What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 129 added, 155 removed, 231 unchanged (55% of the section changed)

3 unchanged sentences

( In thousands, except share data)

September 30,

Current assets:

5 unchanged sentences

Property, plant and equipment, net

Right-of-use (ROU) assets

Operating lease right-of-use (ROU) assets

Deferred tax assets, net

Capitalized product development cost

LIABILITIES AND STOCKHOLDERS’ EQUITY

4 unchanged sentences

Accrued other expenses and other current liabilities

Short-term lease liabilities

Short-term operating lease liabilities

Credit facility

2 unchanged sentences

Total current liabilities

Notes payable, net of current portion

Long-term lease liabilities

Long-term operating lease liabilities

Deferred revenue

9 unchanged sentences

10,000,000 authorized shares;

3,722,970 and 3,686,939 issued and 3,432,890 and 3,396,859 outstanding shares as of September 30, 2023, and December 31, 2022, respectively

3,871,792 and 3,867,082 issued and 3,529,712 and 3,577,002 outstanding shares as of March, 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

Accumulated deficit

Treasury stock, at cost, 290,080 shares as of September 30, 2023, and December 31, 2022, respectively

Treasury stock, at cost, 342,080 and 290,080 shares as of March 31, 2024, and December 31, 2023, respectively

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of products

Selling, general and administrative expenses

Selling, general and administrative

Total operating expenses

2 unchanged sentences

Net interest (expense)

Gain (Loss) on investments

Loss on investments

Gain on disposal of property, plant and equipment

Other (expense)

1 unchanged sentence

Income (loss) before income taxes

Provision for income tax

Provision for income tax (expense)

Net income (loss)

7 unchanged sentences

( In thousands ) ( Unaudited )

Nine Months Ended

September 30,

Three Months Ended

Operating activities

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

Net income (loss)

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

Inventories allowances

Amortization of deferred finance and other assets

Depreciation and amortization

5 unchanged sentences

Prepaid expenses and other current assets

Capitalized product development cost

ROU assets and lease liabilities

4 unchanged sentences

Accrued other expenses and other current liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Investing activities

3 unchanged sentences

Proceeds from common stock issuance

Cash dividends paid

Proceeds from the credit facility and notes payable

11 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Three and Nine Months Ended September 30, 2023, and 2022

Three Months Ended March 31, 2024 and 2023

(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 September 30, 2023, the condensed consolidated statements of operations for the three and nine months ended September 30, 2023, and 2022, and the condensed consolidated statements of cash flows for the three and nine months ended September 30, 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 March 31, 2024, the condensed consolidated statements of operations for the three months ended March 31, 2024, and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024, and 2023, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited.

The condensed consolidated balance sheet as of December 31, 2023, has been derived from the Company’s audited consolidated financial statements at that date.

1 unchanged sentence

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, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 14, 2024.

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

The results of operations for the three months ended March 31, 2024, and 2023, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

2 unchanged sentences

The Company consolidates entities in which it has a controlling financial interest.

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity.

VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest.

A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.

Voting interest entities lack one or more of the characteristics of a VIE.

The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.

When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20 % to 50 %), the Company’s investment is accounted for under the equity method of accounting.

If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected or at cost.

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

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 September 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.

FGF) (“FGF”), which investment was held by the Company in 1347 LP.

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

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

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

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

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

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

As of March 31, 2024, and December 31, 2023, 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.

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

As further discussed in Note 7, the Company recorded the investment according to guidance provided by ASC 820 “Fair Value Measurement”, as the Company did not have a controlling financial interest in, nor exerted significant influence over the activities of FG Holdings LLC.

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

The NAV was calculated using the observable fair value of the underlying stock of FG Financial Group, Inc.

FGF) held by FG Holdings LLC, plus uninvested cash, less liabilities, further adjusted through allocations based on distribution preferences, as defined in operating agreement of FG Holdings LLC.

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

On January 25, 2024, the Company redeemed its Series B common membership interests (the “Interests”) of FG Holdings LLC and withdrew from FG Holdings LLC.

In exchange for its Interests, the Company received 52,000 shares of the Company’s Common Stock, with an approximate fair value of $ 650 on the date of the transaction and recorded a realized loss of $ 91 on the investment during the first quarter of 2024.

The shares received by the Company are held as treasury stock, increasing the total number of treasury shares held by the Company to 342,080 .

The Company incurred operating losses during 2023 and 2022 and reported negative cash flows from operations during 2022.

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

The Company’s operating results were significantly impacted by the worldwide shortages of materials, particularly semiconductors and integrated circuits, extended lead times, and increased costs and inventory levels for certain components in 2022 with improvement to pre-COVID pandemic levels through the fiscal year 2023.

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc.

1 unchanged sentence

(the “Subsidiaries”), entered into an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”), providing for a one-year line of credit with total maximum funding up to $ 15 million (the “Line of Credit”).

On November 22, 2023, the IPSA was renewed for one more year, and is expected to be renewed in November 2024.

The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement (defined below) (see Note 12).

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The Company does not discuss recent pronouncements that are not anticipated to have a material impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial assets, including financial assets arising from revenue transactions, such as accounts receivable.

The new expected credit loss methodology, which is based on a combination of historical experience, current conditions, and reasonable and supportable forecasts, replaced the incurred loss model for measuring and recognizing expected credit losses.

This ASU is effective for the Company for 2023, and management incorporated this guidance into its methodology for estimating its accounts receivable allowances.

Based on historical trends, the financial condition of the Company’s customers, and management’s expectations of economic and industry factors affecting the Company’s customers, the adoption of ASU 2016-13 did not have a material effect on the Company’s consolidated financial statements.

Significant Events and Transactions

On January 31, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (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 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 $ 9,160 and $ 10,666 as of September 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.

On November 6, 2023, the Company entered into a Master Supply Agreement (the “MSA”) and Transition Services Agreement (the “TSA,” and together with the MSA, the “Agreements”) with East West Manufacturing, LLC, a Georgia limited liability company (“East West”).

Pursuant to the Agreements, the Company will transition its West Melbourne, Florida manufacturing activities to East West’s facilities, and East West will become the exclusive third-party manufacturer of the Company’s radio product line under a three-year arrangement.

In connection with the Agreements, the Company and East West entered into a Stock Purchase Agreement (the “SPA”), pursuant to which East West purchased 77,520 shares of the Company’s common stock (the “BKTI Stock”) for an investment of $ 1,000 .

The number of shares of BKTI Stock was determined based upon a price per share of $ 12.90 ,which is equal to the average of the closing price of BKTI Stock on the NYSE American exchange for the 30 most recent trading days prior to November 6, 2023, rounded up to the nearest whole number of shares.

Additionally, East West purchased a warrant (“Warrant”), with a five-year term to purchase up to 135,300 shares of the Company’s common stock at an exercise price per share of $15.00.

The consideration for the Warrant is payment equal to (a) One Million Dollars ($1,000) minus (b) (i) the amount of any outstanding accounts payable by Company to East West and (ii) the amount of any excess or obsolete inventory of Company currently held by East West (solely to the extent not otherwise taken into account pursuant to the MSA or any other agreement between the Company and East West).

The payment included a $ 950 reduction in accounts payable and $ 50 in cash.

The BKTI Stock, the Warrant and the shares issuable upon exercise of the Warrant are deemed to be issued to an accredited investor in a private placement exempt from the registration pursuant to Section 4(a)(2) of the Securities Act of1933, as amended (“Securities Act”).

The Company’s reliance upon Section 4(a)(2) of the Securities Act is based in part upon the following factors:

(a) the issuance of the securities was in connection with isolated private transactions which did not involve any public offering;

(b) there were a limited number of offerees;

(c) there will be no subsequent or contemporaneous public offerings of the Warrant or the shares underlying the Warrant by the Company;

and (d) the negotiations for the sale of the securities took place directly between East West and the Company.

Allowance for Credit Losses

The allowance for credit losses on trade receivables was approximately $ 50 on gross trade receivables of $ 11,517 and $ 7,952 as of March 31, 2024, and December 31, 2023, respectively.

The measurement and recognition of credit losses involves the use of judgment and represents management’s estimate of expected lifetime credit losses based on historical experience and trends, current conditions, and forecasts.

The Company’s assessment of expected credit losses includes consideration of historical credit loss experience, the aging of account balances, customer concentrations, customer credit-worthiness, current and expected economic, market and industry factors affecting the Company’s customers, including their financial condition.

The Company evaluates its experience with historical losses and then applies this historical loss ratio to financial assets with similar characteristics.

Based on information available, management believes the allowance for credit losses as of March 31, 2024 and December 31, 2023 is adequate.

Inventories, Net

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

September 30,

Finished goods

2 unchanged sentences

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

The allowances were approximately $ 1,186 as of September 30, 2023, compared with approximately $ 1,247 as of December 31, 2022.

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

The allowances were approximately $ 1,333 as of March 31, 2024, compared with approximately $ 1,838 as of December 31, 2023.

The Company has recorded $ 21 tax expense for the three months ended March 31, 2024.

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

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 September 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.

As of March 31, 2024, 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 $ 4,212 and $ 3,356 as of September 30, 2023, and December 31, 2022, respectively.

Accordingly, the Company established a valuation allowance of $ 4,398 as of March 31, 2024, and December 31, 2023, 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 September 30, 2023.

Through September 30, 2022, the Company was the sole limited partner of 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 FGF.

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

On September 14, 2022, FG contributed all of the shares of common stock of FGF held by 1347 LP to Holdings LLC, 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 LLC, with an equivalent value.

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

FG Holdings LLC invests in the common and preferred stock of FGF.

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, 2024.

Capitalized Product Development Costs

The Company accounts for the costs of Land Mobile Radio (LMR) multi-band development within its products in accordance with ASC Topic 350-30, “ Intangibles – Goodwill and Other ” , under which certain LMR multi-band radio development costs incurred subsequent to the establishment of technological feasibility are capitalized and amortized over the estimated lives of the related products.

The Company determined technological feasibility was established for multi-band LMR radio products by the introduction of the BKR9000 multi-band portable product to the market in June 2023, as specified by Topic 350-30.

Upon the general release of the LMR multi-band mobile radio product currently in development to customers, development costs for that product will be amortized over periods not exceeding ten years, based on future revenue of the product.

Capitalized product development costs are $ 147 as of March 31, 2024.

On January 25, 2024, the Company redeemed its Series B common membership interests (the “Interests”) of FG Holdings LLC and withdrew from FG Holdings LLC.

The shares received by the Company are held as treasury stock, increasing the total number of treasury shares held by the Company to 342,080 .

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

FG Holdings LLC invests in the common and preferred stock of FG Financial Group, Inc.

FGF) (“FGF”).

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

1 unchanged sentence

Series B common membership interests also receive an additional return equal to 1.5 times the Series A of positive profits described above.

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

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

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

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

There is no defined redemption frequency, and the Company could not redeem or transfer its investment without the prior written consent of FG Holdings LLC' managers, who were related parties.

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

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

As of December 31, 2023, the members and affiliates of FG Holdings LLC 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 Board, is Chief Executive Officer, Co-Founder and Partner of FG and serves as chairman of the board of directors of FG Group Holdings Inc., the entity that is a manager and majority Series B member in FG Holdings LLC.

Cerminara also serves as chairman of the board of directors of FGF.

Kyle Cerminara, who served as a director of the Company and chairman of the Board of Directors until December 14, 2023, is Chief Executive Officer, Co-Founder, and Partner of FG and serves as chairman of the board of directors of FG Group Holdings Inc., the entity that is a majority Series B member in FG Holdings LLC.

Cerminara also serves as a manager of FG Holdings, LLC and chairman of the board of directors of FGF.

Stockholders’ Equity

1 unchanged sentence

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 November 6, 2023, there were 3,745,579 shares of common stock issued and 3,455,499 outstanding, and no shares of preferred stock outstanding.

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

The changes in condensed consolidated stockholders’ equity for the three months ended March 31, 2024, and 2023, are as follows:

Common Stock Shares

Common Stock Amount

Additional Paid-In Capital

Balance as of December 31, 2022

Common stock issued

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Balance as of March 31, 2023

Common stock issued

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Balance as of June 30, 2023

Common stock issued

Balance at December 31, 2023

Common stock issued under restricted stock units

1 unchanged sentence

Share-based compensation expense-restricted stock units

Balance as of September 30, 2023

Treasury shares

Balance at March 31, 2024

Common Stock Shares

Common Stock Amount

Additional Paid-In Capital

Balance as of December 31, 2021

Common stock issued under restricted stock units

Share-based compensation expense-stock options

Share-based compensation expense-restricted stock units

Balance as of 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 as of June 30, 2022

Balance at December 31, 2022

Common stock issued

Common stock issued under restricted stock units

1 unchanged sentence

Share-based compensation expense-restricted stock units

Common stock dividends ($0.03 per share)

Balance as of September 30, 2022

Balance at March 31, 2023

Income (Loss) Per Share

1 unchanged sentence

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

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

Denominator for basic income (loss) per weighted average shares

Effect of dilutive securities:

Options and restricted stock units

Denominator for diluted loss per share weighted average shares

Denominator for diluted income (loss) per weighted average shares

Basic income (loss) per share

Diluted income (loss) per share

Approximately 168,600 and 224,600 stock options and 28,569 and 29,381 restricted stock units for the three and nine months ended September 30, 2023, respectively, and 220,300 stock options and 41,129 restricted stock units for the three and nine months ended September 30, 2022, were excluded from the calculation because they were anti-dilutive.

Approximately 255,500 stock options and 0 restricted stock units for the three months ended March 31, 2024, and 198,300 stock options and 41,129 restricted stock units for the three months ended March 31, 2023, 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 plans.

Related to these programs, the Company recorded non-cash share-based employee compensation expense of $ 44 and $ 163 for the three and nine months ended September 30, 2023, respectively, compared with $ 69 and $ 205 , for the same periods last year.

The Company has 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 $ 55 for the three months ended March 31, 2024, compared with $ 58 for the same period 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.

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

The non-cash share-based employee compensation expense recorded in the three and nine months ended September 30, 2023, was calculated using certain assumptions.

The non-cash share-based employee compensation expense recorded in the three months ended March 31, 2024, 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, 2023.

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

Non-Cash Share-Based Employee Compensation (continued)

A summary of activity under the Company’s stock option plans during the three months ended March 31, 2024, is presented below:

Remaining Contractual

($) Per Share

Intrinsic Value ($)

As of January 1, 2024

Period activity

As of September 30, 2023

As of March 31, 2024

Restricted Stock Units

The Company recorded non-cash restricted stock unit compensation expense of $ 641 and $ 773 for the three and nine months ended September 30, 2023, compared with $ 126 and $ 367 for the same periods last year.

The Company recorded non-cash restricted stock unit compensation expense of $ 121 for the three months ended March 31, 2024, compared with $ 69 for the same period last year.

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

Number of Shares

Weighted Average Grant Date

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Vested and issued

Vested-to be issued

Cancelled/forfeited

Unvested as of September 30, 2023

Unvested as of March 31, 2024

Commitments and Contingencies

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From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business.

On a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings using the latest information available, on a quarterly basis.

Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, it records a liability in its consolidated financial statements.

1 unchanged sentence

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 September 30, 2023.

There were no pending material claims or legal matters as of March 31, 2024.

Commitments and Contingencies (continued)

Purchase Commitments

As of September 30, 2023, the Company had purchase commitments for inventory totaling approximately $ 13,134 .

As of March 31, 2024, the Company had purchase commitments for inventory totaling approximately $ 12,308 .

Significant Customers

Sales to United States government agencies represented approximately $ 12,142 ( 60.5 %) and $ 29,571 ( 51.2 %) of the Company’s net total sales for the three and nine months ended September 30, 2023, respectively, compared with approximately $ 4,196 ( 35.2 %) and $ 11,161 ( 36.4 %), for the same periods last year.

Accounts receivable from agencies of the United States government were $ 4,280 as of September 30, 2023, compared with approximately $ 1,545 at the same date last year.

Sales to United States government agencies represented approximately $ 9,830 ( 53.9 %) of the Company’s net total sales for the three months ended March 31, 2024, compared with approximately $ 8,644 ( 46.2 %) for the same period last year.

Accounts receivable from agencies of the United States government were $ 5,941 as of March 31, 2024, compared with approximately $ 3,412 at the same date last year.

Geopolitical Tensions and COVID-19

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflicts between Russia and Ukraine, and in the Middle East.

Although the length and impact of the ongoing military conflicts is highly unpredictable, the conflict in both of these regions could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

While the impacts of COVID-19 are reflected in our results of operations for 2023 and 2022 respectively, we cannot separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter.

The ultimate duration and impact of the COVID-19 pandemic on our supply chain and geopolitical factors to our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the geopolitical factors on the global economy, which are uncertain and cannot be predicted at this time.

Credit Facilities

1 unchanged sentence

On November 28, 2022, the Subsidiaries and Alterna entered into a rider to the IPSA, to modify the IPSA 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, is scheduled to be renewed in November 2023, unless canceled by either party, as provided in the agreement.

The IPSA, which provides for a one-year Line of Credit with a maximum capacity of up to $ 15 million, unless canceled by either party, as provided in the agreement, was renewed in November 2023.

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

The effective borrowing rate under the IPSA was 10.35 % as of September 30, 2023.

Interest and related servicing fees for the three months and nine months ended September 30, 2023, were approximately $ 153 and $ 476 , respectively.

The effective borrowing rate under the IPSA was 10.35 % as of March 31, 2024.

Interest and related servicing fees for the three months ended March 31, 2024, was approximately $ 201 .

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.

1 unchanged sentence

The Company accounts for the transfers of receivables as a secured borrowing due to the Company’s continuing involvement with the accounts receivable.

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.

(“JPMC”), which subsequently expired on January 31, 2023 .

During the three and nine months ended September 30, 2023, the Company transferred receivables having an aggregate face value of $17.5 and $52.5 million, respectively, to the conduit and received proceeds of $18.2 and $58.9 million, respectively, which also include draws on available inventory funding.

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

As of September 30, 2023, the outstanding borrowings under the IPSA were approximately $ 6.5 million and the outstanding principal amount of receivables transferred under the IPSA amounted to $ 7.0 million.

The Company used approximately $ 4.5 million of IPSA funding to repay the outstanding balance of the previous credit facility with JP Morgan Chase Bank, N.A.

(“JPMC”), which expired on January 31, 2023 .

During the three months ended March 31, 2024, the Company transferred receivables having an aggregate face value of $ 17.5 million to the conduit and received proceeds of $ 15.0 million, which also includes draws on available inventory funding.

There were no losses incurred on these transfers during the three months ended March 31, 2024.

As of March 31, 2024, the outstanding borrowings under the IPSA were approximately $ 7.3 million and the outstanding principal amount of receivables transferred under the IPSA amounted to $ 11.0 million.

Debt (continued)

Notes Payable

7 unchanged sentences

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

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

September 30,

Remaining three months of 2023

The following table summarizes the notes payable principal repayments subsequent to March 31, 2024:

Remaining nine months of 2024

Total payments

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

The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception.

The Company accounts for its leasing arrangements in accordance with Topic 842, “Leases.” The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

4 unchanged sentences

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease.

The lease has the expiration date of September 30, 2027 .

The lease has an expiration date of September 30, 2027 .

Annual rental, maintenance, and tax expenses for the facility are approximately $ 491 .

1 unchanged sentence

Annual rental, maintenance, and tax expenses for the facility will be approximately $ 196 for the first year, increasing by approximately 3% for each subsequent 12-month period.

Leases (continued)

Lease costs consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

2 unchanged sentences

Total lease cost

Leases (continued)

Supplemental cash flow information related to leases was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

4 unchanged sentences

Other information related to operating leases was as follows:

September 30,

Weighted average remaining lease term (in years)

Weighted average discount rate

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

September 30,

Remaining three months of 2023

Maturity of lease liabilities as of March 31, 2024, were as follows:

Remaining nine months of 2024

Total payments

1 unchanged sentence

Total present value of lease liability

Subsequent Events

On October 12, 2023, the Company’s President, Timothy A.

Vitou, retired.

In connection with Mr.

Vitou’s retirement, the Company and Mr.

Vitou entered into a Separation Agreement and General Release (“Separation Agreement”).

Pursuant to the Separation Agreement, the Company will pay to Mr.

Vitou $283,250, which amounts to twelve months of compensation at Mr.

Vitou’s current normal base pay rate, less taxes, social security and other required withholdings, to be paid in bi-weekly increments in accordance with the Company’s regular payroll practices .

Pursuant to the Separation Agreement, Mr.

Vitou granted a general release to the Company from any and all claims (known or unknown), rights, or demands that Mr.

Vitou has or may have against the Company and other released parties described in the Separation Agreement.

On October 13, 2023, the Company granted 1,920 restricted stock units to Joshua Horowitz, third party, for strategic advisory service compensation.

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

On November 6, 2023, the Company entered into a Master Service Agreement (the “EW MSA”) with East West Manufacturing, LLC, a Georgia limited liability company (“EW”), for the manufacturing production of certain land mobile radio (“LMR”) products and accessories.

In connection with the EW MSA, the Company and EW also entered into a Transition Services Agreement to govern the transition of manufacturing production to EW.

Also in connection with the EW MSA, the Company and EW entered into a Stock Purchase Agreement, pursuant to which EW purchased 77,520 shares of Common Stock with a value equal to $ 1,000,000 .

The number of shares of stock was determined based upon a price per share of $ 12.90 , which is equal to the average of the closing price of the Common Stock on the NYSE American exchange for the 30 most recent trading days prior to November 6, 2023, rounded up to the nearest whole number of shares.

Additionally, EW purchased a warrant (“Warrant”), with a five-year term to purchase up to 135,300 shares of Common Stock at an exercise price per share of $ 15.00 .

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