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 ...

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements, management's analysis of financial condition and operations, market risk disclosures, and controls and procedures for the company [Item 1. FINANCIAL STATEMENTS](index=2&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents BK Technologies Corporation's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with detailed notes on presentation, significant events, and accounting policies for the specified periods [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2021, and December 31, 2020 **Condensed Consolidated Balance Sheets (In thousands):** | Item | June 30, 2021 (Unaudited) | December 31, 2020 | | :---------------------------------- | :------------------------ | :------------------ | | Total current assets | $36,773 | $24,611 | | Property, plant and equipment, net | $4,426 | $3,566 | | Investment in securities | $4,481 | $2,014 | | Total assets | $52,491 | $37,490 | | Total liabilities | $17,464 | $11,899 | | Total stockholders' equity | $35,027 | $22,524 | - Total assets increased by approximately **$15 million** from December 31, 2020, to June 30, 2021, primarily driven by an increase in cash and cash equivalents and investment in securities[8](index=8&type=chunk) - Total stockholders' equity increased significantly from **$22,524 thousand** at December 31, 2020, to **$35,027 thousand** at June 30, 2021[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss for the three and six months ended June 30, 2021 and 2020 **Condensed Consolidated Statements of Operations (In thousands, except per share data):** | Item | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales, net | $11,335 | $9,937 | $19,899 | $20,826 | | Operating loss | $(342) | $(36) | $(1,219) | $(884) | | Gain (loss) on investment in securities | $2,262 | $(200) | $2,467 | $(506) | | Net income (loss) | $1,696 | $(302) | $1,002 | $(1,494) | | Net income (loss) per share-basic | $0.13 | $(0.02) | $0.08 | $(0.12) | | Net income (loss) per share-diluted | $0.12 | $(0.02) | $0.08 | $(0.12) | - Net sales for the three months ended June 30, 2021, increased by **14.1%** year-over-year, reaching **$11,335 thousand**, while six-month sales decreased by **4.5%** to **$19,899 thousand**[11](index=11&type=chunk) - The company reported a net income of **$1,696 thousand** for Q2 2021, a significant improvement from a net loss of **$302 thousand** in Q2 2020, largely due to a substantial gain on investment in securities[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the inflows and outflows of cash from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 **Condensed Consolidated Statements of Cash Flows (In thousands):** | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(2,825) | $3,597 | | Net cash used in investing activities | $(1,541) | $(525) | | Net cash provided by (used in) financing activities | $13,201 | $(809) | | Net change in cash and cash equivalents | $8,835 | $2,263 | | Cash and cash equivalents, end of period | $15,661 | $6,939 | - Operating activities used **$2,825 thousand** in cash for the six months ended June 30, 2021, a reversal from **$3,597 thousand** provided in the prior year, primarily due to increased inventory and accounts receivable[16](index=16&type=chunk) - Financing activities provided **$13,201 thousand** in cash, largely driven by **$11,599 thousand** from common stock issuance, significantly boosting the cash balance[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=5&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, significant events, and specific financial line items [1. Condensed Consolidated Financial Statements](index=5&type=section&id=1.%20Condensed%20Consolidated%20Financial%20Statements) This note details the basis of presentation for the unaudited condensed consolidated financial statements, including the company's reorganization and accounting policies - The unaudited condensed consolidated financial statements were prepared by BK Technologies Corporation, following a holding company reorganization on March 28, 2019, which established BK Technologies Corporation as the direct parent company[19](index=19&type=chunk) - The company consolidates entities where it has a controlling financial interest, determined by evaluating if the entity is a variable interest entity (VIE) or a voting interest entity[21](index=21&type=chunk) - The company adopted ASU 2018-13 on January 1, 2020, which modified fair value measurement disclosure requirements, but it had no material impact on its consolidated financial statements[29](index=29&type=chunk) [2. Significant Events and Transactions](index=6&type=section&id=2.%20Significant%20Events%20and%20Transactions) This note highlights key corporate actions and financial transactions, including dividend declarations and a public offering of common stock - The Board of Directors declared a quarterly dividend of **$0.02 per share** on July 9, 2021, paid on August 9, 2021[31](index=31&type=chunk) - On June 9, 2021, the company completed a public offering of **4,249,250 shares** of common stock at **$3.00 per share**, generating net proceeds of **$11,559,000** for general corporate purposes, including working capital, capital expenditures, and potential acquisitions[32](index=32&type=chunk) [3. Allowance for Doubtful Accounts](index=6&type=section&id=3.%20Allowance%20for%20Doubtful%20Accounts) This note details the company's provision for uncollectible trade receivables, showing gross receivables and the allowance amount **Allowance for Doubtful Accounts (In thousands):** | Item | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Gross trade receivables | $7,260 | $6,516 | | Allowance for doubtful accounts | $50 | $50 | - The allowance for doubtful accounts remained stable at **$50 thousand**, despite an increase in gross trade receivables from **$6,516 thousand** to **$7,260 thousand**[33](index=33&type=chunk) [4. Inventories, Net](index=6&type=section&id=4.%20Inventories,%20Net) This note provides a breakdown of the company's inventory, including finished goods, work in process, raw materials, and the allowance for obsolete inventory **Inventories, Net (In thousands):** | Item | June 30, 2021 | December 31, 2020 | | :------------------ | :------------ | :---------------- | | Finished goods | $2,459 | $1,975 | | Work in process | $3,539 | $3,288 | | Raw materials | $6,038 | $4,178 | | Total inventories | $12,036 | $9,441 | | Allowance for slow-moving, excess, or obsolete inventory | $888 | $520 | - Total inventories increased by **$2,595 thousand** from December 31, 2020, to June 30, 2021, primarily driven by a significant increase in raw materials[34](index=34&type=chunk) - The allowance for slow-moving, excess, or obsolete inventory increased by **$368 thousand**, from **$520 thousand** to **$888 thousand**[35](index=35&type=chunk) [5. Income Taxes](index=6&type=section&id=5.%20Income%20Taxes) This note details the company's income tax expense, deferred tax assets, and the valuation allowance established against them **Income Tax Expense (In thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $184 | $28 | | Six months ended June 30 | $184 | $28 | - Income tax expense for both the three and six months ended June 30, 2021, was **$184 thousand**, a substantial increase from **$28 thousand** in the prior year periods[36](index=36&type=chunk) - As of June 30, 2021, net deferred tax assets totaled approximately **$4,116 thousand**, primarily from R&D tax credits, deferred revenue, and net operating loss carryforwards[39](index=39&type=chunk) - The company established a valuation allowance of **$98 thousand** against deferred tax assets, concluding it may not generate sufficient taxable income to fully utilize the benefits[41](index=41&type=chunk) [6. Investment in Securities](index=7&type=section&id=6.%20Investment%20in%20Securities) This note describes the company's investment in FGI 1347 Holdings, LP, and the recognized unrealized gains or losses on these securities - The company holds an investment in FGI 1347 Holdings, LP (1347 LP), of which it is the sole limited partner, established for investing in securities[42](index=42&type=chunk) - As of June 30, 2021, the company indirectly held **477,282 shares** of FG Financial Group, Inc. (FGF) with a fair value of **$4,481 thousand** through 1347 LP[44](index=44&type=chunk) **Unrealized Gain (Loss) on Investment in Securities (In thousands):** | Period | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Three months ended June 30 | $2,262 | $(200) | | Six months ended June 30 | $2,467 | $(506) | - The company recognized significant unrealized gains on the FGF investment: **$2,262 thousand** for Q2 2021 and **$2,467 thousand** for the six months ended June 30, 2021, a reversal from losses in the prior year[44](index=44&type=chunk) [7. Stockholders' Equity](index=7&type=section&id=7.%20Stockholders'%20Equity) This note details the changes in stockholders' equity, including common stock issuance, net income, and their impact on the overall equity balance **Changes in Condensed Consolidated Stockholders' Equity (In thousands, except share data):** | Item | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Total | | :---------------------------------------------------- | :------------------ | :------------------ | :------------------------- | :------------------ | :------------- | :------ | | Balance at December 31, 2020 | 13,962,366 | $8,377 | $26,346 | $(6,797) | $(5,402) | $22,524 | | Common stock issued, net of issuance costs (Q2 2021) | 4,249,250 | $2,549 | $9,010 | - | - | $11,559 | | Net income (Q2 2021) | — | — | - | $1,696 | - | $1,696 | | Balance at June 30, 2021 | 18,236,121 | $10,941 | $35,534 | $(6,046) | $(5,402) | $35,027 | | Balance at December 31, 2019 | 13,929,381 | $8,357 | $26,095 | $(6,043) | $(5,133) | $23,276 | | Net loss (Q2 2020) | — | — | - | $(302) | - | $(302) | | Balance at June 30, 2020 | 13,943,820 | $8,366 | $26,235 | $(8,039) | $(5,402) | $21,160 | - Total stockholders' equity increased significantly from **$22,524 thousand** at December 31, 2020, to **$35,027 thousand** at June 30, 2021, primarily due to the **$11,559 thousand** from common stock issuance and net income[48](index=48&type=chunk) - The number of common stock shares outstanding increased from **13,962,366** at December 31, 2020, to **18,236,121** at June 30, 2021, largely due to the public offering[48](index=48&type=chunk) [8. Income (Loss) Per Share](index=8&type=section&id=8.%20Income%20(Loss)%20Per%20Share) This note presents the basic and diluted earnings per share calculations, reflecting the company's profitability on a per-share basis **Income (Loss) Per Share (In thousands, except per share data):** | Item | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) for basic and diluted earnings per share | $1,696 | $(302) | $1,002 | $(1,494) | | Weighted average shares outstanding-basic | 13,563,763 | 12,495,707 | 13,043,477 | 12,525,407 | | Basic income (loss) per share | $0.13 | $(0.02) | $0.08 | $(0.12) | | Diluted income (loss) per share | $0.12 | $(0.02) | $0.08 | $(0.12) | - Basic and diluted EPS significantly improved to **$0.13** and **$0.12**, respectively, for Q2 2021, compared to a loss of **$0.02** in Q2 2020[51](index=51&type=chunk) - For the six months ended June 30, 2021, basic and diluted EPS turned positive at **$0.08**, compared to a loss of **$0.12** in the prior year period[51](index=51&type=chunk) [9. Non-Cash Share-Based Employee Compensation](index=9&type=section&id=9.%20Non-Cash%20Share-Based%20Employee%20Compensation) This note details the non-cash expenses related to stock options and restricted stock units granted to employees **Non-Cash Share-Based Employee Compensation Expense (In thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Stock option expense (3 months) | $33 | $30 | | Stock option expense (6 months) | $65 | $60 | | Restricted stock unit expense (3 months) | $25 | $68 | | Restricted stock unit expense (6 months) | $128 | $89 | - Total non-cash share-based compensation expense for stock options increased slightly, while restricted stock unit compensation expense decreased for the three months ended June 30, 2021, compared to the prior year[52](index=52&type=chunk)[63](index=63&type=chunk) - The company uses the Black-Scholes-Merton option valuation model for stock option grants[53](index=53&type=chunk) - Restricted stock units outstanding decreased from **147,038** at December 31, 2020, to **122,533** at June 30, 2021[63](index=63&type=chunk) [10. Commitments and Contingencies](index=10&type=section&id=10.%20Commitments%20and%20Contingencies) This note outlines potential future obligations and uncertain events, including legal actions, the impact of COVID-19, purchase commitments, and sales to government agencies - The company assesses liabilities and contingencies for legal actions quarterly, recording a liability when a loss is probable and estimable[64](index=64&type=chunk) - The COVID-19 pandemic has the potential to adversely impact the business and financial performance, with uncertainties regarding its duration and severity, and its impact on the global economy and supply chain[65](index=65&type=chunk) - As of June 30, 2021, the company had purchase commitments for inventory totaling approximately **$8,591 thousand**[66](index=66&type=chunk) **Sales to United States Government Agencies (In thousands):** | Period | 2021 Sales | 2021 % of Total Sales | 2020 Sales | 2020 % of Total Sales | | :-------------------------------- | :--------- | :-------------------- | :--------- | :-------------------- | | Three months ended June 30 | $4,749 | 41.9% | $4,268 | 43.0% | | Six months ended June 30 | $6,865 | 34.5% | $10,845 | 52.1% | | Accounts receivable (June 30) | $3,279 | N/A | $589 | N/A | - Sales to U.S. government agencies remained a significant portion of total sales, representing **41.9%** for Q2 2021 and **34.5%** for the six months ended June 30, 2021[67](index=67&type=chunk) [11. Debt](index=10&type=section&id=11.%20Debt) This note details the company's debt obligations, including its revolving credit agreement and equipment financing arrangements - BK Technologies, Inc. extended its **$5,000 thousand** revolving Credit Agreement with JPMorgan Chase Bank, N.A. through January 31, 2022[68](index=68&type=chunk)[69](index=69&type=chunk) - As of June 30, 2021, the company had an outstanding balance of approximately **$1,500 thousand** and a net balance availability of **$3,165 thousand** under the Credit Agreement[73](index=73&type=chunk) - On April 6, 2021, the company entered into a Master Loan Agreement for **$743 thousand** with JPMC to finance manufacturing equipment, payable over 48 months at a fixed interest rate of **3.0%**[74](index=74&type=chunk) [12. Leases](index=11&type=section&id=12.%20Leases) This note describes the company's operating lease arrangements for facilities and equipment, including lease costs and maturity schedules - The company leases manufacturing and office facilities and equipment under operating leases, recognizing ROU assets and lease liabilities based on the present value of lease payments[76](index=76&type=chunk) **Total Lease Cost (In thousands):** | Period | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $136 | $143 | $302 | $287 | | Variable lease cost | $33 | $32 | $65 | $63 | | Total lease cost | $169 | $175 | $367 | $352 | - The company terminated a lease for office space in Lawrence, Kansas, effective March 31, 2021, recognizing a termination expense of approximately **$53 thousand**[81](index=81&type=chunk) **Maturity of Lease Liabilities as of June 30, 2021 (In thousands):** | Period | Amount | | :------------------------- | :----- | | Remaining six months of 2021 | $287 | | 2022 | $582 | | 2023 | $595 | | 2024 | $608 | | 2025 | $618 | | Thereafter | $722 | | Total payments | $3,412 | | Less: imputed interest | $(486) | | Total liability | $2,926 | [13. Subsequent Event](index=12&type=section&id=13.%20Subsequent%20Event) This note discloses a significant accounting method change implemented after the reporting period, impacting inventory and retained earnings - Effective July 1, 2021, the company changed its accounting method to burden material at the time of purchase receipts, resulting in a net increase of approximately **$1.3 million** in inventory and retained earnings[84](index=84&type=chunk) [Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=13&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of the company's financial condition and operational results, discussing sales trends, profitability, expenses, and liquidity for the periods ended June 30, 2021, and 2020 [SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS](index=13&type=section&id=SPECIAL%20NOTE%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements, outlining inherent risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements regarding future events and expectations, which involve risks and uncertainties that could cause actual results to differ materially[88](index=88&type=chunk) - Key risk factors include changes in technology, success of product lines (e.g., land mobile radio, BKR Series), competition, economic conditions, capital availability, reliance on contract manufacturers, government sales, tax compliance, ability to attract talent, growth management, and impacts of the COVID-19 pandemic[89](index=89&type=chunk)[92](index=92&type=chunk) - The company assumes no obligation to publicly update or revise any forward-looking statements[93](index=93&type=chunk) [Executive Overview](index=14&type=section&id=Executive%20Overview) This overview introduces BK Technologies Corporation as a holding company specializing in two-way land mobile radios for government and public safety, highlighting operational impacts from COVID-19 and material shortages - BK Technologies Corporation is a holding company that designs, manufactures, and markets two-way land mobile radios, repeaters, base stations, and related components, primarily under the 'BK' brand for government and public safety markets[97](index=97&type=chunk)[98](index=98&type=chunk) - A holding company reorganization was implemented on March 28, 2019, to create a more efficient corporate structure and increase operational flexibility, with no material operational or financial impacts[99](index=99&type=chunk) - The company is considered an 'essential business' and has maintained manufacturing operations during the COVID-19 pandemic, implementing safety measures and workforce adjustments[103](index=103&type=chunk) - Worldwide shortages of materials, especially semiconductors, have led to limited supplies, extended lead times, and increased costs, potentially impacting future sales and manufacturing operations[105](index=105&type=chunk) [Second Quarter and Six Months Summary](index=15&type=section&id=Second%20Quarter%20and%20Six%20Months%20Summary) This summary highlights the company's financial and operating performance for the second quarter and six months ended June 30, 2021, noting sales trends, gross profit margins, and the impact of a public offering - Financial and operating results for Q2 and the six months ended June 30, 2021, improved year-over-year, with Q2 sales increasing **14.1%** and six-month sales being within **4.5%** of the prior year[108](index=108&type=chunk) - Gross profit margins decreased due to cost increases in materials and freight, and a less favorable sales mix[108](index=108&type=chunk) - The company closed a public offering in Q2 2021, raising approximately **$11.6 million** in net proceeds[108](index=108&type=chunk) **Key Financial Highlights (In thousands, except per share data):** | Metric | Q2 2021 | Q2 2020 | 6M 2021 | 6M 2020 | | :----------------------------------- | :------ | :------ | :------ | :------ | | Net Sales | $11,335 | $9,937 | $19,899 | $20,826 | | Gross Profit Margin (%) | 37.2% | 43.6% | 36.7% | 39.5% | | SG&A Expenses | $4,553 | $4,364 | $8,526 | $9,107 | | Operating Loss | $(342) | $(36) | $(1,219) | $(884) | | Unrealized Gain (Loss) on Investment | $2,262 | $(200) | $2,467 | $(506) | | Net Income (Loss) | $1,696 | $(302) | $1,002 | $(1,494) | | Basic EPS | $0.13 | $(0.02) | $0.08 | $(0.12) | | Diluted EPS | $0.12 | $(0.02) | $0.08 | $(0.12) | - Working capital increased to approximately **$25.0 million** as of June 30, 2021, from **$15.1 million** at December 31, 2020, largely due to cash from the public offering[115](index=115&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's operational performance, examining net sales, cost of products, gross profit, operating expenses, and income taxes [Net Sales](index=17&type=section&id=Net%20Sales) This section analyzes the company's net sales performance, highlighting growth drivers and the impact of supply chain constraints **Net Sales (In thousands):** | Period | 2021 | 2020 | Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | | Three months ended June 30 | $11,335 | $9,937 | +14.1% | | Six months ended June 30 | $19,899 | $20,826 | -4.5% | - The increase in Q2 2021 sales was primarily driven by demand from federal legacy customers and western region state public safety agencies, despite supply chain constraints delaying shipments[120](index=120&type=chunk) - The new BKR Series of APCO Project 25 land mobile radio products, including the BKR 5000, is expected to expand the addressable market, with additional models planned for later in the year[121](index=121&type=chunk) - Reorganization of sales resources aims to capture new sales opportunities in federal, state, and local public safety agencies[122](index=122&type=chunk) [Cost of Products and Gross Profit Margin](index=17&type=section&id=Cost%20of%20Products%20and%20Gross%20Profit%20Margin) This section examines the cost of products sold and the resulting gross profit margins, noting the impact of product mix and rising material and freight costs **Gross Profit Margins (% of Sales):** | Period | 2021 | 2020 | Change (YoY) | | :-------------------------- | :----- | :----- | :----------- | | Three months ended June 30 | 37.2% | 43.6% | -6.4 pp | | Six months ended June 30 | 36.7% | 39.5% | -2.8 pp | - Gross profit margins decreased in Q2 2021 and for the six-month period primarily due to a less favorable product sales mix and increased material and freight costs[125](index=125&type=chunk) - The six-month gross profit margins were also adversely impacted by one-time inventory reserves related to the legacy KNG series product line in Q1[125](index=125&type=chunk) - Ongoing worldwide shortages of materials, particularly semiconductors, are causing supply limitations, extended lead times, and increased costs, which could impact future sales and manufacturing[127](index=127&type=chunk) [Selling, General and Administrative Expenses](index=18&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section analyzes the trends and components of selling, general, and administrative expenses, including engineering, marketing, and other overhead costs **SG&A Expenses (In thousands, % of sales):** | Period | 2021 Amount | 2021 % of Sales | 2020 Amount | 2020 % of Sales | Change (YoY) | | :-------------------------------- | :---------- | :-------------- | :---------- | :-------------- | :----------- | | Three months ended June 30 | $4,553 | 40.2% | $4,364 | 43.9% | +4.3% | | Six months ended June 30 | $8,526 | 42.8% | $9,107 | 43.7% | -6.4% | | Engineering and product development (6 months) | $4,100 | 20.7% | $4,100 | 19.5% | 0% | | Marketing and selling (6 months) | $2,000 | 10.1% | $2,500 | 11.9% | -18.5% | | Other general and administrative (6 months) | $2,400 | 12.1% | $2,600 | 12.5% | -7.7% | - SG&A expenses for the six months ended June 30, 2021, decreased by **$581 thousand (6.4%)** year-over-year, primarily due to reductions in sales and go-to-market employment and related expenses[131](index=131&type=chunk)[133](index=133&type=chunk) - Engineering and product development expenses remained comparable year-over-year for the six-month period, with a primary focus on the BKR series, including planned multiband products[132](index=132&type=chunk) [Operating Loss](index=18&type=section&id=Operating%20Loss) This section details the company's operating loss, explaining the factors contributing to its increase for the reported periods **Operating Loss (In thousands, % of sales):** | Period | 2021 Amount | 2021 % of Sales | 2020 Amount | 2020 % of Sales | | :-------------------------- | :---------- | :-------------- | :---------- | :-------------- | | Three months ended June 30 | $(342) | 3.0% | $(36) | 0.4% | | Six months ended June 30 | $(1,219) | 6.1% | $(884) | 4.2% | - The operating loss for Q2 2021 increased to **$342 thousand** from **$36 thousand** in Q2 2020, and for the six-month period, it increased to **$1,219 thousand** from **$884 thousand**[135](index=135&type=chunk) - The increased operating loss for the six months is attributed to sales mix and increased material costs, which negatively impacted gross profit margins, partially offset by SG&A expense reductions[135](index=135&type=chunk) [Other (Expense) Income](index=18&type=section&id=Other%20(Expense)%20Income) This section covers non-operating financial items, including net interest expense and unrealized gains or losses from investment in securities **Net Interest (Expense) Income (In thousands):** | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Three months ended June 30 | $(14) | $(6) | | Six months ended June 30 | $(18) | $3 | **Unrealized Gain (Loss) on Investment in FGF (In thousands):** | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Three months ended June 30 | $2,262 | $(200) | | Six months ended June 30 | $2,467 | $(506) | - Net interest expense increased for both the three and six months ended June 30, 2021, primarily due to lower average cash balances and equipment financing[136](index=136&type=chunk) - The company recognized significant unrealized gains on its investment in FGF, totaling **$2.3 million** for Q2 2021 and **$2.5 million** for the six-month period, a substantial improvement from losses in the prior year[137](index=137&type=chunk) [Income Taxes](index=18&type=section&id=Income%20Taxes) This section details the company's income tax expense, deferred tax assets, and the valuation allowance, reflecting the estimated full-year effective tax rate **Income Tax Expense (In thousands):** | Period | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Six months ended June 30 | $184 | $28 | - Income tax expense for the six months ended June 30, 2021, was **$184 thousand**, up from **$28 thousand** in the prior year, based on management's estimate of the full-year effective tax rate[138](index=138&type=chunk) - Net deferred tax assets totaled approximately **$4.1 million** as of June 30, 2021, primarily from R&D tax credits, operating loss carryforwards, and deferred revenue[139](index=139&type=chunk) - A valuation allowance of **$98 thousand** was established against deferred tax assets, as the company concluded it may not generate sufficient taxable income to fully utilize the benefits[141](index=141&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash flows from operating, investing, and financing activities, assessing its ability to meet short-term and long-term financial obligations **Cash Flow Summary (In thousands):** | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(2,900) | $3,600 | | Net cash used in investing activities | $(1,500) | $(525) | | Net cash provided by financing activities | $13,200 | $(809) | | Cash and cash equivalents, end of period | $15,700 | $6,939 | - Net cash used in operating activities was approximately **$2.9 million** for the six months ended June 30, 2021, primarily due to increased inventory and accounts receivable, partially offset by net income[142](index=142&type=chunk)[143](index=143&type=chunk) - Financing activities provided approximately **$13.2 million** in cash, largely from **$11.6 million** net proceeds from a public common stock offering[146](index=146&type=chunk) - The company's revolving credit facility with JPMC was extended through January 31, 2022, with an outstanding balance of approximately **$1.5 million** as of June 30, 2021[147](index=147&type=chunk)[153](index=153&type=chunk) - Management believes current cash, anticipated cash from operations, and borrowing availability are sufficient to meet working capital requirements for the foreseeable future[155](index=155&type=chunk) [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) This section identifies the company's critical accounting policies that require significant judgment and estimates, such as revenue recognition and inventory valuation - The company's critical accounting policies involve significant judgments, estimates, and assumptions related to revenue recognition, allowance for collection of trade receivables, allowance for excess or obsolete inventory, and income taxes[156](index=156&type=chunk) - There were no changes to the critical accounting policies during the quarter ended June 30, 2021, as described in the Annual Report on Form 10-K for fiscal year 2020[157](index=157&type=chunk) [Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=20&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) As a smaller reporting company, BK Technologies Corporation is not required to provide quantitative and qualitative disclosures about market risk in this report - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[158](index=158&type=chunk) [Item 4. CONTROLS AND PROCEDURES](index=20&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) This section details the company's evaluation of its disclosure controls and procedures and confirms that no material changes occurred in internal control over financial reporting during the quarter ended June 30, 2021 [Evaluation of Disclosure Controls and Procedures](index=21&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section outlines management's assessment of the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2021[161](index=161&type=chunk) - Based on the evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required under the Exchange Act[161](index=161&type=chunk) [Changes in Internal Control over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that no material changes in internal control over financial reporting occurred during the quarter ended June 30, 2021 - No changes in internal control over financial reporting were identified during the three months ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[162](index=162&type=chunk) [PART II - OTHER INFORMATION](index=21&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including risk factors, equity security sales, and a list of exhibits [Item 1A. RISK FACTORS](index=21&type=section&id=Item%201A.%20RISK%20FACTORS) This section reiterates and emphasizes risk factors from the Annual Report on Form 10-K, highlighting how the COVID-19 pandemic and material shortages could exacerbate impacts on business, financial condition, and operations - Many risk factors from the Annual Report on Form 10-K may be further heightened or exacerbated by the impact of the COVID-19 pandemic[164](index=164&type=chunk) - The COVID-19 pandemic has negatively impacted, and could continue to materially adversely affect, the company's business, financial condition, results of operations, and cash flow[165](index=165&type=chunk) - Worldwide shortages of materials, especially semiconductors, have resulted in limited supplies, extended lead times, and increased costs, posing potential impacts on future sales, manufacturing, and financial results[167](index=167&type=chunk) - Fluctuations in quarterly results may occur due to governmental customer spending patterns influenced by fiscal year-end budgets and appropriations, as well as seasonal sales related to wildland fire-suppression efforts[169](index=169&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=22&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section discloses that the company's Credit Agreement with JPMorgan Chase Bank, N.A. contains limitations and covenants that may restrict its wholly-owned operating subsidiary, BK Technologies, Inc., from paying dividends to the parent company - The Credit Agreement with JPMC contains limitations and covenants that may restrict BK Technologies, Inc.'s ability to pay dividends to BK Technologies Corporation[170](index=170&type=chunk) [Item 6. EXHIBITS](index=22&type=section&id=Item%206.%20EXHIBITS) This section provides a list of exhibits filed with the quarterly report, including certifications from the principal executive and financial officers, and XBRL-related documents - The exhibit index lists various certifications (e.g., 31.1, 31.2, 32.1, 32.2) required by the Sarbanes-Oxley Act, along with XBRL Instance Document and Taxonomy Extension documents[172](index=172&type=chunk) [SIGNATURES](index=23&type=section&id=SIGNATURES) This section provides the official signatures of the principal executive and financial officers, certifying the accuracy of the report - The report was signed on August 12, 2021, by John M. Suzuki, Chief Executive Officer, and William P. Kelly, Executive Vice President and Chief Financial Officer, on behalf of BK Technologies Corporation[177](index=177&type=chunk)

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

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company designs, manufactures, and markets two-way land mobile radio communications equipment for government and industrial markets - BK Technologies Corporation is a holding company, with its operating subsidiary BK Technologies, Inc. providing two-way radio communications equipment[9](index=9&type=chunk) - The company designs, manufactures, and markets wireless communications products including two-way LMRs, repeaters, base stations, and related components, utilizing both analog and P-25 compliant digital technologies[10](index=10&type=chunk)[11](index=11&type=chunk) - BK Radio-branded products target the government and public safety market, while RELM-branded products serve the business and industrial market[12](index=12&type=chunk)[13](index=13&type=chunk) - On March 28, 2019, the company implemented a holding company reorganization to create a more efficient corporate structure and increase operational flexibility, with BK Technologies Corporation becoming the new parent company[16](index=16&type=chunk)[19](index=19&type=chunk) - Significant orders received in 2019 and early 2020 include approximately **$3.1 million** from the U.S. Forest Service, **$1.6 million** from a California State customer, and a **$1.8 million** firm delivery order from the TSA, with an additional **$2.1 million** order from a California State customer and **$2.8 million** from the USFS announced in January/February 2020[21](index=21&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) - The company declared and paid four quarterly dividends of **$0.02 per share** in 2019 and declared another for April 2020, marking fifteen consecutive quarterly dividends[26](index=26&type=chunk) - The LMR industry is mature, with slowed growth due to factors like limited spectrum availability and constrained government budgets, leading to a migration towards more spectrum-efficient digital technologies like P-25[32](index=32&type=chunk)[33](index=33&type=chunk) - The P-25 Compliance Assessment Program (CAP) validates the company's KNG and KNG2 Series digital radios for P-25 compliance and interoperability with competitors' infrastructure, which is crucial for federal, state, and local emergency response agencies[11](index=11&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) Sales by Market Segment (2018-2019) | Market Segment | 2019 Sales (% of Total) | 2018 Sales (% of Total) | | :--- | :--- | :--- | | Government and Public Safety | 93% | 95% | | Business and Industrial | 7% | 5% | Engineering and Development Expenses (2018-2019) | Year | Expenses (in millions) | | :--- | :--- | | 2019 | $9.8 | | 2018 | $7.8 | - The increase in R&D expenses was primarily due to the development of the new BKR Series, including multiband radios, expected to supplant the KNG and KNG2 series[44](index=44&type=chunk)[46](index=46&type=chunk) - The company has no U.S. patents but relies on registered federal trademarks ('BK Technologies', 'BK Radio', 'Radios for Heroes') and trade secret laws[48](index=48&type=chunk)[103](index=103&type=chunk) - Manufacturing strategy involves a hybrid of internal capabilities and outside contract arrangements, with approximately **64.0% of material and subassembly procurements** in 2019 sourced from three suppliers, some of which are international[49](index=49&type=chunk)[52](index=52&type=chunk) - Sales may fluctuate quarterly due to governmental customer spending patterns (fiscal year budgets) and increased demand from wildland fire-suppression efforts during the summer season[53](index=53&type=chunk) U.S. Government Sales (2018-2019) | Year | % of Total Sales | | :--- | :--- | | 2019 | 49% | | 2018 | 40% | Backlog of Unshipped Customer Orders (2018-2019) | As of December 31 | Backlog (in millions) | | :--- | :--- | | 2019 | $7.2 | | 2018 | $7.6 | - The company competes in a highly competitive industry dominated by Motorola Solutions, Inc., leveraging price, product quality, and customer responsiveness as competitive advantages[57](index=57&type=chunk)[69](index=69&type=chunk) - The company is subject to various U.S. federal, state, local, and international laws and regulations, including FCC regulations for wireless communications products and U.S. Federal Government procurement regulations[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) Sales by Customer Location (2018-2019) | Customer Location | 2019 Sales (in millions) | 2018 Sales (in millions) | | :--- | :--- | :--- | | United States | $39.7 | $44.8 | | International | $0.4 | $4.6 | | Total | $40.1 | $49.4 | [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from product line dependency, intense competition, technological change, government sales reliance, and supply chain disruptions - The company is **highly dependent on its LMR product line** as its sole source of sales, and the success of new products like the BKR Series is critical[68](index=68&type=chunk) - The LMR industry is highly competitive, dominated by Motorola Solutions, Inc., which has significantly greater resources and a broader product range, including complete communication systems and infrastructure that BK Technologies does not provide[69](index=69&type=chunk) - Failure to keep pace with rapid technological changes, such as the transition from analog to digital LMR products and the adoption of the P-25 standard, could materially adversely affect the business[73](index=73&type=chunk) Reliance on U.S. Government Sales | Year | % of Total Sales to U.S. Government | | :--- | :--- | | 2019 | 49.1% | | 2018 | 40.0% | - The company's U.S. Government contracts are subject to strict procurement regulations, oversight audits, and potential termination, which could result in penalties or negative financial impacts[78](index=78&type=chunk)[79](index=79&type=chunk) - Approximately **67.0% of material, subassembly, and product procurements** in 2019 were sourced internationally, exposing the company to economic, political, and health risks in foreign countries, including potential disruptions from the coronavirus outbreak[81](index=81&type=chunk)[84](index=84&type=chunk) - Carrying substantial inventory and inaccurate demand estimates could lead to markdowns and negatively impact financial results[86](index=86&type=chunk) - Fixed-price contracts carry risks of losses if cost estimates are incorrect or if there are unforeseen events like raw material price fluctuations or subcontractor issues[87](index=87&type=chunk) - The investment strategy, including holdings in public companies like PIH, is riskier than conservative investments and could adversely impact financial condition if not successful[88](index=88&type=chunk) - Fundamental Global Investors, LLC, as the largest stockholder (approx. 39%), can exert significant influence over company policies and affairs, potentially leading to interests that differ from other stockholders[89](index=89&type=chunk) - The company's brand and reputation are critical, and negative incidents, product issues, or legal violations could lead to lost sales and recruiting difficulties[91](index=91&type=chunk) - Challenging economic conditions could lead to deferred purchases by customers, increased financial pressures on third-party partners, and limited access to credit and capital for the company[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The credit agreement with JPMorgan Chase Bank, N.A. contains restrictive covenants, including a tangible net worth requirement, which could limit operating flexibility and lead to default if not met[96](index=96&type=chunk) - Dependence on a limited number of contract manufacturers and component suppliers (**64.0% from three suppliers in 2019**) creates risks of shortages, delays, and price increases[97](index=97&type=chunk)[98](index=98&type=chunk) - Failure to effectively manage growth, including integrating new employees and improving operating systems, could materially and adversely affect the business[100](index=100&type=chunk) - The loss of executive officers or key personnel, or the inability to attract and retain qualified staff, is critical to the company's success[101](index=101&type=chunk)[102](index=102&type=chunk) - The company's reliance on trademarks and trade secret laws, without U.S. patents, may make it difficult to protect intellectual property rights against infringement[103](index=103&type=chunk) - Rising healthcare costs could have a material adverse effect on the company's financial condition[104](index=104&type=chunk) - Insurance coverage may not fully cover all potential exposures, and disruptions in financial markets could impact insurer stability or increase premiums[106](index=106&type=chunk) - The company's stock price is vulnerable to significant fluctuations due to quarterly operating results, technological innovations, competition, and personnel changes[107](index=107&type=chunk) - Natural disasters, acts of war or terrorism, and other catastrophic events could cause operational disruptions, physical damage, and negatively impact financial condition[108](index=108&type=chunk) - Cybersecurity breaches or disruptions to information technology systems, including those of partners, could lead to data loss, operational disruptions, litigation, and reputational harm[110](index=110&type=chunk) - Noncompliance with U.S. and foreign laws and regulations, including those from the FCC and SEC, could result in penalties and reputational damage[113](index=113&type=chunk) - Failure to maintain NYSE American listing standards could lead to delisting, making it harder to trade common stock and access capital markets[115](index=115&type=chunk) - Infringement claims against the company could result in costly litigation, product redesigns, or licensing requirements, negatively impacting business and financial results[116](index=116&type=chunk) - The company has deferred tax assets that may not be fully utilized if future operating losses occur, potentially requiring a valuation allowance and additional non-cash income tax expense[117](index=117&type=chunk) - Compliance with Dodd-Frank conflict minerals disclosure requirements could affect sourcing, availability, and cost of minerals, potentially leading to reputational damage if conflict-free products are not obtainable[118](index=118&type=chunk) - As a holding company, BK Technologies Corporation relies on its subsidiaries' operations and funds, and restrictions on dividend payments from subsidiaries could impact its ability to meet obligations[120](index=120&type=chunk) - Future sales of substantial amounts of common stock, particularly by affiliates, could negatively affect the stock price and impair the ability to raise equity capital[121](index=121&type=chunk)[122](index=122&type=chunk) [Item 1B. Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - No unresolved staff comments[123](index=123&type=chunk) [Item 2. Properties](index=22&type=section&id=Item%202.%20Properties) The company leases industrial and office space in Florida and Kansas and entered a new office lease in Sunrise, Florida, in February 2020 - The company leases approximately **54,000 square feet** of industrial space in West Melbourne, Florida, with a lease term until June 30, 2027[124](index=124&type=chunk) - The company also leases **8,100 square feet** of office space in Lawrence, Kansas, with the lease term extended until December 31, 2021[124](index=124&type=chunk) - In February 2020, a new lease for **6,857 square feet** of office space in Sunrise, Florida, was entered into for 64 months, with annual rental expenses starting at approximately **$196,000**[125](index=125&type=chunk) [Item 3. Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2019, there were no pending material claims or legal matters - No pending material claims or legal matters as of December 31, 2019[126](index=126&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[127](index=127&type=chunk) PART II [Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE American, with details on stockholders, dividends, and a stock repurchase program provided - Common stock trades on the NYSE American under the symbol 'BKTI'[132](index=132&type=chunk) - As of February 19, 2020, there were **645 holders of record** of common stock[133](index=133&type=chunk) - The company currently pays quarterly cash dividends, funded by its wholly-owned subsidiary, BK Technologies, Inc., subject to credit agreement covenants[134](index=134&type=chunk)[135](index=135&type=chunk) Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Shares Purchased Under Publicly Announced Plans | Shares Remaining Under Publicly Announced Plans | | :--- | :--- | :--- | :--- | :--- | | 10/01/19-10/31/19 | 15,384 | 3.44 | 15,384 | 177,891 | | 11/01/19-11/30/19 | 15,569 | 3.18 | 15,569 | 162,322 | | 12/01/19-12/31/19 | 44,180 | 3.09 | 44,180 | 118,142 | | Total | 75,133 | 3.24 | 75,133 | | - The company has a stock repurchase program authorizing up to **1 million shares**, with no termination date[137](index=137&type=chunk) [Item 6. Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data is not required for smaller reporting companies - Not required for smaller reporting companies[138](index=138&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales and operating results declined in 2019 due to lower volumes and increased R&D, with a focus on new product development for future growth [Executive Summary](index=24&type=section&id=Executive%20Summary) Financial results declined in 2019, marked by an **18.8% decrease in sales** and an operating loss, driven by lower public safety agency purchases - Financial and operating results for 2019 declined from 2018, with **sales down 18.8%** and an operating loss recognized[141](index=141&type=chunk) Key Financial Highlights (2018-2019) | Metric | 2019 (in millions) | 2018 (in millions) | | :--- | :--- | :--- | | Total Sales | $40.1 | $49.4 | | Gross Profit Margin | 39.0% | 40.5% | | SG&A Expenses | $20.0 | $17.6 | | Operating (Loss) Income | ($4.4) | $2.4 | | Pretax (Loss) Income | ($3.6) | ($0.5) | | Net Loss | ($2.6) | ($0.2) | | Cash Used in Operations | ($2.5) | $5.3 (provided) | - The decrease in sales was primarily due to reduced purchases from state and international public safety agencies in California and Canada, partially offset by new state and local agency sales[142](index=142&type=chunk)[154](index=154&type=chunk) - Increased operating expenses were largely attributed to product development and engineering for the new BKR Series, including a multiband radio, which has experienced delays[141](index=141&type=chunk)[149](index=149&type=chunk) - Working capital decreased to **$14.5 million** at year-end 2019 from **$21.0 million** in 2018, with cash, cash equivalents, and trade receivables declining[147](index=147&type=chunk) - The coronavirus outbreak in China has not impacted operations to date, but its potential future impact on the supply chain and ability to fulfill customer demand is uncertain[148](index=148&type=chunk)[155](index=155&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Sales fell **18.8%** to **$40.1 million** and gross margin decreased to **39.0%**, while SG&A expenses rose due to increased R&D for the BKR Series Consolidated Statements of Operations as a Percentage of Sales | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Sales | 100.0% | 100.0% | | Cost of products | (61.0)% | (59.5)% | | Gross margin | 39.0% | 40.5% | | Selling, general and administrative expenses | (50.0)% | (35.5)% | | Other income (expense), net | 1.9% | (6.0)% | | Loss before income taxes | (9.1)% | (1.0)% | | Income tax benefit | 2.5% | 0.6% | | Net loss | (6.6)% | (0.4)% | Sales, Net (2018-2019) | Year | Sales (in millions) | | :--- | :--- | | 2019 | $40.1 | | 2018 | $49.4 | - Sales decreased by **$9.3 million (18.8%)** in 2019, primarily due to non-recurring substantial purchases from state and international public safety agencies in California and Canada in prior years, and the federal government shutdown in Q1 2019[154](index=154&type=chunk) - Gross profit margin decreased to **39.0%** in 2019 from **40.5%** in 2018, mainly due to lower sales and manufacturing volumes, leading to suboptimal utilization of expenses, and a product mix weighted towards lower-margin products[158](index=158&type=chunk)[159](index=159&type=chunk) Selling, General and Administrative (SG&A) Expenses (2018-2019) | Year | SG&A Expenses (in millions) | % of Sales | | :--- | :--- | :--- | | 2019 | $20.0 | 50.0% | | 2018 | $17.6 | 35.5% | - Engineering and product development expenses increased to **$9.8 million (24.5% of sales)** in 2019 from **$7.8 million (15.7% of sales)** in 2018, driven by the development of the new BKR Series, including multiband radios[162](index=162&type=chunk) - Marketing and selling expenses decreased slightly to **$5.2 million** in 2019, while general and administrative expenses increased to **$5.0 million**, primarily due to corporate headquarters costs and IT security upgrades[163](index=163&type=chunk)[164](index=164&type=chunk) Operating (Loss) Income (2018-2019) | Year | Operating (Loss) Income (in millions) | % of Sales | | :--- | :--- | :--- | | 2019 | ($4.4) | (10.9)% | | 2018 | $2.4 | 4.9% | - The operating loss in 2019 was primarily due to lower sales combined with increased product development expenses[165](index=165&type=chunk) [Other Income (Expense)](index=27&type=section&id=Other%20Income%20(Expense)) Other income improved significantly due to an unrealized gain on an investment in securities, compared to a substantial loss in the prior year Other Income (Expense) (2018-2019) | Metric | 2019 (in thousands) | 2018 (in thousands) | | :--- | :--- | :--- | | Interest Income | $150 | $102 | | Gain (Loss) on Investment in Securities | $716 | ($2,671) | | Other Expense | ($104) | ($328) | | Total Other Income (Expense) | $762 | ($2,897) | - The company recognized an **unrealized gain of $716,000** on its investment in PIH in 2019, a significant improvement from a **$2.7 million loss** in 2018[168](index=168&type=chunk) - Other expenses in 2018 were primarily attributed to exchange losses from a Canadian dollar-denominated contract[170](index=170&type=chunk) [Income Tax Benefit](index=27&type=section&id=Income%20Tax%20Benefit) The company recorded a non-cash income tax benefit resulting from deferred items, with net deferred tax assets totaling **$4.4 million** Income Tax Benefit (2018-2019) | Year | Income Tax Benefit (in thousands) | | :--- | :--- | | 2019 | $987 | | 2018 | $277 | - The income tax benefit for both years is largely non-cash, resulting from deferred items[145](index=145&type=chunk) - Net deferred tax assets totaled approximately **$4.4 million** as of December 31, 2019, primarily from R&D tax credits, operating loss carryforwards, and accrued expenses[173](index=173&type=chunk) - Management believes the company can generate sufficient taxable income to utilize the entire deferred tax asset, but future losses could necessitate additional valuation allowances[174](index=174&type=chunk)[175](index=175&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$6.6 million** due to a net loss, inventory increases, dividends, and stock repurchases Net Cash Flow Summary (2018-2019) | Activity | 2019 (in millions) | 2018 (in millions) | | :--- | :--- | :--- | | Operating | ($2.5) | $5.3 | | Investing | ($2.5) | $3.2 | | Financing | ($1.7) | ($4.4) | | Net Change in Cash | ($6.6) | $4.1 | - Cash used in operating activities in 2019 was primarily due to a net loss, increased inventory, decreased accrued compensation, and an unrealized gain on investment, partially offset by decreased accounts receivable and increased deferred revenue[177](index=177&type=chunk)[178](index=178&type=chunk) - Cash used in investing activities in 2019 was for property, plant, and equipment purchases, while 2018 included proceeds from securities sales[179](index=179&type=chunk) - Financing activities in 2019 included **$1.0 million** in quarterly dividends and **$1.0 million** in stock repurchases, partially offset by **$0.4 million** from a new equipment loan[180](index=180&type=chunk) - On January 30, 2020, the company entered into a new **$5.0 million** revolving line of credit with JPMorgan Chase Bank, N.A., collateralized by personal property and subject to restrictive covenants, including a **$20.0 million** tangible net worth requirement[184](index=184&type=chunk)[186](index=186&type=chunk) Cash and Cash Equivalents (2018-2019) | As of December 31 | Amount (in millions) | | :--- | :--- | | 2019 | $4.7 | | 2018 | $11.3 | - The company believes current funds, anticipated cash from operations, and the new credit agreement are sufficient for foreseeable working capital needs[189](index=189&type=chunk) [Off Balance Sheet Arrangements](index=29&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[190](index=190&type=chunk) [Recently Adopted Accounting Pronouncements](index=29&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) The company adopted new accounting standards for revenue, financial instruments, and leases, with the lease standard having the most significant balance sheet impact - Adopted ASU 2014-09 (Revenue from Contracts with Customers) in Q1 2018 using the modified retrospective approach, with no material impact on financial statements[191](index=191&type=chunk) - Adopted ASU 2016-01 (Financial Instruments) in Q1 2018, resulting in a **$4.3 million** reclassification of unrealized gain on investment in securities to accumulated deficit[193](index=193&type=chunk) - Adopted ASU 2018-15 (Cloud Computing Arrangement Implementation Costs) in Q4 2018, with no material impact[194](index=194&type=chunk) - Adopted ASU 2016-02 (Leases) on January 1, 2019, recognizing approximately **$2.9 million** in Right-of-Use (ROU) assets and **$3.0 million** in lease liabilities for operating leases[195](index=195&type=chunk) [Recent Accounting Pronouncements](index=30&type=section&id=Recent%20Accounting%20Pronouncements) No recent accounting pronouncements are expected to materially impact the company's financial condition or results of operations - No recent pronouncements are anticipated to have a material impact on the company's financial condition, results of operations, cash flows, or disclosures[196](index=196&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve significant estimates for revenue recognition, inventory and accounts receivable allowances, warranty costs, and income taxes - Critical accounting policies and estimates include revenue recognition, allowance for doubtful accounts, allowance for excess or obsolete inventory, allowance for product warranty, software development, and income taxes[197](index=197&type=chunk) - Revenue is recognized when control of promised goods or services is transferred to customers, typically upon shipment. Extended warranty revenue is deferred and recognized straight-line over the warranty period[199](index=199&type=chunk)[200](index=200&type=chunk) Allowance for Doubtful Accounts (2018-2019) | As of December 31 | Allowance (in thousands) | Gross Trade Receivables (in millions) | | :--- | :--- | :--- | | 2019 | $50 | $4.0 | | 2018 | $50 | $5.8 | - The allowance for doubtful accounts is based on historical collection experience and a general allowance of approximately **1.3% of gross receivables**, with no specific allowance as of December 31, 2019 and 2018[201](index=201&type=chunk) Allowance for Obsolete and Slow-Moving Inventory (2018-2019) | As of December 31 | Allowance (in thousands) | | :--- | :--- | | 2019 | $823 | | 2018 | $629 | - Inventory allowance is determined by classifying inventory usage, business forecasts, and individual management review to ensure valuation at the lower of cost or net realizable value[204](index=204&type=chunk) - A liability for estimated product warranty costs (two-year warranties) is recorded at the time of revenue recognition, based on historical experience and periodically assessed for adequacy[205](index=205&type=chunk) - Income taxes are accounted for using the asset and liability method, with deferred tax assets and liabilities recognized for temporary differences. Valuation allowances are provided if realization of deferred tax assets is not more likely than not, based on estimates of future earnings and tax planning strategies[206](index=206&type=chunk) [Forward-Looking Statements](index=33&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements that involve risks and uncertainties, and readers are cautioned against placing undue reliance on them - The report contains forward-looking statements regarding future events and expectations, which involve risks and uncertainties that could cause actual results to differ materially[208](index=208&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company assumes no obligation to publicly update or revise them[209](index=209&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Disclosures about market risk are not required for smaller reporting companies - Not required for smaller reporting companies[210](index=210&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the audited consolidated financial statements for 2019 and 2018, the independent auditor's report, and detailed notes - The consolidated financial statements for the years ended December 31, 2019 and 2018, have been audited by MSL, P.A., who issued an **unqualified opinion**[214](index=214&type=chunk)[218](index=218&type=chunk) - The financial statements include Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Stockholders' Equity, and Consolidated Statements of Cash Flows[220](index=220&type=chunk)[223](index=223&type=chunk)[226](index=226&type=chunk)[230](index=230&type=chunk) - Notes to the consolidated financial statements provide detailed information on significant accounting policies, inventories, allowance for doubtful accounts, property, plant and equipment, debt, investment in securities, leases, income taxes, loss per share, share-based employee compensation, significant customers, retirement plan, commitments and contingencies, and the capital program[233](index=233&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk)[291](index=291&type=chunk)[303](index=303&type=chunk)[307](index=307&type=chunk)[317](index=317&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[354](index=354&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=57&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[359](index=359&type=chunk) [Item 9A. Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - The President and Chief Financial Officer concluded that disclosure controls and procedures were **effective** as of December 31, 2019[360](index=360&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2019, based on the COSO framework[363](index=363&type=chunk) - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control over financial reporting during the fourth fiscal quarter[364](index=364&type=chunk) [Item 9B. Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - No other information[365](index=365&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, officers, and corporate governance is incorporated by reference from the 2020 proxy statement - Information on Directors, Executive Officers, and Corporate Governance is incorporated by reference from the 2020 definitive proxy statement[368](index=368&type=chunk)[370](index=370&type=chunk) - The company has a Code of Business Conduct and Ethics and a Code of Ethics for the CEO and Senior Financial Officers, available on its website[371](index=371&type=chunk) [Item 11. Executive Compensation](index=58&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the 2020 proxy statement - Executive compensation information is incorporated by reference from the 2020 definitive proxy statement[372](index=372&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2020 proxy statement - Security ownership information is incorporated by reference from the 2020 definitive proxy statement[373](index=373&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2020 proxy statement - Information on related party transactions and director independence is incorporated by reference from the 2020 definitive proxy statement[374](index=374&type=chunk) [Item 14. Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2020 proxy statement - Information on principal accounting fees and services is incorporated by reference from the 2020 definitive proxy statement[375](index=375&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and all exhibits filed with the report - The report includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[378](index=378&type=chunk) - A comprehensive list of exhibits is provided, covering organizational documents, incentive compensation plans, employment agreements, credit agreements, and various certifications (e.g., XBRL, Section 302, Section 906)[380](index=380&type=chunk)[381](index=381&type=chunk)[383](index=383&type=chunk) - All financial statement schedules have been omitted as they are inapplicable, not material, or the information is included in the Consolidated Financial Statements and notes[386](index=386&type=chunk) [Item 16. Form 10-K Summary](index=61&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable as no Form 10-K Summary is provided - No Form 10-K Summary is provided[387](index=387&type=chunk)

Sales Performance - For Q3 2019, sales decreased by 11.3% to approximately $11.8 million compared to $13.3 million in Q3 2018[89] - For the nine months ended September 30, 2019, sales totaled approximately $32.7 million, down 15.4% from $38.7 million in the same period last year[89] - The company anticipates sales growth and the expected production and sale of new products to favorably impact overall gross profit margins in the future[102] - The sales funnel includes potential new customers in federal, state, and local public safety agencies, with strengthened sales and marketing resources[99] Profitability - Gross profit margin for Q3 2019 improved to approximately 43.3%, compared to 41.1% in Q3 2018[90] - For the nine-month period ended September 30, 2019, gross profit margin was approximately 40.4%, down from 41.8% in the same period last year[90] - The company recognized operating income of approximately $295,000 in Q3 2019, compared to $878,000 in Q3 2018[91] - Operating income for Q3 2019 was approximately $295,000, or 2.5% of sales, down from $878,000, or 6.6% of sales in Q3 2018[111] - Net income for Q3 2019 was approximately $238,000 ($0.02 per share), down from $650,000 ($0.05 per share) in Q3 2018[94] - The company recorded a net loss of approximately $1.3 million for the nine months ended September 30, 2019, compared to net income of approximately $1.2 million for the same period last year[122] Expenses - SG&A expenses for Q3 2019 totaled approximately $4.8 million, representing 40.8% of sales, a decline of 15.3% from the previous quarter[91] - SG&A expenses for Q3 2019 totaled approximately $4.8 million, or 40.8% of sales, compared to $4.6 million, or 34.5% of sales in Q3 2018[105] - Engineering and product development expenses for Q3 2019 were approximately $2.4 million, representing 20.1% of total sales, up from $2.1 million, or 15.9% of total sales in Q3 2018[106] - Marketing and selling expenses for Q3 2019 were approximately $1.4 million, or 11.5% of sales, unchanged from the same quarter last year[109] - General and administrative expenses for Q3 2019 totaled approximately $1.1 million, or 9.1% of total sales, compared to $1.1 million, or 8.3% of total sales in Q3 2018[110] Cash Flow and Working Capital - As of September 30, 2019, working capital totaled approximately $17.1 million, down from $21.0 million as of December 31, 2018[95] - Cash provided by operating activities for the nine months ended September 30, 2019, totaled approximately $1.0 million, down from $2.6 million for the same period last year[121] - As of September 30, 2019, the company's cash and cash equivalents balance was approximately $8.8 million, which is expected to meet working capital requirements for the foreseeable future[131] Investments and Future Products - The company recognized an unrealized loss of approximately $258,000 on its investment in 1347 Property Insurance Holdings, Inc. for Q3 2019, compared to a loss of $191,000 in Q3 2018[113] - The company anticipates introducing a new multi-band product in the market in the second half of 2020, following design changes aimed at improving functionality and performance[107] Accounting Policies - No changes were made to critical accounting policies during the quarter ended September 30, 2019[133]