BK Technologies Corporation (NYSE:BKTI) Q3 2021 Earnings Conference Call November 11, 2021 9:00 AM ET Company Participants Timothy Vitou - President John Suzuki - CEO William Kelly - CFO Conference Call Participants Orin Hirschman - AIGH Investment Partners LP Operator Good morning, ladies and gentlemen, and welcome to the BK Technologies Corporation Conference Call for the Third Quarter 2021. This call is being recorded. All participants have been placed in a listen-only mode. Following, management’s remar ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-32644 BK TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) | --- | --- | --- | --- | ...

| --- | --- | --- | --- | |-------|-------|-------|-------| | | | | | | | | | | DISCLOSURES Forward-Looking Statements This presentation contains certain forward-looking statements that are made pursuant to the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern the Company's operations, economic performance and financial condition and are based largely on the Company's beliefs and expectations. These statements can be identified by forw ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-32644 BK TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) Nevada (State or other jurisdic ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-32644 BK TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) Nevada 83-4064262 (State or ot ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) The company designs and manufactures two-way land mobile radio (LMR) equipment for the public safety and government sectors - The company provides two-way land mobile radios (LMRs), repeaters, and base stations for the government, public safety, and commercial markets[7](index=7&type=chunk) - In August 2020, the company introduced the **BKR 5000 portable radio**, the first model in its new BKR Series of APCO Project 25 products[10](index=10&type=chunk)[21](index=21&type=chunk) Sales by Market Segment (FY 2020 vs. FY 2019) | Market Segment | 2020 Sales (%) | 2019 Sales (%) | | :--- | :--- | :--- | | Government and Public Safety | 92% | 93% | | Business and Industrial | 8% | 7% | - Sales to the U.S. Government constituted approximately **51% of total sales in 2020**, up from 49% in 2019[26](index=26&type=chunk) - The backlog of unshipped customer orders was approximately **$5.9 million** as of December 31, 2020, a decrease from $7.2 million at the end of 2019[27](index=27&type=chunk) Engineering & Development Expenses | Year | Expense (in millions) | | :--- | :--- | | 2020 | $7.9 | | 2019 | $9.8 | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from product line dependency, intense competition, government contracts, and supply chain vulnerabilities - The company's success is highly dependent on its LMR products and the market acceptance of its **new BKR Series product line**[38](index=38&type=chunk) - The company faces intense competition from larger suppliers like **Motorola Solutions, Inc.**, which has a dominant market share[39](index=39&type=chunk) - Approximately **51% of 2020 sales were to the U.S. Government**, creating risk associated with government spending and budget processes[42](index=42&type=chunk) - The **COVID-19 pandemic** could materially adversely affect business through supply chain disruptions and reduced customer spending[45](index=45&type=chunk) - The company relies on a limited number of suppliers, with **65% of material procurements in 2020 sourced from six suppliers**[57](index=57&type=chunk) - The largest stockholder, FG and its affiliates, holds approximately **34.3% of the company's common stock**, giving it significant influence[51](index=51&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[73](index=73&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) The company leases all its facilities and does not own any real estate - The company leases all its facilities, including its primary **54,000 sq. ft.** industrial space in West Melbourne, Florida[74](index=74&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company had no pending material claims or legal actions as of year-end 2020 - There were no pending material claims or legal matters as of December 31, 2020[75](index=75&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[75](index=75&type=chunk) Part II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE American, pays a quarterly dividend, and completed its repurchase program in April 2020 - The company's common stock is traded on the NYSE American under the symbol **"BKTI"**[79](index=79&type=chunk) - The company pays quarterly cash dividends, with four dividends of **$0.02 per share** paid in 2020[10](index=10&type=chunk)[82](index=82&type=chunk) Issuer Purchases of Equity Securities (Jan-Apr 2020) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | Jan 2020 | 36,155 | 2.94 | | Feb 2020 | 20,963 | 2.72 | | Mar 2020 | 44,695 | 1.72 | | Apr 2020 | 16,129 | 1.63 | | **Total** | **117,942** | **2.25** | - The stock repurchase program was **completed in April 2020**[84](index=84&type=chunk) [Selected Financial Data](index=22&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not required as the company is a smaller reporting company - Not required for smaller reporting companies[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company achieved a significant turnaround in 2020 with 10.1% sales growth and a return to profitability Financial Performance Summary (FY 2020 vs. FY 2019) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Sales | $44.1M | $40.1M | +10.1% | | Gross Profit Margin | 41.0% | 39.0% | +2.0 p.p. | | SG&A Expenses | $17.0M | $20.0M | -15.0% | | Operating Income (Loss) | $1.0M | ($4.4M) | +$5.4M | | Net Income (Loss) | $0.25M | ($2.6M) | +$2.85M | | EPS (diluted) | $0.02 | ($0.21) | +$0.23 | - Sales growth in 2020 was primarily attributed to orders from **federal and state public safety agencies** and initial sales from the new BKR 5000 radio[87](index=87&type=chunk)[92](index=92&type=chunk) - The company implemented cost-reduction measures, including an **18% workforce reduction** in Q2 2020, which incurred approximately $221,000 in severance costs[89](index=89&type=chunk)[102](index=102&type=chunk) - In April 2020, the company received a **$2.2 million PPP loan** but repaid it in full the same month out of caution[12](index=12&type=chunk)[102](index=102&type=chunk) - Cash provided by operating activities was **$4.4 million** in 2020, a significant improvement from $2.5 million used in 2019, largely due to a **$4.1 million decrease in inventory**[100](index=100&type=chunk) - The company renewed its **$5.0 million revolving line of credit**, with no borrowings outstanding as of year-end 2020[102](index=102&type=chunk)[104](index=104&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required as the company is a smaller reporting company - Not required for smaller reporting companies[116](index=116&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the Consolidated Financial Statements and auditor's report included in the filing - Refers to the Consolidated Financial Statements included in the report[116](index=116&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=56&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[204](index=204&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2020 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2020[205](index=205&type=chunk) - Management assessed internal control over financial reporting using the COSO framework (2013) and concluded it was **effective** as of December 31, 2020[206](index=206&type=chunk) [Other Information](index=56&type=section&id=Item%209B.%20Other%20Information) A board member resigned in March 2021 with no reported disagreements - Lewis M. Johnson, a board member, resigned effective March 2, 2021, with **no reported disagreement** with the company[208](index=208&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=56&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the 2021 proxy statement - Required information is incorporated by reference from the definitive proxy statement for the 2021 annual stockholders' meeting[210](index=210&type=chunk) [Executive Compensation](index=57&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the 2021 proxy statement - Required information is incorporated by reference from the definitive proxy statement for the 2021 annual stockholders' meeting[212](index=212&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=57&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2021 proxy statement - Required information is incorporated by reference from the definitive proxy statement for the 2021 annual stockholders' meeting[213](index=213&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=57&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transaction information is incorporated by reference from the 2021 proxy statement - Required information is incorporated by reference from the definitive proxy statement for the 2021 annual stockholders' meeting[214](index=214&type=chunk) [Principal Accounting Fees and Services](index=57&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on accounting fees is incorporated by reference from the 2021 proxy statement - Required information is incorporated by reference from the definitive proxy statement for the 2021 annual stockholders' meeting[215](index=215&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=58&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed with the report, omitting inapplicable financial schedules - Lists all exhibits filed with the Form 10-K, including corporate governance documents, incentive plans, and material agreements[218](index=218&type=chunk)[219](index=219&type=chunk) - All financial statement schedules have been omitted because they are inapplicable or the information is included elsewhere[226](index=226&type=chunk) [Form 10-K Summary](index=60&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a Form 10-K summary - None[227](index=227&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=33&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion with two critical audit matters identified - The auditor issued an **unqualified (clean) opinion** on the consolidated financial statements[119](index=119&type=chunk) - Critical Audit Matters identified were: 1) **Allowance for slow-moving and obsolete inventory**, and 2) **Assessment of realizability of deferred tax assets**[123](index=123&type=chunk)[124](index=124&type=chunk)[127](index=127&type=chunk) [Consolidated Balance Sheets](index=35&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $37.5 million, with a significant inventory reduction offset by increased cash and receivables Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $6,826 | $4,676 | | Inventories, net | $9,441 | $13,513 | | Total current assets | $24,611 | $23,886 | | **Total assets** | **$37,490** | **$37,940** | | **Liabilities & Equity** | | | | Accounts payable | $5,119 | $5,310 | | Total current liabilities | $9,466 | $9,376 | | **Total liabilities** | **$14,966** | **$14,664** | | **Total stockholders' equity** | **$22,524** | **$23,276** | [Consolidated Statements of Operations](index=36&type=section&id=Consolidated%20Statements%20of%20Operations) The company achieved net income of $248,000 in 2020, a turnaround from a $2.6 million loss in 2019 Consolidated Statement of Operations (in thousands, except per share data) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Sales, net | $44,139 | $40,100 | | Cost of products | $26,055 | $24,449 | | Selling, general and administrative | $17,036 | $20,036 | | **Operating income (loss)** | **$1,048** | **($4,385)** | | (Loss) gain on investment in securities | ($620) | $716 | | Income (loss) before income taxes | $251 | ($3,623) | | **Net income (loss)** | **$248** | **($2,636)** | | Net income (loss) per share-diluted | $0.02 | ($0.21) | [Consolidated Statements of Changes in Stockholders' Equity](index=37&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased to $22.5 million due to dividends and stock repurchases offsetting net income Changes in Stockholders' Equity for FY 2020 (in thousands) | Description | Amount | | :--- | :--- | | Balance at Dec 31, 2019 | $23,276 | | Net income | $248 | | Dividends declared | ($1,002) | | Repurchase of common stock | ($269) | | Share-based compensation & other | $271 | | **Balance at Dec 31, 2020** | **$22,524** | [Consolidated Statements of Cash Flows](index=38&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $4.4 million, driving a $2.15 million increase in total cash and cash equivalents Consolidated Statement of Cash Flows (in thousands) | Cash Flow Category | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $4,444 | ($2,486) | | Net cash used in investing activities | ($946) | ($2,455) | | Net cash used in financing activities | ($1,348) | ($1,651) | | **Net change in cash and cash equivalents** | **$2,150** | **($6,592)** | | Cash and cash equivalents, end of year | $6,826 | $4,676 |

Sales Performance - Sales for Q3 2020 increased by 8.1% to approximately $12.8 million compared to $11.8 million in Q3 2019[105] - For the nine months ended September 30, 2020, sales increased by 2.6% to approximately $33.6 million compared to $32.7 million in the same period last year[105] - For the third quarter ended September 30, 2020, net sales increased 8.1% to approximately $12.8 million, compared to approximately $11.8 million for the same quarter last year[114] Income and Profitability - Operating income for Q3 2020 increased by 253.2% to approximately $1.0 million compared to approximately $0.3 million in Q3 2019[108] - Net income for Q3 2020 increased by 184.5% to approximately $678,000 ($0.05 per share) compared to approximately $238,000 ($0.02 per share) in Q3 2019[110] - Operating income for the third quarter increased approximately $747,000 (253.2%) to approximately $1.0 million (8.2% of sales), compared to $295,000 (2.5% of sales) for the same quarter last year[129] Expenses Management - Selling, general and administrative expenses decreased by 13.6% to approximately $4.2 million in Q3 2020 compared to approximately $4.8 million in Q3 2019[107] - SG&A expenses for the third quarter decreased by $653,000, or 13.6%, to approximately $4.2 million (32.6% of sales), compared to approximately $4.8 million (40.8% of sales) for the same quarter last year[125] - Engineering and product development expenses for the third quarter decreased $359,000, or 15.1%, to approximately $2.0 million (15.8% of sales), compared to approximately $2.4 million (20.1% of sales) for the same quarter last year[126] Cash Flow and Working Capital - Inventory was reduced by over $5.0 million, or 37.6%, from the start of the year, contributing to positive cash flow from operations[103] - Net cash provided by operating activities for the nine months ended September 30, 2020, totaled approximately $3.5 million, compared to cash used in operating activities of approximately $1.0 million for the same period last year[139] - As of September 30, 2020, working capital totaled approximately $14.4 million, with approximately $12.2 million in cash, cash equivalents, and trade receivables[111] Workforce and Costs - The company implemented workforce reductions of approximately 18% in May 2020, incurring severance costs of approximately $221,000[101] - The company incurred approximately $221,000 in severance costs related to workforce reductions recognized in Q2 2020[146] Investments and Financing - An unrealized loss of approximately $291,000 was recognized on the investment in 1347 Property Insurance Holdings, Inc. for Q3 2020[109] - Cash used in investing activities for the nine months ended September 30, 2020, totaled approximately $742,000, compared to approximately $2.3 million for the same period last year[141] - The company received $2.2 million under the PPP, which was fully repaid within the same period[144] - The company has a $5.0 million Credit Agreement with JPMC, with no borrowings outstanding as of September 30, 2020, and approximately $2.8 million available for borrowing[151] - The Master Loan Agreement for $425,000 to finance manufacturing equipment has a term of five years and bears a fixed interest rate of 5.11%[152] Product Development and Market Focus - The company launched the BKR 5000, the first model in the new BKR Series of APCO Project 25 land mobile radio products during the third quarter[116] - The company reorganized its sales resources to better focus on target markets, enhancing its sales funnel for potential new customers in federal, state, and local public safety agencies[117] Stock and Capital Management - The company used approximately $1.1 million in financing activities, including $752,000 in dividends and $269,000 in stock repurchases[143] - The company’s stock repurchase program was terminated in April 2020 and was not renewed[143] - The Credit Agreement requires the company to maintain a tangible net worth of at least $20.0 million at any fiscal quarter end[149] - The company may engage in public or private offerings of equity or debt securities to increase capital resources, depending on market conditions[154]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) Unaudited condensed consolidated financial statements for H1 2020 reflect decreased assets and equity, a $1.5 million net loss, and positive operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $34.6 million by June 30, 2020, driven by a $4.0 million inventory reduction, with liabilities and stockholders' equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $21,457 | $23,886 | | Inventories, net | $9,527 | $13,513 | | **Total Assets** | **$34,610** | **$37,940** | | **Total Current Liabilities** | $8,011 | $9,376 | | **Total Liabilities** | **$13,450** | **$14,664** | | **Total Stockholders' Equity** | **$21,160** | **$23,276** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales for Q2 2020 decreased to $9.9 million, resulting in a $302,000 net loss; H1 2020 net sales were flat at $20.8 million with a $1.5 million net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2020 (in thousands) | Q2 2019 (in thousands) | Six Months 2020 (in thousands) | Six Months 2019 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $9,937 | $13,294 | $20,826 | $20,938 | | Operating (loss) income | ($36) | $20 | ($884) | ($2,298) | | Net loss | ($302) | ($247) | ($1,494) | ($1,565) | | Net loss per share | ($0.02) | ($0.02) | ($0.12) | ($0.12) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2020 operating cash flow was $3.6 million, a significant improvement driven by a $3.9 million inventory decrease, with cash and equivalents increasing to $6.9 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,597 | ($1,333) | | Net cash used in investing activities | ($525) | ($1,462) | | Net cash used in financing activities | ($809) | ($1,058) | | **Net change in cash and cash equivalents** | **$2,263** | **($3,853)** | | **Cash and cash equivalents, end of period** | **$6,939** | **$7,415** | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail COVID-19 impacts, including an 18% workforce reduction and PPP loan repayment, significant sales to U.S. government agencies, and an unrealized investment loss - In response to the COVID-19 pandemic, the company implemented an approximately **18% workforce reduction** in May 2020, incurring about **$221,000 in severance costs**[31](index=31&type=chunk) - The company received a **$2.2 million loan** under the Paycheck Protection Program (PPP) in April 2020 but repaid it in full the same month due to uncertainty regarding qualification requirements[32](index=32&type=chunk) - Sales to U.S. government agencies accounted for **43.0% of net sales in Q2 2020** and **52.1% for the first six months of 2020**[62](index=62&type=chunk) - The company recognized a six-month unrealized loss of approximately **$506,000** on its investment in 1347 Property Insurance Holdings, Inc. (PIH), compared to a **$444,000 gain** in the prior year period[45](index=45&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses H1 2020 financial results, highlighting COVID-19 impacts, cost-saving measures, improved gross margins, reduced SG&A, and positive operating cash flow [Impact of COVID-19 Pandemic](index=20&type=section&id=Impact%20of%20COVID-19%20Pandemic) As an essential business, the company maintained operations while implementing cost reductions, including an 18% workforce reduction and repaying a $2.2 million PPP loan - The company is considered an "essential business" and has kept manufacturing operations open during the pandemic[89](index=89&type=chunk) - In May 2020, the company reduced its workforce by approximately **18%** to lower costs, resulting in severance charges of about **$221,000**[91](index=91&type=chunk) - The company's stock repurchase program terminated in April 2020 and was not renewed[92](index=92&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) H1 2020 sales were flat at $20.8 million, with gross margin improving to 39.5% and SG&A decreasing to $9.1 million, resulting in a reduced operating loss Key Operational Metrics Comparison (in millions, except for percentages) | Metric | H1 2020 (in millions) | H1 2019 (in millions) | | :--- | :--- | :--- | | Net Sales | $20.8 | $20.9 | | Gross Profit Margin | 39.5% | 38.9% | | SG&A Expenses | $9.1 | $10.4 | | Operating Loss | ($0.884) | ($2.3) | - Engineering and product development expenses for H1 2020 decreased to **$4.1 million** from **$5.2 million** in H1 2019 as development activities for the new BKR Series shifted to the internal engineering team[116](index=116&type=chunk) - The company anticipates its new BKR Series product line will be available for sale in the second half of 2020, which is expected to increase its addressable market[108](index=108&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with H1 2020 operating cash flow of $3.6 million, driven by inventory reduction, and a $5.0 million revolving credit line secured - Net cash provided by operating activities was **$3.6 million** for H1 2020, mainly due to a decrease in inventory of **$3.9 million**[130](index=130&type=chunk)[131](index=131&type=chunk) - In H1 2020, the company paid **$502,000 in dividends** and repurchased **$269,000 of its common stock**; the repurchase program ended in April 2020[134](index=134&type=chunk) - In January 2020, the company entered into a **$5.0 million credit agreement** with JPMC, with approximately **$3.9 million available** as of June 30, 2020, and no outstanding borrowings[138](index=138&type=chunk)[142](index=142&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during Q2 2020 - The President and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[148](index=148&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[149](index=149&type=chunk) PART II - OTHER INFORMATION [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20RISK%20FACTORS) Updated risk factors highlight the COVID-19 pandemic's material adverse impact on business, including workforce disruptions, supply chain delays, and reduced customer spending - The COVID-19 pandemic is expected to have a material adverse impact on business and financial performance, with the full extent dependent on future developments like the pandemic's duration and severity[154](index=154&type=chunk) - Risks include potential disruptions to the supply chain, manufacturing, and product shipments, as well as the possibility of customers reducing or delaying orders due to budget constraints or economic uncertainty[156](index=156&type=chunk)[158](index=158&type=chunk) - The company has taken steps to reduce expenses, including a workforce reduction of approximately **18%**, but there is no certainty these measures will be sufficient to mitigate all risks posed by the pandemic[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 16,129 shares in April 2020 before terminating its stock repurchase program, with credit agreement covenants potentially limiting subsidiary dividends Issuer Purchases of Equity Securities (Q2 2020) | Period | Total Shares Purchased (shares) | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2020 | 16,129 | $1.63 | | May 2020 | 0 | $0 | | June 2020 | 0 | $0 | - The company's stock repurchase program terminated in April 2020 and was not renewed[162](index=162&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20OTHER%20INFORMATION) The company entered a consulting agreement with Itasca Financial LLC for strategic advice, involving a retainer and monthly fees, with related party disclosures - The company entered into a consulting agreement with Itasca Financial LLC on June 24, 2020, for strategic advice, involving a **$50,000 retainer** and a **$20,000 monthly fee**; the agreement has since been suspended indefinitely[164](index=164&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20EXHIBITS) This section indexes exhibits filed with the Form 10-Q, including corporate governance documents, the new consulting agreement, and officer certifications - The Exhibit Index lists all documents filed with the report, including certifications required by the Sarbanes-Oxley Act and XBRL data files[168](index=168&type=chunk)[170](index=170&type=chunk)

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=2&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) The company reported a Q1 net loss of $1.2 million on decreased assets, but generated positive operating cash flow of $0.9 million due to inventory reduction and took post-quarter actions in response to COVID-19 [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $35.7 million as of March 31, 2020, driven by lower inventory, while stockholders' equity declined due to the net loss and stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $22,275 | $23,886 | | Inventories, net | $10,937 | $13,513 | | **Total Assets** | **$35,712** | **$37,940** | | **Total Current Liabilities** | $8,565 | $9,376 | | **Total Liabilities** | **$14,070** | **$14,664** | | **Total Stockholders' Equity** | **$21,642** | **$23,276** | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales grew 42.5% to $10.9 million in Q1 2020, significantly narrowing the operating loss to $0.85 million despite an investment loss Q1 2020 vs Q1 2019 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Sales, net | $10,889 | $7,644 | | Operating loss | $(848) | $(2,318) | | Net loss | $(1,192) | $(1,318) | | Net loss per share-basic and diluted | $(0.09) | $(0.10) | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated $0.9 million in cash from operations in Q1 2020, a significant turnaround from the prior year, driven by a $2.5 million decrease in inventories Q1 2020 vs Q1 2019 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $915 | $(2,308) | | Net cash used in investing activities | $(131) | $(829) | | Net cash used in financing activities | $(514) | $(591) | | **Net change in cash and cash equivalents** | **$270** | **$(3,728)** | [Notes to Condensed Consolidated Financial Statements](index=5&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail significant events including the COVID-19 impact, large USFS orders, a new credit facility, an investment loss, and post-quarter PPP loan and workforce reduction actions - The company's operating subsidiary received orders totaling approximately **$4.9 million** from the U.S. Forest Service (USFS) in February and March 2020[37](index=37&type=chunk)[38](index=38&type=chunk) - The company has an investment in 1347 Property Insurance Holdings, Inc. (PIH) which had a fair value of **$2.3 million** as of March 31, 2020, and an unrealized loss of **$306,000** was recognized in Q1 2020[51](index=51&type=chunk) - On January 30, 2020, the company entered into a new **$5.0 million** revolving line of credit with JPMorgan Chase Bank, which was undrawn as of March 31, 2020[70](index=70&type=chunk)[75](index=75&type=chunk) - Subsequent to quarter end, the company received a **$2.2 million PPP loan** on April 13, 2020, but decided to repay the full amount on April 24, 2020, following new SBA guidance[86](index=86&type=chunk)[87](index=87&type=chunk) - On May 4, 2020, the company implemented an **18% workforce reduction** to cut costs due to the uncertain business environment from COVID-19, incurring approximately **$221,000** in severance costs[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=16&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the 42.5% sales growth driven by federal demand, improved gross margins, a reduced operating loss, and the significant uncertainty and responsive actions related to COVID-19 [Executive Overview & COVID-19 Impact](index=17&type=section&id=Executive%20Overview%20%26%20COVID-19%20Impact) The company outlines its two-way radio business and details the significant operational and financial uncertainties posed by the COVID-19 pandemic, including responsive cost-cutting measures - The company designs, manufactures, and markets two-way land mobile radios under the BK Radio (government/public safety) and RELM (business/industrial) brands[97](index=97&type=chunk)[99](index=99&type=chunk) - The COVID-19 pandemic poses significant challenges, and while manufacturing remains open as an "essential business," the company has implemented cost-reduction measures, including an **18% workforce reduction**[103](index=103&type=chunk)[107](index=107&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q1 2020 net sales rose 42.5% to $10.9 million with improved gross margins and lower relative SG&A expenses, leading to a substantially reduced operating loss of $848,000 Q1 2020 vs Q1 2019 Key Metrics | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Sales | $10.9M (+42.5%) | $7.6M | | Gross Margin % | 35.8% | 31.9% | | SG&A Expenses | $4.7M | $4.8M | | Operating Loss | $(0.85)M | $(2.3)M | - The increase in net sales was primarily due to **strong demand from federal customers** like the U.S. Forest Service, contrasting with an unusually low Q1 2019 affected by a federal government shutdown[118](index=118&type=chunk) - Engineering and product development expenses decreased by 4.8% to **$2.0 million** as development activities for the new BKR Series migrated to the internal engineering team[128](index=128&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with positive operating cash flow of $0.9 million from inventory reduction, a new $5.0 million credit facility, and post-quarter actions to preserve capital - Net cash provided by operating activities was **$0.9 million**, a significant improvement from the $2.3 million used in the prior year, mainly due to a **$2.5 million decrease in net inventories**[141](index=141&type=chunk)[142](index=142&type=chunk) - Financing activities in Q1 2020 used **$514,000**, consisting of **$252,000 for dividends** and **$243,000 for stock repurchases**[145](index=145&type=chunk) - The company secured a **$5.0 million credit agreement** with JPMC, with approximately **$3.2 million available** as of March 31, 2020[149](index=149&type=chunk)[153](index=153&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls during the quarter - The President and Chief Financial Officer evaluated disclosure controls and procedures and concluded they were **effective as of March 31, 2020**[159](index=159&type=chunk) - **No material changes** in internal control over financial reporting occurred during the first quarter of 2020[160](index=160&type=chunk) [PART II - OTHER INFORMATION](index=25&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Risk Factors](index=25&type=section&id=Item%201A.%20RISK%20FACTORS) The primary risk factor update centers on the COVID-19 pandemic's potential material adverse impact on operations, supply chain, and financial condition - The COVID-19 pandemic is expected to have a **material adverse impact** on business and financial performance, with uncertainty regarding its duration and severity[164](index=164&type=chunk)[165](index=165&type=chunk) - Risks include operational disruptions, supply chain delays, increased freight costs, and potential for **reduced customer orders and delayed payments**[167](index=167&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - In response to the economic downturn from the pandemic, the company has restructured operations, including **reducing its workforce by approximately 18%**[167](index=167&type=chunk) [Issuer Purchases of Equity Securities](index=26&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 101,813 shares for approximately $240,000 in Q1 2020 under a program that terminated in April 2020 and was not renewed Q1 2020 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2020 | 36,155 | $2.94 | | Feb 2020 | 20,963 | $2.72 | | Mar 2020 | 44,695 | $1.72 | | **Total** | **101,813** | **$2.36** | - The company's stock repurchase program **terminated in April 2020** and has not been renewed[173](index=173&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20EXHIBITS) This section indexes all exhibits filed with the Form 10-Q, including governance documents, agreements, and certifications

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-K ——————— ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-32644 ——————— BK TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) ——————— ...