BK Technologies(US:BKTI)2022-11-03 16:00PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended September 30, 2022, detailing balance sheets, statements of operations, and cash flows, reflecting key financial changes Condensed Consolidated Balance Sheet (Unaudited) | Account | Sep 30, 2022 ($ in thousands) | Dec 31, 2021 ($ in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 4,034 | 10,580 | | Trade accounts receivable, net | 5,379 | 8,229 | | Inventories, net | 26,332 | 16,978 | | Total current assets | 37,456 | 37,421 | | Total assets | 49,038 | 50,385 | | Liabilities & Equity | | | | Accounts payable | 13,257 | 4,458 | | Total current liabilities | 22,824 | 12,234 | | Total liabilities | 28,045 | 17,767 | | Total stockholders' equity | 20,993 | 32,618 | | Total liabilities and stockholders' equity | 49,038 | 50,385 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2022 ($ in thousands) | Three Months Ended Sep 30, 2021 ($ in thousands) | Nine Months Ended Sep 30, 2022 ($ in thousands) | Nine Months Ended Sep 30, 2021 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales, net | 11,917 | 12,626 | 30,612 | 32,526 | | Cost of products | 9,676 | 8,488 | 25,175 | 20,914 | | Operating loss | (2,391) | (370) | (9,515) | (1,422) | | Net loss | (2,402) | (2,566) | (10,672) | (1,398) | | Net loss per share-basic | (0.14) | (0.15) | (0.63) | (0.10) | Condensed Consolidated Statements of Cash Flows (Unaudited, Nine Months Ended) | Activity | Sep 30, 2022 ($ in thousands) | Sep 30, 2021 ($ in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (6,858) | (3,619) | | Net cash used in investing activities | (959) | (1,921) | | Net cash provided by financing activities | 1,271 | 12,801 | | Net change in cash and cash equivalents | (6,546) | 7,261 | | Cash and cash equivalents, end of period | 4,034 | 14,087 | - On October 27, 2022, the Company entered into a Letter of Intent for a new one-year Line of Credit of up to $15 million to replace the existing JPMorgan Chase facility and for working capital99 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 5.6% Q3 2022 revenue decline due to supply chain issues and Hurricane Ian, sharply reduced gross profit margins, increased SG&A, and a higher operating loss, while addressing liquidity management and credit facility negotiations - Customer demand and orders remained strong in Q3 2022, but supply chain constraints and Hurricane Ian limited product shipments, increasing backlog126137 Q3 and Nine-Month 2022 Performance vs. 2021 | Metric | Q3 2022 | Q3 2021 | Change | Nine Months 2022 | Nine Months 2021 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $11.9M | $12.6M | -5.6% | $30.6M | $32.5M | -5.9% | | Gross Profit Margin | 18.8% | 32.8% | -14.0 p.p. | 17.8% | 35.7% | -17.9 p.p. | | SG&A Expenses | $4.6M | $4.5M | +2.8% | $15.0M | $13.0M | +14.7% | | Operating Loss | ($2.4M) | ($0.4M) | +500% | ($9.5M) | ($1.4M) | +578% | | Net Loss | ($2.4M) | ($2.6M) | -7.7% | ($10.7M) | ($1.4M) | +664% | - Gross profit margin declined due to increased material and freight costs, leading to suboptimal manufacturing overhead absorption143 - Net cash used in operating activities for the nine months ended September 30, 2022, was $6.9 million, primarily due to net loss and a $9.4 million inventory increase to mitigate supply chain risks160161 - The company manages liquidity with its $5 million JPMC credit facility, with $4.46 million outstanding as of September 30, 2022, expiring January 31, 2023166170 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide disclosure under this item as it qualifies as a "smaller reporting company" according to Regulation S-K - As a "smaller reporting company" under Regulation S-K, the Company is not required to include market risk disclosures177 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the third quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the reporting period end179 - No material changes occurred in the company's internal control over financial reporting during the third quarter of 2022180 PART II - OTHER INFORMATION Item 1A. Risk Factors The company reports no material changes to the Risk Factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes occurred to the Risk Factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021184 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's credit agreement limitations on dividends and a $5 million share repurchase program authorized in December 2021, under which no shares were repurchased in Q3 2022 - The Board authorized a share repurchase program on December 21, 2021, allowing purchases of up to $5 million of common shares186 Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Still be Purchased ($) | | :--- | :--- | :--- | :--- | | July 1–31, 2022 | — | — | 5,000,000 | | August 1–31, 2022 | — | — | 5,000,000 | | September 1–30, 2022 | — | — | 5,000,000 | | Quarter Ended Sep 30, 2022 | — | $ — | $ 5,000,000 | Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes required exhibits such as CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and various XBRL documents191192 Signatures - The report was duly signed and authorized on November 4, 2022, by John M. Suzuki, CEO, and Scott A. Malmanger, Interim CFO196