could have an adverse effect on our financial condition or results of operations.

The terms of the credit agreement with Alterna Capital Solutions, LLC contains restrictive covenants that may limit our operating flexibility or that of our subsidiaries.

On November 22, 2022, our subsidiaries, BK Technologies, Inc.

and RELM Communications, Inc.

(the “Subsidiaries”), entered into an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”) 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 IPSA line of credit is 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 used funds obtained from the IPSA line of credit to replace the existing JPMC Credit Agreement and for working capital for the business.

The IPSA also has covenants concerning additional financing and indebtedness restrictions.

The IPSA provides for the payment of fees by the Subsidiaries and includes customary representations and warranties, indemnification provisions, covenants and events of default.

Subject in some cases to cure periods, amounts outstanding under the IPSA may be accelerated for typical defaults including, but not limited to, the failure to make payments when due, the failure to perform any covenant, the inaccuracy of representations and warranties, the occurrence of debtor-relief proceedings, and the occurrence of unpermitted liens against the purchased accounts receivable and collateral.

The Subsidiaries have granted Alterna a security interest in all of their respective personal property to secure their obligations under the IPSA.

The Subsidiaries entered into a cross-guarantee, guaranteeing each other’s obligations under the IPSA, and BK also provided a guaranty of the Subsidiaries’ obligations under the IPSA.

In general, the IPSA could have an adverse effect on our financial condition or results of operations.

We depend on a limited number of manufacturers and on a limited number of suppliers of components to produce our products, and the inability to obtain adequate and timely delivery of supplies and manufactured products could have a material adverse effect on us

6 unchanged sentences

In addition, our dependence on limited and sole source suppliers of components involves several risks, including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component quality.

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.

33 unchanged sentences

We rely on a combination of contract, trademark and trade secret laws to protect our intellectual property rights, and failure to effectively utilize or successfully assert these rights could negatively impact us

Currently, we have 6 pending applications for US patents.

Currently, we have two approved and four pending applications for US patents.

We have several trademarks related to the names “BK Technologies,” “BK Radio”, and “Radios for Heroes”.

We have applied for a trademark related to the name “BKR.” As part of our confidentiality procedures, we generally enter into nondisclosure agreements with our employees, distributors and customers and limit access to and distribution of our proprietary information.

We have applied for trademarks related to the names “BKR”, “BKRplay”, and “InteropONE”.

As part of our confidentiality procedures, we generally enter into nondisclosure agreements with our employees, distributors and customers and limit access to and distribution of our proprietary information.

We also rely on trade secret laws to protect our intellectual property rights.

85 unchanged sentences

As a result, we rely on cash flows from subsidiaries to meet our obligations, including payment of dividends to our stockholders.

Additionally, our subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to BK Technologies Corporation, as the new holding company;

for instance, the Credit Agreement permits BK Technologies, Inc.

to pay dividends to us only if there is no default, and the payment of the dividends would not result in a default, under the Credit Agreement.

The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility.

3 unchanged sentences

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 1A. Risk Factors