What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-04 · 94 added, 62 removed, 276 unchanged (36% of the section changed)

36 unchanged sentences

10,000,000 authorized shares;

18,448,587 and 18,434,697 issued and 16,998,187 and 16,984,297 outstanding shares at March 31, 2023 and December 31, 2022, respectively

3,694,298 and 3,686,939 issued and 3,404,218 and 3,396,859 outstanding shares at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

Treasury stock, at cost, 1,450,400 shares at March 31, 2023, and December 31, 2022, respectively

Treasury stock, at cost, 290,080 shares at June 30, 2023, and December 31, 2022, respectively

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Cost of products

6 unchanged sentences

Other expense

Total other (expense), net

Total other (expense) income

Loss before income taxes

Provision for income tax (expense)

Provision for income tax

Net loss per share-basic and diluted:

4 unchanged sentences

( In thousands ) ( Unaudited )

Three Months Ended

Six Months Ended

Operating activities

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

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

Inventories allowances

Amortization of deferred finance and other assets

Depreciation and amortization

20 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

8 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Three and Six Months Ended June 30, 2023 and 2022

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

1 unchanged sentence

Basis of Presentation

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited.

The condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the three and six months ended June 30, 2023 and 2022, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited.

The condensed consolidated balance sheet at December 31, 2022, has been derived from the Company’s audited consolidated financial statements at that date.

2 unchanged sentences

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, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.

The results of operations for the three months ended March 31, 2023, and 2022, are not necessarily indicative of the operating results for a full year.

The results of operations for the three and six months ended June 30, 2023, and 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

11 unchanged sentences

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.

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, investments, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities.

As of March 31, 2023, and December 31, 2022, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

As of June 30, 2023, and December 31, 2022, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

14 unchanged sentences

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.

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

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

Reverse Stock Split

On March 23, 2023, the board of directors (the “Board”) of the Company approved a one (1)-for-five (5) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”), and on April 4, 2023, the Company filed with the Secretary of State of the State of Nevada a Certificate of Change to its Articles of Incorporation to effect the Reverse Stock Split.

The Reverse Stock Split became effective at 5:00 p.m.

Eastern Time on April 21, 2023.

The Company executed the one (1) for five (5) reverse stock split of its issued and outstanding common stock, par value $ 0.60 per share.

Shares of common stock underlying outstanding stock options and restricted stock units were proportionately reduced, and the respective exercise prices were proportionately increased in accordance with the terms of the agreements governing such securities.

Accordingly, all shares and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split.

Recent Accounting Pronouncements

2 unchanged sentences

On January 31, 2023 the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (“ThinkEquity” or the “Sales Agent”), relating to the sale of shares of our common stock.

In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,225,352 shares of our common stock from time to time up to an aggregate offering price of $ 15,000,000 through or to the Sales Agent, acting as sales agent or principal.

In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock from time to time up to an aggregate offering price of $ 15,000,000 through or to the Sales Agent, acting as sales agent or principal.

After adjusting for the Reverse Stock Split, the number of shares issuable under the terms of the Sales Agreement is 845,070 shares of our common stock.

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

Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $ 50 on gross trade receivables of $ 10,840 and $ 10,666 at March 31, 2023, and December 31, 2022, respectively.

The allowance for doubtful accounts on trade receivables was approximately $ 50 on gross trade receivables of $ 9,239 and $ 10,666 at June 30, 2023, and December 31, 2022, 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.

1 unchanged sentence

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

March 31, 2023

June 30, 2023

December 31, 2022

3 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 $ 1,161 at March 31, 2023, compared with approximately $ 1,247 at December 31, 2022.

The Company has recorded no tax expense or benefit for the three months ended March 31,2023 and 2022.

The allowances were approximately $ 1,161 at June 30, 2023, compared with approximately $ 1,247 at December 31, 2022.

The Company has recorded no tax expense or benefit for the three and six months ended June 30, 2023, and 2022.

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 March 31, 2023, 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 June 30, 2023, 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 $ 3,474 and $ 3,356 as of March 31, 2023 and December 31, 2022, respectively.

Accordingly, the Company established a valuation allowance of $ 4,134 and $ 3,356 as of June 30, 2023 and December 31, 2022, 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 March 31, 2023.

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, 2023.

Through September 30, 2022, the Company was the sole limited partner of FGI 1347 Holdings’ LP (“1347 LP”).

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

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

1 unchanged sentence

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

On September 14, 2022, FG contributed all of the outstanding shares of common stock of FGF (including those shares held by 1347 LP) to FG Holdings, with an approximate value of $ 945 , based on the published price of FGF stock at the time of contribution, in exchange for Series B common membership interests of FG Holdings, with an equivalent value.

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

The investment in the Series B common membership 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.

6 unchanged sentences

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

As of March 31, 2023, the members and affiliates of FG Holdings beneficially owned in the aggregate 5,619,111 shares of FGF’s common stock, representing approximately 60.3 % of FGF’s outstanding shares.

As of June 30, 2023, the members and affiliates of FG Holdings beneficially owned in the aggregate 5,666,111 shares of FGF’s common stock, representing approximately 55 % 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.

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 FG Group Holdings 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 months ended March 31, 2023, and 2022, are as follows:

Effective on April 21, 2023, the Company filed a Certificate of Change to the Articles of Incorporation to effect the Reverse Stock Split (see Note 1).

All share and per share information in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.

As of July 31, 2023, there were 3,694,298 shares of common stock issued and 3,404,218 outstanding, and no shares of preferred stock outstanding.

The changes in condensed consolidated stockholders’ equity for the three and six months ended June 30, 2023, and 2022, are as follows:

Common Stock Shares

1 unchanged sentence

Additional Paid-In Capital

Accumulated Deficit

Treasury Stock

Balance at December 31, 2022

4 unchanged sentences

Balance at March 31, 2023

Common stock issue

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Balance at June 30, 2023

Common Stock Shares

6 unchanged sentences

Balance at March 31, 2022

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 June 30, 2022

Loss Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Net loss for basic and diluted earnings per share

4 unchanged sentences

Basic and diluted loss per share

Approximately 991,500 stock options and 205,644 restricted stock units for the three months ended March 31, 2023, and 909,000 stock options and 137,055 restricted stock units for the three months ended March 31, 2022, were excluded from the calculation because they were anti-dilutive.

Approximately 226,900 stock options and 41,129 restricted stock units for the three and six months ended June 30, 2023, and 181,800 stock options and 27,411 restricted stock units for the three and six months ended June 30, 2022, were excluded from the calculation because they were anti-dilutive.

Non-Cash Share-Based Employee Compensation

Stock Options

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 $ 58 for the three ended March 31, 2023, compared with $ 85 , for the same period last year.

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

Related to these programs, the Company recorded non-cash share-based employee compensation expense of $ 61 and $ 119 for the three and six months ended June 30, 2023, respectively, compared with $ 51 and $ 136 , 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 months ended March 31, 2023, was calculated using certain assumptions.

The non-cash share-based employee compensation expense recorded in the three months ended June 30, 2023, 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, 2022.

A summary of activity under the Company’s stock option plans during the three months ended March 31, 2023, is presented below:

A summary of activity under the Company’s stock option plans during the three months ended June 30, 2023, is presented below:

Stock Options

2 unchanged sentences

Grant Date Fair Value ($) Per Share

Aggregate Intrinsic Value ($)

As of January 1, 2023

Period activity

As of March 31, 2023

As of June 30, 2023

Restricted Stock Units

The Company recorded non-cash restricted stock unit compensation expense of $ 69 for the three months ended March 31, 2023, compared with $ 70 for the same period last year.

The Company recorded non-cash restricted stock unit compensation expense of $ 63 and $ 132 for the three and six months ended June 30, 2023, compared with $ 171 and $ 241 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:

5 unchanged sentences

Cancelled/forfeited

Unvested at March 31, 2023

Unvested at June 30, 2023

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 March 31, 2023.

Covid 19 and Geopolitical Tension

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 the impact of inflation related to supply chain and labor costs, interest rates, monetary policy and geopolitical tension.

There were no pending material claims or legal matters as of June 30, 2023.

Purchase Commitments

As of March 31, 2023, the Company had purchase commitments for inventory totaling approximately $ 15,533 .

As of June 30, 2023, the Company had purchase commitments for inventory totaling approximately $ 13,390 .

Significant Customers

Sales to United States government agencies represented approximately $ 8,644 ( 46.2 %) of the Company’s net total sales for the three months ended March 31, 2023, compared with approximately $ 1,650 ( 25.1 %) for the same period last year.

Accounts receivable from agencies of the United States government were $ 3,412 as of March 31,2023 compared with approximately $ 1,314 at the same date last year.

Sales to United States government agencies represented approximately $ 8,785 ( 46.2 %) and $ 17,429 ( 46.2 %) of the Company’s net total sales for the three and six months ended June 30, 2023, respectively, compared with approximately $ 5,316 ( 43.9 %) and $ 6,965 ( 37.3 %), for the same periods last year.

Accounts receivable from agencies of the United States government were $ 2,412 as of June 30, 2023, compared with approximately $ 2,554 at the same date last year.

Credit Facilities

3 unchanged sentences

On November 28, 2022, the Subsidiaries and Alterna entered into a rider to the IPSA, to modify the agreement to, among other things, provide a credit facility for up to 75% of net orderly liquidation value of inventory, not to exceed 100% of the eligible accounts receivable balance .

The IPSA, which provides for a one-year line of credit with a maximum capacity of up to $ 15 million (the “Line of Credit”), is scheduled to be renewed in November 2023, unless canceled by the mutual consent of the parties.

The Line of Credit bears an interest rate of Prime plus 1.85 %.

The effective borrowing rate under the IPSA was 9.85 % as of March 31, 2023.

Interest and related servicing fees for the three months ended March 31, 2023, were approximately $ 0.2 million.

The effective borrowing rate under the IPSA was 10.1 % as of June 30, 2023.

Interest and related servicing fees for the three months and six months ended June 30, 2023, were approximately $ 173 and $ 322 , respectively.

Under the arrangement, the Company may transfer eligible short-term trade receivables to the conduit, with full recourse, on a daily basis in exchange for cash.

2 unchanged sentences

The Company used approximately $ 4.5 million of IPSA funding to repay the outstanding balance of the credit facility with JP Morgan Chase Bank, N.A., which subsequently expired on January 31, 2023 .

During the three months ended March 31, 2023, the Company transferred receivables having an aggregate face value of $24.0 million to the conduit in exchange for proceeds of $20.8 million, of which $19.9 million was funded by re-invested collections.

There were no losses incurred on these transfers during the three months ended March 31, 2023 .

During the three and six months ended June 30, 2023, the Company transferred receivables having an aggregate face value of $18.0 and $35.0 million, respectively, to the conduit in exchange for net proceeds of $19.8 and $40.6 million, respectively, of which $20.2 and $40.1 million, respectively, were funded by re-invested collections.

There were no losses incurred on these transfers during the three and six months ended June 30, 2023 .

The IPSA matures on November 22, 2023.

At March 31, 2023, the outstanding borrowings under this credit facility were approximately $ 7.0 million and the outstanding principal amount of receivables transferred under this facility amounted to $ 7.2 million.

At June 30, 2023, the outstanding borrowings under this credit facility were approximately $ 6.6 million and the outstanding principal amount of receivables transferred under this facility amounted to $ 7.2 million.

Notes Payable

1 unchanged sentence

The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement.

This note payable was paid in full on June 27, 2023.

On September 25, 2019, BK Technologies, Inc., a wholly owned subsidiary of the Company, and U.S.

3 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 %.

The following table summarizes the notes payable principal repayments subsequent to March 31, 2023:

March 31, 2023

Remaining nine months of 2023

The following table summarizes the notes payable principal repayments subsequent to June 30, 2023:

June 30, 2023

Remaining six months of 2023

Total payments

13 unchanged sentences

Three Months Ended

March 31, 2023

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Operating lease cost

4 unchanged sentences

Three Months Ended

March 31, 2023

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

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

4 unchanged sentences

Other information related to operating leases was as follows:

March 31, 2023

June 30, 2023

Weighted average remaining lease term (in years)

Weighted average discount rate

Maturity of lease liabilities as of March 31, 2023, were as follows:

March 31, 2023

Remaining nine months of 2023

Maturity of lease liabilities as of June 30, 2023, were as follows:

June 30, 2023

Remaining six months of 2023

Total payments

1 unchanged sentence

Total present value of lease liability

Subsequent events

On March 23, 2023, the Company’s Board of Directors approved a one (1)-for-five (5) reverse stock split of the Company’s authorized and outstanding shares of common stock, par value $ 0.60 per share (the “Common Stock”, (the “Reverse Stock Split”).

The Reverse Stock Split is being effected because the Company believes that the anticipated increase in the market price of the Common Stock resulting from the Reverse Stock Split will benefit the Company and its stockholders.

The Reverse Stock Split will become effective on April 21, 2023, at 5:00 p.m., Eastern Time.

The Common Stock should begin trading on a split-adjusted basis at the commencement of trading on April 24, 2023, under the Company’s existing trading symbol, “BKTI.” Due to the effective date of April 21, 2023, the condensed consolidated financial statements have not been adjusted for the effect of the stock split.

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