BK TECHNOLOGIES CORP
10-Ks and 10-Qs
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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,
2020
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)
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Nevada
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83-4064262
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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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:
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Title
of Each Class
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Trading
Symbol(s)
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Name of
Each Exchange on Which Registered
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Common
Stock, par value $.60 per share
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BKTI
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NYSE
American
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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.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☑
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Smaller
reporting company
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☑
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Emerging
growth company
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☐
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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 12,493,420 shares of common stock, $0.60 par value, of the
registrant outstanding at May 4, 2020.
PART I - FINANCIAL INFORMATION
I
tem 1.
FINANCIAL
STATEMENTS
B
K TECHNOLOGIES CORPORATION
Condensed Consolidated Balance Sheets
(
In
thousands, except share data)
|
|
March
31, 2020
|
December 31,
2019
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(Unaudited)
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|
|
ASSETS
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Current
assets:
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Cash and cash
equivalents
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$
4,946
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$
4,676
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Trade accounts
receivable, net
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4,590
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3,964
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Inventories,
net
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10,937
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13,513
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Prepaid expenses
and other current assets
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1,802
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1,733
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Total current
assets
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22,275
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23,886
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Property, plant and
equipment, net
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3,775
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3,964
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Right-of-use (ROU)
asset
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2,791
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2,885
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Investment in
securities
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2,329
|
2,635
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Deferred tax
assets, net
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4,373
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4,373
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Other
assets
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169
|
197
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Total
assets
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$
35,712
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$
37,940
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
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Accounts
payable
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$
4,836
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$
5,310
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Accrued
compensation and related taxes
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1,045
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1,271
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Accrued warranty
expense
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1,099
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1,248
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Accrued other
expenses and other current liabilities
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402
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479
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Dividends
payable
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250
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252
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Short-term lease
liability
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393
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369
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Note
payable-current portion
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78
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78
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Deferred
revenue
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462
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369
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Total current
liabilities
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8,565
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9,376
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Note payable, net
of current portion
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309
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328
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Long-term lease
liability
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2,511
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2,606
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Deferred
revenue
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2,685
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2,354
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Total
liabilities
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14,070
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14,664
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Commitments and
contingencies
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Stockholders’
equity:
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Preferred stock;
$1.00 par value; 1,000,000 authorized shares; none issued or
outstanding
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—
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—
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Common stock; $.60
par value; 20,000,000 authorized shares; 13,929,381 issued and
12,495,110 and 12,596,923 outstanding shares at March 31, 2020 and
December 31, 2019, respectively
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8,357
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8,357
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Additional paid-in
capital
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26,146
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26,095
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Accumulated
deficit
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(7,485
)
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(6,043
)
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Treasury stock, at
cost, 1,434,271 and 1,332,458 shares at March 31, 2020 and December
31, 2019, respectively
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(5,376
)
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(5,133
)
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Total
stockholders’ equity
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21,642
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23,276
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Total liabilities
and stockholders’ equity
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$
35,712
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$
37,940
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See notes to condensed consolidated financial
statements.
1
B
K TECHNOLOGIES CORPORATION
Condensed Consolidated Statements of Operations
(
In
thousands, except share and per share data
) (
Unaudited
)
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Three
Months Ended
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March
31, 2020
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March 31,
2019
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Sales,
net
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$
10,889
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$
7,644
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Expenses
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Cost of
products
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6,994
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5,207
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Selling, general
and administrative
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4,743
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4,755
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Total
expenses
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11,737
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9,962
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Operating
loss
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(848
)
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(2,318
)
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Other (expense)
income:
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Net interest
income
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9
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55
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(Loss) gain on
investment in securities
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(306
)
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592
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Other
expense
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(47
)
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(2
)
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Total other
(expense) income
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(344
)
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645
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Loss before income
taxes
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(1,192
)
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(1,673
)
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Income tax
benefit
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—
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355
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|
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Net
loss
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$
(1,192
)
|
$
(1,318
)
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|
|
|
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Net loss per
share-basic and diluted:
|
$
(0.09
)
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$
(0.10
)
|
|
Weighted average
shares outstanding-basic
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12,555,108
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12,761,713
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Weighted average
shares outstanding-diluted
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12,555,108
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12,761,713
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See notes to condensed consolidated financial
statements.
2
B
K TECHNOLOGIES CORPORATION
Condensed Consolidated Statements of Cash Flows
(
In
thousands
) (
Unaudited
)
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|
Three
Months Ended
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|
|
|
March
31, 2020
|
March 31,
2019
|
|
Operating
activities
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|
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Net
loss
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$
(1,192
)
|
$
(1,318
)
|
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
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Inventories
allowances
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38
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19
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Deferred tax
benefit
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—
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(355
)
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Depreciation and
amortization
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320
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256
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Share-based
compensation expense
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30
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31
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Restricted stock
unit compensation expense
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21
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41
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(Gain) loss on
investment in securities
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306
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(592
)
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Changes in
operating assets and liabilities:
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Trade accounts
receivable
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(626
)
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676
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Inventories
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2,538
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(715
)
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Prepaid expenses
and other current assets
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(69
)
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(143
)
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Other
assets
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28
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1
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Lease
liability
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23
|
—
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Accounts
payable
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(474
)
|
602
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Accrued
compensation and related taxes
|
(226
)
|
(951
)
|
|
Accrued warranty
expense
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(149
)
|
(88
)
|
|
Deferred
revenue
|
424
|
296
|
|
Accrued other
expenses and other current liabilities
|
(77
)
|
(68
)
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Net
cash provided by (used in) operating activities
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915
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(2,308
)
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|
|
|
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Investing
activities
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|
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Purchases of
property, plant and equipment
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(131
)
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(829
)
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Net
cash used in investing activities
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(131
)
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(829
)
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Financing
activities
|
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Cash dividends
paid
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(252
)
|
(256
)
|
|
(243
)
|
(337
)
|
|
|
Proceeds from
issuance of common stock
|
—
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2
|
|
Repayment of
debt
|
(19
)
|
—
|
|
Net
cash used in financing activities
|
(514
)
|
(591
)
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
270
|
(3,728
)
|
|
Cash and cash
equivalents, beginning of period
|
4,676
|
11,268
|
|
Cash and cash
equivalents, end of period
|
$
4,946
|
$
7,540
|
|
|
|
|
|
Supplemental
disclosure
|
|
|
|
Cash paid for
interest
|
$
5
|
$
—
|
See notes to condensed consolidated financial
statements.
3
B
K TECHNOLOGIES CORPORATION
Notes to Condensed Consolidated Financial Statements
Unaudited
(In thousands, except share and per share data and
percentages)
1.
Condensed
Consolidated Financial Statements
Basis of Presentation
The
condensed consolidated balance sheet as of March 31, 2020, the
condensed consolidated statements of operations for the three
months ended March 31, 2020 and 2019, and the condensed
consolidated statements of cash flows for the three months ended
March 31, 2020 and 2019 have been prepared by BK Technologies
Corporation (the “Company” or “we”), and
are unaudited. On March 28, 2019, BK Technologies, Inc., the
predecessor of BK Technologies Corporation, implemented a holding
company reorganization, which resulted in BK Technologies
Corporation becoming the direct parent company of, and the
successor issuer to, BK Technologies, Inc. For the purpose of this
report, references to “we” or the “Company”
or its management or business at any period prior to the holding
company reorganization (March 28, 2019) refer to those of BK
Technologies, Inc. as the predecessor company and its subsidiaries
and thereafter to those of BK Technologies Corporation and its
subsidiaries, except as otherwise specified or to the extent the
context otherwise indicates. In the opinion of management, all
adjustments, which include normal, recurring adjustments, necessary
for a fair presentation have been made. All intercompany
transactions and balances have been eliminated in consolidation.
The condensed consolidated balance sheet at December 31, 2019 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, 2019, as filed with the
Securities and Exchange Commission (“SEC”). The results
of operations for the three months ended March 31, 2020 are not
necessarily indicative of the operating results for a full
year.
Revenue Recognition
Effective January
1, 2018, the Company adopted Accounting Standards Update
(“ASU”) No. 2014-09, “Revenue from Contracts with
Customers,” and the additional related ASUs (“ASC
606”), which replaced existing revenue guidance and outlines
a single set of comprehensive principles for recognizing revenue
under U.S. GAAP. The Company elected the modified retrospective
method upon adoption, with no impact to the opening retained
earnings or revenue reported. These standards provide guidance on
recognizing revenue, including a five-step method to determine when
revenue recognition is appropriate:
Step 1:
Identify the contract with the customer;
Step 2:
Identify the performance obligations in the contract;
Step 3:
Determine the transaction price;
Step 4:
Allocate the transaction price to the performance obligations;
and
Step 5:
Recognize revenue as the Company satisfies a performance
obligation.
ASC 606
provides that sales revenue is recognized when control of the
promised goods or services is transferred to customers at an amount
that reflects the consideration to which the entity expects to be
entitled to in exchange for those goods or services. We generally
satisfy performance obligations upon shipment of the product or
service to the customer. This is consistent with the time in which
the customer obtains control of the product or service.
For extended warranties,
sales revenue associated with the warranty is deferred at the time
of sale and later recognized on a straight-line basis over the
extended warranty period.
Some contracts include
installation services, which are completed in a short period of
time, and the revenue is recognized when the installation is
complete. Customary payment terms are granted to customers, based
on credit evaluations. Currently, the Company does not have any
contracts where revenue is recognized, but the customer payment is
contingent on a future event.
4
The
Company periodically reviews its revenue recognition procedures to
assure that such procedures are in accordance with GAAP. Surcharges
collected on certain sales to government customers and remitted to
governmental agencies are not included in revenues or in costs and
expenses.
Principles of Consolidation
The
Company consolidates entities in which it has a controlling
financial interest. The Company determines whether it has a
controlling financial interest in an entity by first evaluating
whether the entity is a variable interest entity
(“VIE”) or a voting interest entity.
VIEs
are entities in which (i) the total equity investment at risk is
not sufficient to enable the entity to finance its activities
independently, or (ii) the at-risk equity holders do not have the
normal characteristics of a controlling financial interest. A
controlling financial interest in a VIE is present when an
enterprise has one or more variable interests that have both (i)
the power to direct the activities of the VIE that most
significantly impact the VIE’s economic performance, and (ii)
the obligation to absorb losses of the VIE or the right to receive
benefits from the VIE that could potentially be significant to the
VIE. The enterprise with a controlling financial interest is the
primary beneficiary and consolidates the VIE.
Voting
interest entities lack one or more of the characteristics of a VIE.
The usual condition for a controlling financial interest is
ownership of a majority voting interest for a corporation or a
majority of kick-out or participating rights for a limited
partnership.
When
the Company does not have a controlling financial interest in an
entity but exerts significant influence over the entity’s
operating and financial policies (generally defined as owning a
voting or economic interest of between 20% to 50%), the
Company’s investment is accounted for under the equity method
of accounting. If the Company does not have a controlling financial
interest in, or exert significant influence over, an entity, the
Company accounts for its investment at fair value, if the fair
value option was elected, or at cost.
The
Company has an investment in 1347 Property Insurance Holdings,
Inc., made through FGI 1347 Holdings, LP, a consolidated
VIE.
Fair Value
The
Company’s financial instruments consist of cash and cash
equivalents, trade accounts receivable, investment in securities,
accounts payable, accrued expenses and other liabilities. As of
March 31, 2020 and December 31, 2019, the carrying amount of cash
and cash equivalents, trade accounts receivable, accounts payable,
accrued expenses and other liabilities approximated their
respective fair value due to the short-term nature and maturity of
these instruments.
The
Company uses observable market data assumptions (Level 1 inputs, as
defined in accounting guidance) that it believes market participant
would use in pricing investment in securities.
Recently Adopted Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board ("FASB")
issued ASU 2016-02 “Leases,” which amended leasing
guidance by requiring companies to recognize a right-of-use
(“ROU”) asset and a lease liability for all operating
and capital (finance) leases with lease terms greater than twelve
months. The lease liability is equal to the present value of lease
payments. The lease asset is based on the lease liability, subject
to adjustment, such as for initial direct costs. For income
statement purposes, leases continue to be classified as operating
or capital (finance), with lease expense in both cases calculated
substantially the same as under the prior leasing guidance. The
updated guidance became effective for interim and annual periods
beginning after December 15, 2018. The Company adopted the new
guidance on January 1, 2019. Adoption resulted in the recognition
of ROU assets and lease liabilities on the condensed consolidated
financial statements. Refer to Note 12 (Leases) for further details
on leases.
5
In
August 2018, the FASB issued ASU 2018-13, “Disclosure
Framework–Changes to the Disclosure Requirements for Fair
Value Measurement,” which modifies the disclosure
requirements on fair value measurements in Topic 820, Fair Value
Measurement, including the removal of certain disclosure
requirements. The amendments in the ASU are effective for all
entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2019. Early adoption is
permitted upon issuance of the ASU. The Company adopted this
guidance as of January 1, 2020, and the adoption did not have an
impact on its consolidated financial statements.
Recent Accounting Pronouncements
The
Company does not discuss recent pronouncements that are not
anticipated to have an impact on or are unrelated to its financial
condition, results of operations, cash flows or
disclosures.
2.
Significant
Events and Transactions
In
December 2019, a novel strain of the coronavirus (COVID-19)
surfaced in Wuhan, China, which spread globally and was declared a
pandemic by the World Health Organization in March 2020. The
challenges posed by the COVID-19 pandemic on the global economy
increased significantly as the first quarter progressed, and the
Company anticipates the effects of COVID-19 will continue to have
an adverse impact on the Company going forward. In response to
COVID-19, national and local governments around the world have
instituted certain measures, including travel bans, prohibitions on
group events and gatherings, shutdowns of certain businesses,
curfews, shelter-in-place orders and recommendations to practice
social distancing. The ultimate impact of COVID-19 on the
Company’s business, results of operations, financial
condition and cash flows is dependent on future developments,
including the duration of the pandemic and the related length of
its impact on the global economy, which are uncertain and cannot be
predicted at this time.
In
February 2020, the Company announced that its operating subsidiary
received orders totaling approximately $2,800 from the U.S. Forest
Service (“USFS”). The orders were for KNG-Series
Digital P-25 portable radios, mobile radios, and base stations, as
well as related accessories, and were fulfilled in the first
quarter of 2020.
In
March 2020, the Company announced that its operating subsidiary
received an order totaling approximately $2,100 from the USFS. The
order was for KNG-Series Digital P-25 mobile radios and related
accessories. The order was fulfilled during the first and second
quarters of 2020.
In
March 2020, Fundamental Global Investors, LLC, on behalf of the
funds managed by it, entered into a stock trading plan in
accordance with Rule 10b5-1 of the Securities Exchange Act of 1934,
as amended (the “10b5-1 Plan”), for the purchase of up
to one million shares of common stock of the Company. The 10b5-1
Plan became effective on April 2, 2020 and will terminate on April
2, 2021 or such earlier date as set forth in the 10b5-1 Plan.
Transactions under the 10b5-1 Plan, if any, will be reported to the
Securities and Exchange Commission in accordance with applicable
securities laws, rules and regulations.
D. Kyle Cerminara, the Chief Executive Officer,
Co-Founder and Partner of Fundamental Global Investors, LLC, and
Lewis M. Johnson, the President, Co-Founder and Partner of
Fundamental Global Investors, LLC, are both members of the
Company’s Board of Directors. In addition, John W. Struble,
Chairman of the Company's Board of Directors, serves as a
consultant to Fundamental Global Management, LLC, an affiliate of
Fundamental Global Investors, LLC. Fundamental Global Investors,
LLC, with its affiliates, is the Company’s largest
stockholder.
6
Pursuant to the
Company’s capital return program, the Company’s Board
of Directors declared a quarterly dividend of $0.02 per share of
the Company’s common stock on March 2, 2020 to stockholders
of record as of March 31, 2020. These dividends were paid on April
13, 2020.
3.
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts on trade receivables was
approximately $50 on gross trade receivables of $4,640 and $4,014
at March 31, 2020 and December 31, 2019, 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
The
components of inventories, net of allowances for slow-moving,
excess or obsolete inventory, consisted of the
following:
|
|
March
31, 2020
|
December 31,
2019
|
|
Finished
goods
|
$
2,680
|
$
3,864
|
|
Work in
process
|
4,725
|
6,122
|
|
Raw
materials
|
3,532
|
3,527
|
|
|
$
10,937
|
$
13,513
|
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 $861 at March 31, 2020,
compared with approximately $823 at December 31, 2019.
5.
Income
Taxes
The
Company has not recorded income tax expense or benefit for the
three months ended March 31, 2020, compared with income tax benefit
of approximately $355 for the same period last year.
The
Company’s income tax provision is based on management’s
estimate of the effective tax rate for the full year. The tax
provision in any period will be affected by, among other things,
permanent, as well as temporary, differences in the deductibility
of certain items, in addition to changes in tax legislation. As a
result, the Company may experience significant fluctuations in the
effective book tax rate (that is, tax expense divided by pre-tax
book income) from period to period.
As of
March 31, 2020, the Company’s net deferred tax assets totaled
approximately $4,373 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 has the ability to
generate sufficient taxable income in the necessary period to
utilize the entire benefit for the deferred tax assets. 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 a
valuation allowance related to the deferred tax assets recognized
as of March 31, 2020.
7
6.
Investment
in Securities
The
Company has an investment in a limited partnership, FGI 1347
Holdings, LP, of which the Company is the sole limited partner. FGI
1347 Holdings, LP was established for the purpose of investing in
securities.
As
of March 31, 2020, the Company indirectly held approximately $170
in cash and 477,282 shares of 1347 Property Insurance Holdings,
Inc. (Nasdaq: PIH) with fair value of $2,329, through an investment
in FGI 1347 Holdings, LP. These shares were purchased in March and
May 2018 for approximately $3,741. For the three months ended March
31, 2020, the Company recognized an unrealized loss on the
investment of approximately $306, compared with an unrealized gain
of $592 for the same period last year. As of March 31, 2020 and
December 31, 2019, the unrealized loss on investment was
approximately $1,412 and $1,106, respectively.
Affiliates
of Fundamental Global Investors, LLC serve as the general partner
and the investment manager of FGI 1347 Holdings, LP, and the
Company is the sole limited partner. As of May 4, 2020, the Company
and the affiliates of Fundamental Global Investors, LLC, including,
without limitation, Ballantyne Strong, Inc., beneficially owned in
the aggregate 3,042,593 shares of PIH’s common stock,
including 100,000 shares of common stock subject to a call option,
representing approximately 50.1% of PIH’s outstanding shares.
In addition, Capital Wealth Advisors, Inc., an affiliate of
Fundamental Global, held 64,710 shares of PIH’s common stock
for the accounts of individual investors, which represents
approximately 1.1% of PIH’s outstanding shares. Fundamental
Global with its affiliates is the largest stockholder of the
Company. Mr. Kyle Cerminara, a director of the Company, is Chief
Executive Officer, Co-Founder and Partner of Fundamental Global
Investors, LLC and serves as Chairman of the Board of Directors of
Ballantyne Strong and as principal executive officer and Chairman
of the Board of Directors of PIH. Mr. Lewis M. Johnson, a director
of the Company, is President, Co-Founder and Partner of Fundamental
Global Investors, LLC and serves as Co-Chairman of the Board of
Directors of Ballantyne Strong and of PIH. Mr. John Struble, the
Chairman of the Company’s Board of Directors, serves as a
consultant to an affiliate of Fundamental
Global.
8
7.
Stockholders’
Equity
The
changes in condensed consolidated stockholders’ equity for
the three months ended March 31, 2020 and 2019 are as
follows:
|
|
Common
Stock Shares
|
Common
Stock Amount
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Treasury
Stock
|
Total
|
|
Balance at December
31, 2018
|
13,882,937
|
$
8,330
|
$
25,867
|
$
(2,393
)
|
$
(4,092
)
|
$
27,712
|
|
Stock options
exercised and issued
|
1,000
|
—
|
2
|
—
|
—
|
2
|
|
Share-based
compensation expense
|
—
|
—
|
31
|
—
|
—
|
31
|
|
Restricted stock
unit compensation expense
|
—
|
—
|
41
|
—
|
—
|
41
|
|
Dividends declared
($0.02
per share)
|
—
|
—
|
—
|
(254
)
|
—
|
(254
)
|
|
Net
loss
|
—
|
—
|
—
|
(1,318
)
|
—
|
(1,318
)
|
|
Repurchase of
common stock
|
—
|
—
|
—
|
—
|
(337
)
|
(337
)
|
|
Balance at March
31, 2019
|
13,883,937
|
$
8,330
|
$
25,941
|
$
(3,965
)
|
$
(4,429
)
|
$
25,877
|
|
|
Common
Stock Shares
|
Common
Stock Amount
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Treasury
Stock
|
Total
|
|
Balance at December
31, 2019
|
13,929,381
|
$
8,357
|
$
26,095
|
$
(6,043
)
|
$
(5,133
)
|
$
23,276
|
|
Share-based
compensation expense
|
—
|
—
|
30
|
—
|
—
|
30
|
|
Restricted stock
unit compensation expense
|
—
|
—
|
21
|
—
|
—
|
21
|
|
Dividends declared
($0.02
per share)
|
—
|
—
|
—
|
(250
)
|
—
|
(250
)
|
|
Net
loss
|
—
|
—
|
—
|
(1,192
)
|
—
|
(1,192
)
|
|
Repurchase of
common stock
|
—
|
—
|
—
|
—
|
(243
)
|
(243
)
|
|
Balance at March
31, 2020
|
13,929,381
|
$
8,357
|
$
26,146
|
$
(7,485
)
|
$
(5,376
)
|
$
21,642
|
9
8.
Loss
Per Share
The
following table sets forth the computation of basic and diluted
loss per share:
|
|
Three
Months Ended
|
|
|
|
March
31, 2020
|
March 31,
2019
|
|
Numerator:
|
|
|
|
Net loss (numerator
for basic and diluted loss per share)
|
$
(1,192
)
|
$
(1,318
)
|
|
Denominator:
|
|
|
|
Denominator for
basic loss per share weighted average shares
|
12,555,108
|
12,761,713
|
|
Effect of dilutive
securities:
|
|
|
|
Options and
restricted stock units
|
—
|
—
|
|
Denominator:
|
|
|
|
Denominator for
diluted loss per share weighted average shares
|
12,555,108
|
12,761,713
|
|
Basic loss per
share
|
$
(0.09
)
|
$
(0.10
)
|
|
Diluted loss per
share
|
$
(0.09
)
|
$
(0.10
)
|
Approximately
448,400 stock options and 0 restricted stock units for the three
months ended March 31, 2020, and 537,500 stock options and 148,598
restricted stock units for the three months ended March 31, 2019,
were excluded from the calculation because they were
anti-dilutive.
9.
Non-Cash
Share-Based Employee Compensation
The
Company has an employee and non-employee director share-based
incentive compensation plan. Related to these programs, the Company
recorded non-cash share-based employee compensation expense of $30
for the three months ended March 31, 2020, compared with $31 for
the same period last year. The Company considers its non-cash
share-based employee compensation expenses as a component of cost
of products and selling, general and administrative expenses. There
was no non-cash share-based employee compensation expense
capitalized as part of capital expenditures or inventory for the
periods presented.
The
Company uses the Black-Scholes-Merton option valuation model to
calculate the fair value of a stock option grant. The non-cash
share-based employee compensation expense recorded in the three
months ended March 31, 2020 was calculated using certain
assumptions. Such assumptions are described more comprehensively in
Note 10 (Share-Based Employee Compensation) of the Notes to the
Company’s consolidated financial statements included in its
Annual Report on Form 10-K for the fiscal year ended December 31,
2019.
10
A
summary of activity under the Company’s stock option plans
during the three months ended March 31, 2020 is presented
below:
|
As of
January 1, 2020
|
Stock
Options
|
Wgt.
Avg.
Exercise
Price
($)
Per
Share
|
Wgt.
Avg.
Remaining
Contractual
Life
(Years)
|
Wgt.
Avg.
Grant
Date
Fair Value
($)
Per
Share
|
Aggregate
Intrinsic
Value
($)
|
|
Outstanding
|
569,500
|
4.16
|
6.82
|
1.75
|
24,000
|
|
Vested
|
214,800
|
4.12
|
4.20
|
1.95
|
24,000
|
|
Nonvested
|
354,700
|
4.18
|
8.40
|
1.63
|
—
|
|
|
|
|
|
|
|
|
Period
activity
|
|
|
|
|
|
|
Issued
|
—
|
—
|
—
|
—
|
—
|
|
Exercised
|
—
|
—
|
—
|
—
|
—
|
|
Forfeited
|
56,100
|
4.11
|
—
|
1.74
|
—
|
|
Expired
|
65,000
|
4.07
|
—
|
2.88
|
—
|
|
|
|
|
|
|
|
|
As
of March 31, 2020
|
|
|
|
|
|
|
Outstanding
|
448,400
|
4.18
|
7.34
|
1.59
|
—
|
|
Vested
|
201,400
|
4.21
|
6.22
|
1.55
|
—
|
|
Nonvested
|
247,000
|
4.15
|
8.26
|
1.62
|
—
|
Restricted Stock Units
On
September 6, 2019, the Company granted to each non-employee
director restricted stock units with a grant-date fair value of $40
per award (resulting in total aggregate grant-date fair value of
$280), which will vest in five equal, annual installments beginning
with the first anniversary of the grant date, subject to the
director’s continued service through such date, provided
that, if the director makes himself available and consents to be
nominated by the Company for continued service as a director, but
is not nominated for the Board for election by shareholders, other
than for good reason, as determined by the Board in its discretion,
then the restricted stock units shall vest in full as of the
director’s last date of service as a director of the
Company.
On
September 6, 2018, the Company granted to each non-employee
director restricted stock units with a grant-date fair value of $20
per award (resulting in total aggregate grant-date fair value of
$140), which vest in five equal, annual installments beginning with
the first anniversary of the grant date, subject to the
director’s continued service through such date, provided
that, if the director makes himself available and consents to be
nominated by the Company for continued service as a director, but
is not nominated for the Board for election by shareholders, other
than for good reason, as determined by the Board in its discretion,
then the restricted stock units vest in full as of the
director’s last date of service as a director of the Company.
On September 6, 2019, which was the first anniversary of the grant
date, the first tranche of the September 2018 restricted stock
units vested.
On June
4, 2018, the Company granted to each non-employee director
restricted stock units with a grant fair value of $20 per award
(resulting in total aggregate grant-date fair value of $140), which
vested on June 4, 2019.
The
Company recorded non-cash restricted stock unit compensation
expense of $21 for the three months ended March 31, 2020, compared
with $41 for the same period last year.
10.
Commitments
and Contingencies
From
time to time, the Company may be involved in various claims and
legal actions arising in the ordinary course of its business. On a
quarterly basis, the Company assesses its liabilities and
contingencies in connection with outstanding legal proceedings
utilizing the latest information available. Where it is probable
that the Company will incur a loss and the amount of the loss can
be reasonably estimated, it records a liability in its consolidated
financial statements. These legal accruals may be increased or
decreased to reflect any relevant developments on a quarterly
basis. Where a loss is not probable or the amount of the loss is
not estimable, the Company does not accrue legal reserves,
consistent with applicable accounting guidance.
There were no
pending material claims or legal matters as of March 31,
2020.
11
Purchase Commitments
As of
March 31, 2020, the Company had purchase commitments for inventory
totaling approximately $7,062.
Significant Customers
Sales
to United States government agencies represented approximately
$6,576 (60.4%) of the Company’s net total sales for the three
months ended March 31, 2020, compared with approximately $5,401
(70.7%) for the same period last year. Accounts receivable from
agencies of the United States government were $2,832 as of March
31, 2020, compared with approximately $4,225 at the same date last
year.
11.
Debt
On
January 30, 2020, BK Technologies, Inc., a wholly-owned subsidiary
of the Company, entered into a $5,000 Credit Agreement and a
related Line of Credit Note (the “Note” and
collectively with the Credit Agreement, the “Credit
Agreement”) with JPMorgan Chase Bank, N.A. ("JPMC"). The
Credit Agreement provides for a revolving line of credit of up to
$5,000, with availability under the line of credit subject to a
borrowing base calculated as a percentage of accounts receivable
and inventory. The line of credit will expire on January 31, 2021.
Proceeds of borrowings under the Credit Agreement may be used for
general corporate purposes. The line of credit is collateralized by
a blanket lien on all personal property of BK Technologies, Inc.
pursuant to the terms of the Continuing Security Agreement with
JPMC. The Company and each subsidiary of BK Technologies, Inc. are
guarantors of BK Technologies, Inc.’s obligations under the
Credit Agreement, in accordance with the terms of the Continuing
Guaranty.
Borrowings under
the Credit Agreement will bear interest at a rate per annum equal
to one-month LIBOR (or zero if the LIBOR is less than zero) plus a
margin of 1.90%. The line of credit is to be repaid in monthly
payments of interest only, payable in arrears, commencing on
February 1, 2020, with all outstanding principal and interest to be
payable in full at maturity.
The
Credit Agreement contains certain customary restrictive covenants,
including restrictions on liens, indebtedness, loans and
guarantees, acquisitions and mergers, sales of assets, and stock
repurchases by BK Technologies, Inc. The Credit Agreement contains
one financial covenant requiring BK Technologies, Inc. to maintain
a tangible net worth of at least $20,000 at any fiscal quarter
end.
The
Credit Agreement provides for customary events of default,
including: (1) failure to pay principal, interest or fees under the
Credit Agreement when due and payable; (2) failure to comply with
other covenants and agreements contained in the Credit Agreement
and the other documents executed in connection therewith; (3) the
making of false or inaccurate representations and warranties; (4)
defaults under other agreements with JPMC or under other debt or
other obligations of BK Technologies, Inc.; (5) money judgments and
material adverse changes; (6) a change in control or ceasing to
operate business in the ordinary course; and (7) certain events of
bankruptcy or insolvency. Upon the occurrence of an event of
default, JPMC may declare the entire unpaid balance immediately due
and payable and/or exercise any and all remedial and other rights
under the Credit Agreement.
12
BK
Technologies, Inc. was in compliance with all covenants under the
Credit Agreement as of March 31, 2020 and the date of filing this
report. As of March 31, 2020 and the date of filing this report,
there were no borrowings outstanding under the Credit
Agreement.
On
September 25, 2019, BK Technologies, Inc., a wholly-owned
subsidiary of BK Technologies Corporation, 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
and maturing on September 25, 2024, and bears a fixed interest rate
of 5.11%.
12.
Leases
The
Company adopted ASU No. 2016-02, “Leases” (Topic 842)
on January 1, 2019 and applied the modified retrospective approach
to adoption whereby the standard is applied only to the current and
future periods. 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 June 30, 2027. Annual rental, maintenance and tax expenses
for the facility are approximately $491.
The
Company also leases 8,100 square feet (not in thousands) of office
space in Lawrence, Kansas, to accommodate a portion of the
Company’s engineering team. In November 2019, this lease was
amended to extend the lease term until December 31, 2021. Annual
rental, maintenance and tax expenses for the facility are
approximately $121.
Lease
costs consist of the following:
|
|
Three
Months Ended
|
|
|
|
March
31, 2020
|
March 31,
2019
|
|
Operating lease
cost
|
$
143
|
$
134
|
|
Short-term lease
cost
|
2
|
4
|
|
Variable lease
cost
|
32
|
32
|
|
Total lease
cost
|
$
177
|
$
170
|
13
Supplemental
cash flow information related to leases was as
follows:
|
|
Three
Months Ended
|
|
|
|
March
31, 2020
|
March 31,
2019
|
|
Cash paid for
amounts included in the measurement of lease
liabilities:
|
|
|
|
Operating cash
flows (fixed payments)
|
$
122
|
$
118
|
|
Operating cash
flows (liability reduction)
|
82
|
78
|
|
|
|
|
|
ROU assets obtained
in exchange for lease obligations:
|
|
|
|
Operating
leases
|
9
|
2,840
|
Other
information related to operating leases was as
follows:
|
|
March
31, 2020
|
|
Weighted average
remaining lease term (in years)
|
6.81
|
|
Weighted average
discount rate
|
5.50
%
|
Maturity
of lease liabilities as of March 31, 2020 were as
follows:
|
|
March 31, 2020
|
|
Remaining
nine months of 2020
|
$
541
|
|
2021
|
526
|
|
2022
|
444
|
|
2023
|
451
|
|
2024
|
461
|
|
Thereafter
|
1,074
|
|
Total
payments
|
3,497
|
|
Less:
imputed interest
|
593
|
|
Total
liability
|
$
2,904
|
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
twelve-month period. The Company will record the ROU asset and
related lease liability for this lease upon its
commencement.
13.
Subsequent
Events
On April 13, 2020, BK Technologies, Inc., a
wholly-owned operating subsidiary of the Company, received approval
and funding pursuant to a promissory note evidencing an unsecured
loan in the amount of approximately $2,196 (the “Loan”)
under the Paycheck Protection Program (or “PPP”). The
PPP was established under the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”) and is administered by
the U.S. Small Business Administration (“SBA”).
The Company intended to use the Loan for qualifying expenses in
accordance with the terms of the CARES Act. At the time the Company
applied for the Loan, it believed it qualified to receive the funds
pursuant to the PPP.
On
April 23, 2020, the SBA, in consultation with the Department of
Treasury, issued new guidance that created uncertainty regarding
the qualification requirements for a PPP loan. On April 24, 2020,
out of an abundance of caution, the Board determined to repay the
Loan and the Company initiated repayment of the full amount of the
Loan to the lender.
On May
4, 2020, the Company implemented workforce reductions of
approximately 18% to reduce costs and to better position the
Company in an uncertain business environment resulting from the
COVID-19 pandemic. The Company incurred approximately $221 in
severance costs relating to these workforce reductions, which will
be recognized in the second quarter of 2020 and will be paid over
the next five months.
14
I
tem 2
.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SPECIAL NOTE CONCERNING
FORWARD-LOOKING STATEMENTS
We
believe that it is important to communicate our future expectations
to our security holders and to the public. This report, therefore,
contains statements about future events and expectations which are
“forward-looking statements” within the meaning of
Sections 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934 (the “Exchange Act”),
including the statements about our plans, objectives, expectations
and prospects. You can expect to identify these statements by
forward-looking words such as “may,”
“might,” “could,” “would,”
“should,” “will,” “anticipate,”
“believe,” “plan,” “estimate,”
“project,” “expect,” “intend,”
“seek,” “are encouraged” and other similar
expressions. Any statement contained in this report that is not a
statement of historical fact may be deemed to be a forward-looking
statement. Although we believe that the plans, objectives,
expectations and prospects reflected in or suggested by our
forward-looking statements are reasonable, those statements involve
risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by these forward-looking statements, and we can give no
assurance that our plans, objectives, expectations and prospects
will be achieved.
Important factors
that might cause our actual results to differ materially from the
results contemplated by the forward-looking statements are
contained in the “Risk Factors” section of and
elsewhere in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 and in our subsequent filings with the
Securities and Exchange Commission, and include, among others, the
following:
●
changes or advances
in technology;
●
the success of our
land mobile radio product line;
●
successful
introduction of new products and technologies, including our
ability to successfully develop and sell our anticipated new
multiband product and other related products in the planned new BKR
Series product line;
●
competition in the
land mobile radio industry;
●
general economic
and business conditions, including federal, state and local
government budget deficits and spending limitations, any impact
from a prolonged shutdown of the U.S. Government, and the ongoing
effects of the COVID-19 pandemic;
●
the availability,
terms and deployment of capital;
●
reliance on
contract manufacturers and suppliers;
●
risks associated
with fixed-price contracts;
●
heavy reliance on
sales to agencies of the U.S. Government and our ability to comply
with the requirements of contracts, laws and regulations related to
such sales;
●
allocations by
government agencies among multiple approved suppliers under
existing agreements;
●
our ability to
comply with U.S. tax laws and utilize deferred tax
assets;
●
our ability to
attract and retain executive officers, skilled workers and key
personnel;
●
our ability to
manage our growth;
15
●
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, as well as any further impact resulting from the COVID-19
pandemic;
●
our inventory and
debt levels;
●
protection of our
intellectual property rights;
●
fluctuation in our
operating results and stock price;
●
acts of war or
terrorism, natural disasters and other catastrophic events, such as
the COVID-19 pandemic;
●
any infringement
claims;
●
data security
breaches, cyber-attacks and other factors impacting our technology
systems;
●
availability of
adequate insurance coverage;
●
maintenance of our
NYSE American listing;
●
risks related to
being a holding company; and
●
the effect on our
stock price and ability to raise equity capital of future sales of
shares of our common stock.
Some of
these factors and risks have been, and may further be, exacerbated
by the COVID-19 pandemic. We assume no obligation to publicly
update or revise any forward-looking statements made in this
report, whether as a result of new information, future events,
changes in assumptions or otherwise, after the date of this report.
Readers are cautioned not to place undue reliance on these
forward-looking statements.
Reported dollar
amounts in the management’s discussion and analysis
(“MD&A”) 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, 2019.
Executive Overview
BK
Technologies Corporation is a holding company, with a wholly-owned
operating subsidiary, BK Technologies, Inc. We design, manufacture
and market two-way land mobile radios, repeaters, base stations and
related components and subsystems.
16
Two-way
land mobile radios can be hand-held (portable) or installed in
vehicles (mobile). Repeaters expand the range of two-way land
mobile radios, enabling them to operate over a wider area. Base
station components and subsystems are installed at radio
transmitter sites to improve performance by enhancing the signal
and reducing or eliminating signal interference and enabling the
use of one antenna for both transmission and reception. We
incorporate both analog and digital technologies in our products.
Our digital technology is compliant with the Project 25 standard of
the Association of Public-Safety Communications Officials. We offer
products under two brand names: BK Radio and RELM. Generally, BK
Radio-branded products serve the government and public safety
market, while RELM-branded products serve the business and
industrial market.
Holding Company Reorganization
On
March 28, 2019, we implemented a holding company reorganization.
The reorganization created a new holding company, BK Technologies
Corporation, which became the new parent company of BK
Technologies, Inc. The holding company reorganization was intended
to create a more efficient corporate structure and increase
operational flexibility. We did not incur any material operational
or financial impacts. The holding company reorganization was
effected through a merger transaction that was a tax-free
transaction for U.S. federal income tax purposes for our
stockholders. No stockholder vote was required to effect the merger
transaction.
As part
of the holding company reorganization, stockholders of our
predecessor, BK Technologies, Inc., became stockholders of BK
Technologies Corporation, on a one-for-one basis, with the same
number of shares and same ownership percentage of common stock that
they held immediately prior to the holding company reorganization.
Following the reorganization, BK Technologies Corporation replaced
BK Technologies, Inc. as the publicly traded entity, and shares of
BK Technologies Corporation were listed on the NYSE American under
the symbol “BKTI,” which is the same symbol as
previously used by BK Technologies, Inc. In addition, the common
stock of BK Technologies Corporation was assigned a new CUSIP
Number: 05587G 104. The holding company has the same directors and
executive officers as its predecessor, BK Technologies,
Inc.
For the
purpose of this report, references to “we” or the
“Company” or our management or business at any period
prior to the holding company reorganization (March 28, 2019) refer
to those of BK Technologies, Inc. as the predecessor company and
its subsidiaries and thereafter to those of BK Technologies
Corporation and its subsidiaries, except as otherwise specified or
to the extent the context otherwise indicates.
Impact of COVID-19 Pandemic
In December 2019, a novel strain of the
coronavirus (COVID-19) surfaced in Wuhan, China, which spread
globally and was declared a pandemic by the World Health
Organization in March 2020. The challenges posed by the COVID-19
pandemic on the global economy increased significantly as the first
quarter progressed. In response to COVID-19, national and local
governments around the world instituted certain measures, including
travel bans, prohibitions on group events and gatherings, shutdowns
of certain businesses, curfews, shelter-in-place orders and
recommendations to practice social distancing. While we are
considered an “essential business” that is supporting
first responders and our manufacturing operations currently remain
open, we have implemented certain policies at our offices in
accordance with best practices, such as implementing social
distancing orders and remote work policies. Consistent with these
policies, in the event our business is disrupted in coming weeks
and months, we have taken steps to reduce expenses throughout the
Company, including suspending all Company travel and participation
in trade shows and other business meetings. We have also
implemented workforce reductions and reduced employment and related
expenses by approximately 18%. During the first quarter, there was
limited impact to customer orders as reflected by the increase in
sales for the first quarter of 2020 compared with the first quarter
last year. Also, while
some of our supply chain partners
were temporarily closed for a period of time during the first
quarter, most of these facilities have been reopened to varying
degrees. Although we have in some cases experienced delays and
increased freight costs, we have been able to procure the materials
necessary to manufacture products and fulfill customer orders.
Depending on the progression of the pandemic, our ability to obtain
necessary supplies and ship finished products to customers may be
partly or completely disrupted. Continued progression of the
pandemic could result in a decline in customer orders and impair
our ability to manufacture our products, which could have a
material adverse impact on our results of operations and cash flow.
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.
Furthermore, the extent to
which our mitigation efforts are successful, if at all, is not
presently ascertainable. However, we anticipate that our results of
operations in future periods may be adversely impacted by the
COVID-19 pandemic and its negative effects on global economic
conditions. For additional risks relating to the COVID-19 pandemic,
see Item 1A. Risk Factors in Part II of this report.
17
On March 27, 2020, President Trump signed into law
the Coronavirus Aid, Relief and Economic Security Act (the
“CARES Act”). Among other things, the CARES Act
includes provisions relating to refundable payroll tax credits,
deferment of employer side social security payments, net operating
loss carryback periods, alternative minimum tax credit refunds,
modifications to the net interest deduction limitations and
technical corrections to tax depreciation methods for qualified
improvement property. On April 13, 2020, we received an unsecured
Loan (as defined below) in the amount of $2,196,335 under the
Paycheck Protection Program (or “PPP”) established
under the CARES Act, as further discussed below under
“Liquidity and Capital Resources.” We
intended
to use the Loan for qualifying expenses in accordance with the
terms of the CARES Act. At the time of application, we believed we
qualified to receive the funds pursuant to the PPP.
On
April 23, 2020, the SBA, in consultation with the Department of
Treasury, issued new guidance that created uncertainty regarding
the qualification requirements for a PPP loan. On April 24, 2020,
out of an abundance of caution, the Board determined to repay the
Loan, and we initiated repayment of the full amount of the Loan to
the lender.
On May
4, 2020, the Company implemented workforce reductions of
approximately 18% to reduce costs and to better position the
Company in an uncertain business environment resulting from the
COVID-19 pandemic. The Company incurred approximately $221,000 in
severance costs relating to these workforce reductions, which will
be recognized in the second quarter of 2020 and will be paid over
the next five months.
Our
stock repurchase program terminated in April 2020 and has not
been renewed.
First Quarter Summary
Overall, our
financial and operating results for the three months ended March
31, 2020 improved from the same period of last year. For the first
quarter of 2020, sales increased significantly from last
year’s first quarter, while gross profit margins as a
percentage of sales for the first quarter of 2020 also improved
compared with the same quarter of last year. Selling, general and
administrative expenses remained substantially unchanged compared
with last year’s first quarter. These factors combined to
yield an operating loss that declined significantly from last
year’s first quarter operating loss. Additionally, during the
first quarter of 2020, we reduced inventory by approximately $2.5
million, which was a primary factor enabling us to generate
positive cash flow from operations.
For the
first quarter of 2020, our sales increased $3.2 million (42.5%) to
approximately $10.9 million, from $7.6 million for the first
quarter last year.
Gross
profit margins as a percentage of sales for the first quarter of
2020 were approximately 35.8%, compared with 31.9% for the first
quarter last year.
Selling, general
and administrative expenses (“SG&A”) for the first
quarter of 2020 decreased to approximately $4.7 million (43.6% of
sales), compared with approximately $4.8 million (62.2% of sales)
for last year’s first quarter.
For the
first quarter of 2020, our operating loss was approximately
$848,000, which was 63.4% lower, compared with last year’s
first quarter operating loss of $2.3 million.
For the
first quarter of 2020, we reported an unrealized loss of $306,000
on our investment in 1347 Property Insurance Holdings, Inc.
(“PIH”), made through FGI 1347 Holdings, LP, a
consolidated VIE. This compares with an unrealized gain of $592,000
on the investment for the first quarter of last year.
Net
loss for the three months ended March 31, 2020 was approximately
$1.2 million ($0.09
per basic and
diluted share), compared with a net loss of approximately $1.3
million ($0.10 per basic and diluted share) for the same quarter
last year.
As of
March 31, 2020, working capital totaled approximately $13.7
million, of which approximately $9.5 million was comprised of cash,
cash equivalents and trade receivables. As of December 31, 2019,
working capital totaled approximately $14.5 million, of which
approximately $8.6 million was comprised of cash, cash equivalents
and trade receivables.
18
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, 2020
|
March 31,
2019
|
|
Sales
|
100.0
%
|
100.0
%
|
|
Cost of
products
|
(64.2
)
|
(68.1
)
|
|
Gross
margin
|
35.8
|
31.9
|
|
Selling, general
and administrative expenses
|
(43.6
)
|
(62.2
)
|
|
Other (expense)
income
|
(3.2
)
|
8.4
|
|
Loss before income
taxes
|
(11.0
)
|
(21.9
)
|
|
Income tax
benefit
|
—
|
4.7
|
|
Net
loss
|
(11.0
)%
|
(17.2
)%
|
Net Sales
For the
first quarter ended March 31, 2020, net sales increased 42.5% ($3.2
million) to approximately $10.9 million, compared with
approximately $7.6 million for the first quarter of last
year.
The
increase in net sales was attributed primarily to strong demand
from federal customers such as the U.S. Forest Service and the U.S.
Bureau of Land Management, among others. During the first quarter
of 2020, there was limited impact to our sales from the COVID-19
outbreak. Furthermore, sales for last year’s first quarter
were unusually low, reflecting the federal government shutdown
early in the quarter.
During
the first quarter of 2020, we reorganized our sales resources to
more effectively focus on target markets and customers where we
believe we can maximize our sales success. Our funnel of sales
prospects for coming quarters includes potential
new customers
in federal, state and local public safety agencies. We
believe the reorganization and our current sales funnel better
position us to capture new sales opportunities moving
forward.
While
the potential impacts of the COVID-19 outbreak in coming months and
quarters are uncertain, such effects have the potential to
materially adversely impact our customers, which could reduce
customer orders, and our supply chain, which could impair our
ability to fulfill customer requirements in a timely manner, or at
all. Such negative effects on our customers and suppliers could
materially adversely affect our future business, operations and
financial results.
The
anticipated launch of our BKR Series product line, which was
planned for 2019, was delayed. The initial product in this line is
currently anticipated to be available in the second quarter of
2020, with additional models expected to be introduced in the
future. Introduction of our BKR Series products could be delayed by
various factors, including potential impacts related to the
COVID-19 pandemic. BKR Series products, we believe, should increase
our addressable market by expanding the number of federal and other
customers that may purchase our products. However, the timing and
size of orders from agencies at all levels can be unpredictable and
subject to the influence of 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.
Cost of Products and Gross Profit Margin
Gross
profit margins as a percentage of sales for the first quarter ended
March 31, 2020 improved to approximately 35.8%, compared with 31.9%
for the first quarter of 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. Although gross profit margins for the first
quarter of 2020 increased compared with the first quarter of last
year, they were below typical levels as the mix of product sales
was more heavily weighted toward lower margin products compared
with the first quarter last year. Also, freight costs associated
with the procurement of certain materials increased during the
first quarter, due in part to COVID-19 impact on our supply chain.
Additionally, in concert with our inventory reduction program, more
customer orders were fulfilled with inventory on-hand.
Consequently, gross profit margins were impacted by lower
manufacturing volumes resulting in suboptimal utilization and
absorption of manufacturing and support expenses. Gross profit
margins for the first quarter last year were adversely impacted by
extraordinarily low sales and manufacturing levels resulting in
under-absorption of support and overhead expenses.
19
We
utilize a combination of internal manufacturing capabilities and
contract manufacturing relationships for production efficiencies
and to manage material and labor costs, and anticipate continuing
to do so in the future. To better position our operations in an
uncertain business environment, in April 2020 we reduced
manufacturing operations employment by approximately 21% as well as
other related expenses. We believe that our current manufacturing
capabilities and contract relationships or comparable alternatives
will continue to be available to us. Although in the future we may
encounter new product cost and competitive pricing pressures, the
extent of their impact on gross margins, if any, is
uncertain.
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, 2020 decreased slightly
($12,000, or 0.3%) to approximately $4.7 million (43.6% of sales),
compared with approximately $4.8 million (62.2% of sales) for the
first quarter last year. Consistent with employment and expense
reductions in our manufacturing operations, we reduced SG&A
employment by approximately 15%, as well as other expenses in
sales, go-to-market, engineering and headquarters.
Engineering and
product development expenses for the first quarter of 2020
decreased 4.8%, or $104,000, to approximately $2.0 million (18.8%
of sales), compared with approximately $2.1 million (28.1% of
sales) for the same quarter of last year. Product development
expenses related to an anticipated new line of portable and mobile
radios with enhanced features, the BKR Series, decreased as
development activities migrated away from external resources to our
new internal engineering team. This team is also involved with our
multiband radio development, which was reevaluated in the fourth
quarter of 2019. Design improvements identified by the reevaluation
are in process. The precise date for introducing the multiband
product in the market is uncertain and may be further delayed by
COVID-19 related impacts in coming months.
Marketing and
selling expenses for the first quarter of 2020 totaled
approximately $1.5 million (13.8% of sales), compared with
approximately $1.4 million (18.4% of sales) for the first quarter
last year. The increase is attributed to sales incentive commission
expenses resulting from sales growth compared to the first quarter
of last year.
General
and administrative expenses for the first quarter 2020 were
materially unchanged compared with last year’s first quarter,
totaling approximately $1.2 million (11.0% of sales) and $1.2
million (15.7% of sales), respectively. The decrease in G&A as
a percentage of sales reflects the 42.5% growth in sales for the
first quarter of 2020 compared with last year’s first
quarter.
Operating Income (Loss)
The
operating loss for the first quarter ended March 31, 2020 improved
63.4% from the last year’s first quarter, totaling
approximately $848,000 (7.8% of sales), compared with $2.3 million
(30.3% of sales) for the first quarter last year. The reduced
operating loss for the first quarter of 2020 was primarily
attributed to sales growth and gross profit margin improvements,
while maintaining consistent SG&A expenses.
Other (Expense) Income
We
recorded net interest income of approximately $9,000 for the first
quarter ended March 31, 2020, compared with approximately $55,000
for the first quarter of last year, as a result of lower cash
balances.
During
the first quarter of 2020, we had no outstanding borrowings under
the Credit Agreement (defined below), and therefore did not incur
any interest expense on any outstanding borrowings under the Credit
Agreement.
Additionally, on
September 25, 2019, through a wholly-owned subsidiary, we entered
into a Master Loan Agreement with U.S. Bank Equipment Finance, a
division of U.S. Bank National Association, in the amount of
$425,000, to finance various items of equipment. The loan is
collateralized by equipment. The agreement has a term of five years
and bears a fixed interest rate of 5.11%.
20
For the
three months ended March 31, 2020, we recognized an unrealized loss
of approximately $306,000 on our investment in
PIH, compared with an unrealized gain of $592,000
for last year’s first quarter.
Income Taxes
We did
not record income tax expense or benefit for the three months ended
March 31, 2020, compared with an income tax benefit of $355,000 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.
As of
March 31, 2020, our net deferred tax assets totaled approximately
$4.4 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 have the ability to generate
sufficient taxable income in the necessary period to utilize the
entire benefit for the deferred tax asset. 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, 2020.
Liquidity and Capital Resources
For the
three months ended March 31, 2020, net cash provided by operating
activities totaled approximately $0.9 million, compared with cash
used in operating activities of approximately $2.3 million for the
same period of last year. Cash provided by operating
activities for the three months ended March 31, 2020, was primarily
related to a decrease in inventory and an unrealized loss on our
investment in PIH, which were partially offset by a net loss, an
increase in accounts receivable and depreciation and amortization,
and a decrease in accounts payable, as well as accrued compensation
and related taxes.
For the
three months ended March 31, 2020, we had a net loss of
approximately $1.2 million, compared with approximately $1.3
million for the same period last year. Net inventories decreased
during the three months ended March 31, 2020 by approximately $2.5
million, compared with an increase of approximately $715,000 for
the same period last of year. The decrease for the first quarter of
2020 was primarily attributable to an increase in sales and our
inventory reduction program. Unrealized losses on securities for
the three months ended March 31, 2020 totaled approximately
$306,000, compared with gains of approximately $592,000 for last
year’s first quarter. For additional information pertaining
to our investment in securities, refer to Notes 1 (Condensed
Consolidated Financial Statements) and 6 (Investment in Securities)
to the condensed consolidated financial statements included in this
report. Accounts receivable increased approximately $626,000 during
the first quarter ended March 31, 2020, compared with a decrease of
approximately $676,000 for last year’s first quarter. The
increase in accounts receivable was attributable to sales later in
the first quarter of 2020 that had not completed their collection
cycle. Depreciation and amortization totaled approximately $320,000
for the first quarter ended March 31, 2020, compared with
approximately $256,000 for the first quarter last year.
Accounts payable for the first
quarter ended March 31, 2020, decreased approximately $474,000,
compared with an increase of approximately $602,000 for the first
quarter of last year, primarily due to payments to material
suppliers during the first quarter of 2020.
Cash
used in investing activities for the first quarter ended March 31,
2020 totaled approximately $131,000 and was attributed to purchases
of property, plant and equipment. For the same period last year,
cash used in investing activities totaled approximately $829,000,
and was also attributed to purchases of property, plant and
equipment.
21
For the
first quarter ended March 31, 2020, approximately $514,000 was used
in financing activities, primarily related to our capital return
program, which included quarterly dividends totaling approximately
$252,000 and stock repurchases totaling approximately $243,000. We
also utilized $19,000 for the repayment of debt. For the first
quarter last year, approximately $256,000 was used to pay dividends
and approximately $337,000 was used for stock
repurchases.
On
April 13, 2020, BK Technologies, Inc., our wholly-owned operating
subsidiary, received approval and funding pursuant to a promissory
note (the “PPP Note”) evidencing an unsecured loan in
the amount of $2,196,335 (the “Loan”) under the PPP.
The PPP was established under the CARES Act and is administered by
the U.S. Small Business Administration (“SBA”). The
Loan was made through JPMorgan Chase Bank, N.A.
(“JPMC”).
We
intended to use the Loan for qualifying expenses in accordance with
the terms of the CARES Act. At the time of application, we believed
we qualified to receive the funds pursuant to the PPP.
On
April 23, 2020, the SBA, in consultation with the Department of
Treasury, issued new guidance that created uncertainty regarding
the qualification requirements for a PPP loan. On April 24, 2020,
out of an abundance of caution, the Board determined to repay the
Loan and we initiated repayment of the full amount of the Loan to
the lender.
On May
4, 2020, the Company implemented workforce reductions of
approximately 18% to reduce costs and to better position the
Company in an uncertain business environment resulting from the
COVID-19 pandemic. The Company incurred approximately $221,000 in
severance costs relating to these workforce reductions, which will
be recognized in the second quarter of 2020 and will be paid over
the next five months.
On
January 30, 2020, BK Technologies, Inc., our wholly-owned
subsidiary, entered into a $5.0 million Credit Agreement and a
related Line of Credit Note (the “Note” and
collectively with the Credit Agreement, the “Credit
Agreement”) with JPMC. The Credit Agreement provides for a
revolving line of credit of up to $5.0 million, with availability
under the line of credit subject to a borrowing base calculated as
a percentage of accounts receivable and inventory. The line of
credit will expire on January 31, 2021. Proceeds of borrowings
under the Credit Agreement may be used for general corporate
purposes. The line of credit is collateralized by a blanket lien on
all personal property of BK Technologies, Inc. pursuant to the
terms of the Continuing Security Agreement with JPMC. We and each
subsidiary of BK Technologies, Inc. are guarantors of BK
Technologies, Inc.’s obligations under the Credit Agreement,
in accordance with the terms of the Continuing
Guaranty.
Borrowings under
the Credit Agreement will bear interest at a rate per annum equal
to one-month LIBOR (or zero if the LIBOR is less than zero) plus a
margin of 1.90%. The line of credit is to be repaid in monthly
payments of interest only, payable in arrears, commencing on
February 1, 2020, with all outstanding principal and interest to be
payable in full at maturity.
The
Credit Agreement contains certain customary restrictive covenants,
including restrictions on liens, indebtedness, loans and
guarantees, acquisitions and mergers, sales of assets, and stock
repurchases by BK Technologies, Inc. The Credit Agreement contains
one financial covenant requiring BK Technologies, Inc. to maintain
a tangible net worth of at least $20.0 million at any fiscal
quarter end.
The
Credit Agreement provides for customary events of default,
including: (1) failure to pay principal, interest or fees under the
Credit Agreement when due and payable; (2) failure to comply with
other covenants and agreements contained in the Credit Agreement
and the other documents executed in connection therewith; (3) the
making of false or inaccurate representations and warranties; (4)
defaults under other agreements with JPMC or under other debt or
other obligations of BK Technologies, Inc.; (5) money judgments and
material adverse changes; (6) a change in control or ceasing to
operate business in the ordinary course; and (7) certain events of
bankruptcy or insolvency. Upon the occurrence of an event of
default, JPMC may declare the entire unpaid balance immediately due
and payable and/or exercise any and all remedial and other rights
under the Credit Agreement.
BK
Technologies, Inc. was in compliance with all covenants under the
Credit Agreement as of March 31, 2020 and the date of filing this
report. As of March 31, 2020 and the date of filing this report,
there were no borrowings outstanding under the Credit Agreement and
there was approximately $3.2 million of borrowing available under
the Credit Agreement.
On
September 25, 2019, BK Technologies, Inc., a wholly-owned
subsidiary of BK Technologies Corporation, 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 $425,000 to
finance items of manufacturing equipment. The loan is
collateralized by the equipment purchased using the proceeds. The
Master Loan Agreement has a term of five years and bears a fixed
interest rate of 5.11%.
22
Our
cash and cash equivalents balance at March 31, 2020 was
approximately $4.9 million. We believe these funds, combined
with our cost-saving initiatives, anticipated cash generated from
operations and borrowing availability under our Credit Agreement,
are sufficient to meet our working capital requirements for the
foreseeable future. However, financial and economic conditions,
including those resulting from the COVID-19 pandemic, could limit
our access to credit and impair our ability to raise capital, if
needed, on acceptable terms or at all. We also face other risks
that could impact our business, liquidity and financial condition.
For a description of these risks, see “Item 1A. Risk
Factors” set forth in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 and “Item 1A. Risk
Factors” below in this report.
Critical Accounting Policies
In
response to the Securities and Exchange Commission’s
financial reporting release, FR-60, Cautionary Advice Regarding
Disclosure About Critical Accounting Policies, we have selected for
disclosure our revenue recognition process and our accounting
processes involving significant judgments, estimates and
assumptions. These processes affect our reported revenues and
current assets and are, therefore, critical in assessing our
financial and operating status. We regularly evaluate these
processes in preparing our financial statements. The
processes for revenue recognition, allowance for collection of
trade receivables, allowance for excess or obsolete inventory,
software development and income taxes involve certain assumptions
and estimates that we believe to be reasonable under present facts
and circumstances. These estimates and assumptions, if incorrect,
could adversely impact our operations and financial
position.
There
were no changes to our critical accounting policies during the
quarter ended March 31, 2020, as described in Item 7 of our Annual
Report on Form 10-K for the fiscal year ended December 31,
2019.
I
tem 4.
CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our
President (who serves as our principal executive officer) and Chief
Financial Officer (who serves as our principal financial and
accounting officer) have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e)) as of March 31, 2020. Based on this evaluation, they
have concluded that our disclosure controls and procedures were
effective as of March 31, 2020.
Changes in Internal Control over Financial Reporting
During
the three months ended March 31, 2020, there were no changes in our
internal control over financial reporting identified in connection
with the evaluation required by Exchange Act Rule 13a-15(d) that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
23
PART II - OTHER INFORMATION
I
tem 1A. RISK FACTORS
Item 1A
“Risk Factors” in our Annual Report on Form 10-K for
the year ended December 31, 2019 includes a detailed discussion of
the Company’s risk factors. There have been no material
changes to the risk factors as disclosed in our Annual Report,
except as set forth below. However, many of the risk factors
disclosed in Item 1A of our Annual Report have been, and we expect
will continue to be further, heightened or exacerbated by the
impact of the COVID-19 pandemic.
The COVID-19 pandemic and ensuing governmental responses has
negatively impacted, and could further materially adversely affect,
our
business, financial
condition,
results of operations and cash flow.
In December 2019, a novel strain of the
coronavirus (COVID-19) surfaced in Wuhan, China, which spread
globally and was declared a pandemic by the World Health
Organization in March 2020.
We expect the COVID-19 pandemic
to have a material adverse impact on our business and financial
performance. The extent of the impact of the COVID-19 pandemic on
our business and financial performance, including our ability to
execute our near-term and long-term business strategies and
initiatives, such as the launch of products in the BKR Series, in
the expected time frame, will depend on future developments,
including the duration and severity of the pandemic, which are
uncertain and cannot be predicted. In addition, the pandemic has
significantly increased economic and demand uncertainty and caused
a worldwide economic downturn, and it is possible that it could
cause a global recession.
In response to COVID-19, national and local
governments around the world instituted certain measures, including
travel bans, prohibitions on group events and gatherings, shutdowns
of certain businesses, curfews, shelter-in-place orders and
recommendations to practice social distancing.
Although many
governmental measures have had specific expiration dates, some of
those measures have already been extended more than once; as a
result, there is considerable uncertainty regarding the duration of
such measures and potential future measures. Measures providing for
business shutdowns generally exclude certain essential services,
and those essential services commonly include critical
infrastructure and the businesses that support that critical
infrastructure, which includes our business. While our
manufacturing operations currently remain open, these measures have
impacted and may further impact our workforce and operations, as
well as those of our customers, vendors and suppliers.
We have
modified our business practices, including restricting employee
travel, modifying employee work locations, implementing social
distancing and enhanced sanitary measures in our facilities, and
cancelling attendance at events and conferences. Many of our
suppliers, vendors and service providers have made similar
modifications. A large part of our workforce is currently working
from home, and the resources available to employees working
remotely may not enable them to maintain the same level of
productivity and efficiency, and these and other employees may face
additional demands on their time, such as increased
responsibilities resulting from school closures or the illness of
family members. Further, our increased reliance on remote access to
our information systems increases our exposure to potential
cybersecurity breaches. We may take further actions as government
authorities require or recommend or as we determine to be in the
best interests of our employees, customers, partners and suppliers.
In light of the economic downturn generated by the COVID-19
pandemic, we have restructured our operations, including, among
other things, reducing our workforce by approximately 18%. We will
incur costs as a result of the workforce reduction, and there can
be no assurance that we will be able to rehire our workforce in the
event our business experiences a subsequent recovery. There is no
certainty that such measures will be sufficient to mitigate the
risks posed by COVID-19, in which case our employees may become
sick, our ability to perform critical functions could be harmed,
and our business and operations could be negatively
impacted. The resumption of normal business operations after
such interruptions may be delayed or constrained by lingering
effects of COVID-19 on our suppliers, third-party service
providers, and/or customers.
24
In
addition, we have experienced delays and cost increases, and may
continue to do so, in obtaining and transporting supplies.
Since the outbreak, some of our supply
chain partners were temporarily closed for a period of
time.
Most
of these facilities have been reopened to varying degrees.
Although we have in some cases experienced delays and increased
freight costs, we have, to date, been able to procure the materials
necessary to manufacture products and fulfill customer orders,
which may not continue to be the case in the event the pandemic
worsens or continues for an extended period of time.
Depending on the progression of the pandemic, our
ability to obtain necessary supplies and ship finished products to
customers may continue to be disrupted.
Further, our
current and potential customers’ businesses could be
disrupted or they could seek to limit spending, either of which
could negatively impact the willingness or ability of our customers
to place new, or any, orders with us and ultimately adversely
affect our revenues, as well as negatively impact the payment of
accounts receivable and collections and potentially lead to
write-downs or write-offs.
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 of the pandemic and the related length of
its impact on the global economy, which are uncertain and cannot be
predicted at this time.
Furthermore, the extent to which our
mitigation efforts are successful, if at all, is not presently
ascertainable. However, we expect that our results of operations,
including revenues, in future periods will be adversely impacted by
the COVID-19 pandemic and its negative effects on global economic
conditions.
I
tem 2.
UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid Per Share (1)
|
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs (2)
|
Maximum Number of Shares that May Yet Be Purchased Under Publicly
Announced Plans or Programs (2)
|
|
01/01/20-01/31/20
|
36,155
|
$
2.94
|
36,155
|
81,787
|
|
02/01/20-02/29/20
|
20,963
|
$
2.72
|
20,963
|
60,824
|
|
03/01/20-03/31/20
|
44,695
|
$
1.72
|
44,695
|
16,129
|
|
Total
|
101,813
|
$
2.36
|
101,813
|
|
(1)
Average price paid
per share of common stock repurchased is the executed price,
including commissions paid to brokers.
(2)
The Company has a
repurchase program of up to 1 million shares of the Company’s
common stock that can be purchased, from time to time, pursuant to
a stock repurchase plan in conformity with the provisions of Rule
10b5-1 and Rule 10b-18 promulgated under the Exchange Act. The
repurchase program was initially announced in May 2016 and expanded
in June 2017. The program terminated in April 2020 and has not been
renewed.
Dividend
Restrictions
On
January 30, 2020, BK Technologies, Inc., our wholly-owned operating
subsidiary, entered into the Credit Agreement with JPMC. The Credit
Agreement contains limitations and covenants that may limit BK
Technologies, Inc.’s ability to take certain actions,
including pay dividends to us.
25
I
tem 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
|
|
|
Articles
of Merger, filed with the Nevada Secretary of State on March 28,
2019 (Incorporated by reference from Exhibit 3.1 to the
Company’s Current Report on Form 8-K12B filed March 28,
2019)
|
|
|
|
Articles
of Incorporation of BK Technologies Corporation (Incorporated by
reference from Exhibit 3.2 to the Company’s Current Report on
Form 8-K12B filed March 28, 2019)
|
|
|
|
Bylaws
of BK Technologies Corporation (Incorporated by reference from
Exhibit 3.3 to the Company’s Current Report on Form 8-K12B
filed March 28, 2019)
|
|
|
|
Credit
Agreement, executed as of January 30, 2020, by and between JPMorgan
Chase Bank, N.A., as lender, and BK Technologies, Inc., as borrower
(Incorporated by reference from Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed January 30, 2020)
|
|
|
|
Line of Credit Note, executed as of January 30, 2020, by BK
Technologies, Inc., as borrower, for the benefit of JPMorgan Chase
Bank, N.A., as lender (Incorporated by reference from Exhibit
10.2 to the Company’s Current Report on Form 8-K filed
January 30, 2020)
|
|
|
|
Continuing
Guaranty, executed as of January 30, 2020, by and among JPMorgan
Chase Bank, N.A., as lender, and BK Technologies Corporation and
RELM Communications, Inc., as guarantors (Incorporated by reference
from Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed January 30, 2020)
|
|
|
|
Continuing Security Agreement, executed as of January 30, 2020, by
and between JPMorgan Chase Bank, N.A., as lender, and BK
Technologies, Inc., as pledgor (Incorporated by reference from
Exhibit 10.4 to the Company’s Current Report on Form 8-K
filed January 30, 2020)
|
|
|
|
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
|
|
|
|
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
|
|
|
|
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)
|
|
|
|
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
|
26
S
IGNATURES
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 13, 2020
|
By:
/s/
Timothy A.
Vitou
|
|
|
Timothy
A. Vitou
President
(Principal
executive officer and duly
authorized
officer)
|
|
|
|
|
Date:
May 13, 2020
|
By:
/s/
William P.
Kelly
|
|
|
William
P. Kelly
Executive Vice
President and
Chief
Financial Officer
(Principal
financial and accounting
officer
and duly authorized officer)
|
|
|
|
27
TABLE OF CONTENTS
Part I - Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 4. Controls and ProceduresPart II - Other InformationItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 6. Exhibits