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 March 31, 2023

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 $0.60 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 16,998,187 shares of common stock, $0.60 par value, of the registrant outstanding at April 23, 2023.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		3
Item 1.	FINANCIAL STATEMENTS	3
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

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	March 31,  2023			December 31,  2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,823		$	1,918
Trade accounts receivable, net		10,790			10,616
Inventories, net		22,829			22,105
Prepaid expenses and other current assets		1,463			1,578
Total current assets		37,905			36,217
Property, plant and equipment, net		5,098			4,884
Right-of-use (ROU) assets		1,884			1,991
Investments		1,368			1,481
Deferred tax assets, net		4,116			4,116
Other assets		387			143
Total assets	$	50,758		$	48,832
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,070		$	12,898
Accrued compensation and related taxes		1,573			1,143
Accrued warranty expense		669			591
Accrued other expenses and other current liabilities		411			700
Short-term lease liabilities		494			485
Credit facility		6,884			5,854
Notes payable-current portion		279			277
Deferred revenue		1,029			1,022
Total current liabilities		25,409			22,970
Notes payable, net of current portion		258			329
Long-term lease liabilities		1,657			1,785
Deferred revenue		4,427			3,613
Total liabilities		31,751			28,697
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding		—			—
Common stock; $0.60 par value; 50,000,000 authorized shares; 18,448,587 and 18,434,697 issued and 16,998,187 and 16,984,297 outstanding shares at March 31, 2023 and December 31, 2022, respectively		11,069			11,061
Additional paid-in capital		36,589			36,455
Accumulated deficit		(23,249	)		(21,979	)
Treasury stock, at cost, 1,450,400 shares at March 31, 2023, and December 31, 2022, respectively		(5,402	)		(5,402	)
Total stockholders’ equity		19,007			20,135
Total liabilities and stockholders’ equity	$	50,758		$	48,832

See notes to condensed consolidated financial statements.

3

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Operations

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

	Three Months Ended
	March 31, 2023			March 31,  2022
Sales, net	$	18,721		$	6,585
Expenses
Cost of products		13,826			5,113
Selling, general and administrative		5,882			4,916
Total operating expenses		19,708			10,029
Operating loss		(987	)		(3,444	)
Other (expense) income:
Net interest (expense)		(144	)		(15	)
Loss on investments		(113	)		(496	)
Other (expense)		(26	)		19
Total other (expense), net		(283	)		(492	)
Loss before income taxes		(1,270	)		(3,936	)
Provision for income tax (expense)		—			—
Net loss	$	(1,270	)	$	(3,936	)
Net loss per share-basic and diluted:	$	(0.07	)	$	(0.23	)
Weighted average shares outstanding-basic and diluted:		16,984,745			16,848,777

See notes to condensed consolidated financial statements.

4

BK TECHNOLOGIES CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Three Months Ended
	March 31,  2023			March 31, 2022
Operating activities
Net loss	$	(1,270	)	$	(3,936	)
Adjustments to reconcile net loss net cash provided by (used in) operating activities:
Inventories allowances		(86	)		48
Depreciation and amortization		378			342
Share-based compensation expense-stock options		58			85
Share-based compensation expense-restricted stock units		69			70
Loss on investments		113			496
Changes in operating assets and liabilities:
Trade accounts receivable		(174	)		3,466
Inventories		(637	)		(4,161	)
Prepaid expenses and other current assets		152			(904	)
Other assets		(244	)		1
ROU assets and lease liabilities		(12	)		(8	)
Accounts payable		1,172			1,371
Accrued compensation and related taxes		430			351
Accrued warranty expense		78			(21	)
Deferred revenue		820			(108	)
Accrued other expenses and other current liabilities		(289	)		(387	)
Net cash provided by (used in) operating activities		558			(3,295	)
Investing activities
Purchases of property, plant, and equipment		(592	)		(345	)
Net cash used in investing activities		(592	)		(345	)
Financing activities
Proceeds from common stock issuance		15			—
Cash dividends paid		—			(505	)
Proceeds from the credit facility and notes payable		20,809			—
Repayment of the credit facility and notes payable		(19,885	)		(78	)
Net cash provided by (used in) financing activities		939			(583	)
Net change in cash and cash equivalents		905			(4,223	)
Cash and cash equivalents, beginning of period		1,918			10,580
Cash and cash equivalents, end of period	$	2,823		$	6,357
Supplemental disclosure
Cash paid for interest	$	154		$	15
Non-cash financing activity
Common stock issued under restricted stock units	$	31		$	40

See notes to condensed consolidated financial statements.

5

BK TECHNOLOGIES CORPORATION

Notes to Condensed Consolidated Financial Statements

Unaudited

(In thousands, except share and per share data and percentages or as otherwise noted)

1. Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited. The condensed consolidated balance sheet at December 31, 2022, 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, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.  The results of operations for the three months ended March 31, 2023, and 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company and its subsidiaries have been included in the accompanying condensed 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.

Through September 30, 2022, the Company was the sole limited partner in FGI 1347 Holdings, LP (“1347 LP”), a consolidated VIE.  As disclosed in Note 6, the Company ceased to be the limited partner of 1347 LP as of September 30, 2022.

6

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investments, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of March 31, 2023, and December 31, 2022, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

Prior to September 14, 2022, the Company held an investment in the common stock of FG Financial Group, Inc. (“FGF”), which investment was held by the Company in 1347 LP.  The Company used observable market data assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing its investment in FGF.  

Effective September 14, 2022, the Company has an investment in Series B common membership interests of FG Financial Holdings, LLC (“FG Holdings”). As further discussed in Note 6, the Company records the investment according to guidance provided by ASC 820 “Fair Value Measurement”, as the Company does not have a controlling financial interest in, nor exerts significant influence over the activities of FG Holdings. The investment in Series B common membership interests of FG Holdings is reported using net asset value (“NAV”) of interests held by the Company at period-end.  The NAV is calculated using the observable fair value of the underlying stock of FGF held by FG Holdings, plus uninvested cash, less liabilities, further adjusted through allocations based on distribution preferences, as defined in operating agreement of FG Holdings.  The NAV is used as a practical expedient and has not been classified within the fair value hierarchy.

Liquidity

The Company incurred operating losses during 2023 and 2022 and reported negative cash flows from operations during 2022. The Company’s operating results have been negatively impacted by the worldwide shortages of materials, in particular semiconductors and integrated circuits, extended lead times, and increased costs and inventory levels for certain components.

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc. and RELM Communications, Inc. (the “Subsidiaries”), entered into an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”), providing for a one-year Line of Credit with total maximum funding up to $15 million (the “Line of Credit”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement (see Note 11).

Management believes that cash and cash equivalents currently available, combined with anticipated cash to be generated from operations, and borrowing ability are sufficient to meet the Company’s working capital requirements in the foreseeable future. The Company generally relies on cash from operations, commercial debt, and equity offerings to the extent available, to satisfy its liquidity needs and to meet its payment obligations The Company may engage in public or private offerings of equity or debt securities to maintain or increase its liquidity and capital resources. However, financial and economic conditions, including those resulting from the current inflationary environment, COVID-19 pandemic and current geopolitical tension, could impact our ability to raise capital or debt financing, if needed, on acceptable terms or at all.

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

On January 31, 2023 the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (“ThinkEquity” or the “Sales Agent”), relating to the sale of shares of our common stock. In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,225,352 shares of our common stock from time to time up to an aggregate offering price of $15,000,000 through or to the Sales Agent, acting as sales agent or principal. 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. 

7

3. Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $10,840 and $10,666 at March 31, 2023, and December 31, 2022, respectively.  This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

4. Inventories, Net

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

	March 31, 2023		December 31, 2022
Finished goods	$	3,355	$	2,965
Work in process		8,220		7,313
Raw materials		11,254		11,827
	$	22,829	$	22,105

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $1,161 at March 31, 2023, compared with approximately $1,247 at December 31, 2022.

5. Income Taxes

The Company has recorded no tax expense or benefit for the three months ended March 31,2023 and 2022.

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, changes in the valuation allowance related to net deferred tax assets, 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 March 31, 2023, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

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 $3,474 and $3,356 as of March 31, 2023 and December 31, 2022, respectively. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.  If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of March 31, 2023.

8

6. Investments

Through September 30, 2022, the Company was the sole limited partner of FGI 1347 Holdings’ LP (“1347 LP”).  1347 LP was established for the purpose of investing in securities, and its sole asset was shares of common stock of FG Financial Group, Inc. (Nasdaq: FGF) (“FGF”).  These shares were purchased in March and May 2018 for approximately $3,741.  

On September 14, 2022, FG contributed all of the outstanding shares of common stock of FGF (including those shares held by 1347 LP) to FG Holdings, with an approximate value of $945, based on the published price of FGF stock at the time of contribution, in exchange for Series B common membership interests of FG Holdings, with an equivalent value. 

The investment in the Series B common membership interests of FG Holdings is measured using the NAV practical expedient in accordance with ASC 820 Fair Value Measurement and has not been classified within the fair value hierarchy.  FG Holdings invests in the common and preferred stock of FGF.  FG Holdings’ structure provides for Series A preferred interests, which accrue a return of eight percent per annum and receive 20% of positive profits with respect to the total return in the capital provided by the holders of Series A preferred membership interests.  The Series B common membership interests receive cumulative distributions equal to the aggregate capital contributions by the Series B common membership interest equal to the total return on capital provided by the Series B common membership interests. Series B common membership interests also receive an additional return equal to 1.5 times the Series A of positive profits described above. There is no defined redemption frequency, and the Company cannot redeem or transfer its investment without the prior written consent of FG Holdings’ managers, who are FG affiliates.  Distributions may be made to members at such times and amounts as determined by the managers, and shall be based on the most recent NAV. The Company does not have any unfunded commitments related to this investment.

As of March 31, 2023, the members and affiliates of FG Holdings beneficially owned in the aggregate 5,619,111 shares of FGF’s common stock, representing approximately 60.3% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, Chairman 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., a manager and majority Series B member in FG Holdings. 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 months ended March 31, 2023, and 2022, are as follows:

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2022		18,434,697	$	11,061	$	36,455		$	(21,979	)	$	(5,402	)	$	20,135
Common stock issued		4,290		2		13			—			—			15
Common stock issued under restricted stock units		9,600		6		(6	)		—			—			—
Share-based compensation expense-stock options		—		—		58			—			—			58
Share-based compensation expense-restricted stock units		—		—		69			—			—			69
Net loss		—		—		—			(1,270	)		—			(1,270	)
Balance at March 31, 2023		18,448,587	$	11,069	$	36,589		$	(23,249	)	$	(5,402	)	$	19,007

9

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated  Deficit			Treasury Stock			Total
Balance at December 31, 2021		18,298,999	$	10,979	$	35,862		$	(8,821	)	$	(5,402	)	$	32,618
Common stock issued under restricted stock units		16,000		10		(10	)		—			—			—
Share-based compensation expense-stock options		—		—		85			—			—			85
Share-based compensation expense-restricted stock units		—		—		70			—			—			70
Net loss		—		—		—			(3,936	)		—			(3,936	)
Balance at March 31, 2022		18,314,999	$	10,989	$	36,007		$	(12,757	)	$	(5,402	)	$	28,837

8. Loss Per Share

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

	Three Months Ended
	March 31,  2023			March 31,  2022
Numerator:
Net loss for basic and diluted earnings per share	$	(1,270	)	$	(3,936	)
Denominator for basic loss per share weighted average shares		16,984,745			16,848,777
Effect of dilutive securities:
Options and restricted stock units		—			—
Denominator for diluted loss per share weighted average shares		16,984,745			16,848,777
Basic and diluted loss per share	$	(0.07	)	$	(0.23	)

Approximately 991,500 stock options and 205,644 restricted stock units for the three months ended March 31, 2023, and 909,000 stock options and 137,055 restricted stock units for the three months ended March 31, 2022, were excluded from the calculation because they were anti-dilutive.

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9. Non-Cash Share-Based Employee Compensation

Stock Options

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 $58 for the three ended March 31, 2023, compared with $85, 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  months ended March 31, 2023, 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, 2022.

A summary of activity under the Company’s stock option plans during the three months ended March 31, 2023, 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, 2023
Outstanding		1,001,500		3.10		7.87		1.13		460,925
Vested		434,233		3.57		6.73		1.31		101,090
Nonvested		567,267		2.74		8.74		0.99		359,835
Period activity
Issued		—		—		—		—		—
Exercised		—		—		—		—		—
Forfeited		—		—		—		—		—
Expired		10,000		2.23		—		1.40		—
As of March 31, 2023
Outstanding		991,500		3.10		7.70		1.13		190,525
Vested		515,066		3.44		6.91		1.25		64,926
Nonvested		476,434		2.74		8.56		0.99		125,599

Restricted Stock Units

The Company recorded non-cash restricted stock unit compensation expense of $69 for the three months ended March 31, 2023, compared with $70 for the same period last year.

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

	Number of Shares		Weighted Average Price per Share
Unvested at January 1, 2023		205,644	$	2.64
Granted		---		-
Vested and issued		---		-
Cancelled/forfeited		---		-
Unvested at March 31, 2023		205,644	$	2.64

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10. Commitments and Contingencies

Legal Matters

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 March 31, 2023.

Covid 19 and Geopolitical Tension

The COVID-19 pandemic continues to evolve, impacting the global economy, causing market instability and uncertainty in the labor market. The full extent of the impact of the COVID-19 pandemic will depend on the impact of inflation related to supply chain and labor costs, interest rates, monetary policy and geopolitical tension.

Purchase Commitments

As of March 31, 2023, the Company had purchase commitments for inventory totaling approximately $15,533.

Significant Customers

Sales to United States government agencies represented approximately $8,644 (46.2%) of the Company’s net total sales for the three months ended March 31, 2023, compared with approximately $1,650 (25.1%) for the same period last year. Accounts receivable from agencies of the United States government were $3,412 as of March 31,2023 compared with approximately $1,314 at the same date last year.

11. Debt

Credit Facilities

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc. and RELM Communications, Inc. (the “Subsidiaries”), entered into an accounts receivable financing arrangement via an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”).  On November 28, 2022, the Subsidiaries and Alterna entered into a rider to the IPSA, to modify the agreement to, among other things, provide a credit facility for up to 75% of net orderly liquidation value of inventory, not to exceed 100% of the eligible accounts receivable balance.   The IPSA, which provides for a one-year line of credit with a maximum capacity of up to $15 million (the “Line of Credit”), is scheduled to be renewed in November 2023, unless canceled by the mutual consent of the parties. The Line of Credit bears an interest rate of Prime plus 1.85%. The effective borrowing rate under the IPSA was 9.85% as of March 31, 2023.   Interest and related servicing fees for the three months ended March 31, 2023, were approximately $0.2 million. Under the arrangement, the Company may transfer eligible short-term trade receivables to the conduit, with full recourse, on a daily basis in exchange for cash.  Generally, at the transfer date, the Company may receive cash equal to approximately 85% of the value of the transferred receivables.  The Company accounts for the transfers of receivables as a secured borrowing due to the Company’s continuing involvement with the accounts receivable.

The Company used approximately $4.5 million  of IPSA funding to repay the outstanding balance of the credit facility with JP Morgan Chase Bank, N.A., which subsequently expired on January 31, 2023.

 During the three months ended March 31, 2023, the Company transferred receivables having an aggregate face value of $24.0 million to the conduit in exchange for proceeds of $20.8 million, of which $19.9 million was funded by re-invested collections. There were no losses incurred on these transfers during the three months ended March 31, 2023.  The IPSA matures on November 22, 2023.

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 At March 31, 2023, the outstanding borrowings under this credit facility were approximately $7.0 million and the outstanding principal amount of receivables transferred under this facility amounted to $7.2 million.

Notes Payable

 On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of the Company, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment (the “JPMC Credit Agreement”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement.

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%.  

The following table summarizes the notes payable principal repayments subsequent to March 31, 2023:

	March 31, 2023
Remaining nine months of 2023	$	208
2024		263
2025		66
Thereafter		—
Total payments	$	537

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.

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Lease costs consisted of the following:

	Three Months Ended
	March 31, 2023		March 31,  2022
Operating lease cost	$	136	$	136
Short-term lease cost		—		—
Variable lease cost		33		33
Total lease cost	$	169	$	169

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2023		March 31,  2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	148	$	143
Operating cash flows (liability reduction)	$	118	$	108
ROU assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—

Other information related to operating leases was as follows:

	March 31, 2023
Weighted average remaining lease term (in years)		3.98
Weighted average discount rate		5.50	%

Maturity of lease liabilities as of March 31, 2023, were as follows:

	March 31, 2023
Remaining nine months of 2023	$	447
2024		608
2025		618
2026		479
2027		242
Thereafter		—
Total payments		2,394
Less: imputed interest		(243	)
Total present value of lease liability	$	2,151

13. Subsequent events

On March 23, 2023, the Company’s Board of Directors approved a one (1)-for-five (5) reverse stock split of the Company’s authorized and outstanding shares of common stock, par value $0.60 per share (the “Common Stock”, (the “Reverse Stock Split”).  The Reverse Stock Split is being effected because the Company believes that the anticipated increase in the market price of the Common Stock resulting from the Reverse Stock Split will benefit the Company and its stockholders. The Reverse Stock Split will become effective on April 21, 2023, at 5:00 p.m., Eastern Time. The Common Stock should begin trading on a split-adjusted basis at the commencement of trading on April 24, 2023, under the Company’s existing trading symbol, “BKTI.”  Due to the effective date of April 21, 2023, the condensed consolidated financial statements have not been adjusted for the effect of the stock split.

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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, including any information incorporated by reference in 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, as amended, and 21E of the Exchange Act, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. We also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, we may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others. Forward-looking statements include, but are not limited to, the following: changes or advances in technology; the success of our SaaS and Radio business lines and the products offered thereunder; successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated SaaS products, and our new multiband radio product and other related products in the planned new BKR Series product line; competition in the LMR industry; general economic and business conditions, including federal, state and local government budget deficits and spending limitations and any impact from a prolonged shutdown of the U.S. Government; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contacts; 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; our ability to identify potential candidates for, and consummate, acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation; 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; 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; 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 of future sales of shares of our common stock.

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. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

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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, 2022, 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 and our announced SaaS solution;

· 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, inflation, supply-chain constraints, ongoing geopolitical conflicts and related sanctions;

· 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;

· 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, inflation, ongoing geopolitical conflicts and related sanctions, 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, inflation, ongoing geopolitical conflicts and related sanctions;

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· 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 and general economic conditions, including the ongoing military conflict in Ukraine, such as inflationary pressures and disruptions in the global supply chain. 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, 2022, filed with the SEC on March 16, 2023.

Executive Summary

BK Technologies Corporation (NYSE American: BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides public safety grade communications products and services which make first responders safer and more efficient. All operating activities described herein are undertaken by our operating subsidiary.

In business for over 70 years, BK operates two business units through its operating subsidiary, BK Technologies, Inc.: Radio and SaaS.

The Radio business unit designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”). Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile).

 Generally, BK Technologies-branded products serve the government markets, including but not limited to, emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises. We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, Project 25-compliant radio at a lower cost relative to comparable offerings.

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The SaaS business unit focuses on delivering innovative, public safety smartphone applications that operate ubiquitously over public cellular networks. Our BKRplay branded smartphone application will offer multiple services that make first responders safer and more efficient. When tethered to our radios, the combined solution will offer a unique capability which increases the sales reach of our radios.

 We were incorporated under the laws of the State of Nevada on October 24, 1997. We are the corporation resulting from the reincorporation merger of our predecessor, Adage, Inc., a Pennsylvania corporation, which reincorporated from Pennsylvania to Nevada effective as of January 30, 1998. Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.”

Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414.

Customer demand and orders for our products were strong during 2022. Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders during 2022. Consequently, approximately 13,000 radio units were carried in backlog as of December 31, 2022, and we fulfilled approximately 66% of these radio units during the first quarter of 2023.

Our backlog of unshipped customer orders was approximately $22.9 million and $27.0 million as of March 31, 2023, and December 31, 2022, respectively.  Changes in the backlog are attributed primarily to the timing of orders and their fulfillment.

For the three months ended March 31, 2023, sales grew approximately 184.3% to approximately $18.7 million, compared with $6.6 million for the prior year period. The growth was attributed primarily to the BKR 5000 product and the fulfillment of the 2022 backlog described above. Gross profit margins as a percentage of sales for the three months ended March 31, 2023, were 26.1%, compared with 22.4% for the same period of the prior year, generally reflecting improvement in material, component and freight costs. Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2023, totaled approximately $5.9 million (31.4% of sales), compared with $4.9 million (74.7% of sales) last year. We recognized an operating loss for the three months ended March 31, 2023, of approximately $1.0 million, compared with an operating loss of approximately $3.4 million for the same period for the prior year.

For the three months ended March 31, 2023, we recognized other expenses, net totaling approximately $0.3 million, primarily attributed to interest expense on our Line of Credit and net unrealized losses from our investment in FG Financial Group, Inc. This compares with other expenses, net totaling $0.5 million for the same period last year, which was also primarily related to an unrealized loss from the investment in FG Financial Group, Inc.

For the three months ended March 31, 2023, the pretax loss totaled approximately $1.3 million, compared with pretax loss of approximately $3.9 million for same period of the prior year.

We recognized no tax expense for the three months ended March 31, 2023, and for the same period of the prior year.

The net loss for the three months ended March 31, 2023, totaled approximately $1.3 million ($0.07 per basic and diluted share), compared with net loss of approximately $3.9 million ($0.23 per basic and diluted share) for the same period last year. The primary factor for the improvement for the three months ended March 31, 2023, compared to the same period last year was due to production issues experienced last year related to electronic component shortages from supply chain disruptions.    

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As of March 31, 2023, working capital totaled approximately $12.5 million, of which $13.6 million was comprised of cash, cash equivalents and trade receivables. This compares with working capital totaling approximately $13.2 million at 2022 year-end, which included $12.5 million of cash, cash equivalents and trade receivables.

Available Information

Our Internet website address is www.bktechnologies.com. We make available on our Internet website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to these reports as soon as practicable after we file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the “SEC”). In addition, our Code of Business Conduct and Ethics, Code of Ethics for the CEO and Senior Financial Officers, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter and other corporate governance policies are available on our website, under “Investor Relations.”  The information contained on our website is not incorporated by reference in this report. A copy of any of these materials may be obtained, free of charge, upon request from our investor relations department by submitting a written request to bktechnologies@imsinvestorrelations.com or calling (203) 972-9200. Additional information regarding our investor relations department can be found on our website. All reports that the Company files with or furnishes to the SEC are also available free of charge via the SEC’s website at http://www.sec.gov.

Impact of COVID-19 Pandemic and Supply Chain

 We received record customer orders of approximately $70 million in 2022. Worldwide shortages of materials, particularly semiconductors and integrated circuits, resulting in part from the impact of COVID-19 have resulted in limited supplies, extended lead times, and increased our costs and inventory levels 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 in 2022, we have experienced 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. 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.

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First Quarter Summary

Customer demand and orders for our products continued to be strong during the three months ended March 31, 2023.  Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all of the orders that we received in 2022.  Consequently, we had approximately 13,000 radio units that were carried in backlog as of December 31, 2022, and we fulfilled approximately 66% of these radio units during the three months ended March 31, 2023.

Overall, our revenues for the three months ended March 31, 2023, increased significantly compared with the same period of last year.  For the first quarter 2023, sales increased 184.3% to approximately $18.7 million, compared with approximately $6.6 million of sales for the first quarter last year.  Gross profit margin as a percentage of sales for the first quarter of 2023 was approximately 26.1%, compared with 22.4% for the same period of last year, generally reflecting improvements in supply chain material costs and freight, and increased production volumes compared to the first quarter last year.  Selling, general and administrative (“SG&A”) expenses for the first quarter of 2023 totaled approximately $5.9 million, which was 19.7% higher than the SG&A expenses of approximately $4.9 million for the first quarter last year.  The increase in SG&A expenses is attributed primarily to sales staffing and strategic and marketing initiatives.  These factors yielded an operating loss of approximately $1.0 million for the three-month period ended March 31, 2023, compared with an operating loss of approximately $3.4 million for the same quarter last year, which improved primarily due to reduced supply chain material challenges compared to the same period last year.  

For the first quarter of 2023, we recognized a net unrealized loss totaling approximately $0.1 million on our investment in FG Financial Group, Inc. made through FG Holdings, LLC.  This compares with an unrealized loss of approximately $0.5 million on the investment in FG Financial Group, Inc. made through FG 1347 Holdings, LP, for the first quarter of last year.  

Net loss for the three months ended March 31, 2023, was approximately $1.3 million ($0.07 per basic and diluted share), compared with a net loss of approximately $3.9 million ($0.23 per basic and diluted share) for the same quarter last year.  

As of March 31, 2023, working capital totaled approximately $12.5 million, of which approximately $13.6 million was comprised of cash, cash equivalents and trade receivables.  As of December 31, 2022, working capital totaled approximately $13.2 million, of which approximately $12.5 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
	March 31, 2023			March 31, 2022
Sales		100.0	%		100.0	%
Cost of products		(73.9	)		(77.6	)
Gross margin		26.1			22.4
Selling, general and administrative expenses		(31.4	)		(74.7	)
Other (expense) income		(1.5	)		(7.5	)
(Loss) income before income taxes		(6.8	)		(59.8	)
Income tax (expense) benefit		(0.0	)		(0.0	)
Net (loss) income		(6.8	)		(59.8	)

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Net Sales

For the first quarter ended March 31, 2023, net sales increased 184.3% to approximately $18.7 million, compared with approximately $6.6 million for the same quarter last year.  

Customer demand and orders for our products continued to be strong, reflecting the acceptance by the marketplace for our BKR 5000 product.  We were able to fulfill approximately 66% of the radio units in backlog as of December 31, 2022, during the first quarter of this year.  The supply chain issues experienced in 2022 have improved significantly, but the precise impact on sales and shipments for the remainder of 2023 cannot be quantified, hence we anticipate maintaining an elevated level of inventory.

Sales for the three months ended March 31, 2023, were attributed primarily to the backlog carried over from 2022 (described above) to certain state and local public safety opportunities, as well as federal wildland fire related agencies.  From a product perspective, the primary contributor to orders and shipments during the first quarter was our BKR 5000 portable radio and related accessories.  The BKR Series is envisioned as a comprehensive line of new products, which will include new models in coming quarters.  The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts on our supply chain as a result of various electronic component suppliers. 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.

While the potential impacts of material shortages, lead-times, the COVID-19 pandemic, the current inflationary environment and ongoing geopolitical conflict and related sanctions 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, gross profit margins, operations, and financial results.

Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the first quarter ended March 31, 2023, were approximately 26.1% compared with 22.4% for the same quarter 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 quarter ended March 31, 2023, increased compared with the same period last year, primarily due to improvement in production volumes related to supply shortages, material costs, including electronic components, and to a lesser degree, easing of escalated freight costs.

During recent quarters, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies, which in turn, extended lead times and resulted in higher costs for certain components used in our products.  Accordingly, we have experienced delivery delays and increased costs within our supply chain.  While the progression and duration of these shortages is not known with certainty, we are monitoring a number of critical components for product cost improvement, but the shortages may last for several quarters for a small number of components.  The impact on our operations of such shortages and increased product costs is uncertain, but could potentially impact our future sales, gross profit margins, manufacturing, operations and financial results.  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. However, we may encounter new product cost and competitive pricing pressures in the future and the extent of their impact on gross margins, if any, is uncertain.

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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 first quarter ended March 31, 2023, totaled approximately $5.9 million (31.4% of sales), compared with approximately $4.9 million (74.7% of sales) for the same quarter last year.

Engineering and product development expenses for the first quarter of 2023 totaled approximately $2.4 million (12.9% of sales), compared with approximately $2.3 million (35.1% of sales) for the same quarter of last year. The increase in engineering expenses is attributed primarily to ongoing product design and development activities, particularly prototyping, for the new BKR series radios.  Most of these activities are being performed by our internal engineering team and are their primary focus, combined with sustaining engineering support of our existing products.  The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and certain component lead times in coming months and quarters.

Marketing and selling expenses for the first quarter of 2023 totaled approximately $1.5 million (8.2% of sales), compared with approximately $1.0 million (14.8% of sales) for the first quarter last year.  The increase for the three-month period ended March 31, 2023, is primarily attributable to increases in activities in support of anticipated sales growth from new products and customers.

Other general and administrative expenses for the first quarter 2023 totaled approximately $1.9 million (10.3% of sales), compared with approximately $1.6 million (24.8% of sales) for the same quarter last year.   The increase in general and administrative expenses for the three months ending March 31, 2023, is attributed primarily to corporate and headquarters staffing in support of strategic initiatives.

Operating Loss

The operating loss for the first quarter ended March 31, 2023, totaled approximately $1.0 million (5.3% of sales), compared with approximately $3.4 million (52.3% of sales) for last year’s first quarter.  The operating loss for the quarter ended March 31, 2023, is attributed to lower gross profit margins related to operating costs and somewhat to increased strategic initiative costs.  

Other (Expense) Income

We recorded net interest expense of approximately $144,000 for the first quarter ended March 31, 2023, compared with approximately $15,000 for the first quarter of last year. Net interest expense was primarily the result our Line of Credit and equipment financing.

For the first quarter ended March 31, 2023, we recognized an unrealized loss of approximately $0.1 million on our investment in FG Holdings, compared with an unrealized loss of approximately $0.5 million in FG Financial Group, Inc. made through FG 1347 Holdings, LP for the first quarter last year.   

Income Taxes

We recorded no tax expense or benefit for the quarter ended March 31, 2023, compared with no income tax provision for the first quarter 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. 

22

As of March 31, 2023, 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 $3.4 million as of both March 31, 2023 and December 31, 2022.  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 March 31, 2023.

Liquidity and Capital Resources

For the three months ended March 31, 2023, net cash provided by operating activities totaled approximately $0.6 million, compared with cash used by operating activities of approximately $3.3 million for the same period last year.  Cash provided by operating activities for the three months ended March 31, 2023, was primarily related to a net loss which was offset by increased accounts payable and deferred revenues.

For the first quarter of 2023, we had a net loss of approximately $1.3 million, compared with a net loss of approximately $3.9 million for the same quarter last year.  Gross inventories increased during the quarter ended March 31, 2023, by approximately $0.6 million compared with approximately $4.2 million for the same quarter last year.  Accounts payable for the quarter ended March 31, 2023, increased approximately $1.2 million, compared with an increase of approximately $1.4 million for last year’s first quarter, primarily due to increased material and component purchases related to the increased production volumes for 2023 and to delays and shortages within our supply chain for the same period of 2022. The increases for both inventories and accounts payable were attributed primarily to material and component availability combined with extended supplier lead times and planned new product introductions. Accounts receivable increased approximately $0.2 million during the first quarter ended March 31, 2023, compared with a decrease of approximately $3.5 million for last year’s first quarter.  The increase was primarily due to higher sales in 2023 and customer collections combined with decreased sales during the first quarter of 2022.   Prepaid expenses decreased during the first quarter by approximately $0.2 million compared with an increase of $0.9 million for last year’s first quarter.  The increases in prepaid expenses for the first quarter last year were attributed primarily to supply chain material availability combined with extended supplier lead times.  Depreciation and amortization totaled approximately $0.4 million for the first quarter ended March 31, 2023, compared with approximately $0.3 million for last year’s first quarter.  Depreciation and amortization are primarily related to manufacturing and engineering equipment.  The unrealized loss on securities for the first quarter ended March 31, 2023, totaled approximately $0.1 million, compared with an unrealized loss of approximately $0.5 million for the first quarter last year.  For additional information pertaining to our investment in securities, refer to Note 1 (Condensed Consolidated Financial Statements) and Note 6 (Investments) to the condensed consolidated financial statements included in this report.  

Cash used in investing activities for the quarter ended March 31, 2023, totaled approximately $0.6 million, compared with approximately $0.3 million for last year’s first quarter.  The cash used for both periods was attributed primarily to the purchase of engineering and manufacturing related equipment.

For the quarter ended March 31, 2023, cash of approximately $0.9 million was provided by financing activities, compared with cash used in financing activities of approximately $0.6 million for last year’s first quarter.  During the first quarter of 2023 we received cash of approximately $20.8 million from debt, net of repayments totaling approximately $19.9 million, while for last year’s first quarter, we paid a quarterly dividend of approximately $0.5 million and repayment of debt of $0.1 million.

23

Our cash and cash equivalents balance on March 31, 2023, was approximately $2.8 million.  We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our ISPA 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, which could be impacted by the current inflationary environment, COVID-19 pandemic and current geopolitical tension, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all.  

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 three months ended March 31, 2023.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 229.10(f)(1) of Regulation S-K, 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 March 31, 2023, there were no changes in our internal control over financial reporting 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

As of the date of this filing, except as set forth herein, there have been no material changes to the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 16, 2023.  The Risk Factors set forth in the 2022 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q.  Any of the risks described in the 2022 Form 10-K, could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made.  These are not the only risks we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

Share Repurchase Program

                On December 21, 2021, the Company announced that the Board has authorized a share repurchase program which permits the Company to purchase up to an aggregate of $5 million of its common shares. The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations. The actual timing, manner and number of shares repurchased under the program will be determined by management and the Board of Directors at their discretion, and will depend on several factors, including the market price of the Company’s common shares, general market and economic conditions, alternative investment opportunities, and other business considerations in accordance with applicable securities laws and exchange rules. The authorization of the share repurchase program does not require BK Technologies to acquire any particular number of shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The following table provides information about purchases made by us of our common stock for each month included in the first quarter of 2023:

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Still be Purchased Under the Plans or Programs
January 1–31, 2023	—		—	—	$	5,000,000
February 1–28, 2023	—		—	—	$	5,000,000
March 1–31, 2023	—		—	—	$	5,000,000
Quarter Ended March 31, 2023	—	$	—	—	$	5,000,000

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 3.1	Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed March 17, 2022)
Exhibit 3.2	Certificate of Amendment to Articles of Incorporation (incorporated by reference from Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K filed March 17, 2022)
Exhibit 3.3	Certificate of Change to Articles of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 28, 2023)
Exhibit 3.4	Bylaws (incorporated by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
Exhibit 10.1	Sales Agreement, dated January 31, 2023, by and between the Company and ThinkEquity LLC (incorporated by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed January 31, 2023)
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: May 4, 2023	By:	/s/ John M. Suzuki
		John M. Suzuki Chief Executive Officer (Principal executive officer and duly authorized officer)
Date: May 4, 2023	By:	/s/ Scott A. Malmanger
		Scott A. Malmanger 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: May 4, 2023	/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, Scott A. Malmanger, 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: May 4, 2023	/s/ Scott A. Malmanger
	Scott A. Malmanger
	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 March 31, 2023 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
May 4, 2023

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 March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott A. Malmanger, 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/ Scott A. Malmanger
	Scott A. Malmanger
	Chief Financial Officer
May 4, 2023

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	Apr. 23, 2023
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	Mar. 31, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Entity Common Stock Shares Outstanding		16,998,187
Document Quarterly Report	true
Document Transition Report	false
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 $0.60 per share
Trading Symbol	BKTI
Security Exchange Name	NYSE
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 2,823	$ 1,918
Trade accounts receivable, net	10,790	10,616
Inventories, net	22,829	22,105
Prepaid expenses and other current assets	1,463	1,578
Total current assets	37,905	36,217
Property, plant and equipment, net	5,098	4,884
Right-of-use (ROU) assets	1,884	1,991
Investments	1,368	1,481
Deferred tax assets, net	4,116	4,116
Other assets	387	143
Total assets	50,758	48,832
Current liabilities:
Accounts payable	14,070	12,898
Accrued compensation and related taxes	1,573	1,143
Accrued warranty expense	669	591
Accrued other expenses and other current liabilities	411	700
Short-term lease liabilities	494	485
Credit facility	6,884	5,854
Notes payable-current portion	279	277
Deferred revenue	1,029	1,022
Total current liabilities	25,409	22,970
Notes payable, net of current portion	258	329
Long-term lease liabilities	1,657	1,785
Deferred revenue	4,427	3,613
Total liabilities	31,751	28,697
Stockholders' equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding	0	0
Common stock; $0.60 par value; 50,000,000 authorized shares; 18,448,587 and 18,434,697 issued and 16,998,187 and 16,984,297 outstanding shares at March 31, 2023 and December 31, 2022, respectively	11,069	11,061
Additional paid-in capital	36,589	36,455
Accumulated deficit	(23,249)	(21,979)
Treasury stock, at cost, 1,450,400 shares at March 31, 2023, and December 31, 2022, respectively	(5,402)	(5,402)
Total stockholders' equity	19,007	20,135
Total liabilities and stockholders' equity	$ 50,758	$ 48,832

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
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	50,000,000	50,000,000
Common Stock, Shares Issued	18,448,587	18,434,697
Common Stock, Shares Outstanding	16,998,187	16,984,297
Treasury Stock	1,450,400	1,450,400

XML

Condensed Consolidated Statements Of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Condensed Consolidated Statements Of Operations (Unaudited)
Sales, net	$ 18,721	$ 6,585
Expenses
Cost of products	13,826	5,113
Selling, general and administrative	5,882	4,916
Total operating expenses	19,708	10,029
Operating loss	(987)	(3,444)
Other (expense) income:
Net interest (expense)	(144)	(15)
Loss on investments	(113)	(496)
Other (expense)	(26)	19
Total other (expense), net	(283)	(492)
Loss before income taxes	(1,270)	(3,936)
Provision for income tax (expense)	0	0
Net loss	$ (1,270)	$ (3,936)
Net loss per share-basic and diluted:	$ (0.07)	$ (0.23)
Weighted average shares outstanding-basic and diluted:	16,984,745	16,848,777

XML

Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating activities
Net loss	$ (1,270)	$ (3,936)
Adjustments to reconcile net loss net cash provided by (used in) operating activities:
Inventories allowances	(86)	48
Depreciation and amortization	378	342
Share-based compensation expense-stock options	58	85
Share-based compensation expense-restricted stock units	69	70
Loss on investments	113	496
Changes in operating assets and liabilities:
Trade accounts receivable	(174)	3,466
Inventories	(637)	(4,161)
Prepaid expenses and other current assets	152	(904)
Other assets	(244)	1
ROU assets and lease liabilities	(12)	(8)
Accounts payable	1,172	1,371
Accrued compensation and related taxes	430	351
Accrued warranty expense	78	(21)
Deferred revenue	820	(108)
Accrued other expenses and other current liabilities	(289)	(387)
Net cash provided by (used in) operating activities	558	(3,295)
Investing activities
Purchases of property, plant, and equipment	(592)	(345)
Net cash used in investing activities	(592)	(345)
Financing activities
Proceeds from common stock issuance	15	0
Cash dividends paid	0	(505)
Proceeds from the credit facility and notes payable	20,809	0
Repayment of the credit facility and notes payable	(19,885)	(78)
Net cash provided by (used in) financing activities	939	(583)
Net change in cash and cash equivalents	905	(4,223)
Cash and cash equivalents, beginning of period	1,918	10,580
Cash and cash equivalents, end of period	2,823	6,357
Supplemental disclosure
Cash paid for interest	154	15
Non-cash financing activity
Common stock issued under restricted stock units	$ 31	$ 40

XML

Condensed Consolidated Financial Statements

3 Months Ended

Mar. 31, 2023

Condensed Consolidated Financial Statements

Condensed Consolidated Financial Statements

1. Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited. The condensed consolidated balance sheet at December 31, 2022, 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, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.  The results of operations for the three months ended March 31, 2023, and 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company and its subsidiaries have been included in the accompanying condensed 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.

Through September 30, 2022, the Company was the sole limited partner in FGI 1347 Holdings, LP (“1347 LP”), a consolidated VIE.  As disclosed in Note 6, the Company ceased to be the limited partner of 1347 LP as of September 30, 2022.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investments, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of March 31, 2023, and December 31, 2022, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

Prior to September 14, 2022, the Company held an investment in the common stock of FG Financial Group, Inc. (“FGF”), which investment was held by the Company in 1347 LP.  The Company used observable market data assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing its investment in FGF.  

Effective September 14, 2022, the Company has an investment in Series B common membership interests of FG Financial Holdings, LLC (“FG Holdings”). As further discussed in Note 6, the Company records the investment according to guidance provided by ASC 820 “Fair Value Measurement”, as the Company does not have a controlling financial interest in, nor exerts significant influence over the activities of FG Holdings. The investment in Series B common membership interests of FG Holdings is reported using net asset value (“NAV”) of interests held by the Company at period-end.  The NAV is calculated using the observable fair value of the underlying stock of FGF held by FG Holdings, plus uninvested cash, less liabilities, further adjusted through allocations based on distribution preferences, as defined in operating agreement of FG Holdings.  The NAV is used as a practical expedient and has not been classified within the fair value hierarchy.

Liquidity

The Company incurred operating losses during 2023 and 2022 and reported negative cash flows from operations during 2022. The Company’s operating results have been negatively impacted by the worldwide shortages of materials, in particular semiconductors and integrated circuits, extended lead times, and increased costs and inventory levels for certain components.

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc. and RELM Communications, Inc. (the “Subsidiaries”), entered into an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”), providing for a one-year Line of Credit with total maximum funding up to $15 million (the “Line of Credit”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement (see Note 11).

Management believes that cash and cash equivalents currently available, combined with anticipated cash to be generated from operations, and borrowing ability are sufficient to meet the Company’s working capital requirements in the foreseeable future. The Company generally relies on cash from operations, commercial debt, and equity offerings to the extent available, to satisfy its liquidity needs and to meet its payment obligations The Company may engage in public or private offerings of equity or debt securities to maintain or increase its liquidity and capital resources. However, financial and economic conditions, including those resulting from the current inflationary environment, COVID-19 pandemic and current geopolitical tension, could impact our ability to raise capital or debt financing, if needed, on acceptable terms or at all.

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

3 Months Ended

Mar. 31, 2023

Significant Events and Transactions

Significant Events And Transactions

2. Significant Events and Transactions

On January 31, 2023 the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (“ThinkEquity” or the “Sales Agent”), relating to the sale of shares of our common stock. In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,225,352 shares of our common stock from time to time up to an aggregate offering price of $15,000,000 through or to the Sales Agent, acting as sales agent or principal. 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

3 Months Ended

Mar. 31, 2023

Allowance for Doubtful Accounts

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 $10,840 and $10,666 at March 31, 2023, and December 31, 2022, respectively.  This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.

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Inventories, Net

3 Months Ended

Mar. 31, 2023

Inventories, Net

Inventories, Net

4. Inventories, Net

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

	March 31, 2023		December 31, 2022
Finished goods	$	3,355	$	2,965
Work in process		8,220		7,313
Raw materials		11,254		11,827
	$	22,829	$	22,105

Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $1,161 at March 31, 2023, compared with approximately $1,247 at December 31, 2022.

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Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

5. Income Taxes

The Company has recorded no tax expense or benefit for the three months ended March 31,2023 and 2022.

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, changes in the valuation allowance related to net deferred tax assets, 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 March 31, 2023, the Company’s net deferred tax assets totaled approximately $4,116 and were primarily derived from research and development tax credits, deferred revenue, and net operating loss carryforwards.

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 $3,474 and $3,356 as of March 31, 2023 and December 31, 2022, respectively. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.  If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of March 31, 2023.

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Investments

3 Months Ended

Mar. 31, 2023

Investments

Investments

6. Investments

Through September 30, 2022, the Company was the sole limited partner of FGI 1347 Holdings’ LP (“1347 LP”).  1347 LP was established for the purpose of investing in securities, and its sole asset was shares of common stock of FG Financial Group, Inc. (Nasdaq: FGF) (“FGF”).  These shares were purchased in March and May 2018 for approximately $3,741.  

On September 14, 2022, FG contributed all of the outstanding shares of common stock of FGF (including those shares held by 1347 LP) to FG Holdings, with an approximate value of $945, based on the published price of FGF stock at the time of contribution, in exchange for Series B common membership interests of FG Holdings, with an equivalent value. 

The investment in the Series B common membership interests of FG Holdings is measured using the NAV practical expedient in accordance with ASC 820 Fair Value Measurement and has not been classified within the fair value hierarchy.  FG Holdings invests in the common and preferred stock of FGF.  FG Holdings’ structure provides for Series A preferred interests, which accrue a return of eight percent per annum and receive 20% of positive profits with respect to the total return in the capital provided by the holders of Series A preferred membership interests.  The Series B common membership interests receive cumulative distributions equal to the aggregate capital contributions by the Series B common membership interest equal to the total return on capital provided by the Series B common membership interests. Series B common membership interests also receive an additional return equal to 1.5 times the Series A of positive profits described above. There is no defined redemption frequency, and the Company cannot redeem or transfer its investment without the prior written consent of FG Holdings’ managers, who are FG affiliates.  Distributions may be made to members at such times and amounts as determined by the managers, and shall be based on the most recent NAV. The Company does not have any unfunded commitments related to this investment.

As of March 31, 2023, the members and affiliates of FG Holdings beneficially owned in the aggregate 5,619,111 shares of FGF’s common stock, representing approximately 60.3% of FGF’s outstanding shares. Additionally, FG and its affiliates constitute the largest stockholder of the Company. Mr. Kyle Cerminara, Chairman 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., a manager and majority Series B member in FG Holdings. Mr. Cerminara also serves as Chairman of the Board of Directors of FGF.

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Stockholders Equity

3 Months Ended

Mar. 31, 2023

Stockholders Equity

Stockholders' Equity

7. Stockholders’ Equity

The changes in condensed consolidated stockholders’ equity for the three months ended March 31, 2023, and 2022, are as follows:

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2022		18,434,697	$	11,061	$	36,455		$	(21,979	)	$	(5,402	)	$	20,135
Common stock issued		4,290		2		13			—			—			15
Common stock issued under restricted stock units		9,600		6		(6	)		—			—			—
Share-based compensation expense-stock options		—		—		58			—			—			58
Share-based compensation expense-restricted stock units		—		—		69			—			—			69
Net loss		—		—		—			(1,270	)		—			(1,270	)
Balance at March 31, 2023		18,448,587	$	11,069	$	36,589		$	(23,249	)	$	(5,402	)	$	19,007

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated  Deficit			Treasury Stock			Total
Balance at December 31, 2021		18,298,999	$	10,979	$	35,862		$	(8,821	)	$	(5,402	)	$	32,618
Common stock issued under restricted stock units		16,000		10		(10	)		—			—			—
Share-based compensation expense-stock options		—		—		85			—			—			85
Share-based compensation expense-restricted stock units		—		—		70			—			—			70
Net loss		—		—		—			(3,936	)		—			(3,936	)
Balance at March 31, 2022		18,314,999	$	10,989	$	36,007		$	(12,757	)	$	(5,402	)	$	28,837

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Loss Per Share

3 Months Ended

Mar. 31, 2023

Loss Per Share

Loss Per Share

8. Loss Per Share

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

	Three Months Ended
	March 31,  2023			March 31,  2022
Numerator:
Net loss for basic and diluted earnings per share	$	(1,270	)	$	(3,936	)
Denominator for basic loss per share weighted average shares		16,984,745			16,848,777
Effect of dilutive securities:
Options and restricted stock units		—			—
Denominator for diluted loss per share weighted average shares		16,984,745			16,848,777
Basic and diluted loss per share	$	(0.07	)	$	(0.23	)

Approximately 991,500 stock options and 205,644 restricted stock units for the three months ended March 31, 2023, and 909,000 stock options and 137,055 restricted stock units for the three months ended March 31, 2022, were excluded from the calculation because they were anti-dilutive.

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Non-Cash Share-Based Employee Compensation

3 Months Ended

Mar. 31, 2023

Non-Cash Share-Based Employee Compensation

Non-Cash Share-Based Employee Compensation

9. Non-Cash Share-Based Employee Compensation

Stock Options

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 $58 for the three ended March 31, 2023, compared with $85, 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  months ended March 31, 2023, 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, 2022.

A summary of activity under the Company’s stock option plans during the three months ended March 31, 2023, 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, 2023
Outstanding		1,001,500		3.10		7.87		1.13		460,925
Vested		434,233		3.57		6.73		1.31		101,090
Nonvested		567,267		2.74		8.74		0.99		359,835
Period activity
Issued		—		—		—		—		—
Exercised		—		—		—		—		—
Forfeited		—		—		—		—		—
Expired		10,000		2.23		—		1.40		—
As of March 31, 2023
Outstanding		991,500		3.10		7.70		1.13		190,525
Vested		515,066		3.44		6.91		1.25		64,926
Nonvested		476,434		2.74		8.56		0.99		125,599

Restricted Stock Units

The Company recorded non-cash restricted stock unit compensation expense of $69 for the three months ended March 31, 2023, compared with $70 for the same period last year.

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

	Number of Shares		Weighted Average Price per Share
Unvested at January 1, 2023		205,644	$	2.64
Granted		---		-
Vested and issued		---		-
Cancelled/forfeited		---		-
Unvested at March 31, 2023		205,644	$	2.64

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and contingencies

Commitments And Contingencies

10. Commitments and Contingencies

Legal Matters

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 March 31, 2023.

Covid 19 and Geopolitical Tension

The COVID-19 pandemic continues to evolve, impacting the global economy, causing market instability and uncertainty in the labor market. The full extent of the impact of the COVID-19 pandemic will depend on the impact of inflation related to supply chain and labor costs, interest rates, monetary policy and geopolitical tension.

Purchase Commitments

As of March 31, 2023, the Company had purchase commitments for inventory totaling approximately $15,533.

Significant Customers

Sales to United States government agencies represented approximately $8,644 (46.2%) of the Company’s net total sales for the three months ended March 31, 2023, compared with approximately $1,650 (25.1%) for the same period last year. Accounts receivable from agencies of the United States government were $3,412 as of March 31,2023 compared with approximately $1,314 at the same date last year.

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Debt

3 Months Ended

Mar. 31, 2023

Debt

Debt

11. Debt

Credit Facilities

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc. and RELM Communications, Inc. (the “Subsidiaries”), entered into an accounts receivable financing arrangement via an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”).  On November 28, 2022, the Subsidiaries and Alterna entered into a rider to the IPSA, to modify the agreement to, among other things, provide a credit facility for up to 75% of net orderly liquidation value of inventory, not to exceed 100% of the eligible accounts receivable balance.   The IPSA, which provides for a one-year line of credit with a maximum capacity of up to $15 million (the “Line of Credit”), is scheduled to be renewed in November 2023, unless canceled by the mutual consent of the parties. The Line of Credit bears an interest rate of Prime plus 1.85%. The effective borrowing rate under the IPSA was 9.85% as of March 31, 2023.   Interest and related servicing fees for the three months ended March 31, 2023, were approximately $0.2 million. Under the arrangement, the Company may transfer eligible short-term trade receivables to the conduit, with full recourse, on a daily basis in exchange for cash.  Generally, at the transfer date, the Company may receive cash equal to approximately 85% of the value of the transferred receivables.  The Company accounts for the transfers of receivables as a secured borrowing due to the Company’s continuing involvement with the accounts receivable.

The Company used approximately $4.5 million  of IPSA funding to repay the outstanding balance of the credit facility with JP Morgan Chase Bank, N.A., which subsequently expired on January 31, 2023.

 During the three months ended March 31, 2023, the Company transferred receivables having an aggregate face value of $24.0 million to the conduit in exchange for proceeds of $20.8 million, of which $19.9 million was funded by re-invested collections. There were no losses incurred on these transfers during the three months ended March 31, 2023.  The IPSA matures on November 22, 2023.

 At March 31, 2023, the outstanding borrowings under this credit facility were approximately $7.0 million and the outstanding principal amount of receivables transferred under this facility amounted to $7.2 million.

Notes Payable

 On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of the Company, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment (the “JPMC Credit Agreement”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement.

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%.  

The following table summarizes the notes payable principal repayments subsequent to March 31, 2023:

	March 31, 2023
Remaining nine months of 2023	$	208
2024		263
2025		66
Thereafter		—
Total payments	$	537

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Leases

3 Months Ended

Mar. 31, 2023

Leases

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.

Lease costs consisted of the following:

	Three Months Ended
	March 31, 2023		March 31,  2022
Operating lease cost	$	136	$	136
Short-term lease cost		—		—
Variable lease cost		33		33
Total lease cost	$	169	$	169

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2023		March 31,  2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	148	$	143
Operating cash flows (liability reduction)	$	118	$	108
ROU assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—

Other information related to operating leases was as follows:

	March 31, 2023
Weighted average remaining lease term (in years)		3.98
Weighted average discount rate		5.50	%

Maturity of lease liabilities as of March 31, 2023, were as follows:

	March 31, 2023
Remaining nine months of 2023	$	447
2024		608
2025		618
2026		479
2027		242
Thereafter		—
Total payments		2,394
Less: imputed interest		(243	)
Total present value of lease liability	$	2,151

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events

Subsequent events

13. Subsequent events

On March 23, 2023, the Company’s Board of Directors approved a one (1)-for-five (5) reverse stock split of the Company’s authorized and outstanding shares of common stock, par value $0.60 per share (the “Common Stock”, (the “Reverse Stock Split”).  The Reverse Stock Split is being effected because the Company believes that the anticipated increase in the market price of the Common Stock resulting from the Reverse Stock Split will benefit the Company and its stockholders. The Reverse Stock Split will become effective on April 21, 2023, at 5:00 p.m., Eastern Time. The Common Stock should begin trading on a split-adjusted basis at the commencement of trading on April 24, 2023, under the Company’s existing trading symbol, “BKTI.”  Due to the effective date of April 21, 2023, the condensed consolidated financial statements have not been adjusted for the effect of the stock split.

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Condensed Consolidated Financial Statements (Policies)

3 Months Ended

Mar. 31, 2023

Condensed Consolidated Financial Statements

Basis Of Presentation

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, have been prepared by BK Technologies Corporation (the “Company,” “we,” “us,” “our”), and are unaudited. The condensed consolidated balance sheet at December 31, 2022, 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, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.  The results of operations for the three months ended March 31, 2023, and 2022, are not necessarily indicative of the operating results for a full year.

Principles of Consolidation

The accounts of the Company and its subsidiaries have been included in the accompanying condensed 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.

Through September 30, 2022, the Company was the sole limited partner in FGI 1347 Holdings, LP (“1347 LP”), a consolidated VIE.  As disclosed in Note 6, the Company ceased to be the limited partner of 1347 LP as of September 30, 2022.

Fair Value Of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investments, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities. As of March 31, 2023, and December 31, 2022, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, notes payable, credit facilities, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

Prior to September 14, 2022, the Company held an investment in the common stock of FG Financial Group, Inc. (“FGF”), which investment was held by the Company in 1347 LP.  The Company used observable market data assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing its investment in FGF.  

Effective September 14, 2022, the Company has an investment in Series B common membership interests of FG Financial Holdings, LLC (“FG Holdings”). As further discussed in Note 6, the Company records the investment according to guidance provided by ASC 820 “Fair Value Measurement”, as the Company does not have a controlling financial interest in, nor exerts significant influence over the activities of FG Holdings. The investment in Series B common membership interests of FG Holdings is reported using net asset value (“NAV”) of interests held by the Company at period-end.  The NAV is calculated using the observable fair value of the underlying stock of FGF held by FG Holdings, plus uninvested cash, less liabilities, further adjusted through allocations based on distribution preferences, as defined in operating agreement of FG Holdings.  The NAV is used as a practical expedient and has not been classified within the fair value hierarchy.

Liquidity

The Company incurred operating losses during 2023 and 2022 and reported negative cash flows from operations during 2022. The Company’s operating results have been negatively impacted by the worldwide shortages of materials, in particular semiconductors and integrated circuits, extended lead times, and increased costs and inventory levels for certain components.

On November 22, 2022, the Company’s subsidiaries, BK Technologies, Inc. and RELM Communications, Inc. (the “Subsidiaries”), entered into an Invoice Purchase and Security Agreement (“IPSA”) with Alterna Capital Solutions, LLC (“Alterna”), providing for a one-year Line of Credit with total maximum funding up to $15 million (the “Line of Credit”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement (see Note 11).

Management believes that cash and cash equivalents currently available, combined with anticipated cash to be generated from operations, and borrowing ability are sufficient to meet the Company’s working capital requirements in the foreseeable future. The Company generally relies on cash from operations, commercial debt, and equity offerings to the extent available, to satisfy its liquidity needs and to meet its payment obligations The Company may engage in public or private offerings of equity or debt securities to maintain or increase its liquidity and capital resources. However, financial and economic conditions, including those resulting from the current inflationary environment, COVID-19 pandemic and current geopolitical tension, could impact our ability to raise capital or debt financing, if needed, on acceptable terms or at all.

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)

3 Months Ended

Mar. 31, 2023

Inventories, Net

Components Of Inventory

	March 31, 2023		December 31, 2022
Finished goods	$	3,355	$	2,965
Work in process		8,220		7,313
Raw materials		11,254		11,827
	$	22,829	$	22,105

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Stockholders Equity (Tables)

3 Months Ended

Mar. 31, 2023

Stockholders Equity

Changes In Consolidated Stockholders' Equity

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Total
Balance at December 31, 2022		18,434,697	$	11,061	$	36,455		$	(21,979	)	$	(5,402	)	$	20,135
Common stock issued		4,290		2		13			—			—			15
Common stock issued under restricted stock units		9,600		6		(6	)		—			—			—
Share-based compensation expense-stock options		—		—		58			—			—			58
Share-based compensation expense-restricted stock units		—		—		69			—			—			69
Net loss		—		—		—			(1,270	)		—			(1,270	)
Balance at March 31, 2023		18,448,587	$	11,069	$	36,589		$	(23,249	)	$	(5,402	)	$	19,007

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated  Deficit			Treasury Stock			Total
Balance at December 31, 2021		18,298,999	$	10,979	$	35,862		$	(8,821	)	$	(5,402	)	$	32,618
Common stock issued under restricted stock units		16,000		10		(10	)		—			—			—
Share-based compensation expense-stock options		—		—		85			—			—			85
Share-based compensation expense-restricted stock units		—		—		70			—			—			70
Net loss		—		—		—			(3,936	)		—			(3,936	)
Balance at March 31, 2022		18,314,999	$	10,989	$	36,007		$	(12,757	)	$	(5,402	)	$	28,837

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Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Loss Per Share

Computation Of Basic And Diluted Loss Per Share

	Three Months Ended
	March 31,  2023			March 31,  2022
Numerator:
Net loss for basic and diluted earnings per share	$	(1,270	)	$	(3,936	)
Denominator for basic loss per share weighted average shares		16,984,745			16,848,777
Effect of dilutive securities:
Options and restricted stock units		—			—
Denominator for diluted loss per share weighted average shares		16,984,745			16,848,777
Basic and diluted loss per share	$	(0.07	)	$	(0.23	)

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Non-Cash Share-Based Employee Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Non-Cash Share-Based Employee Compensation

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, 2023
Outstanding		1,001,500		3.10		7.87		1.13		460,925
Vested		434,233		3.57		6.73		1.31		101,090
Nonvested		567,267		2.74		8.74		0.99		359,835
Period activity
Issued		—		—		—		—		—
Exercised		—		—		—		—		—
Forfeited		—		—		—		—		—
Expired		10,000		2.23		—		1.40		—
As of March 31, 2023
Outstanding		991,500		3.10		7.70		1.13		190,525
Vested		515,066		3.44		6.91		1.25		64,926
Nonvested		476,434		2.74		8.56		0.99		125,599

Summary of non-vested restricted stock

	Number of Shares		Weighted Average Price per Share
Unvested at January 1, 2023		205,644	$	2.64
Granted		---		-
Vested and issued		---		-
Cancelled/forfeited		---		-
Unvested at March 31, 2023		205,644	$	2.64

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt

Schedule Of Current Balances Of Note Payable

	March 31, 2023
Remaining nine months of 2023	$	208
2024		263
2025		66
Thereafter		—
Total payments	$	537

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases

Lease Cost

	Three Months Ended
	March 31, 2023		March 31,  2022
Operating lease cost	$	136	$	136
Short-term lease cost		—		—
Variable lease cost		33		33
Total lease cost	$	169	$	169

Supplemental Cash Flow Information Related To Leases

	Three Months Ended
	March 31, 2023		March 31,  2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	148	$	143
Operating cash flows (liability reduction)	$	118	$	108
ROU assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—

Other Information Related To Operating Leases

	March 31, 2023
Weighted average remaining lease term (in years)		3.98
Weighted average discount rate		5.50	%

Schedule of maturity of lease liabilities

	March 31, 2023
Remaining nine months of 2023	$	447
2024		608
2025		618
2026		479
2027		242
Thereafter		—
Total payments		2,394
Less: imputed interest		(243	)
Total present value of lease liability	$	2,151

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Condensed Consolidated Financial Statements (Details Narrative) - F G Financial Group [Member]	3 Months Ended
	Mar. 31, 2023
Minimum [Member]
Voting Interest	20.00%
Maximum [Member]
Voting Interest	50.00%

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Significant Events and Transactions (Details Narrative) - Sales Agreement [Member]	Mar. 31, 2023 USD ($) shares
Common stock, shares sold | shares	4,225,352
Offering price value | $	$ 15,000,000

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Allowance for Doubtful Accounts (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Allowance for Doubtful Accounts
Allowance For Doubtful Accounts On Trade Receivables	$ 50
Accounts Receivable, Gross	$ 10,840	$ 10,666

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Inventories, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventories, Net
Finished Goods	$ 3,355	$ 2,965
Work In Process	8,220	7,313
Raw Materials	11,254	11,827
Total Inventory	$ 22,829	$ 22,105

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Inventories, Net (Details Narrative) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Inventories, Net
Inventories, net of allowance for slow moving, excess	$ 1,161	$ 1,247

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Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Income Taxes
Net Deferred Tax Assets	$ 4,116	$ 4,116
Valuation Allowance	$ 3,474	$ 3,356

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Investments (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Common stock shares authorized	50,000,000	50,000,000
FG Financial Group [Member]
Holding percentage	20.00%
Common stock shares authorized	5,619,111
Ownership percentage of outstanding shares	60.30%
Share Purchased	$ 3,741
Fair Value Investment	$ 945

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Stockholders Equity (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Beginning balance, Amount	$ 20,135,000
Net Income (loss)	(1,270,000)	$ (3,936,000)
Ending balance, Amount	19,007,000
Share-based Compensation Expense-restricted Stock Units	69,000	70,000
Total [Member]
Beginning balance, Amount	20,135,000	32,618,000
Net Income (loss)	(1,270,000)	(3,936,000)
Ending balance, Amount	19,007,000	28,837,000
Common stock issued, amount	15,000
Common Stock Issued Under Restricted Stock Units, Amount	0	0
Share-based Compensation Expense-stock Options	58	85
Share-based Compensation Expense-restricted Stock Units	69,000	70,000
Common Stock [Member]
Beginning balance, Amount	11,061,000	10,979,000
Net Income (loss)	0	0
Ending balance, Amount	11,069,000	10,989,000
Common stock issued, amount	2,000
Common Stock Issued Under Restricted Stock Units, Amount	6,000	10,000
Share-based Compensation Expense-stock Options	0	0
Share-based Compensation Expense-restricted Stock Units	$ 0	$ 0
Beginning balance, Shares	18,434,697	18,298,999
Common stock issued, shares	4,290
Common Stock Issued Under Restricted Stock Units, shares	9,600	16,000
Ending Balance, shares	18,448,587	18,314,999
Treasury Stock [Member]
Beginning balance, Amount	$ (5,402,000)	$ (5,402)
Net Income (loss)	0	0
Ending balance, Amount	(5,402,000)	(5,402,000)
Common stock issued, amount	0
Common Stock Issued Under Restricted Stock Units, Amount	0	0
Share-based Compensation Expense-stock Options	0	0
Share-based Compensation Expense-restricted Stock Units	0	0
Additional Paid-In Capital [Member]
Beginning balance, Amount	36,455,000	35,862,000
Net Income (loss)	0	0
Ending balance, Amount	36,589,000	36,007,000
Common stock issued, amount	13,000
Common Stock Issued Under Restricted Stock Units, Amount	(6,000)	(10,000)
Share-based Compensation Expense-stock Options	58,000	85,000
Share-based Compensation Expense-restricted Stock Units	69,000	70,000
Retained Earnings (Accumulated Deficit) [Member]
Beginning balance, Amount	(21,979,000)	(8,821,000)
Net Income (loss)	(1,270,000)	(3,936,000)
Ending balance, Amount	(23,249,000)	(12,757,000)
Common stock issued, amount	0
Common Stock Issued Under Restricted Stock Units, Amount	0	0
Share-based Compensation Expense-stock Options	0	0
Share-based Compensation Expense-restricted Stock Units	$ 0	$ 0

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Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net Income (loss)	$ (1,270)	$ (3,936)
Denominator:
Denominator For Basic Loss Per Share Weighted Average Shares	16,984,745	16,848,777
Effect Of Dilutive Securities:
Denominator For Diluted Loss Per Share Weighted Average Shares	16,984,745	16,848,777
Basic and diluted loss per share	$ (0.07)	$ (0.23)

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Loss Per Share (Details Narrative) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock Options [Member]
Antidilutive Securities	991,500	909,000
Restricted Stock Units [Member]
Antidilutive Securities	205,644	137,055

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Non-Cash Share-Based Employee Compensation (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Non-Cash Share-Based Employee Compensation
Outstanding, Beginning Balance	1,001,500
Vested, Beginning Balance	434,233
Nonvested, Beginning Balance	567,267
Issued	0
Exercised	0
Forfeited	0
Expired	10,000
Outstanding, Ending Balance	991,500	1,001,500
Vested, Ending Balance	515,066	434,233
Nonvested, Ending Balance	476,434	567,267
Wgt. Avg. Exercise Price Per Share, Outstanding, Beginning Balance	$ 3.10
Wgt. Avg. Exercise Price Per Share, Vested, Beginning Balance	3.57
Wgt. Avg. Exercise Price Per Share, Nonvested, Beginning Balance	2.74
Wgt. Avg. Exercise Price Per Share, Issued	0
Wgt. Avg. Exercise Price Per Share, Exercised	0
Wgt. Avg. Exercise Price Per Share, Forfeited	0
Wgt. Avg. Exercise Price Per Share, Expired	2.23
Wgt.avg. Exercise Price Per Share, outstanding, ending Balance	3.10	$ 3.10
Wgt. Avg. Exercise Price Per Share, Vested, Ending Balance	3.44	3.57
Wgt. Avg. Exercise Price Per Share, Nonvested, Ending Balance	$ 2.74	$ 2.74
Wgt. Avg. Remaining Contractual Life (Years), Outstanding	7 years 8 months 12 days	7 years 10 months 13 days
Wgt. Avg. Remaining Contractual Life (Years), Vested	6 years 10 months 28 days	6 years 8 months 23 days
Wgt. Avg. Remaining Contractual Life (Years), Nonvested	8 years 6 months 21 days	8 years 8 months 26 days
Wgt. Avg. Grant Date Fair Value Per Share, Outstanding, Beginning Balance	$ 1.13
Wgt. Avg. Grant Date Fair Value Per Share, Vested, Beginning Balance	1.31
Wgt. Avg. Grant Date Fair Value Per Share, Nonvested, Beginning Balance	0.99
Wgt. Avg. Grant Date Fair Value Per Share, Issued	0
Wgt. Avg. Grant Date Fair Value Per Share, Exercised	0
Wgt. Avg. Grant Date Fair Value Per Share, Forfeited	0
Wgt. Avg. Grant Date Fair Value Per Share, Expired	1.40
Wgt. Avg. Grant Date Fair Value Per Share, Outstanding, Ending Balance	1.13	$ 1.13
Wgt. Avg. Grant Date Fair Value Per Share, Vested, Ending Balance	1.25	1.31
Wgt. Avg. Grant Date Fair Value Per Share, Nonvested, Ending Balance	$ 0.99	$ 0.99
Aggregate Intrinsic Value, Outstanding, Beginning Balance	$ 460,925,000
Aggregate Intrinsic Value, Vested, Beginning Balance	101,090,000
Aggregate Intrinsic Value, Nonvested, Beginning Balance	359,835
Aggregate Intrinsic Value, Issued	0
Aggregate Intrinsic Value, Exercised	0
Aggregate Intrinsic Value, Forfeited	0
Aggregate Intrinsic Value, Expired	0
Aggregate Intrinsic Value, Outstanding, Ending Balance	190,525,000	$ 460,925,000
Aggregate Intrinsic Value, Vested, Ending Balance	64,926,000	101,090,000
Aggregate Intrinsic Value, Nonvested, Ending Balance	$ 125,599	$ 359,835

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Non-Cash Share-Based Employee Compensation (Details1)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Non-Cash Share-Based Employee Compensation
Number of shares Unvested begaining | shares	205,644
Number of shares granted | shares	0
Number of shares Vested and issued | shares	0
Number of shares Cancelled/forfeited | shares	0
Number of shares Unvested ending balance | shares	205,644
Weighted Average price per shares Unvested begaining balance | $ / shares	$ 2.64
Weighted Average price per shares Granted | $ / shares	0
Weighted Average price per shares Vested and issued | $ / shares	0
Weighted Average price per shares Cancelled/forfeited | $ / shares	0
Weighted Average price per shares Unvested ending balance | $ / shares	$ 2.64

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Non-Cash Share-Based Employee Compensation (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Employee and Non-Employee Director [Member]
Share Based Compensation Expense	$ 58	$ 85
Restricted Stock Units [Member]
Share Based Compensation Expense	$ 69	$ 70

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Purchase Commitments	$ 15,533
Accounts Receivable From Us Government	3,412	$ 1,314
Sales	18,721	6,585
United States Government Agencies [Member]
Sales	$ 8,644	$ 1,650
Sales Percentage	46.20%	25.10%

XML

Debt (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Debt
Remaining nine months of 2023	$ 208
2024	263
2025	66
Thereafter	0
Total Payments	$ 537

XML

Debt (Details Narrative) $ in Thousands	1 Months Ended		3 Months Ended
	Nov. 22, 2022 USD ($)	Sep. 25, 2019 USD ($)	Mar. 31, 2023 USD ($)	Apr. 06, 2021 USD ($) integer
Description of transferred receivables			the Company transferred receivables having an aggregate face value of $24.0 million to the conduit in exchange for proceeds of $20.8 million, of which $19.9 million was funded by re-invested collections. There were no losses incurred on these transfers during the three months ended March 31, 2023
Interest and related servicing fees			$ 20
Transferred receivables			85.00%
JP Morgan Chase Bank [Member]
Outstanding balance of the credit facility			$ 450
Subsequently expired			January 31, 2023
Credit Agreement [Member]
Outstanding borrowings credit facility			$ 7,000
Outstanding principal amount of receivables			$ 720
Master loan agreement installments | integer				60
Principal and interest payments		$ 8
Principal and interest payments, beginning date		October 25, 2019
Principal and interest payments, maturity date		September 25, 2024
Principal and interest payments, interest rate percentage		5.11%
Master loan agreement amount		$ 425		$ 743
Line of credit maturity date			January 31, 2023
Invoice Purchase And Security Agreement
Principal and interest payments, interest rate percentage	1.85%
Line of credit maximum funding amount	$ 15,000
Effective borrowing rate			9.85%
Description of IPSA	the IPSA, to modify the agreement to, among other things, provide a credit facility for up to 75% of net orderly liquidation value of inventory, not to exceed 100% of the eligible accounts receivable balance

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases
Operating lease cost	$ 136	$ 136
Short-term lease cost	0	0
Variable lease cost	33	33
Total lease cost	$ 169	$ 169

XML

Leases (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$ 148	$ 143
Operating cash flows (liability reduction)	118	108
ROU assets obtained in exchange for lease obligations:
Operating leases	$ 0	$ 0

XML

Leases (Details 2)	3 Months Ended
	Mar. 31, 2023
Leases
Weighted Average Remaining Lease Term (in Years)	3 years 11 months 23 days
Weighted Average Discount Rate	5.50%

XML

Leases (Details 3) $ in Thousands	Mar. 31, 2023 USD ($)
Leases
Remaining nine months of 2023	$ 447
2024	608
2025	618
2026	479
2027	242
Thereafter	0
Total payments	2,394
Less: imputed interest	(243)
Total present value of lease liability	$ 2,151

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Leases (Details Narrative)	1 Months Ended	3 Months Ended
	Feb. 28, 2021	Mar. 31, 2023 USD ($) ft²	Feb. 28, 2020 ft²
Area Of Lease Land | ft²		54,000	6,857
Lease Expiration Date		September 30, 2027
Annual Rental, Maintenance And Tax Expenses On Lease		$ 491
Lease Term	64 months
Sawgrass Technology Park [Member]
Annual Rental, Maintenance And Tax Expenses On Lease		$ 196
Annual rental, maintenance and tax expenses increased percentage annually		3.00%

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Subsequent events (Details Narrative) - $ / shares	Mar. 31, 2023	Jan. 31, 2023	Dec. 31, 2022
Shares of common stock, par value	$ 0.60		$ 0.60
Board of Directors [Member]
Shares of common stock, par value		$ 0.60