10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 ☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-32644

BK TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	83-4064262
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7100 Technology Drive

West Melbourne, Florida 32904

(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (321) 984-1414

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $.60 per share	BKTI	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

There were 16,785,721 shares of common stock, $0.60 par value, of the registrant outstanding at August 6, 2021.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		1
Item 1.	FINANCIAL STATEMENTS	1
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	24
Item 4.	CONTROLS AND PROCEDURES	24
PART II - OTHER INFORMATION		25
Item 1A.	RISK FACTORS	25
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
Item 6.	EXHIBITS	26
SIGNATURES		27

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,661		$	6,826
Trade accounts receivable, net		7,210			6,466
Inventories, net		12,036			9,441
Prepaid expenses and other current assets		1,866			1,878
Total current assets		36,773			24,611
Property, plant and equipment, net		4,426			3,566
Right-of-use (ROU) asset		2,594			2,887
Investment in securities		4,481			2,014
Deferred tax assets, net		4,116			4,300
Other assets		101			112
Total assets	$	52,491		$	37,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,316		$	5,119
Accrued compensation and related taxes		1,481			1,635
Accrued warranty expense		644			791
Accrued other expenses and other current liabilities		364			307
Dividends payable		—			250
Short-term lease liability		428			525
Credit facility		1,470			—
Notes payable-current portion		262			82
Deferred revenue		934			757
Total current liabilities		11,899			9,466
Notes payable, net of current portion		740			247
Long-term lease liability		2,498			2,702
Deferred revenue		2,327			2,551
Total liabilities		17,464			14,966
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding		—			—
Common stock; $.60 par value; 20,000,000 authorized shares; 18,236,121 and 13,962,366 issued and 16,785,721 and 12,511,966 outstanding shares at June 30, 2021, and December 31, 2020, respectively		10,941			8,377
Additional paid-in capital		35,534			26,346
Accumulated deficit		(6,046	)		(6,797	)
Treasury stock, at cost, 1,450,400 shares at June 30, 2021, and December 31, 2020, respectively		(5,402	)		(5,402	)
Total stockholders’ equity		35,027			22,524
Total liabilities and stockholders’ equity	$	52,491		$	37,490

See notes to condensed consolidated financial statements.

1

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data) (Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Sales, net	$	11,335		$	9,937		$	19,899		$	20,826
Expenses
Cost of products		7,124			5,609			12,592			12,603
Selling, general and administrative		4,553			4,364			8,526			9,107
Total expenses		11,677			9,973			21,118			21,710
Operating loss		(342	)		(36	)		(1,219	)		(884	)
Other income (expense):
Net interest (expense) income		(14	)		(6	)		(18	)		3
Gain (loss) gain on investment in securities		2,262			(200	)		2,467			(506	)
Other expense		(26	)		(32	)		(44	)		(79	)
Total other income (expense)		2,222			(238	)		2,405			(582	)
Income (loss) before income taxes		1,880			(274	)		1,186			(1,466	)
Income tax expense		(184	)		(28	)		(184	)		(28	)
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	)
Weighted average shares outstanding-basic		13,563,763			12,495,707			13,043,477			12,525,407
Weighted average shares outstanding-diluted		13,625,095			12,495,707			13,101,635			12,525,407

See notes to condensed consolidated financial statements.

2

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Six Months Ended
	June 30, 2021			June 30, 2020
Operating activities
Net income (loss)	$	1,002		$	(1,494	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Inventories allowances		368			72
Deferred tax expense		184			28
Depreciation and amortization		681			661
Share-based compensation expense-stock options		65			60
Share-based compensation expense-restricted stock units		128			89
(Gain) loss on investment in securities		(2,467	)		506
Changes in operating assets and liabilities:
Trade accounts receivable		(744	)		381
Inventories		(2,963	)		3,914
Prepaid expenses and other current assets		12			325
Other assets		11			54
ROU asset and lease liability		(8	)		44
Accounts payable		1,197			(838	)
Accrued compensation and related taxes		(154	)		(331	)
Accrued warranty expense		(147	)		(337	)
Deferred revenue		(47	)		557
Accrued other expenses and other current liabilities		57			(94	)
Net cash (used in) provided by operating activities		(2,825	)		3,597
Investing activities
Purchases of property, plant, and equipment		(1,541	)		(525	)
Net cash used in investing activities		(1,541	)		(525	)
Financing activities
Proceeds from common stock issuance, net of costs		11,599			—
Cash dividends paid		(501	)		(502	)
Repurchase of common stock		—			(269	)
Proceeds from the credit facility and notes payable		3,543			2,196
Repayment of the credit facility and notes payable		(1,400	)		(2,234	)
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, beginning of period		6,826			4,676
Cash and cash equivalents, end of period	$	15,661		$	6,939
Supplemental disclosure
Cash paid for interest	$	14		$	11
Non-cash financing activity
Common stock issued under restricted stock units	$	84		$	56

See notes to condensed consolidated financial statements.

3

BK TECHNOLOGIES CORPORATION

Notes to Condensed Consolidated Financial Statements

Unaudited

(In thousands, except share and per share data and percentages)

1. Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc., as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. In the opinion of management, all adjustments, which include normal, recurring adjustments, necessary for a fair presentation, have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2020, has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 3, 2021. The results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

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

VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.

Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.

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

The Company has an investment in FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated VIE.

4

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of June 30, 2021, and December 31, 2020, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements. The amendments in the ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the ASU. The Company adopted this guidance as of January 1, 2020, and the adoption did not have an impact on its consolidated financial statements.

Recent Accounting Pronouncements

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

2. Significant Events and Transactions

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock on July 9, 2021, to stockholders of record as of July 26, 2021. These dividends were paid on August 9, 2021.

On June 9, 2021, the Company closed a public offering of 4,249,250 shares of its common stock at a price of $3.00 per share, for net proceeds of $11,559,000 after deducting underwriting discounts and commissions and offering expenses payable by the Company. The shares sold in the offering included the exercise in-full by the underwriters of their over-allotment option to purchase up to 554,250 shares of common stock in addition to the 3,695,000 shares which the underwriters initially agreed to purchase. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering. The Company intends to use the net proceeds from the offering primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.

3. Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $7,260 and $6,516 at June 30, 2021, and December 31, 2020, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

4. Inventories, Net

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

	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
	$	12,036	$	9,441

5

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $888 at June 30, 2021, compared with approximately $520 at December 31, 2020.

5. Income Taxes

The Company has recorded income tax expense of $184 for the three and six months ended June 30, 2021, compared with an income tax expense of $28 for the same periods last year.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision (benefit) in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

As of June 30, 2021, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years. The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, the Company established a valuation allowance of $98. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2021.

6. Investment in Securities

1347 LP

The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP (“1347 LP”), was established for the purpose of investing in securities.

Affiliates of Fundamental Global Investors, LLC (“FG”), serve as the general partner and the investment manager of 1347 LP, and the Company is the sole limited partner. As the sole limited partner, the Company is entitled to 100% of net assets held by 1347 LP. The general partner of 1347 LP is entitled to reimbursement of certain costs, fees, and expenses arising in connection with 1347 LP’s operations, as provided by the partnership agreement, upon approval by the Company’s Board of Directors.

FG Financial Group

As of June 30, 2021, the Company indirectly held approximately $76 in cash and 477,282 shares of FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq: FGF) (“FGF”), with fair value of $4,481, through an investment in 1347 LP. These shares were purchased in March and May 2018 for approximately $3,741. For the three and six months ended June 30, 2021, the Company recognized unrealized gains on the investment of approximately $2,262 and $2,467, respectively, compared with unrealized losses of $200 and $506, respectively for the same periods last year. There have been no costs, fees, and expenses paid to the general partner or its affiliates for any periods, including the three and six months ended June 30, 2021 and 2020.

6

As of June 30, 2021, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 3,045,593 shares of FGF’s common stock, representing approximately 60.8% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, a member of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of FG and serves as Chairman of the Board of Directors of Ballantyne Strong, Inc. Mr. Cerminara also serves as Chairman of the Board of Directors of FGF.

7. Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three and six months ended June 30, 2021 and 2020, are as follows:

	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 under restricted stock units		24,505		15		(15	)		-			-			-
Share-based compensation expense-stock options		—		—		32			-			-			32
Share-based compensation expense-restricted stock units		—		—		103			-			-			103
Common stock dividends ($0.02 per share)		—		—		-			(251	)		-			(251	)
Net loss		—		—		-			(694	)	-				(694	)
Balance at March 31, 2021		13,986,871		8,392		26,466			(7,742	)		(5,402	)		21,714
Common stock issued, net of issuance costs		4,249,250		2,549		9,010			-			-			11,559
Share-based compensation expense-stock options		—		—		33			-			-			33
Share-based compensation expense-restricted stock units		—		—		25			-			-			25
Net income		—		—		-			1,696			-			1,696
Balance at June 30, 2021		18,236,121	$	10,941	$	35,534		$	(6,046	)	$	(5,402	)	$	35,027

7

7. Stockholders’ Equity (continued)

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2019		13,929,381	$	8,357	$	26,095		$	(6,043	)	$	(5,133	)	$	23,276
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		21			-			-			21
Common stock dividends ($0.02 per share)		—		—		-			(250	)		-			(250	)
Net loss		—		—		-			(1,192	)		-			(1,192	)
Repurchase of common stock		—		—		-			-			(243	)		(243	)
Balance at March 31, 2020		13,929,381		8,357		26,146			(7,485	)		(5,376	)		21,642
Common stock issued under restricted stock units		14,439		9		(9	)		-			-			-
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		68			-			-			68
Common stock dividends ($0.02 per share)		—		—		-			(252	)		-			(252	)
Net loss		—		—		-			(302	)		-			(302	)
Repurchase of common stock		—		—		-			-			(26	)		(26	)
Balance at June 30, 2020		13,943,820	$	8,366	$	26,235		$	(8,039	)	$	(5,402	)	$	21,160

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8. Income (Loss) Per Share

The following table sets forth the computation of basic and diluted loss per share:

	Three Months Ended					Six Months Ended
	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Numerator:
Net income (loss) for basic and diluted earnings per share	$	1,696	$	(302	)	$	1,002	$	(1,494	)
Denominator for basic income (loss) per share weighted average shares		13,563,763		12,495,707			13,043,477		12,525,407
Effect of dilutive securities:
Options and restricted stock units		61,332		-			58,158		-
Denominator for diluted loss per share weighted average shares		13,625,095		12,495,707			13,101,635		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	)

Approximately 444,000 stock options and 0 restricted stock units for the three and six months ended June 30, 2021, respectively, and 510,900 stock options and 86,636 restricted stock units for the three and six months ended June 30, 2020, respectively, were excluded from the calculation because they were anti-dilutive.

9

9. Non-Cash Share-Based Employee Compensation

The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $33 and $65 for the three and six months ended June 30, 2021, respectively, compared with $30 and $60, respectively, for the same period last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of stock option grants under this plan. The non-cash share-based employee compensation expense recorded in the three and six months ended June 30, 2021, was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

A summary of activity under the Company’s stock option plans during the six months ended June 30, 2021, is presented below:

	Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value ($) Per Share		Aggregate Intrinsic Value ($)
As of January 1, 2021
Outstanding		489,000		3.96		7.23		1.51		20,000
Vested		185,800		4.15		5.65		1.55		20,000
Nonvested		303,200		3.84		8.20		1.49		-
Period activity
Issued		-		-		—		-		-
Exercised		-		-		—		-		-
Forfeited		-		-		—		-		-
Expired		10,000		4.55		—		1.06		-
As of June 30, 2021
Outstanding		479,000		3.94		6.88		1.52		24,250
Vested		250,600		4.10		6.00		1.55		24,250
Nonvested		228,400		3.77		7.84		1.48		-

Restricted Stock Units

On March 4, 2021, upon the resignation of former director Lewis Johnson, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Johnson’s unvested restricted stock units granted September 6, 2018, September 6, 2019, and August 24, 2020, and issued 24,505 shares of common stock to Mr. Johnson.

On August 24, 2020, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $240), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

On April 24, 2020, upon the resignation of former director Ryan Turner, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Turner’s unvested restricted stock units granted September 6, 2019, and September 6, 2018, and issued 10,389 and 4,050 shares of common stock, respectively.

On September 6, 2019, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $280), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

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On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units vest in full as of the director’s last date of service as a director of the Company. On September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested.

On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 4, 2019.

There were 122,533 and 147,038 restricted stock units outstanding as of June 30, 2021, and December 31, 2020, respectively.

The Company recorded non-cash restricted stock unit compensation expense of $25 and $128 for the three and six months ended June 30, 2021, respectively, compared with $68 and $89, respectively for the same period last year.

10. Commitments and Contingencies

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, it records a liability in its consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not accrue legal reserves, consistent with applicable accounting guidance. There were no pending material claims or legal matters as of June 30, 2021.

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced in Wuhan, China, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The pandemic may have the potential of adversely impacting our business and financial performance in the future. The extent of the potential impact will depend on future developments, which are uncertain and, given the continuing evolution of the COVID-19 pandemic and the global responses to curb its spread, cannot be predicted. In addition, the pandemic has significantly increased economic uncertainty. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact, including any recession that may occur in the future.

Purchase Commitments

As of June 30, 2021, the Company had purchase commitments for inventory totaling approximately $8,591.

Significant Customers

Sales to United States government agencies represented approximately $4,749 (41.9%) and $6,865 (34.5%) of the Company’s net total sales for the three and six months ended June 30, 2021, respectively, compared with approximately $4,268 (43.0%) and $10,845 (52.1%), respectively, for the same period last year. Accounts receivable from agencies of the United States government were $3,279 as of June 30, 2021, compared with approximately $589 at the same date last year.

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11. Debt

BK Technologies, Inc., a wholly owned subsidiary of the Company, entered into a $5,000 Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”) on January 30, 2020. The Credit Agreement provides for a revolving line of credit of up to $5,000, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc., pursuant to the terms of the Continuing Security Agreement with JPMC. The Company and each subsidiary of BK Technologies, Inc., are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. On January 26, 2021, the Company extended this revolving credit facility for one year, through January 31, 2022.

Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR or zero if the LIBOR is less than zero) plus a margin of 1.90% (1.97263% as of June 30, 2021). The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2020, with all outstanding principal and interest to be payable in full at maturity (January 31, 2022).

The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20,000 at any fiscal quarter end.

The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of June 30, 2021, and the date of filing this report. As of June 30, 2021, and the date of filing this report, the Company had an outstanding balance of approximately $1,500, and a net balance availability of $3,165 under the Credit Agreement.

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

On September 25, 2019, BK Technologies, Inc., a wholly owned subsidiary of the Company, and U.S. Bank Equipment Finance, a division of U.S. Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $425 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 equal monthly principal and interest payments of approximately $8 beginning on October 25, 2019, matures on September 25, 2024, and bears a fixed interest rate of 5.11%.

12. Leases

The Company accounts for its leasing arrangements in accordance with Topic 842, “Leases”. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

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As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of September 30, 2027. Annual rental, maintenance and tax expenses for the facility are approximately $491.

In February 2020, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2020. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent 12-month period.

In March 2021, the Company executed an agreement for the termination of its lease for 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, effective March 31, 2021 and recognized a termination lease expense of approximately $53. The original term of the lease was through December 31, 2021.

Lease costs consisted of the following:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost	$	136	$	143	$	302	$	287
Short-term lease cost		-		-		-		2
Variable lease cost		33		32		65		63
Total lease cost	$	169	$	175	$	367	$	352

Supplemental cash flow information related to leases was as follows:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	140	$	122	$	352	$	243
Operating cash flows (liability reduction)	$	100	$	83	$	271	$	164
ROU assets obtained in exchange for lease obligations:
Operating leases	$	-	$	26	$	14	$	35

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12. Leases (continued)

Other information related to operating leases was as follows:

	June 30, 2021
Weighted average remaining lease term (in years)		5.68
Weighted average discount rate		5.50	%

Maturity of lease liabilities as of June 30, 2021, were as follows:

	June 30, 2021
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

Effective July 1, 2021, the Company changed its accounting to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress. This change resulted in a net increase of approximately $1.3 million in inventory and retained earnings.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE CONCERNING

FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including the statements about our plans, objectives, expectations, and prospects. You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “should,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “are encouraged” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in our subsequent filings with the Securities and Exchange Commission, and include, among others, the following:

· changes or advances in technology;

· the success of our land mobile radio product line;

· successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated new multiband product and other related products in the planned new BKR Series product line;

· competition in the land mobile radio industry;

· general economic and business conditions, including federal, state and local government budget deficits and spending limitations, any impact from a prolonged shutdown of the U.S. Government, and the ongoing effects of the COVID-19 pandemic;

· the availability, terms and deployment of capital;

· reliance on contract manufacturers and suppliers;

· risks associated with fixed-price contracts;

· heavy reliance on sales to agencies of the U.S. Government and our ability to comply with the requirements of contracts, laws and regulations related to such sales;

· allocations by government agencies among multiple approved suppliers under existing agreements;

· our ability to comply with U.S. tax laws and utilize deferred tax assets;

· our ability to attract and retain executive officers, skilled workers and key personnel;

· our ability to manage our growth;

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· our ability to identify potential candidates and consummate acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation;

· the impact of general business conditions, including those resulting from the COVID-19 pandemic, on the companies in which we hold investments;

· impact of our capital allocation strategy;

· risks related to maintaining our brand and reputation;

· impact of government regulation;

· rising health care costs;

· our business with manufacturers located in other countries, including changes in the U.S. Government and foreign governments’ trade and tariff policies, as well as any further impact resulting from the COVID-19 pandemic;

· our inventory and debt levels;

· protection of our intellectual property rights;

· fluctuation in our operating results and stock price;

· acts of war or terrorism, natural disasters and other catastrophic events, such as the COVID-19 pandemic;

· any infringement claims;

· data security breaches, cyber-attacks and other factors impacting our technology systems;

· availability of adequate insurance coverage;

· maintenance of our NYSE American listing;

· risks related to being a holding company; and

· the effect on our stock price and ability to raise equity capital through future sales of shares of our common stock.

Some of these factors and risks have been, and may further be, exacerbated by the COVID-19 pandemic. We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report. Readers are cautioned not to place undue reliance on these forward-looking statements.

Reported dollar amounts in the management’s discussion and analysis (“MD&A”) section of this report are disclosed in millions or as whole dollar amounts.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report and the MD&A, consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 3, 2021.

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Executive Overview

BK Technologies Corporation is a holding company, with a wholly owned operating subsidiary, BK Technologies, Inc. We design, manufacture and market two-way land mobile radios, repeaters, base stations and related components and subsystems.

Two-way land mobile radios can be hand-held (portable) or installed in vehicles (mobile). Repeaters expand the range of two-way land mobile radios, enabling them to operate over a wider area. Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal and reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception. We incorporate both analog and digital technologies in our products. Our digital technology is compliant with the Project 25 standard of the Association of Public-Safety Communications Officials. We offer products primarily under the “BK” brand name. Generally, BK-branded products serve the government and public safety market.

Holding Company Reorganization

On March 28, 2019, we implemented a holding company reorganization. The reorganization created a new holding company, BK Technologies Corporation, which became the new parent company of BK Technologies, Inc. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility. We did not incur any material operational or financial impacts. The holding company reorganization was effected through a merger transaction that was a tax-free transaction for U.S. federal income tax purposes for our stockholders. No stockholder vote was required to effect the merger transaction.

As part of the holding company reorganization, stockholders of our predecessor, BK Technologies, Inc., became stockholders of BK Technologies Corporation, on a one-for-one basis, with the same number of shares and same ownership percentage of common stock that they held immediately prior to the holding company reorganization. Following the reorganization, BK Technologies Corporation replaced BK Technologies, Inc. as the publicly traded entity, and shares of BK Technologies Corporation were listed on the NYSE American under the symbol “BKTI,” which is the same symbol as previously used by BK Technologies, Inc. In addition, the common stock of BK Technologies Corporation was assigned a new CUSIP Number: 05587G 104.

For the purpose of this report, references to “we” or the “Company” or our management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc., as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates.

Impact of COVID-19 Pandemic

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020. In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing. We are considered an “essential business” that is supporting first responders and our manufacturing operations have remained open throughout the pandemic. We implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing, wearing face masks, and remote work practices. Among other things, we have invested in employee safety equipment, additional cleaning supplies and measures, adjusted production lines and workplaces as necessary and adapted new processes for interactions with our suppliers and customers to safely manage our operations. Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing.

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In planning for the possible disruption of our business, we took steps to reduce expenses throughout the Company. This included suspending all Company travel for a period of time, as well as our participation in trade shows and other business meetings, instituting strict inventory control and decreasing expenditures. We also implemented workforce reductions during the second quarter of 2020 and suspended the employer’s 401K match. For the first six months of 2021, the impact to our business, particularly customer orders, is unknown with any certainty. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times and increased costs for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and longer delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations. We may also experience fluctuations in our quarterly results, in part, due to our sales to federal and state agencies that participate in wildland fire-suppression efforts, which may be greater during the summer season when forest fire activity is heightened. In some years, these factors may cause an increase in sales for the second and third quarters, compared with the first and fourth quarters of the same fiscal year. Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition.

Second Quarter and Six Months Summary

Overall, our financial and operating results for the three and six months ended June 30, 2021, improved compared with the same periods of last year. For the second quarter 2021, sales increased 14.1% from the second quarter last year and 32.4% from the immediately preceding quarter. The improvement in sales for the second quarter brought sales for the six-months ended June 30, 2021, within 4.5% of last year’s six month period. Gross profit margins as a percentage of sales for the second quarter and six-month periods of 2021 decreased compared with the same periods of last year, generally reflecting cost increases in materials and freight, and a less favorable sales mix. Selling, general and administrative (“SG&A”) expenses for the second quarter of 2021 were within 4.3% of SG&A expenses for the second quarter last year, while SG&A expenses for the six-month period ended June 30, 2021, decreased 6.4% from the same period last year. These factors yielded operating losses for the three and six months ended June 30, 2021, that increased slightly from the comparable periods last year. During the second quarter we closed a public offering of our common stock, raising net proceeds of approximately $11.6 million with the issuance of approximately 4.2 million common shares.

For the second quarter of 2021, our sales increased 14.1% to approximately $11.3 million, compared with approximately $9.9 million for the same quarter last year. For the six months ended June 30, 2021, sales totaled approximately $19.9 million, compared with approximately $20.8 million for the same period last year.

Gross profit margins as a percentage of sales for the second quarter of 2021 were approximately 37.2%, compared with 43.6% for the second quarter last year. For the six-month period ended June 30, 2021, gross profit margins as a percentage of sales were approximately 36.7%, compared with 39.5% for the same period last year.

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SG&A expenses for the second quarter of 2021 totaled approximately $4.6 million, compared with approximately $4.4 million for the same quarter last year. SG&A expenses for the first six months of 2021 decreased 6.4% to approximately $8.5 million, compared with approximately $9.1 million for the same period last year.

For the second quarter of 2021, we recognized an operating loss of approximately $342,000, compared with approximately $36,000 for the same quarter last year. For the six-month period ended June 30, 2021, our operating loss totaled approximately $1.2 million, compared with approximately $0.9 million for the same period last year.

For the second quarter of 2021, we recognized an unrealized gain totaling approximately $2.3 million on our investment in FGF Financial (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated variable interest entity. This compares with an unrealized loss of approximately $200,000 on the investment for the second quarter last year. For the six-month period ended June 30, 2021, we recognized an unrealized gain of approximately $2.5 million, compared with an unrealized loss of $506,000 for last year’s six-month period.

Net income for the three months ended June 30, 2021, was approximately $1.7 million ($0.13 per basic and $0.12 per diluted share), compared with a net loss of approximately $302,000 ($0.02 per basic and diluted share) for the same quarter last year. For the six months ended June 30, 2021, our net income totaled approximately $1.0 million ($0.08 per basic and diluted share), compared with a net loss of approximately $1.5 million ($0.12 per basic and diluted share) for the same period last year.

As of June 30, 2021, working capital totaled approximately $25.0 million, of which approximately $22.9 million was comprised of cash, cash equivalents and trade receivables, reflecting the cash received from or closed public offering of our common stock. As of December 31, 2020, working capital totaled approximately $15.1 million, of which approximately $13.3 million was comprised of cash, cash equivalents and trade receivables.

Results of Operations

As an aid to understanding our operating results for the periods covered by this report, the following table shows selected items from our condensed consolidated statements of operations expressed as a percentage of sales:

	Percentage of Sales Three Months Ended						Percentage of Sales Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products		(62.8	)		(56.4	)		(63.3	)		(60.5	)
Gross margin		37.2			43.6			36.7			39.5
Selling, general and administrative expenses		(40.2	)		(43.9	)		(42.8	)		(43.7	)
Other income (expense)		19.6			(2.4	)		12.1			(2.9	)
Income (loss) before income taxes		16.6			(2.7	)		6.0			(7.0	)
Income tax (expense) benefit		(1.6	)		(0.3	)		(0.9	)		(0.1	)
Net loss		15.0	%		(3.0	)%		5.1	%		(7.2	)%

Net Sales

For the second quarter ended June 30, 2021, net sales increased 14.1% to approximately $11.3 million, compared with approximately $9.9 million for the same quarter last year. Sales for the six months ended June 30, 2021, totaled approximately $19.9 million, compared with approximately $20.8 million for the six-month period last year.

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The increase in sales for the three months ended June 30, 2021, was attributed primarily to certain federal legacy customers combined with demand from western region state public safety agencies. While customer demand during the quarter was strong, second quarter shipments and sales were impacted by supply chain constraints that delayed our ability to convert product orders into shipments. Although these factors may continue to create delays during the next several quarters, we anticipate being able to fulfill customer requirements. The precise impact to sales and shipments for future quarters, however, cannot be quantified.

In the second half of 2020, we launched the first model in our new BKR Series of APCO Project 25 land mobile radio products and solutions, the BKR 5000. The BKR Series is envisioned as a comprehensive line of new products with additional new models planned for later this year, including products with multi-band capability. The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain and the COVID-19 pandemic. BKR Series products, we believe, should increase our addressable market by expanding the number of federal and other public safety customers that may purchase our products. However, the timing and size of orders from agencies at all levels can be unpredictable and subject to budgets, priorities, and other factors. Accordingly, we cannot assure that sales will occur under particular contracts, or that our sales prospects will otherwise be realized.

Last year we reorganized our sales resources to focus more effectively on target markets and customers where we can realize sales success. The current funnel of sales prospects includes potential new customers in federal, state, and local public safety agencies. We believe the reorganization and our sales funnel better positions us to capture new sales opportunities moving forward.

While the potential impacts of material shortages, lead-times and the COVID-19 pandemic in coming months and quarters remain uncertain, such effects have the potential to adversely impact our customers and our supply chain. Such negative effects on our customers and suppliers could adversely affect our future sales, operations, and financial results.

Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the second quarter ended June 30, 2021 were approximately 37.2%, compared with 43.6% for the same quarter last year. For the six-month period ended June 30, 2021, gross profit margins were approximately 36.7%, compared with 39.5% for the same period last year.

Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing. Gross profit margins for the second quarter of 2021 decreased compared with the same period last year primarily due to a less favorable mix of product sales and increased material and freight costs. For the six months ended June 30, 2021, gross profit margins reflect a less favorable mix of product sales compared with the same period last year and were adversely impacted by one-time inventory reserves in the first quarter related to our legacy product line, the KNG series.

We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs. While we anticipate continuing to do so in the future, we have increased, and are continuing to increase, our utilization of U.S.-based resources, which provides greater security and control over our production. We believe that our current manufacturing capabilities and contract relationships or comparable alternatives will continue to be available to us. Although in the future we may encounter new product cost and competitive pricing pressures, the extent of their impact on gross margins, if any, is uncertain.

During recent quarters, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies and extended lead times for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and extended lead times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results.

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Selling, General and Administrative Expenses

SG&A expenses consist of marketing, sales, commissions, engineering, product development, management information systems, accounting, headquarters, and non-cash share-based employee compensation expenses.

SG&A expenses for the second quarter ended June 30, 2021, totaled approximately $4.6 million (40.2% of sales), compared with approximately $4.4 million (43.9% of sales) for the same quarter last year. For the six months ended June 30, 2021, SG&A expenses decreased by $581,000, or 6.4%, to approximately $8.5 million (42.8% of sales), compared with approximately $9.1 million (43.7% of sales), for the six-month period last year.

Engineering and product development expenses for the second quarter of 2021 totaled approximately $2.3 million (20.3% of sales), compared with approximately $2.0 million (20.2% of sales) for the same quarter of last year. For the six months ended June 30, 2021, engineering and product development expenses totaled approximately $4.1 million (20.7% of sales), compared with approximately $4.1 million (19.5% of sales) for the six-month period last year. The increase in engineering expenses for the second quarter was primarily timing related, as expenses for the six-month period were comparable with the same period last year. Expenses for the design and development of the BKR series, a new line of portable and mobile radios, has continued with most ongoing development being performed by our internal engineering team. Development of the BKR Series, including our planned multiband product, is the primary focus of our engineering team. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential effects of the COVID-19 pandemic in coming months.

Marketing and selling expenses for the second quarter of 2021 totaled approximately $1.1 million (9.5% of sales), compared with approximately $1.0 million (9.7% of sales) for the second quarter last year, primarily reflecting increased commissions attributed to sales growth. For the six months ended June 30, 2021, marketing and selling expenses declined approximately $457,000, or 18.5%, to approximately $2.0 million (10.1% of sales), compared with approximately $2.5 million (11.9% of sales). The decreases for the six-month period are attributed to reductions in sales and go-to-market employment, as well as other sales, marketing, and go-to-market related expenses.

Other general and administrative expenses for the second quarter 2021 totaled approximately $1.2 million (10.5% of sales), compared with approximately $1.4 million (14.0% of sales) for the same quarter last year. For the six months ended June 30, 2021, general and administrative expenses totaled approximately $2.4 million (12.1% of sales), compared with approximately $2.6 million (12.5% of sales) for the six-month period last year. Other general and administrative expenses for both periods last year included severance and expenses related to employment reductions.

Operating Loss

The operating loss for the second quarter ended June 30, 2021, totaled approximately $342,000 (3.0% of sales), compared with approximately $36,000 (0.4% of sales) for last year’s second quarter. For the six months ended June 30, 2021, our operating loss totaled approximately $1.2 million (6.1% of sales), compared with approximately $884,000 (4.2% of sales) for the six-month period last year. The operating loss for the first six months is attributed primarily to sales mix combined with increased material costs, which adversely impacted gross profit margins. These factors were partially offset by SG&A expense reductions.

Other (Expense) Income

We recorded net interest expense of approximately $14,000 for the second quarter ended June 30, 2021, compared with approximately $6,000 for the second quarter of last year. For the six months ended June 30, 2021, net interest expense totaled approximately $18,000, compared with net interest income of approximately $3,000 for the six-month period last year. Net interest expense was primarily the result of lower average cash balances and equipment financing.

21

For the second quarter ended June 30, 2021, we recognized an unrealized gain of approximately $2.3 million on our investment in FGF, compared with an unrealized loss of approximately $200,000 for the second quarter last year. For the six months ended June 30, 2021, we recognized an unrealized gain of approximately $2.5 million on our investment in FGF, compared with an unrealized loss of approximately $506,000 for the same period last year.

Income Taxes

We recorded an income tax expense of $184 for the six months ended June 30, 2021, compared with an income tax expense of $28 for the same period last year.

Our income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision (benefit) in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, we may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

As of June 30, 2021, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.

In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years. We analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon our conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, we established a valuation allowance of $98,000. We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2021.

Liquidity and Capital Resources

For the six months ended June 30, 2021, net cash used in operating activities totaled approximately $2.9 million, compared with cash provided by operating activities of approximately $3.6 million for the same period last year. Cash used in operating activities for the six months ended June 30, 2021, was primarily related to increased inventory, increases in accounts receivable, and an unrealized gain on securities, which were partially offset by net income, increased accounts payable and depreciation and amortization.

For the first six months of 2021, we had net income of approximately $1.0 million, compared with a net loss of approximately $1.5 million for the same period last year. Gross inventories increased during the six months ended June 30, 2021, by approximately $3.0 million, compared with a decrease of approximately $3.9 million for the same period last year. The increase for the six-month period was primarily attributable to extended supplier lead-times and planned new product introductions. Accounts receivable increased approximately $744,000 during the six months ended June 30, 2021, primarily due to the timing of sales that were consummated later in the quarter that had not yet completed their collection cycle. For the same period last year, accounts receivable decreased approximately $381,000 as a result of collections. The unrealized gain on securities for the six months ended June 30, 2021, totaled approximately $2.5 million, compared with an unrealized loss of approximately $506,000 for the same period last year. For additional information pertaining to our investment in securities, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investment in Securities) to the condensed consolidated financial statements included in this report. Accounts payable for the six months ended June 30, 2021, increased approximately $1.2 million, compared with a decrease of approximately $838,000 for the same period last year, primarily due to purchases from suppliers. Depreciation and amortization totaled approximately $681,000 for the six months ended June 30, 2021, compared with approximately $661,000 for the same period last year. Depreciation and amortization are primarily related to manufacturing and engineering equipment.

22

Cash used in investing activities for the six months ended June 30, 2021, totaled approximately $1.5 million, primarily for manufacturing equipment. For the same period last year, cash used in investing activities totaled approximately $525,000, primarily for engineering and manufacturing related equipment.

For the six months ended June 30, 2021, cash of approximately $13.2 million was provided by financing activities. In June we closed a public offering of our common stock, generating net proceeds of approximately $11.6 million. During the six months ended June 30, 2021, we received proceeds of approximately $3.5 million from our revolving credit facility and from financing related to the purchase of manufacturing equipment. This was partially offset by loan repayments of approximately $1.4 million. For the same period last year, we received proceeds totaling approximately $2.2 million under the Paycheck Protection Program, which were repaid in full within the same period. We used cash of approximately $501,000 and $502,000 to pay quarterly dividends for the six months ended June 30, 2021 and 2020, respectively. During the first quarter of 2020, we also used approximately $269,000 for stock repurchases.

On January 26, 2021, our revolving credit facility, which originated on January 30, 2020, was extended for one year, through January 31, 2022.

BK Technologies, Inc., our wholly owned subsidiary, entered into the $5 million Credit Agreement with JPMC. The Credit Agreement provides for a revolving line of credit of up to $5 million, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc. pursuant to the terms of the Continuing Security Agreement with JPMC. BK Technologies Corporation and each subsidiary of BK Technologies, Inc., are guarantors of the obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty.

Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR (or zero if the LIBOR is less than zero) plus a margin of 1.90%. The line of credit is to be repaid in monthly payments of interest only, payable in arrears, with all outstanding principal and interest to be payable in full at maturity.

The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20 million at any fiscal quarter end.

The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of June 30, 2021, and the date of filing this report. As of June 30, 2021, and the date of filing this report, approximately $1.5 million in borrowings were outstanding under the Credit Agreement.

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743,000 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16,000 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

23

Our cash and cash equivalents balance at June 30, 2021, was approximately $15.7 million. We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Credit Agreement, are sufficient to meet our working capital requirements for the foreseeable future. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all. We also face other risks that could impact our business, liquidity, and financial condition. For a description of these risks, see “Item 1A. Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and “Item 1A. Risk Factors” below in this report.

Critical Accounting Policies

In response to the Securities and Exchange Commission’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, we have selected for disclosure our revenue recognition process and our accounting processes involving significant judgments, estimates and assumptions. These processes affect our reported revenues and current assets and are, therefore, critical in assessing our financial and operating status. We regularly evaluate these processes in preparing our financial statements. The processes for revenue recognition, allowance for collection of trade receivables, allowance for excess or obsolete inventory, and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances. These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.

There were no changes to our critical accounting policies during the quarter ended June 30, 2021, as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, the Company is not required to include the disclosure under this Item.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including each of such officers as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, 2021, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24

PART II - OTHER INFORMATION

Item 1A. RISK FACTORS

Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, includes a detailed discussion of the Company’s risk factors as set forth below. However, many of the risk factors disclosed in Item 1A of our Annual Report may be further heightened or exacerbated by the impact of the COVID-19 pandemic.

The COVID-19 pandemic and ensuing governmental responses have negatively impacted, and could further materially adversely affect, our business, financial condition, results of operations and cash flow.

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020. In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing. We are considered an “essential business” that is supporting first responders and our manufacturing operations have remained open throughout the pandemic. We implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing, wearing face masks, and remote work practices. Among other things, we have invested in employee safety equipment, additional cleaning supplies and measures, adjusted production lines and workplaces as necessary and adapted new processes for interactions with our suppliers and customers to safely manage our operations. Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing.

In planning for the possible disruption of our business, we took steps to reduce expenses throughout the Company. This included suspending all Company travel for a period of time, as well as our participation in trade shows and other business meetings, instituting strict inventory control and decreasing expenditures. We also implemented workforce reductions during the second quarter of 2020 and suspended the employer’s 401K match. For the first six months of 2021, the impact to our business, particularly customer orders, is unknown with any certainty. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times and increased costs for certain components used in our products. While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and longer delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years. The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations. We may also experience fluctuations in our quarterly results, in part, due to our sales to federal and state agencies that participate in wildland fire-suppression efforts, which may be greater during the summer season when forest fire activity is heightened. In some years, these factors may cause an increase in sales for the second and third quarters, compared with the first and fourth quarters of the same fiscal year. Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Dividend Restrictions

On January 26, 2021, BK Technologies, Inc., our wholly owned operating subsidiary, extended its Credit Agreement with JPMC. The Credit Agreement contains limitations and covenants that may limit BK Technologies, Inc.’s ability to take certain actions, including pay dividends to the Company.

25

Item 6. EXHIBITS

Exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index below.

Exhibit Index

Exhibit Number	Description
Exhibit 31.1	Certification of Principal Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Principal Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)
Exhibit 32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S‑K)
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF	XBRL Taxonomy Definition Linkbase Document
Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document) (filed herewith)

26

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BK TECHNOLOGIES CORPORATION
	(The “Registrant”)
Date: August 12, 2021	By:	/s/ John M. Suzuki
		John M. Suzuki Chief Executive Officer (Principal executive officer and duly authorized officer)
Date: August 12, 2021	By:	/s/ William P. Kelly
		William P. Kelly Executive Vice President and Chief Financial Officer (Principal financial and accounting officer and duly authorized officer)

27

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, John M. Suzuki, Chief Executive Officer of BK Technologies Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BK Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2021
	/s/ John M. Suzuki
	John M. Suzuki
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, William P. Kelly, Executive Vice President and Chief Financial Officer of BK Technologies Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BK Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2021
	/s/ William P. Kelly
	William P. Kelly
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

BK TECHNOLOGIES CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BK Technologies Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John M. Suzuki, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ John M. Suzuki
	John M. Suzuki
	Chief Executive Officer
August 12, 2021

EX-32.2

EXHIBIT 32.2

BK TECHNOLOGIES CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BK Technologies Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William P. Kelly, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ William P. Kelly
	William P. Kelly
	Executive Vice President and Chief Financial Officer
August 12, 2021

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Cover - shares	6 Months Ended
	Jun. 30, 2021	Aug. 06, 2021
Cover [Abstract]
Entity Registrant Name	BK TECHNOLOGIES CORPORATION
Entity Central Index Key	0000002186
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Entity Common Stock Shares Outstanding		16,785,721
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity File Number	001-32644
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	83-4064262
Entity Address Address Line 1	7100 Technology Drive
Entity Address City Or Town	West Melbourne
Entity Address State Or Province	FL
Entity Address Postal Zip Code	32904
City Area Code	321
Local Phone Number	984-1414
Security 12b Title	Common Stock, par value $.60 per share
Trading Symbol	BKTI
Security Exchange Name	NYSEAMER

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 15,661,000	$ 6,826,000
Trade accounts receivable, net	7,210,000	6,466,000
Inventories, net	12,036,000	9,441,000
Prepaid expenses and other current assets	1,866,000	1,878,000
Total current assets	36,773,000	24,611,000
Property, plant and equipment, net	4,426,000	3,566,000
Right-of-use (ROU) asset	2,594,000	2,887,000
Investment in securities	4,481,000	2,014,000
Deferred tax assets, net	4,116,000	4,300,000
Other assets	101,000	112,000
Total assets	52,491,000	37,490,000
Current liabilities:
Accounts payable	6,316,000	5,119,000
Accrued compensation and related taxes	1,481,000	1,635,000
Accrued warranty expense	644,000	791,000
Accrued other expenses and other current liabilities	364,000	307,000
Dividends payable	0	250,000
Short-term lease liability	428,000	525,000
Credit facility	1,470,000	0
Notes payable-current portion	262,000	82,000
Deferred revenue	934,000	757,000
Total current liabilities	11,899,000	9,466,000
Notes payable, net of current portion-	740,000	247,000
Long-term lease liability	2,498,000	2,702,000
Deferred revenue-	2,327,000	2,551,000
Total liabilities	17,464,000	14,966,000
Stockholders' equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding	0	0
Common stock; $.60 par value; 20,000,000 authorized shares; 18,236,121 and 13,962,366 issued and 16,785,721 and 12,511,966 outstanding shares at June 30, 2021, and December 31, 2020, respectively	10,941,000	8,377,000
Additional paid-in capital	35,534,000	26,346,000
Accumulated deficit	(6,046,000)	(6,797,000)
Treasury stock, at cost, 1,450,400 shares at June 30, 2021, and December 31, 2020, respectively	(5,402,000)	(5,402,000)
Total stockholders' equity	35,027,000	22,524,000
Total liabilities and stockholders' equity	$ 52,491,000	$ 37,490,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value	$ 1.00	$ 1.00
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.60	$ 0.60
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	18,236,121	13,962,366
Common stock, shares outstanding	16,785,721	12,511,966
Treasury stock	1,450,400	1,450,400

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Sales, net	$ 11,335	$ 9,937	$ 19,899	$ 20,826
Expenses
Cost of products	7,124	5,609	12,592	12,603
Selling, general and administrative	4,553	4,364	8,526	9,107
Total expenses	11,677	9,973	21,118	21,710
Operating loss	(342)	(36)	(1,219)	(884)
Other income (expense):
Net interest (expense) income	(14)	(6)	(18)	3
Gain (loss) gain on investment in securities	2,262	(200)	2,467	(506)
Other expense	(26)	(32)	(44)	(79)
Total other income (expense)	2,222	(238)	2,405	(582)
Income (loss) before income taxes	1,880	(274)	1,186	(1,466)
Income tax expense	(184)	(28)	(184)	(28)
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)
Weighted average shares outstanding-basic	13,563,763	12,495,707	13,043,477	12,525,407
Weighted average shares outstanding-diluted	13,625,095	12,495,707	13,101,635	12,525,407

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating activities
Net income (loss)	$ 1,002	$ (1,494)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Inventories allowances	368	72
Deferred tax expense	184	28
Depreciation and amortization	681	661
Share-based compensation expense-stock options	65	60
Share-based compensation expense-restricted stock units	128	89
(Gain) loss on investment in securities	(2,467)	506
Changes in operating assets and liabilities:
Trade accounts receivable	(744)	381
Inventories	(2,963)	3,914
Prepaid expenses and other current assets	12	325
Other assets	11	54
ROU asset and lease liability	(8)	44
Accounts payable	1,197	(838)
Accrued compensation and related taxes	(154)	(331)
Accrued warranty expense	(147)	(337)
Deferred revenue	(47)	557
Accrued other expenses and other current liabilities	57	(94)
Net cash (used in) provided by operating activities	(2,825)	3,597
Investing activities
Purchases of property, plant, and equipment	(1,541)	(525)
Net cash used in investing activities	(1,541)	(525)
Financing activities
Proceeds from common stock issuance, net of costs	11,599	0
Cash dividends paid	(501)	(502)
Repurchase of common stock	0	(269)
Proceeds from the credit facility and notes payable	3,543	2,196
Repayment of the credit facility and notes payable	(1,400)	(2,234)
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, beginning of period	6,826	4,676
Cash and cash equivalents, end of period	15,661	6,939
Supplemental disclosure
Cash paid for interest	14	11
Non-cash financing activity
Common stock issued under restricted stock units	$ 84	$ 56

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Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2021

Condensed Consolidated Financial Statements

1. Condensed Consolidated Financial Statements

1. Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc., as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. In the opinion of management, all adjustments, which include normal, recurring adjustments, necessary for a fair presentation, have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2020, has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 3, 2021. The results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

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

VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.

Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.

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

The Company has an investment in FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated VIE.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of June 30, 2021, and December 31, 2020, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements. The amendments in the ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the ASU. The Company adopted this guidance as of January 1, 2020, and the adoption did not have an impact on its consolidated financial statements.

Recent Accounting Pronouncements

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

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Significant Events and Transactions

6 Months Ended

Jun. 30, 2021

Significant Events and Transactions

2. Significant Events and Transactions

2. Significant Events and Transactions

Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock on July 9, 2021, to stockholders of record as of July 26, 2021. These dividends were paid on August 9, 2021.

On June 9, 2021, the Company closed a public offering of 4,249,250 shares of its common stock at a price of $3.00 per share, for net proceeds of $11,559,000 after deducting underwriting discounts and commissions and offering expenses payable by the Company. The shares sold in the offering included the exercise in-full by the underwriters of their over-allotment option to purchase up to 554,250 shares of common stock in addition to the 3,695,000 shares which the underwriters initially agreed to purchase. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering. The Company intends to use the net proceeds from the offering primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.

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Allowance for Doubtful Accounts

6 Months Ended

Jun. 30, 2021

Allowance for Doubtful Accounts

3. Allowance for Doubtful Accounts

3. Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $7,260 and $6,516 at June 30, 2021, and December 31, 2020, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

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Inventories, net

6 Months Ended

Jun. 30, 2021

Inventories, net

4. Inventories, net

4. Inventories, Net

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

	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
	$	12,036	$	9,441

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $888 at June 30, 2021, compared with approximately $520 at December 31, 2020.

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Taxes

5. Income Taxes

5. Income Taxes

The Company has recorded income tax expense of $184 for the three and six months ended June 30, 2021, compared with an income tax expense of $28 for the same periods last year.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision (benefit) in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.

As of June 30, 2021, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years. The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, the Company established a valuation allowance of $98. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2021.

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Investment in Securities

6 Months Ended

Jun. 30, 2021

Investment in Securities

6. Investment in Securities

6. Investment in Securities

1347 LP

The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP (“1347 LP”), was established for the purpose of investing in securities.

Affiliates of Fundamental Global Investors, LLC (“FG”), serve as the general partner and the investment manager of 1347 LP, and the Company is the sole limited partner. As the sole limited partner, the Company is entitled to 100% of net assets held by 1347 LP. The general partner of 1347 LP is entitled to reimbursement of certain costs, fees, and expenses arising in connection with 1347 LP’s operations, as provided by the partnership agreement, upon approval by the Company’s Board of Directors.

FG Financial Group

As of June 30, 2021, the Company indirectly held approximately $76 in cash and 477,282 shares of FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.) (Nasdaq: FGF) (“FGF”), with fair value of $4,481, through an investment in 1347 LP. These shares were purchased in March and May 2018 for approximately $3,741. For the three and six months ended June 30, 2021, the Company recognized unrealized gains on the investment of approximately $2,262 and $2,467, respectively, compared with unrealized losses of $200 and $506, respectively for the same periods last year. There have been no costs, fees, and expenses paid to the general partner or its affiliates for any periods, including the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021, the Company and the affiliates of FG, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 3,045,593 shares of FGF’s common stock, representing approximately 60.8% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, a member of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of FG and serves as Chairman of the Board of Directors of Ballantyne Strong, Inc. Mr. Cerminara also serves as Chairman of the Board of Directors of FGF.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Stockholders' equity:

7. Stockholders' Equity

7. Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three and six months ended June 30, 2021 and 2020, are as follows:

	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 under restricted stock units		24,505		15		(15	)		-			-			-
Share-based compensation expense-stock options		—		—		32			-			-			32
Share-based compensation expense-restricted stock units		—		—		103			-			-			103
Common stock dividends ($0.02 per share)		—		—		-			(251	)		-			(251	)
Net loss		—		—		-			(694	)	-				(694	)
Balance at March 31, 2021		13,986,871		8,392		26,466			(7,742	)		(5,402	)		21,714
Common stock issued, net of issuance costs		4,249,250		2,549		9,010			-			-			11,559
Share-based compensation expense-stock options		—		—		33			-			-			33
Share-based compensation expense-restricted stock units		—		—		25			-			-			25
Net income		—		—		-			1,696			-			1,696
Balance at June 30, 2021		18,236,121	$	10,941	$	35,534		$	(6,046	)	$	(5,402	)	$	35,027

7. Stockholders’ Equity (continued)

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2019		13,929,381	$	8,357	$	26,095		$	(6,043	)	$	(5,133	)	$	23,276
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		21			-			-			21
Common stock dividends ($0.02 per share)		—		—		-			(250	)		-			(250	)
Net loss		—		—		-			(1,192	)		-			(1,192	)
Repurchase of common stock		—		—		-			-			(243	)		(243	)
Balance at March 31, 2020		13,929,381		8,357		26,146			(7,485	)		(5,376	)		21,642
Common stock issued under restricted stock units		14,439		9		(9	)		-			-			-
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		68			-			-			68
Common stock dividends ($0.02 per share)		—		—		-			(252	)		-			(252	)
Net loss		—		—		-			(302	)		-			(302	)
Repurchase of common stock		—		—		-			-			(26	)		(26	)
Balance at June 30, 2020		13,943,820	$	8,366	$	26,235		$	(8,039	)	$	(5,402	)	$	21,160

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Income (Loss) Per Share

6 Months Ended

Jun. 30, 2021

Income (Loss) Per Share

8. Loss per Share

8. Income (Loss) Per Share

The following table sets forth the computation of basic and diluted loss per share:

	Three Months Ended					Six Months Ended
	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Numerator:
Net income (loss) for basic and diluted earnings per share	$	1,696	$	(302	)	$	1,002	$	(1,494	)
Denominator for basic income (loss) per share weighted average shares		13,563,763		12,495,707			13,043,477		12,525,407
Effect of dilutive securities:
Options and restricted stock units		61,332		-			58,158		-
Denominator for diluted loss per share weighted average shares		13,625,095		12,495,707			13,101,635		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	)

Approximately 444,000 stock options and 0 restricted stock units for the three and six months ended June 30, 2021, respectively, and 510,900 stock options and 86,636 restricted stock units for the three and six months ended June 30, 2020, respectively, were excluded from the calculation because they were anti-dilutive.

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Non-Cash Share-Based Employee Compensation

6 Months Ended

Jun. 30, 2021

Non-Cash Share-Based Employee Compensation

9. Non-Cash Share-Based Employee Compensation

9. Non-Cash Share-Based Employee Compensation

The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $33 and $65 for the three and six months ended June 30, 2021, respectively, compared with $30 and $60, respectively, for the same period last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of stock option grants under this plan. The non-cash share-based employee compensation expense recorded in the three and six months ended June 30, 2021, was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

A summary of activity under the Company’s stock option plans during the six months ended June 30, 2021, is presented below:

	Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value ($) Per Share		Aggregate Intrinsic Value ($)
As of January 1, 2021
Outstanding		489,000		3.96		7.23		1.51		20,000
Vested		185,800		4.15		5.65		1.55		20,000
Nonvested		303,200		3.84		8.20		1.49		-
Period activity
Issued		-		-		—		-		-
Exercised		-		-		—		-		-
Forfeited		-		-		—		-		-
Expired		10,000		4.55		—		1.06		-
As of June 30, 2021
Outstanding		479,000		3.94		6.88		1.52		24,250
Vested		250,600		4.10		6.00		1.55		24,250
Nonvested		228,400		3.77		7.84		1.48		-

Restricted Stock Units

On March 4, 2021, upon the resignation of former director Lewis Johnson, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Johnson’s unvested restricted stock units granted September 6, 2018, September 6, 2019, and August 24, 2020, and issued 24,505 shares of common stock to Mr. Johnson.

On August 24, 2020, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $240), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

On April 24, 2020, upon the resignation of former director Ryan Turner, the Company, at the direction of the Board of Directors, accelerated the vesting of Mr. Turner’s unvested restricted stock units granted September 6, 2019, and September 6, 2018, and issued 10,389 and 4,050 shares of common stock, respectively.

On September 6, 2019, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $40 per award (resulting in total aggregate grant-date fair value of $280), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.

On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant-date fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units vest in full as of the director’s last date of service as a director of the Company. On September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested.

On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 4, 2019.

There were 122,533 and 147,038 restricted stock units outstanding as of June 30, 2021, and December 31, 2020, respectively.

The Company recorded non-cash restricted stock unit compensation expense of $25 and $128 for the three and six months ended June 30, 2021, respectively, compared with $68 and $89, respectively for the same period last year.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies

10. Commitments and Contingencies

10. Commitments and Contingencies

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, it records a liability in its consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not accrue legal reserves, consistent with applicable accounting guidance. There were no pending material claims or legal matters as of June 30, 2021.

In December 2019, a novel strain of the coronavirus (COVID-19) surfaced in Wuhan, China, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The pandemic may have the potential of adversely impacting our business and financial performance in the future. The extent of the potential impact will depend on future developments, which are uncertain and, given the continuing evolution of the COVID-19 pandemic and the global responses to curb its spread, cannot be predicted. In addition, the pandemic has significantly increased economic uncertainty. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact, including any recession that may occur in the future.

Purchase Commitments

As of June 30, 2021, the Company had purchase commitments for inventory totaling approximately $8,591.

Significant Customers

Sales to United States government agencies represented approximately $4,749 (41.9%) and $6,865 (34.5%) of the Company’s net total sales for the three and six months ended June 30, 2021, respectively, compared with approximately $4,268 (43.0%) and $10,845 (52.1%), respectively, for the same period last year. Accounts receivable from agencies of the United States government were $3,279 as of June 30, 2021, compared with approximately $589 at the same date last year.

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Debt

6 Months Ended

Jun. 30, 2021

Debt

11. Debt

11. Debt

BK Technologies, Inc., a wholly owned subsidiary of the Company, entered into a $5,000 Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”) on January 30, 2020. The Credit Agreement provides for a revolving line of credit of up to $5,000, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc., pursuant to the terms of the Continuing Security Agreement with JPMC. The Company and each subsidiary of BK Technologies, Inc., are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. On January 26, 2021, the Company extended this revolving credit facility for one year, through January 31, 2022.

Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR or zero if the LIBOR is less than zero) plus a margin of 1.90% (1.97263% as of June 30, 2021). The line of credit, as modified, is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2020, with all outstanding principal and interest to be payable in full at maturity (January 31, 2022).

The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20,000 at any fiscal quarter end.

The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement.

BK Technologies, Inc. was in compliance with all covenants under the Credit Agreement as of June 30, 2021, and the date of filing this report. As of June 30, 2021, and the date of filing this report, the Company had an outstanding balance of approximately $1,500, and a net balance availability of $3,165 under the Credit Agreement.

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%.

On September 25, 2019, BK Technologies, Inc., a wholly owned subsidiary of the Company, and U.S. Bank Equipment Finance, a division of U.S. Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $425 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 equal monthly principal and interest payments of approximately $8 beginning on October 25, 2019, matures on September 25, 2024, and bears a fixed interest rate of 5.11%.

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Leases

6 Months Ended

Jun. 30, 2021

Leases

12. Leases

12. Leases

The Company accounts for its leasing arrangements in accordance with Topic 842, “Leases”. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of September 30, 2027. Annual rental, maintenance and tax expenses for the facility are approximately $491.

In February 2020, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2020. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent 12-month period.

In March 2021, the Company executed an agreement for the termination of its lease for 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, effective March 31, 2021 and recognized a termination lease expense of approximately $53. The original term of the lease was through December 31, 2021.

Lease costs consisted of the following:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost	$	136	$	143	$	302	$	287
Short-term lease cost		-		-		-		2
Variable lease cost		33		32		65		63
Total lease cost	$	169	$	175	$	367	$	352

Supplemental cash flow information related to leases was as follows:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	140	$	122	$	352	$	243
Operating cash flows (liability reduction)	$	100	$	83	$	271	$	164
ROU assets obtained in exchange for lease obligations:
Operating leases	$	-	$	26	$	14	$	35

12. Leases (continued)

Other information related to operating leases was as follows:

	June 30, 2021
Weighted average remaining lease term (in years)		5.68
Weighted average discount rate		5.50	%

Maturity of lease liabilities as of June 30, 2021, were as follows:

	June 30, 2021
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

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Subsequent Event

6 Months Ended

Jun. 30, 2021

Leases

13. Subsequent Event

13. Subsequent Event

Effective July 1, 2021, the Company changed its accounting to burden the material at the time of purchase receipts. Prior to July 1, 2021, the Company applied the material burden at the time the inventory was issued to work in progress. This change resulted in a net increase of approximately $1.3 million in inventory and retained earnings.

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Condensed Consolidated Financial Statements (Policies)

6 Months Ended

Jun. 30, 2021

Condensed Consolidated Financial Statements (Policies)

Basis of Presentation

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc., as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. In the opinion of management, all adjustments, which include normal, recurring adjustments, necessary for a fair presentation, have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2020, has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on March 3, 2021. The results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

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

VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.

Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.

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

The Company has an investment in FG Financial Group, Inc. (formerly 1347 Property Insurance Holdings, Inc.), made through FGI 1347 Holdings, LP, a consolidated VIE.

Fair Value

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of June 30, 2021, and December 31, 2020, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

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

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of certain disclosure requirements. The amendments in the ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the ASU. The Company adopted this guidance as of January 1, 2020, and the adoption did not have an impact on its consolidated financial statements.

Recent Accounting Pronouncements

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

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Inventories, net (Tables)

6 Months Ended

Jun. 30, 2021

Inventories, net

Components of inventory

	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
	$	12,036	$	9,441

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2021

Stockholders' Equity (Tables)

Changes in consolidated stockholders' equity

	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 under restricted stock units		24,505		15		(15	)		-			-			-
Share-based compensation expense-stock options		—		—		32			-			-			32
Share-based compensation expense-restricted stock units		—		—		103			-			-			103
Common stock dividends ($0.02 per share)		—		—		-			(251	)		-			(251	)
Net loss		—		—		-			(694	)	-				(694	)
Balance at March 31, 2021		13,986,871		8,392		26,466			(7,742	)		(5,402	)		21,714
Common stock issued, net of issuance costs		4,249,250		2,549		9,010			-			-			11,559
Share-based compensation expense-stock options		—		—		33			-			-			33
Share-based compensation expense-restricted stock units		—		—		25			-			-			25
Net income		—		—		-			1,696			-			1,696
Balance at June 30, 2021		18,236,121	$	10,941	$	35,534		$	(6,046	)	$	(5,402	)	$	35,027

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2019		13,929,381	$	8,357	$	26,095		$	(6,043	)	$	(5,133	)	$	23,276
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		21			-			-			21
Common stock dividends ($0.02 per share)		—		—		-			(250	)		-			(250	)
Net loss		—		—		-			(1,192	)		-			(1,192	)
Repurchase of common stock		—		—		-			-			(243	)		(243	)
Balance at March 31, 2020		13,929,381		8,357		26,146			(7,485	)		(5,376	)		21,642
Common stock issued under restricted stock units		14,439		9		(9	)		-			-			-
Share-based compensation expense-stock options		—		—		30			-			-			30
Share-based compensation expense-restricted stock units		—		—		68			-			-			68
Common stock dividends ($0.02 per share)		—		—		-			(252	)		-			(252	)
Net loss		—		—		-			(302	)		-			(302	)
Repurchase of common stock		—		—		-			-			(26	)		(26	)
Balance at June 30, 2020		13,943,820	$	8,366	$	26,235		$	(8,039	)	$	(5,402	)	$	21,160

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Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Income (Loss) Per Share

Computation of basic and diluted loss per share

	Three Months Ended					Six Months Ended
	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Numerator:
Net income (loss) for basic and diluted earnings per share	$	1,696	$	(302	)	$	1,002	$	(1,494	)
Denominator for basic income (loss) per share weighted average shares		13,563,763		12,495,707			13,043,477		12,525,407
Effect of dilutive securities:
Options and restricted stock units		61,332		-			58,158		-
Denominator for diluted loss per share weighted average shares		13,625,095		12,495,707			13,101,635		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	)

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Non-Cash Share-Based Employee Compensation (Tables)

6 Months Ended

Jun. 30, 2021

Non-Cash Share-Based Employee Compensation (Tables)

Summary of stock option activity

	Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value ($) Per Share		Aggregate Intrinsic Value ($)
As of January 1, 2021
Outstanding		489,000		3.96		7.23		1.51		20,000
Vested		185,800		4.15		5.65		1.55		20,000
Nonvested		303,200		3.84		8.20		1.49		-
Period activity
Issued		-		-		—		-		-
Exercised		-		-		—		-		-
Forfeited		-		-		—		-		-
Expired		10,000		4.55		—		1.06		-
As of June 30, 2021
Outstanding		479,000		3.94		6.88		1.52		24,250
Vested		250,600		4.10		6.00		1.55		24,250
Nonvested		228,400		3.77		7.84		1.48		-

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Leases (Tables)

6 Months Ended

Jun. 30, 2021

Leases

Lease cost

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost	$	136	$	143	$	302	$	287
Short-term lease cost		-		-		-		2
Variable lease cost		33		32		65		63
Total lease cost	$	169	$	175	$	367	$	352

Supplemental cash flow information related to leases

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	140	$	122	$	352	$	243
Operating cash flows (liability reduction)	$	100	$	83	$	271	$	164
ROU assets obtained in exchange for lease obligations:
Operating leases	$	-	$	26	$	14	$	35

Other information related to operating leases

	June 30, 2021
Weighted average remaining lease term (in years)		5.68
Weighted average discount rate		5.50	%

Maturity of lease liabilities

	June 30, 2021
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

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Condensed Consolidated Financial Statements (Details Narrative)	6 Months Ended
	Jun. 30, 2021
Minimum [Member]
Voting interest	20.00%
Maximum [Member]
Voting interest	50.00%

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Significant Events and Transactions (Details Narrative)	Jun. 09, 2021 USD ($) $ / shares shares
Net proceeds from issuance of common stock | $	$ 11,559,000
Common stock sharse to public offering	4,249,250
Price per share | $ / shares	$ 3.00
Purchase of comon stock , shares	554,250
Underwriters agreed to purchase of shares	3,695,000
Board Of Directors [Member]
Price per share | $ / shares	$ 0.02

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Allowance for Doubtful Accounts (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Allowance for Doubtful Accounts (Details Narrative)
Allowance for doubtful accounts on trade receivables	$ 50
Accounts receivable, gross	$ 7,260	$ 6,516

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Inventories net (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventories, net
Finished goods	$ 2,459	$ 1,975
Work in process	3,539	3,288
Raw materials	6,038	4,178
Total inventory	$ 12,036	$ 9,441

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Inventories net (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventories, net
Reserves for slow-moving, excess, or obsolete inventory	$ 888	$ 520

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Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Taxes
Income tax expense	$ (184)	$ (28)	$ (184)	$ (28)
Net deferred tax assets	$ 4,116		4,116
Valuation allowance			$ 98

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Investment in Securities (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Percentage of net assets held			100.00%
Unrealized gains/loss on the investment			$ (2,467,000)	$ 506,000
FG Financial Group [Member]
Cash held	$ 76,000		$ 76,000
Shares held by related party			477,282
Fair value of shares			$ 4,481,000
Purchase of shares			3,741,000
Unrealized gains/loss on the investment	$ 2,262,000	$ 200,000	$ 2,467,000	$ 506,000
Aggregate shares owned by related party			3,045,593
Percentage of common stock			60.80%

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Stockholders Equity (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Beginning balance, amount	$ 21,714,000	$ 22,524,000	$ 21,642,000	$ 23,276,000	$ 22,524,000	$ 23,276,000
Share-based compensation expense-stock options	33,000	32,000	30,000	30,000
Common stock issued, net of issuance costs	11,559	0	0
Share-based compensation expense-restricted stock units	25,000	103,000	68,000	21,000
Common stock dividends ($0.02 per share)		(251,000)	(252,000)	(250,000)
Net loss	1,696,000	(694,000)	(302,000)	(1,192,000)	1,002,000	(1,494,000)
Repurchase of common stock			(26,000)	243,000
Ending balance, amount	35,027,000	21,714,000	21,160,000	21,642,000	35,027,000	21,160,000
Common Stock [Member]
Beginning balance, amount	8,392,000	8,377,000	8,357,000	8,357,000	8,377,000	8,357,000
Ending balance, amount	$ 10,941,000	$ 8,392,000	$ 8,366,000	$ 8,357,000	$ 10,941,000	$ 8,366,000
Beginning balance, shares	13,986,871	13,962,366	13,929,381	13,929,381	13,962,366	13,929,381
Common stock issued under restricted stock units, amount	$ 2,549,000	$ 15,000	$ 9,000
Common stock issued under restricted stock units, shares	4,249,250	24,505	14,439	0
Ending balance, shares	18,236,121	13,986,871	13,943,820	13,929,381	18,236,121	13,943,820
Additional Paid-in Capitals [Member]
Beginning balance, amount	$ 26,466,000	$ 26,346,000	$ 26,146,000	$ 26,095,000	$ 26,346,000	$ 26,095,000
Share-based compensation expense-stock options	33,000	32,000	30,000	30,000
Share-based compensation expense-restricted stock units	25,000	103,000	68,000	21,000
Common stock dividends ($0.02 per share)	0	0	0	0
Net loss	0	0	0	0
Ending balance, amount	35,534,000	26,466,000	26,235,000	26,146,000	35,534,000	26,235,000
Common stock issued under restricted stock units, amount	9,010,000	(15,000)	(9,000)
Accumulated Deficits [Member]
Beginning balance, amount	(7,742,000)	(6,797,000)	(7,485,000)	(6,043,000)	(6,797,000)	(6,043,000)
Share-based compensation expense-stock options	0	0	0	0
Share-based compensation expense-restricted stock units	0	0	0
Common stock dividends ($0.02 per share)		(251,000)	(252,000)	(250,000)
Net loss	1,696,000	(694,000)	(302,000)	(1,192,000)
Ending balance, amount	(6,046,000)	(7,742,000)	(8,039,000)	(7,485,000)	(6,046,000)	(8,039,000)
Treasury Stocks [Member]
Beginning balance, amount	(5,402,000)	(5,402,000)	(5,376,000)	(5,133,000)	(5,402,000)	(5,133,000)
Share-based compensation expense-stock options	0	0	0	0
Share-based compensation expense-restricted stock units	0	0	0	0
Common stock dividends ($0.02 per share)		0	0	0
Net loss	0	0	0	0
Repurchase of common stock	0	0	(26,000)	243,000
Ending balance, amount	$ (5,402,000)	$ (5,402,000)	$ (5,376,000)	$ (5,376,000)	$ (5,402,000)	$ (5,376,000)

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Income (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Numerator:
Net loss	$ 1,696	$ (694)	$ (302)	$ (1,192)	$ 1,002	$ (1,494)
Denominator:
Denominator for basic loss per share weighted average shares	13,563,763		12,495,707		13,043,477	12,525,407
Effect of dilutive securities:
Options and restricted stock units	61,332,000				58,158,000
Denominator for diluted loss per share weighted average shares	13,625,095,000		12,495,707,000		13,101,635,000	12,525,407,000
Net loss per share-basic	$ 0.13		$ (0.02)		$ 0.08	$ (0.12)
Net loss per share-diluted	$ 0.12		$ (0.02)		$ 0.08	$ (0.12)

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Income (Loss) per Share (Details Narrative) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Restricted Stock Units [Member]
Antidilutive securities			0	86,636
Stock Options [Member]
Antidilutive securities	444,000	510,900

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Non-Cash Share-Based Employee Compensation (Details)	6 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Non-Cash Share-Based Employee Compensation
Outstanding stock options | shares	489,000
Vested stock options | shares	185,800
Nonvested stock options | shares	303,200
Expired stock options | shares	10,000
Outstanding stock options | shares	479,000
Vested stock options | shares	250,600
Nonvested stock options | shares	228,400
Outstanding wgt. avg. exercise price	$ 3.96
Vested wgt. avg. exercise price	4.15
Nonvested wgt. avg. exercise price	3.84
Issued wgt. avg. exercise price	0
Exercised wgt. avg. exercise price	0
Forfeited wgt. avg. exercise price	0
Expired wgt. avg. exercise price	4.55
Outstanding wgt. avg. exercise price	3.94
Vested wgt. avg. exercise price	4.10
Nonvested wgt. avg. exercise price	$ 3.77
Outstanding contractual life, Beginning	7 years 2 months 23 days
Nonvested contractual life, Begining	8 years 2 months 12 days
Vested contractual life, Begining	5 years 7 months 24 days
Outstanding contractual life, Ending	6 years 10 months 17 days
Vested contractual life, Ending	6 years
Nonvested contractual life, Ending	7 years 10 months 2 days
Outstanding grant date fair value	$ 1.51
Vested grant date fair value	1.55
Nonvested grant date fair value	1.49
Issued grant date fair value	0
Exercised grant date fair value	0
Forfeited grant date fair value	0
Expired grant date fair value	1.06
Outstanding grant date fair value	1.52
Vested grant date fair value	1.55
Nonvested grant date fair value	$ 1.48
Outstanding aggregate intrinsic value | $	$ 20,000,000
Vested aggregate intrinsic value | $	20,000,000
Nonvested aggregate intrinsic value | $	0
Issued aggregate intrinsic value | $	0
Forfeited aggregate intrinsic value | $	0
Exercised aggregate intrinsic value | $	0
Outstanding aggregate intrinsic value | $	24,250,000
Vested aggregate intrinsic value | $	24,250,000
Nonvested aggregate intrinsic value | $	$ 0

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Non-Cash Share-Based Employee Compensation (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020	Aug. 24, 2020	Sep. 06, 2019	Sep. 06, 2018	Jun. 04, 2018
Non-cash share-based employee compensation expense	$ 33,000	$ 30,000	$ 65,000	$ 60,000
Restricted stock units outstanding	122,533		122,533		147,038
Restricted Stock Units [Member]
Non-cash share-based employee compensation expense	$ 25,000	$ 68,000	$ 128,000	$ 89,000
Fair value per award						$ 40,000	$ 40,000	$ 20,000	$ 20
Aggregate grant date fair value						$ 240,000	$ 280,000	$ 140,000	$ 140
Ryan Turner [Member] | Restricted Stock Units [Member]
Unvested stock units							10,389	4,050
Lewis Johnson [Member] | Restricted Stock Units [Member]
Unvested stock units						24,505	30	24,505

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Commitments and Contingencies
Purchase commitments	$ 8,591		$ 8,591
Sales to United States Government	$ 4,749	$ 4,268	$ 6,865	$ 10,845
Percentage of sales	41.90%	43.00%	34.50%	52.10%
Accounts receivable from US government	$ 3,279	$ 589	$ 3,279	$ 589

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Debt (Details Narrative) - Credit Agreement		1 Months Ended	6 Months Ended
	Apr. 06, 2021 USD ($) integer	Sep. 25, 2019 USD ($) integer	Jun. 30, 2021 USD ($)	Jan. 30, 2020 USD ($)
Line of credit commencing date			Feb. 01, 2020
Line of credit, description			Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR or zero if the LIBOR is less than zero) plus a margin of 1.90% (1.97263% as of June 30, 2021).
Line of credit tangible net worth			$ 20,000
Line of credit maturity date			Jan. 31, 2022
Line of credit				$ 5,000,000
Line of credit outstanding amount			$ 1,500,000
Line of credit net balance availability			$ 3,165,000
Master loan agreement amount	$ 743,000	$ 425,000
Master loan agreement installments | integer	48	60
Principal and interest payments	$ 16,000	$ 8,000
Principal and interest payments, beginning date	May 08, 2021	Oct. 25, 2019
Principal and interest payments, maturity date	Apr. 08, 2025	Sep. 25, 2024
Principal and interest payments, interest rate percentage	3.00%	5.11%

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Leases (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Leases
Operating lease cost	$ 136,000	$ 143,000	$ 302,000	$ 287,000
Short-term lease cost	0	0	0	2,000
Variable lease cost	33,000	32,000	65,000	63,000
Total lease cost	$ 169,000	$ 175,000	$ 367,000	$ 352,000

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Leases (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Leases
Operating cash flows (fixed payments)	$ 140,000	$ 122,000	$ 352,000	$ 243,000
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (liability reduction)	100,000	83,000	271,000	164,000
ROU assets obtained in exchange for lease obligations:
Operating leases	$ 0	$ 26,000	$ 14,000	$ 35,000

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Leases (Details 2)	6 Months Ended
	Jun. 30, 2021
Leases
Weighted average remaining lease term (in years)	5.68
Weighted average discount rate	5.50%

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Leases (Details 3) $ in Thousands	Jun. 30, 2021 USD ($)
Leases
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

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Leases (Details Narrative)	1 Months Ended		6 Months Ended
	Mar. 31, 2021 ft²	Feb. 29, 2020 USD ($) ft²	Jun. 30, 2021 USD ($) ft²
Leases
Area of lease land | ft²	8,100	6,857	54,000
Lease expiration date	Dec. 31, 2021		Sep. 30, 2027
Annual rental, maintenance and tax expenses on lease | $		$ 196,000	$ 491,000
Increasing rate of percentage on annual rental, maintenance and tax expenses on lease		3.00%
Annual rental, maintenance and tax expenses description			Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent 12-month period.
Lease term			64 years

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Subsequent Event (Details Narrative) $ in Millions	6 Months Ended
	Jun. 30, 2021 USD ($)
July 1, 2021 [Member]
Net increase inventory	$ 1.3