BK Technologies Corporation (“RELM,(NYSE American: BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides two-way radiopublic safety grade communications equipment of high qualityproducts and reliability.

In business for over 70 years, RELM (NYSE American: RWC)BK consists of two business units: Radio and SaaS.

The Radio business unit designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”), repeaters, base stations and related components and subsystems.. Two-way LMRs can be unitsradios that are hand-held (portable) or installed in vehicles (mobile). Repeaters expand the range of two-way LMRs, 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 employ both analog and digital technologies in our products.

Generally, BK Technologies and BK Radio-brandedTechnologies-branded products serve the government and public safety market, while RELM-branded products serve the business and industrial market.

 The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over the public cellular networks. Our BKRplay branded smartphone application offers multiple services which make the first responder safer and more efficient. When tethered to our radios, the combined solution offers an enhanced user experience with more unique capability which increases the sales reach of our radios.

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

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. BK Technologies Corporation’s only significant assets are the outstanding equity interests in BK Technologies, Inc. and any other future subsidiaries of BK Technologies Corporation. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility.

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.

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

On June 9, 2021, we closed a public offering of 4,249,250 shares of our common stock at a price of $3.00 per share, for net proceeds of $11,559,000 after deducting underwriting discounts, commissions and offering expenses. The shares sold in the Company’s capital return program, authorizingoffering included the repurchaseexercise in full by the underwriters of 500,000their over-allotment option to purchase up to 554,250 shares of the Company’s common stock in addition to the 500,0003,695,000 shares originally authorized,which the underwriters initially agreed to purchase. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for a total repurchase authorization of 1 million shares, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).offering. The repurchase program has no termination date. Pursuant to the capital return program, during 2017, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $0.09 per share on March 17, and $0.02 per share on June 14, September 18 and December 6. The dividends were payable to shareholders of record as of March 31, 2017, June 30, 2017, October 2, 2017 and January 2, 2018, respectively. These dividends were paid on April 17, 2017, July 17, 2017, October 16, 2017 and January 16, 2018.

LMR end user communications devices consist of hand-held (portable) and vehicle mountedvehicle-mounted (mobile) two-way radios commonly used by the public safety sector (e.g., police, fire, and emergency medical responders), military and commercial business concerns (e.g., corporate disaster recovery, hotels, airports, farms, transportation service providers, and construction firms), and government agencies within the U.S. and abroad. LMR systems are constructed to meet an organization’s specific communications needs.needs typically over an operating area which exceeds the direct mode (radio to radio) communications range. The cost of a complete LMR system can vary widely, depending on the size and configuration. Likewise, the cost of radio setsend user LMR radios can range from under $100 for a basic analog portable, to thousands of dollars for a fully featured P-25P25 digital unit. Typically, there are no recurring airtime usage charges. Accordingly, LMR usage patterns are considerably different from those for cellular and other wireless communications tools. LMR usage often consists of direct radio-to-radio communications outside of the range of a communication network with one to many members of a group. Also, LMR functions with push-to-talk operation (i.e., no call set-up or dialing a phone number is required). LMR communications often consist of multiple short (5 second) transmissions between multiple members of a group. For the public safety sector, this is known as Mission Critical Voice (“MCV”). The average useful life of a unit can vary, depending upon the application in which the unit is deployed and its handling.

LMR systems are the most widely-usedwidely used and longest-used form of wireless dispatch communications in the U.S., having been first placed in service in 1921. LMR was initially used almost exclusively by law enforcement, and all radio communications were transmitted in an analog format. Analog transmissions typically consist of a voice or other signal modulated directly onto a continuous radio carrier wave. Over time, advances in technology decreased the cost of LMR products and increased their popularity and usage by businesses and other agencies. Responding to the growing usage, additional radio frequency spectrum was allocated by the Federal Communications Commission (“FCC”) for LMR use.

More recently, growth of the LMR industry has slowed, reflectingbeen limited by several factors:

Years ago, as a result of the limited spectrum availability, the FCC mandated that new LMR equipment utilize technology that is more spectrum-efficient.spectrum efficient. This effectively meant that the industry had to migrate to digital technology. Responding to the mandate, the APCO,Association of Public-Safety Communications Officials-International (“APCO”), the NASTD,National Association of State Technology Directors (“NASTD”), the United States (“U.S.”) Federal Government and the Telecommunications Industry Association (“TIA”), in concert with several LMR manufacturers, including RELM,BK, recommended a standard for digital LMR devices that would meet the FCC spectrum-efficiency requirements and provide solutions to several problems experienced primarily by public safety users. The standard is called P-25.Project 25 (“P25”). The primary objectives of P-25P25 are to: (i) allow effective and reliable communication among users of compliant equipment, regardless of its manufacturer, known as interoperability, (ii) maximize radio spectrum efficiency and (iii) promote competition among LMR providers through an open system architecture.

Although the FCC does not require public safety agencies or any radio users to purchase P-25P25 equipment or otherwise adopt the standard, compliance with the standard is a primary consideration for government and public safety purchasers. Users of nationally available 700 MHz frequencies designed for interoperability are required to use P-25 equipment. In addition, U.S. Federal Government grant programs that provide assistance in funding for state and local agencies to purchase interoperable communications equipment for first responders strongly encourage and often require compliance to P-25 standards.with the P25 standard. Accordingly, although funding for LMR purchases by many government agencies is limited, we believe that, as users upgrade equipment to achieve interoperability and comply with FCC narrow-banding mandates,replace equipment, demand for P-25P25 LMR equipment will continue to grow. Additionally, the P-25P25 standard has also been widely adopted in other countries. The migration to P-25P25 equipment is primarily limited to government and public safety agencies. Radio users in the business and industrial market utilize alternative digital technologies (e.g., Digital Mobile Radio) and analog LMR products.

Presently, the market is dominated by one supplier, Motorola Solutions, Inc., which offers a broader range of products than we do.  However, the open architecture of the P-25P25 standard is designed to eliminate the ability of one or more suppliers to lock out competitors.  Formerly, because of proprietary characteristics incorporated in many LMR systems, a customer was effectively precluded from purchasing additional LMR products from a supplier other than the initial supplier of the system.  Additionally, the system infrastructure technology was prohibitive for smaller suppliers to develop and implement.  P-25P25 provides an environment in which users will increasingly have a wider selection of LMR suppliers, including smaller suppliers such as RELM.

We design, manufacture,offer products under the company brand name BK Technologies.  Our KNG Series and market wireless communications equipment consistingBKR Series radios operate in both the P25 digital and analog modes of two-way LMRs, repeaters, base stations and related components and subsystems. We do not provide complete, integrated, communications systems and infrastructure. Two-way LMRs can be units that are hand-held (portable) or installed in vehicles (mobile). Repeaters expand the range of two-way LMRs, enabling them to communicate over a wider area. Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal, reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception.

Our P-25 KNG and KNG2 Series mobile and portableP25 digital radios have been validated under the P-25 CAP as being P-25technology is compliant and interoperable with the communications network infrastructureProject 25 standard for digital LMR equipment.  P25 has been adopted by representatives from APCO, NASTD, the United States (“U.S.”) Federal Government and other public safety user organizations. 

The Department of six of our competitors. Since we do not provide our own communications network infrastructure, we believe CAP validation provides confidence for federal, state and local emergency response agencies that our products are a viable and attractive alternative for use on the infrastructure of our competitors.

The government and public safety market includes military, fire, rescue, law enforcement, homeland security and emergency medical responder personnel. In most instances, BK Radio-branded products serve this marketpersonnel, both domestic and are sold either directly to end-users or through two-way communications dealers. Government and public safety sales represented approximately 97% of our total sales for 2017 and 2016, and 90% for 2015.

The BKRplay smartphone application and InteropONE POC service have been designed to dealers and distributors who then resell the products. Our sales toservice this market and are expected to be sold directly to end-users or through SaaS resellers.

Sales to government and public safety users represented approximately 3%substantially all of our total sales for 20172022 and 2016, and 10% for 2015.

Our engineering and product development activities are conducted by a team of 25 employees combined with contract engineering resources.31 employees.  Their primary development focus has been the design of a new line of next- generation multiband P-25next-generation P25 digital products, to supplementthe BKR Series, which are in the process of supplanting our flagship KNG and KNG2 products.  The first modelsproduct in this line, the KNG line were introduced in 2008 and are included on our primary federal contract vehicles. Subsequently, we added UHF and 700/800MHz products, as well as P-25 Phase II TDMA (Time Division Multiple Access) trunking. The KNG2 SeriesVHF BKR5000 portable radio was introduced in 2016.August 2020.   The second product, the all-band BKR9000 portable radio is scheduled to be released in 2023.   Our P-25KNG and BKR products also provide P25 compliant encrypted operation for secured communication, GPS location and network authentication capabilities.

A segment of our engineering team is responsible for product specifications based on customer requirements and participates in quality assurance activities. They also have primary responsibility for applied engineering and production engineering.

For 2017, 20162022 and 2015,2021, our engineering and development expenses were approximately $5.0 million, $4.1$9.6 million and $3.6$8.1 million, respectively.

We presently have notwo U.S. patents in force.force, and we have four pending U.S. patent applications. We have applied for severalregistered U.S. trademarks related to the names “BK Technologies”Technologies,” “BK Radio” and “BK Radio.”“Radios for Heroes” and have applied for registration of “BKR”, “BKRplay”, and “InteropONE”.   We also rely on trade secret laws and employee and third-party nondisclosure agreements to protect our intellectual property rights.

Our Made in America manufacturing strategy is to utilize the highest quality and most cost-effective resources available for every aspect of our manufacturing. Consistent with that strategy, for many years we have successfully utilized a hybrid of Florida-based internal manufacturing capability in concert with outside contract arrangements for different segmentsmanufacturing processes. In recent years, the breadth of our internal manufacturing operations. Thesecapabilities has been expanded. Our outside manufacturing contract arrangements some of which are with offshore concerns, have been managed and updated to meet our present requirements, and they continue to beincluding increasing relationships with American concerns. This hybrid approach has been instrumental in ramping up our production capacity while controlling our product costs allowing us to be competitive and managemanaging our gross margins.

Contract manufacturers produce various subassemblies and products on our behalf. Generally, the contract manufacturers procure raw materials from RELM-approvedBK-approved sources and complete manufacturing activities in accordance with our specifications. Manufacturing agreements and purchase orders govern the business relationship with the contract manufacturers. These agreements and purchase orders have various terms and conditions and may be renewed or modified upon agreement by both parties. Their scope may also be expanded to include new products in the future.

We plan to continue utilizing contractexpand our internal manufacturing capabilities and U.S.-based relationships, combined with other American manufacturers and suppliers where it furthers our business objectives. This strategy allows us to focuseffectively manage quality, product costs and lead-times while focusing other resources on our core technological competencies of product design and development, and to reduce the substantial capital investment required to manufacture our products.development. We also believe that, ourin certain circumstances, the use of experienced, high-quality, high-volume manufacturers willcan provide greater manufacturing specialization and expertise, higher levels of flexibility and responsiveness, and faster delivery of product, all of which contribute toward product cost control. To ensure that products manufactured by others meet our quality standards, our production and engineering team worksteams work closely with our ISO 9002 industry-qualified contract manufacturers in all key aspects of the production process. We establish product specifications, select the components and, in some cases, the suppliers. We retain all document control. We also work with our contract manufacturers to improve process control and product design and conduct periodic on-site inspections.

We rely upon a limited number of both domesticAmerican and foreign suppliers for several key products and components. Approximately 61.6%61% of our material, subassembly and product procurements in 20172022 were sourced from threenine suppliers. We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. In addition, certain components are obtained from single sources. During 2017, 2016 and 2015,the first half of 2022, our operations were not materially impaired due to delays from single-source suppliers. However, the absence of a single-source component could potentially delay the manufacture of finished products. We manage the risk of such delays by securing secondary sources, where possible, and redesigning products in response to component shortages or obsolescence. We strive to maintain strong relationships with all of our suppliers. We anticipate that the current relationships, or others that are comparable, will be available to us in the future.

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

Sales to the U.S. Government represented approximately 38%, 58% and 36% of our total sales for the years ended December 31, 2017, 20162022 and 2015,2021, respectively. These sales were primarily to various government agencies, including those within the DHS, the U.S. Department of Defense (“DOD”), the USFS and the DOI.

Our backlog of unshipped customer orders was approximately $8.3$27.0 million and $6.6$13.1 million as of December 31, 20172022 and 2016,2021, respectively.  The decrease isChanges in the backlog are attributed primarily to the timing of orders and their fulfillment, of orders.

We compete with other domestic and foreign companies primarily in the North American market, but also internationally. One dominant competitor, Motorola Solutions, Inc., is estimated to have well in excess of half the market for LMR products. We compete by capitalizing on our advantages and strengths, which include price, product quality and customer responsiveness.

We are subject to various international and U.S. federal, state and local laws affecting our business. Any finding that we have been or are in noncompliance with such laws could result in, among other things, governmental penalties. Further, changes in existing laws or new laws may adversely affect our business and could also have the effect of limiting capital expenditures by our customers, which could have a material adverse effect on our business, financial condition and results of operations.

In connection with our U.S. Government contracts, we are subject to the U.S. Federal Government procurement regulations that may provide the buyer with the right to audit and review our performance, as well as our compliance with applicable laws and regulations. In addition, our business is subject to government regulation based on the products we sell that may be subject to government requirements, such as obtaining an export license or end-user certificate from the buyer, in certain circumstances. If a government audit uncovers improper or illegal activities, or if we are alleged to have violated any laws or regulations governing the products we sell under our government contracts, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with U.S. Federal Government agencies.

Our radio products are regulated by the FCC in the U.S. and similar agencies in other countries where we offer our products. Consequently, we and our customers could be positively or negatively affected by the rules and regulations adopted from time to time by the FCC or regulatory agencies in other countries. For example, our wireless communications products, including two-way LMRs, are subject to FCC regulations related to radio frequency spectrum. As a result of limited spectrum availability, the FCC has mandated that new LMR equipment utilize technology that is more spectrum-efficient, which effectively meant that the industry had to migrate to digital technology. These types of mandates may provide us with new business opportunities or may require us to modify all or some of our products so that they can continue to be manufactured and marketed, which may lead to an increase in our capital expenditures and research and development expenses.

As a public company, we are also subject to regulations of the SEC and the stock exchange on which we are listed (NYSE American).

Some of our operations use substances regulated under various federal, state, local and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites, as well as relating to the protection of the environment. Certain of our products are subject to various federal, state, local and international laws governing chemical substances in electronic products. During 2017,2022, compliance with these U.S. federal, state and local and international laws did not have a material effect on our capital expenditures, earnings or competitive position.

Human Capital Resources

As of December 31, 2017,2022, we had 119 employees, including 111 full-time148 employees, most of whom are located at our West Melbourne, Florida facility; 5584 of these employees are engaged in direct manufacturing or manufacturing support, 2531 in engineering, 2021 in sales and marketing, and 1112 in headquarters, accounting and human resources activities. Our employees are not represented by any collective bargaining agreements, nor has there ever been a labor-related work stoppage. We strive to develop and maintain good relations with our employees and believe our relations with our employees are good.

The following table summarizes our sales of LMR products by customer location:

Additional financial information is provided in the Consolidated Financial Statements at pages F-1 through F-22.

We currently depend on our LMR products as our sole source of sales. A decline in the price of and/or demand for LMR products, as a result of competition, technological change, the introduction of new products by us or others or a failure to manage product transitions successfully, could have a material adverse effect on our business, financial condition and results of operations. In addition, our future success will largely depend on the successful introduction and sale of new digital LMR products.our BKR Series product line, including our initial multiband product, which has been delayed from initial projections and which we may be unable to successfully complete in a timely manner, or at all. Even if we successfully develop theseand launch the BKR Series product line, or any other new products, the development of which is a complex and uncertain process requiring innovation and investment, theysuch products may not achieve market acceptance, which could have a material adverse effect on us.

We face intense competition from other LMR suppliers, and the failure to compete effectively could materially and adversely affect our market share, financial condition and results of operations. The largest supplier of LMR products in the world, Motorola Solutions, Inc., currently is estimated to have well in excess of half the market for LMR products. This supplier is also the world’s largest supplier of P-25 products. Some of our competitors are significantly larger and have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we have. Some also have established reputations for success in developing and supplying LMR products, including providing complete, integrated, communications systems and infrastructure. We do not provide complete, integrated, communications systems and infrastructure.  These advantages may allow them:

Some of our competitors have established extensivebroad networks of sales locations and multiple distribution channels that are more extensive than ours.  We may not be able to compete successfully and competitive pressures may materially and adversely affect our business, results of operations and financial condition.

An increase in the demand for P-25 products could benefit competitors that are better financed and positioned to meet such demand.  P-25 products have been brought to the market by an increasing number of our competitors. Our first P-25 portable radio was brought to market in 2003, and in recent years we introduced two new lines of P-25 products, the KNG and KNG2 Series.  We are currently developing a new line of multiband products.P-25 digital products, the BKR Series.  Bringing such products to market and achieving a significant market penetration for them will continue to require time and expenditures of funds.funds, and we may be unable to successfully do so. We may be unsuccessful in developing and marketing, on a timely basis, fully functional product enhancements or new products that respond to these and other technological advances, and our new products may not be accepted by customers. An inability to successfully develop and/or market products could have a material adverse effect on our business, financial condition and results of operations and financial condition.

Our business could suffer if we are unable to keep pace with rapid technological changes and product development in our industry. The market for our LMR products is characterized by ongoing technological development, evolving industry standards and frequent product introductions. The LMR industry is experiencing a transitionhas largely transitioned from analog LMR products to digital LMR products.products in recent years. In addition, the APCO P-25 standard is being increasinglyhas been widely adopted. If we are unable to successfully keep up with these changes, our business, financial condition and results of operations could be materially adversely affected.

We are subject to risks associated with our reliance on sales to the U.S. Government. For the year ended December 31, 2017,2022, approximately 38%37.5% of our sales were to agencies and departments of the U.S. Government. These sales were primarilyGovernment, including but not limited to, agencies of the DHS, DOD, USFSDoA, DoD and DOI.DoI. We may be unable to maintain this government business. Our ability to maintain our government business will depend on many factors outside of our control, including competitive factors, changes in government personnel making contract decisions, spending limits and political factors. The loss of sales to the U.S. Government would have a material adverse effect on our business, financial condition and results of operations.

In addition, most U.S. Government customers award business through a competitive bidding process, which results in greater competition and increased pricing pressure. The bidding process involves significant cost and managerial time to prepare bids for contracts that may not be awarded to us. Even if we are awarded contracts, we may fail to accurately estimate the resources and costs required to fulfill a contract, which could negatively impact the profitability of any contract awardawarded to us. In addition, following a contract award, we may experience significant expense or delay, contract modification or contract rescission as a result of customer delay or our competitors protesting or challenging contracts awarded to us in competitive bidding.

Any delay, especially any prolonged delay, in the U.S. Government budget process or a government shutdown may result in us incurring substantial labor or other costs without reimbursement under our customer contracts, decrease the number of purchase orders issued under our contracts with government agencies, or result in the suspension of work on contracts in progress or in payment delays.

Any of these events could have a material adverse effect on our business, financial condition and results of operations.

Our U.S. Government business is subject to specific procurement regulations with numerous compliance requirements. These requirements, although customary in U.S. Government contracting, increase our performance and compliance costs. These costs may increase in the future, thereby reducing our margins, which could have an adverse effect on our financial condition. Failure to comply with these regulations could lead to suspension or debarment from U.S. Government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws or policies, including those related to procurement integrity, U.S. Government security regulations, employment practices, protection of criminal justice data, protection of the environment, accuracy of records, proper recording of costs, foreign corruption and the False Claims Act.

Generally, U.S. Government contracts are subject to oversight audits by U.S. Government representatives and could result in adjustments to our contracts. Any costs found to be improperly allocated to a specific contract or grant may not be allowed, and such costs already reimbursed to us may have to be refunded. Future audits and adjustments, if required, may materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in investigations, termination of a contract, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. All contracts with the U.S. Government are subject to cancellation at the convenience of the U.S. Government.

In addition, contacts with government officials and participation in political activities are areas that are tightly controlled by federal, state, local and international laws. Failure to comply with these laws could cost us opportunities to seek certain government sales opportunities or even result in fines, prosecution or debarment.

We engage in business with manufacturers, some of which are located in other countries. Approximately 65.7%17% of our material, subassembly and product procurements in 20172022 were sourced internationally. Accordingly, we are subject to special considerations and risks not typically associated with companies operating solely in the U.S. These include the risks associated with the political, economic, legal, health and legal environmentsother conditions in such foreign countries, among others. Our business, financial condition and operating results and financial condition may be materially and adversely affected by, among other things, changes in the general political, social, health and socialeconomic conditions in foreign countries in which we maintain sourcing relationships, unfavorable changes in U.S. trade legislation and regulations, the imposition of governmental economic sanctions on countries in which we do business or other trade barriers, threats of war, terrorism or governmental instability, labor disruptions, the impact of public health epidemics on employees and the global economy, such as the coronavirus currently impacting China, which may cause our manufacturers or suppliers to temporarily suspend operations in the affected region, potentially negatively impacting our product launch timing and shipments, currency controls, fluctuating exchange rates with respect to contracts not denominated in U.S. dollars, and unanticipated or unfavorable changes in government policies with respect to laws and regulations, anti-inflation measures and method of taxation. If we were unable to navigate foreign regulatory environments, or if we were unable to enforce our contract rights in foreign countries, our business could be adversely impacted. Any of these events could interrupt our manufacturing process and cause operational disruptions, increase prices for manufacturing, reduce our sales or otherwise have an adverse effect on our operating performance.

We carry a significant amount of inventory to service customer requirements in a timely manner. If we are unable to sell this inventory over a commercially reasonable time, in the future we may be required to take inventory markdowns, which would reduce our net sales and/or gross margins. In addition, it is critical to our success that we accurately predict trends in customer demand, including seasonal fluctuations, in the future and do not overstock unpopular products or fail to sufficiently stock popular products. Both scenarios could materially harm our business, financial condition and operating results and financial condition.

We sometimes enter into firm fixed-price contracts. If our initial cost estimates are incorrect, we can lose money on these contracts. Because certain of these contracts involve new technologies and applications, require us to engage subcontractors and/or can last multiple years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, problems with our subcontractors or suppliers and other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial results. In addition, a significant increase in inflation rates or currency fluctuations could have an adverse impact on the profitability of longer-term contracts.

We may invest part of our cash balances in public companies. For example, as of December 31, 2017,2022, we held approximately 1.3 million sharesan investment interest in the equity of the common stock of Iteris,FG Financial Group, Inc. (Nasdaq: ITI)FGF) (“Iteris”FGF”). through FG Financial Holdings, LLC (“FG Holdings”). These types of investments arecarry more riskyrisk than holding our cash balances as bank deposits or, for example, such conservative investments as treasury bonds or money market funds. There can be no assurance that we will be able to maintain or enhance the value or the performance of the companies in which we have invested or in which we may invest in the future, or that we will be able to achieve returns or benefits from these investments. We may lose all or part of our investment relating to such companies if their value decreases as a result of their financial performance or for any other reason. If our interests differ from those of other investors in companies over which we do not have control, we may be unable to effect any change at those companies. We are not required to meet any diversification standards, and our investments may become concentrated. If our investment strategy is not successful or we achieve less than expected returns from these investments, it could have a material adverse effect on us. The Board of Directors may also change our investment strategy at any time, and such changes could further increase our exposure, which could adversely impact us.

The interests of Fundamental Global Investors, LLC (“Fundamental Global”)FG may differ from the interests of our other stockholders. Fundamental GlobalAs of December 31, 2022, FG and its affiliates, including Ballantyne Strong, Inc., of which Fundamental Global is the largest stockholder,owners and CWA Asset Management Group, LLC, 50% of which is owned by Fundamental Global,managers together hold approximately 35%16% of the Company’s outstanding shares of common stock. Kyle Cerminara, Chief Executive Officer, Co-Founder, and Partner and Manager of Fundamental Global and Chairman and Chief Executive OfficerFG, is a member of Ballantyne Strong, Inc. and Lewis Johnson, President, Partner and Manager of Fundamental Global Investors, LLC and a director of Ballantyne Strong, Inc., serve on our Board of Directors. As a result of its ownership position and Messrs. Cerminara’s and Johnson’s positions with the Company, Fundamental Global has the ability toFG could exert significant influence over our policies and affairs,matters submitted for stockholder approval, including the power to impact the election of our directors and approval of any action requiring a stockholder vote,other corporate actions such as amendments to our articles of incorporation, by-laws, significant stock issuances, reorganizations, mergers and asset sales. Fundamental Globalsales, and over our business, operations and management, including our strategic plans for the business. FG may have interests that differ from those of our other stockholders and may vote in a way with which our other stockholders disagree, and which may be adverse to their interests. Fundamental Global’s significantFG’s ownership position may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of our common stock.

Our business, results of operations and prospects depend, in part, on maintaining and strengthening our brand and reputation for providing high-quality products and services. Reputational value is based in large part on perceptions. Although reputations may take decades to build, any negative incidents can quickly erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation. If problems with our products cause operational disruption or other difficulties, or there are delays or other issues with the delivery of our products or services, our brand and reputation could be diminished. Damage to our reputation could also arise from actual or perceived legal violations or product safety issues, data securitycybersecurity breaches, actual or perceived poor employee relations, actual or perceived poor service, actual or perceived poor privacy practices, operational or sustainability issues, actual or perceived ethical issues or other events within or outside of our control that generate negative publicity with respect to us. Any event that has the potential to negatively impact our reputation could lead to lost sales, loss of new opportunities and retention and recruiting difficulties. If we fail to promote and maintain our brand and reputation successfully, our business, results of operations and prospects could be materially harmed.

Current economic conditions in the U.S. and elsewhere remain uncertain.  These challenging economic conditions could materially and adversely impact our business, liquidity and financial condition in a number of ways, including:

We contract with manufacturers to produce portions of our products, and our dependence on a limited numberproducts.  Our use of contract manufacturers exposes us to certain risks, including shortages of manufacturing capacity, reduced control over delivery schedules, quality assurance, production yield and costs. If any of our manufacturers terminate production or cannot meet our production requirements, we may have to rely on other contract manufacturing sources or identify and qualify new contract manufacturers. The lead-time required to qualify a new manufacturer could range from approximately two to six months. Despite efforts to do so, we may not be able to identify or qualify new contract manufacturers in a timely and cost-effective manner, and these new manufacturers may not allocate sufficient capacity to us in order to meet our requirements. Any significant delay in our ability to obtain adequate quantities of our products from our current or alternative contract manufacturers could have a material adverse effect on our business, financial condition and results of operations.

In addition, our dependence on limited and sole source suppliers of components involves several risks, including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component quality.  Approximately 61.6%61% of our material, subassembly and product procurements in 20172022 were sourced from threenine suppliers.  We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. Disruption or termination of the supply of these components could delay shipments of our products. The lead-time required for orders of some of our components is as much as six months. In addition, the lead-time requiredup to qualify new suppliers for our components is as much as six months.  If we are unable to accurately predict our component needs, or if our component supply is disrupted, we may miss market opportunities by not being able to meet the demand for our products. This may damage our relationships with current and prospective customers and thus, have a material adverse effect on our business, financial condition and results of operations.

Acquisitions and other business transactions may disrupt or otherwise have a negative impact on our business, financial condition and results of operations. We do not have any acquisitions currently pending, and there can be no assurance that we will complete any future acquisitions or other business transactions or that any such transactions which are completed will prove favorable to our business. We intend to seek stockholder approval for any such transactions only when so required by applicable law or regulation. Any acquisitions of businesses and their respective assets also involve the risks that the businesses and assets acquired may prove to be less valuable than we expect, and we may assume unknown or unexpected liabilities, costs and problems. We hope to grow rapidly, and the failure to manage our growth could materially and adversely affect our business, operationsfinancial condition and financial condition.results of operations. Our business plan contemplates, among other things, leveraging our products and technology for growth in our customer base and sales. This growth, if it materializes, could significantly challenge our management, employees, operations and financial capabilities. In the event of this expansion, we have to continue to implement and improve our operating systems and to expand, train, and manage our employee base. If we are unable to manage and integrate our expanding operations effectively, our business, results of operations and financial condition could be materially and adversely affected.

Our key executives are critical to our success. We do not have employment agreements with these individuals, and we cannot be sure that we will retain their services. The loss of services from any of our executive officers or these other key employees due to any reason whatsoever could have a material adverse effect on our business, financial condition and results of operations.

Our success is also dependent upon our ability to hire and retain qualified operations, development and other personnel. Competition for qualified personnel in our industry is intense, and we may be unable to hire or retain necessary personnel. The inability to attract and retain qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

Currently, we hold no U.S.have two approved and four pending applications for US patents. We have applied for several trademarks related to the names “BK Technologies”Technologies,” “BK Radio”, and “BK Radio.”“Radios for Heroes”. We have applied for trademarks related to the names “BKR”, “BKRplay”, and “InteropONE”. As part of our confidentiality procedures, we generally enter into nondisclosure agreements with our employees, distributors and customers and limit access to and distribution of our proprietary information. We also rely on trade secret laws to protect our intellectual property rights. There is a risk that we may be unable to prevent another party from manufacturing and selling competing products or otherwise violating our intellectual property rights. Our intellectual property rights, and any additional rights we may obtain in the future, may be invalidated, circumvented or challenged in the future. It may also be particularly difficult to protect our products and intellectual property under the laws of certain countries in which our products are or may be manufactured or sold. Our failure to perfect or successfully assert intellectual property rights could harm our competitive position and could negatively impact us.

The costs of employee health care insurance have been increasing in recent years due to rising health care costs, legislative changes and general economic conditions.  We cannot predict what other health care programs and regulations ultimately will be implemented at the federal or state level or the effect of any future legislation or regulation in the U.S. on our business, financial condition and results of operations.  In addition, we cannot predict when or if Congress will repeal and/or replace certain health care programs and regulations at the federal level and the impact such changes would have on our business.  A continued increase in health care costs could have a material adverse effect on us.

We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We are potentially at risk if one or more of our insurance carriers fail. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some insurers. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.

Our quarterly operating results may fluctuate significantly from quarter to quarter and may be below the expectations of the investment community, resulting in volatility for the market price for our common stock. Other factors affecting the volatility of our stock price include:

In addition, the stock market is subject to price and volume fluctuations affecting the market price for the stock of many companies generally, which fluctuations often are unrelated to operating performance.

The occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our suppliers or manufacturers are located, or acts of war or terrorism (wherever located around the world) or military activities disrupting transportation, communication or utility systems or otherwise causing damage to our business, employees, suppliers, manufacturers and customers; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber attacks,cyber-attacks, could have a material adverse effect on our business, operationsfinancial condition and financial condition.results of operations.  Such events could result, among other things, in operational disruptions, physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions.  These factors could also cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and global financial markets and economy. Such occurrences could have a material adverse effect on us and could also have indirect consequences, such as increases in the costs of insurance, if they result in significant loss of property or other insurable damage.

From time to time, we may experience cyber-attacks on our information technology systems and thosethe information systems of our distributors, manufacturers, suppliers and other partners, whose systems we do not control.  These systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including, but not limited to, continually evolving cyber attackscyber-attacks (including social engineering and phishing attempts), attempts to gain unauthorized access to data, cyber intrusion, computer viruses, security breach, misconduct by employees or other insiders with access to our data, energy blackouts, natural disasters, terrorism, sabotage, war and telecommunication failures. Cyber attacksCyber-attacks are rapidly evolving and becoming increasingly sophisticated. It is possible that computerComputer hackers and others might compromise our security measures, or security measures of those parties that we do business with now or in the future, and obtain the personal information of our customers, employees and partners or our business information. A cyber attackcyber-attack or other significant disruption involving our information technology systems or those of our distributors, manufacturers, suppliers or other partners, could result in thedisruptions in critical systems, corruption or loss of data, theft of data, funds or intellectual property, and unauthorized release of our or our customers’ proprietary, confidential or sensitive information of ours or our customers.information. Such unauthorized access to, or release of, this information could expose us to data loss, disrupt our operations, allow others to unfairly compete with us, subject us to litigation, government enforcement actions, regulatory penalties and costly response measures, and could seriously disrupt our operations. Any resulting negative publicity could also significantly harm our reputation. We may not have adequate insurance coverage to compensate us for any losses associated with such events. Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations and cash flow.

Failure to comply with government regulations applicable to our business could result in penalties and reputational damage.  Our products are regulated by the FCC and otherwise subject to a wide range of global laws.  As a public company, we are also subject to regulations of the SEC and the stock exchange on which we are listed.  These laws and regulations are complex, change frequently, have tended to become more stringent over time and increase our cost of doing business.  Compliance with existing or future laws, including U.S. tax laws, could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what products and services we can offer, and generally impact our financial performance.  Failure to comply with or to respond to changes in these requirements and regulations could result in penalties on us, such as fines, restrictions on operations or a temporary or permanent closure of our facility.  These penalties could have a material adverse effect on our business, operating results and financial condition. In addition, existing or new regulatory requirements or interpretations could materially adversely impact us.

Our common stock has been listed on the NYSE American since 2005. If we are unable to satisfy the continued listing standards of the NYSE American, which include, among others, minimum stockholders’ equity, market capitalization, pre-tax income and per share sales price, our common stock may be delisted. If our common stock is delisted, we would be forced to listhave our common stock quoted on the OTC Bulletin BoardMarkets or some other quotation medium, depending on our ability to meet the specific requirements of those quotation systems. In that case, we may lose some or all of our institutional investors, and selling our common stock on the OTC Markets would be more difficult because smaller quantities of shares would likely be bought and sold, and transactions could be delayed. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock. If this happens, we will have greater difficulty accessing the capital markets to raise any additional necessary capital.

As the number of competing products available in the market increases and the functions of those products further overlap, the potential for infringement claims may increase.  Any such claims, with or without merit, may result in costly litigation or require us to redesign the affected product to avoid infringement or require us to obtain a license for future sales of the affected product.  Any of the foregoing could damage our reputation and have a material adverse effect upon our business, financial condition and results of operations and financial condition.operations.  Any litigation resulting from any such claim could require us to incur substantial costs and divert significant resources, including the efforts of our management and engineering personnel.

If we incur future operating losses, we may be required to provide some or all of our deferred tax assets with a valuation allowance, resulting in additional non-cash income tax expense. The change in the valuation allowance may have a material impact on future results. If we do not achieve sufficient federal taxablenet income in future years to utilize all or some of our net operating loss carryforwards (“NOLs”), they will expire.

The Dodd-Frank Wall Street Reform and Consumer Protection Act includes disclosure requirements regarding the use of tin, tantalum, tungsten and gold (which are defined as “conflict minerals”) in our products and whether these materials originated from the DRC or an adjoining country.  The SEC rules necessitate a complex compliance process and related administrative expense for a company once it determines a conflict mineral is necessary to the functionality or production of a product that the company manufactures or contracts to manufacture.  Such companies must then conduct a reasonable countryThese requirements could affect the sourcing, availability and cost of origin inquiry to determine if the conflict minerals originatedused in the covered countriesmanufacture of certain of our products, and undertake due diligence on the source and chain of custody in order to file a conflict minerals report with the SEC. In addition to the increased administrative expense and management involvement, there is a limited pool of suppliers who can provide us “conflict-free” components, parts and manufactured products, particularly since our supply chain is complex and, as a purchaser of finished components, we are several layers removed from the mining of any potential conflict minerals that may be contained in our products. We may not be able to obtain conflict-free products or supplies in sufficient quantities or at competitive prices for our operations. We may alsohave incurred, and will continue to be unable to determineincur, costs associated with complying with these supply chain due diligence procedures. In addition, because our supply chain is complex, if our products are conflict-free. If we discover that our products include minerals that have been identified as “not found to be DRC conflict-free,”conflict-free” or if we continue to beare unable to determine whether such minerals are included in our products, we may face reputational challenges with our customers, stockholders and other stakeholders as a result.

None.

We do not own any real estate. We lease approximately 54,000 square feet of industrial space at 7100 Technology Drive in West Melbourne, Florida. TheIn November 2018, the lease has an expiration date ofwas amended to provide for certain leasehold improvements and extend the lease term until June 30, 2020.2027. Rental, maintenance and tax expenses for this facility were approximately $472,000, $475,000$688,000 and $457,000$556,000 in 2017, 20162022 and 2015,2021, respectively.

We also lease 8,100approximately 6,857 square feet of office space at Sawgrass Technology Park, 1619 NW 136^th Avenue in Lawrence, Kansas, to accommodate a segment of our engineering team. TheSunrise, Florida. This lease has an expiration date ofwill expire on December 31, 2019. Rental,2025. Annual rental, maintenance and tax expenses for thisthe facility were approximately $108,000$203,000 and $208,000 in each of 20172022 and 2016, and $104,000 in 2015.

From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. On March 28, 2017, The Sales Group, Inc. (“TSG”) filed a lawsuit in the U.S. District Court for the Central District of California against the Company. TSG was a sales representative of the Company that the Company terminated in March 2017. TSG asserted claims against the Company for alleged breach of oral contract, violation of the California and Arizona sales representative statutes, and an accounting of alleged unpaid sales commissions. TSG’s complaint sought damages in the amount of $6,090,000 for alleged unpaid past and future sales commissions. On April 3, 2017, counsel for TSG sent the Company a letter outlining additional alleged grounds for recovery against the Company and offering to settle the litigation in exchange for the continued payment of sales commissions to TSG for a negotiated period, a buyout of TSG’s alleged rights for a negotiated sum or reinstatement of TSG for a period of at least 2.5 years with commission rates equal to those in effect at the time of TSG’s termination. The matter was mediated on November 14, 2017, during which the parties agreed to a settlement. On December 19, 2017, the Company entered into a settlement agreement with TSG, pursuant to which TSG agreed to dismiss with prejudice its lawsuit filed against the Company. Pursuant to the settlement agreement, the Company agreed to pay an amount of $900,000 to TSG on or before December 31, 2017. The Company also agreed to pay to TSG commissions, at the rates in effect since February 7, 2013, on all orders for the Company’s products received and accepted by the Company from the states of Arizona, California, Nevada and Hawaii from January 1, 2018 through December 31, 2018, other than for (i) sales of the Company’s products to federal government agencies and offices, (ii) sales of the Company’s products to other end-users, excepting state and local government agencies and offices, and (iii) sales of parts or service, including warranty service. In addition, if at any time on or before December 31, 2018, the Company completes a change-in-control transaction, then the Company will pay to TSG an amount equal to $2 million, less the amount of commissions paid by the Company with respect to 2018, as described above. The settlement agreement settles all claims raised by TSG in its lawsuit against the Company.

Not applicable.

(a) Market Information.

Our common stock trades on the NYSE American under the symbol “RWC.“BKTI.” The following tables set forth the high and low sales price for our common stock for the quarterly periods for the years ended December 31, 2017 and 2016, as reported by the NYSE American.

(b) Holders.

On February 24, 2018,March 1, 2023, there were 779517 holders of record of our common stock.

(c) Dividends.

We have historically paid quarterly dividend. Pursuant to the program, our Board of Directors approved two quarterly dividends of $0.09 per share of our common stock for payment during 2016, one of which was paid on June 17, 2016 to shareholders of record as of June 1, 2016, and the other of which was paid on September 16, 2016 to shareholders of record as of September 1, 2016. On December 7, 2016, our Board of Directors approved a quarterly dividend of $0.09 per share of our common stock, which was paid on January 13, 2017 to shareholders of record as of January 3, 2017.

We receive dividends from our credit facility provides that the payment of cashwholly owned subsidiary, BK Technologies, Inc., to fund past dividends in any twelve-month period may not exceed $5.0 million.

(d) Issuer Purchases of Equity Securities.

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, including any information incorporated by reference in this report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Exchange Act, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “should,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek,” “are encouraged” and other similar expressions. Any statement contained in this report that is not a yearstatement of transition during whichhistorical fact may be deemed to be a forward-looking statement. We also may make forward-looking statements in other documents that are filed or furnished with the SEC. In addition, we implemented significant changes. Thesemay make forward-looking statements orally or in writing to investors, analysts, members of the media, or others. Forward-looking statements include, but are not limited to, the following: changes included reconfiguringor advances in technology; the Board of Directors and senior management, while transforming our strategic direction and improving many aspectssuccess of our operations. After assessingSaaS and Radio business lines and the products offered thereunder; successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated SaaS products, and our new multiband radio product and other related products in the planned new BKR Series product line; competition in the LMR industry; general economic and business conditions, including federal, state and local government budget deficits and spending limitations and any impact from a prolonged shutdown of the U.S. Government; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contacts; heavy reliance on sales to agencies of the U.S. Government and our ability to comply with the requirements of contracts, laws and regulations related to such sales; allocations by government agencies among multiple approved suppliers under existing agreements; our ability to comply with U.S. tax laws and utilize deferred tax assets; our ability to attract and retain executive officers, skilled workers and key personnel; our ability to manage our growth; our ability to identify potential candidates for, and consummate, acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation; impact of our capital allocation strategy; risks related to maintaining our brand and reputation; impact of government regulation; rising health care costs; our business with manufacturers located in other countries, including changes in the U.S. Government and foreign governments’ trade and tariff policies; our inventory and debt levels; protection of our intellectual property rights; fluctuation in our operating results and stock price; acts of war or terrorism, natural disasters and other catastrophic events; any infringement claims; data security breaches, cyber attacks and other factors impacting our technology systems; availability of adequate insurance coverage; maintenance of our NYSE American listing; risks related to being a holding company; and the effect on our stock price and ability to raise equity capital of future sales of shares of our common stock.

Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in “Part I—Item 1A. Risk Factors” and elsewhere in this report and in our subsequent filings with the SEC. 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.

Executive Summary

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

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

The Radio business unit designs, manufactures and markets new product development initiatives were launched, while othersAmerican-made wireless communications products consisting of two-way land mobile radios (“LMRs”). Two-way LMRs can be radios that wereare hand-held (portable) or installed in vehicles (mobile).

Generally, BK Technologies-branded products serve the government markets including but not consistent withlimited to emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises. We believe that our strategic plans were discontinued. We also performedproducts and solutions provide superior value by offering a comprehensive reviewhigh specification, ruggedized, durable, reliable, feature rich, P25 compliant radio at a lower cost relative to comparable offerings.

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

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

Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and quality.

Customer demand and orders for our products were strong during 2022. Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders. Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during the first half of 2023.

For 2022, sales in 2017 decreased 22.3%grew approximately 12.3% to approximately $39.4$51.0 million, compared with approximately $50.7$45.4 million for the prior year. The prior year benefited from significant salesgrowth was attributed primarily to one customer understate and local public safety agencies, as well as the first model in our contract with the U.S. Transportation Security Administration (“TSA”), which were not fully replicated in 2017. Absent the impactBKR line of sales to the TSA, 2017 sales increased approximately 20.9% from 2016.

In 2022 we recognized other expenses, combined to yield a pre-tax loss for 2017net totaling approximately $4.8553,000, primarily attributed to net realized and unrealized losses from our investment in FG Financial Group, Inc. This compares with other expense of $318,000 last year, which was also primarily related to an unrealized loss from the investment in FG Financial Group, Inc.

For 2022 the pretax loss totaled approximately $11.6 million, compared with pre-tax incomepretax loss of $4.3approximately $1.5 million for 2016. the prior year.

We recognized a net incomeno tax benefit ofexpense in 2022, compared with approximately $1.2 million, compared with$187,000 for the prior year. Our income tax expense totaling approximately $1.6 million for 2016. Our income tax benefit and expense for both years is2021 was largely non-cash as a result of deferred items partially derived from NOLs.

The net loss for 2017 totaling2022 totaled approximately $3.6$11.6 million ($0.270.69 per basic and diluted share), compared with net incomeloss of approximately $2.7$1.7 million ($0.200.11 per basic share and $0.19 per diluted share) for 2016.

As of December 31, 2017,2022, working capital totaled approximately $26.7$13.2 million, of which $12.7$12.5 million was comprised of cash, cash equivalents and trade receivables. This compares with working capital totaling approximately $23.4$25.2 million at year end 2016,2021 year-end, which included $14.4$18.8 million of cash, cash equivalents and trade receivables. During 2022, we declared three and paid four quarterly dividends, utilizing cash of approximately $2.0 million.

Impact of COVID-19 Pandemic and Supply Chain

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

In planning for the possible disruption of December 31, 2017our business, we took steps to reduce expenses throughout the Company.  This included suspending all Company travel for a period of time, as well as our participation in trade shows and 2016,other business meetings, instituting strict inventory control and decreasing expenditures.  We also implemented workforce reductions during the third quarter of 2020 and suspended the employer’s 401K match. The impact to our business in 2021, particularly customer orders, is not known with any certainty However, we received record customer orders of approximately $70 million in 2022. Worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products.  While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders in 2022, there were no borrowings outstanding underhave been some delays and longer delivery times within our revolvingsupply chain.  While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years.  The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results.  Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit facility.

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

As an aid to understanding our operating results, the following table shows items from our consolidated statements of operations expressed as a percentage of sales:

For 2017,2022, net sales totaledincreased approximately $39.4$5.6 million to approximately $51.0 million, compared with approximately $50.7$45.4 million last year.

Customer demand and orders for 2016. Salesour products were strong in 2022. Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue. Accordingly, as of P-25 digital productsDecember 31, 2022, these orders were carried in 2017 totaled approximately $28.7 million (72.7%backlog, and we anticipate fulfilling many of total sales), compared with approximately $33.2 million (65.5%them during the first half of total sales)2023. Although supply chain factors may continue to create delays for 2016.

Sales for the prior year benefited from significant salesended December 31, 2022, were attributed primarily to one customer under our contract with the TSA, which were not fully replicated in 2017, resulting in the year-over-year decrease. Absent the impact of sales to the TSA, 2017 sales increased approximately 20.9% from 2016. During 2017, demand from other federal, state and internationalmunicipal public safety agencies, strengthened compared withsome of which were new customers.

The sale of the prior year. We were awarded several multi-year contractsBKR 5000, the first model in our new BKR Series of APCO P25 land mobile radio products and blanket purchase orders from federal agencies thatsolutions was launched in the second half of 2020 and significantly impacted sales in 2021.  The BKR Series is envisioned as a comprehensive line of new products, which will include additional models in coming quarters. The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain, labor shortages, wage pressures, rising inflation, and other force majeure events, such as the COVID-19 pandemic. BKR Series products, we believe, will yield sales in future periods,should increase our addressable market by expanding the number of federal and we are encouraged byother public safety customers that may purchase our funnel of sales prospects. During the year, we added sales resources to capitalize on opportunities for potential sales growth.products. However, the timing and size of orders from government agencies at all levels can be unpredictable dueand subject to the influence of budgets, priorities, and other priorities, andfactors. Accordingly, we cannot assure investors that any sales will occur under the blanket purchase orders,particular contracts, or that our sales prospects will otherwise increase.

Gross profit margins as a percentage of sales for 2017 was 75.8%2022 were approximately 19.3%, compared with 66.3% in 2016. Gross profit margin as a percentage of sales35.8% for 2017 was 24.2%, compared with 33.7% for 2016.

Our cost of products and gross profit marginmargins are primarily derived primarily from material, labor and overhead costs, product mix, manufacturing volumes and pricing. For 2017, costs associated with the write-off of specific inventory and higher product service costs also adversely impacted costs of products and gross profit margin.

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

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

SG&A expenses for the year ended December 31, 2022, totaled approximately $14.6$20.9 million or 37.0%(41.1% of sales,sales), compared with approximately $12.8$17.5 million or 25.3%(38.5% of sales,sales) for 2016.

Engineering and product development expenses for 20172022 totaled approximately $5.0$9.6 million (12.7%(18.8% of total sales), compared with approximately $4.1$8.1 million (8.1% of total sales) for the previous year. Expenses related to new product development projects were the primary contributor to the increase in engineering expenses.

Marketing and selling expenses for the year ended December 31, 2022, totaled approximately $4.4 million (8.6% of sales), compared with approximately $4.0 million (8.9% of sales) for the prior year. The increase in marketing and selling expenses for the year are attributed to staff-related and other sales performance,and go-to-market expenses, which were partially offset by expenses related to new sales staff.

General and administrative expenses for 2017the year ended December 31, 2022, totaled approximately $4.3$6.9 million (11.0%(13.6% of total sales), compared with approximately $3.3$5.4 million (6.5%(11.7% of total sales) for 2016.the prior year. The increase was relatedin general and administrative expenses for the year is attributed primarily to corporate management and headquarters professional fees and expenses incurred inrelated expenses.

Operating Loss

For the first quarter associated with changes in senior management.

Gain/Loss on Investment

For the year ended December 31, 2017 to account2022, we recognized a realized and unrealized loss of approximately $313,000 on our investment in FG Financial Group, Inc., compared with an unrealized loss of approximately $219,000 for the effect of the corporate rate reduction. The netprior year.

Income Tax/(Expense) Benefit

We recorded no income tax expense primarily relates to a reduction infor the deferred tax assets of approximately $1,524,000 and a reduction in the deferred tax liability related to unrealized gain on available-for-sale securities of approximately $(859,000). For the prior year we recognizedended December 31, 2022, compared with income tax expense of approximately $1.6 million. $187,000 for the prior year.

Our income tax benefit andprovision is based on the effective tax rate for the year. The tax expense are primarily non-cash.

As of December 31, 2017 and 2016,2022, our net deferred tax assets totaled approximately $3.3$4.1 million, and $3.4 million, respectively, and are primarily composed of NOLs, offset by deferred tax liabilities of $1.9 million and $1.8 million, respectively,were primarily derived from depreciationresearch and the unrealized gain on available-for-sale securities.  The NOLs, as of December 31, 2017, total $6.5 million for federaldevelopment tax credits, operating loss carryforwards and $13.9 million for state purposes, with expirations starting in 2018 through 2037.

In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years to utilize our NOLs prior to their expiration. The Company analyzesyears. 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 evaluation,analysis of all available evidence, both positive and negative, we have concluded that based onwe do not have the weight of available evidence, it is more likely than not that we will not realize a portion ofability to generate sufficient taxable income in the necessary period to utilize the entire benefit of our state netfor the deferred tax assets recorded at December 31, 2017.assets. Accordingly, we established a valuation allowance totaling approximately $64,000 for the portion of state deferred tax assets that more likely than not will not be realized.$3,356,000. We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If we incur future losses, it may be necessary to record an additional valuation allowance related to the deferred tax assets recognized as of December 31, 2017.

For the year ended December 31, 2017,2022, net cash used in operating activities totaled approximately $2.3$9.0 million, compared with cash providedused by operationsoperating activities of approximately $10.7$6.3 million for 2016.the prior year. Cash used in operating activities for the year was primarily related to a net loss, increased inventory, and increases in accounts receivable, and deferred tax assets, inventories and accrued compensation and related taxes,which were partially offset by increased accounts payable and depreciation and amortization and accrued expenses.

For 2022, we had a net loss of approximately $11.6 million, compared with net loss of approximately $1.7 million for the prior year. Net inventories increased during the year ended December 31, 2017, we realized a net loss of2022, by approximately $3.6$5.1 million, compared with net incomean increase of approximately $2.7$7.1 million lastfor the prior year. The increase was primarily attributable to extended supply-chain lead times, which impacted material purchases and sales shipments, as well as material for planned new product introductions. Accounts receivable increased approximately $2.1$2.4 million during the year ended December 31, 2017, reflecting2022, primarily due to the timing of sales that were consummated later in the year that had not yet completed their collection cycle, compared with a $657,000 decrease for last year. Deferred tax assets for 2017 increased by approximately $1.2 million primarily due to our pre-tax loss, and partially offset by the impact of revaluation derived from tax reform. For the prior year, deferred tax assets decreased approximately $1.1 million primarily as a result of pre-tax income. Net inventories increased during 2017 by approximately $508,000 primarily due to material purchases, which were partially offset by the write-off of certain inventory items. Last year, inventories decreased approximately $2.1 million, primarily due to fulfilling the TSA delivery orders. Accrued compensation and related taxes decreased by approximately $829,000 during 2017 as performance incentives were paid.cycle. For the same period last year, accrued compensation and related taxesaccounts receivable increased by approximately $1.1 million, related primarily to incentive compensation.$1.8 million. Accounts payable for 2017the year ended December 31, 2022, increased approximately $4.0$7.0 million, compared with an increase of approximately $0.8 million for the prior year, primarily relateddue to materialthe timing of purchases and product development expenses, compared with a decrease of $312,000 last year.longer lead times for materials from suppliers. Depreciation and amortization totaled approximately $942,000$1.4 million for both 2017the year ended December 31, 2022, compared with approximately $1.4 million for the prior year. Depreciation and 2016.

Cash provided byused in investing activities for 2017the year ended December 31, 2022, totaled approximately $2.0$1.8 million, whichprimarily for manufacturing and engineering related equipment. For the prior year, cash used in investing activities totaled approximately $2.3 million, primarily for purchases of engineering and manufacturing related equipment.

For the year ended December 31, 2022, cash of approximately $2.1 million was primarily related toprovided by financing activities. During the year, we received proceeds totalingof approximately $2.6$9.7 million from the sale of securities,IPSA with Alterna, This was partially offset by purchasescredit facility repayments of equipment totaling$5.3 million and loan repayments of approximately $628,000. Last$277,000.  For the same period last year, approximately $481,000 was used for the investment in Iteriswe closed a public offering of our common stock, generating net proceeds of approximately $11.6 million. During the year, we received proceeds of approximately $5.7 million from our revolving credit facility and $1.4 million was utilized forfrom financing related to the purchase of manufacturing equipment, that was partially offset by loan repayments of approximately $3.7 million. We used cash of approximately $2.0 million and engineering equipment.

On November 22, 2022, the issuance of common stock upon the exercise of stock options, compared with $30,000 last year.

As of December 31, 2022, and therethe date of filing this report, approximately $6.0 million and $5.6 in borrowings were no borrowings outstanding under the revolving credit facilityIPSA, respectively.

On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of December 31, 2017.  For additional information about our revolving credit facility, see “Note 5—Debt”$743,000 to finance various items of manufacturing equipment. The loan is collateralized by the notes toequipment purchased using the consolidated financial statements.

Our cash and cash equivalents balance at December 31, 20172022, was approximately $7.1$1.9 million. We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our revolving credit facility,IPSA, are sufficient to meet our working capital requirements for the foreseeable future. However, although we do not anticipate needing additionalWe may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in the near term,public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, geopolitical events, and other force majeure events, such as 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 “Part I—Item“Item 1A. Risk Factors” set forth in this report.

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.

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 more subjective accounting estimationprocesses 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 determining the allowance for collection of trade receivables, allowance for excess or obsolete inventory, allowance for product warranty, 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 create an adverseadversely impact on our operations and financial position.

There were no changes to our critical accounting policies during the earnings process is complete and collection is reasonably assured. The earnings process is generally complete when the product is shipped by us or delivered to the customer, depending upon whether the title to the goods, as well as the risks and benefits of ownership, are transferred to the customer at point of shipment or point of delivery. However, sales to the federal government are recognized when the products are delivered. 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. We periodically review our revenue recognition procedures to assure that such procedures are in accordance with Accounting Standards Codification Topic 605, “Revenue Recognition.”

The allowance for doubtful accounts was approximately $50,000 on gross trade receivables of approximately $5.6$10.7 million as of December 31, 2017,2022, as compared with $50,000 on gross trade receivables of approximately $3.5$8.3 million as of December 31, 2016.2021. This allowance is used to state trade receivables at a net realizable value or the amount that we estimate will be collected on our gross receivables as of December 31, 2017.2022 and 2021. Because the amount that we will actually collect on the receivables outstanding as of December 31, 20172022 and 2021 cannot be known with certainty, we rely on prior experience. Our historical collection losses have typically been infrequent, with write-offs of trade receivables being significantly less than 1% of sales during past years. Accordingly, we have maintained a general allowance of up to approximately 5% of the gross trade receivables balance in order to allow for future collection losses that arise from customer accounts that do not indicate the inability to pay but turn out to have such an inability. Currently, our general allowance on trade receivables is approximately 1%0.5% of gross receivables. As revenues and total receivables increase, the allowance balance may also increase. We also maintain a specific allowance for customer accounts that we know may not be collectible due to various reasons, such as bankruptcy and other customer liquidity issues. We analyze our trade receivables portfolio based on the age of each customer’s invoice. In this way, we can identify those accounts that are more likely than not to have collection problems. We may reserve a portion or all of the customer’s balance. As of December 31, 20172022 and 2016,2021, we had no specific allowance on trade receivables.

The allowance for slow moving, excess or obsolete and slow-moving inventory was approximately $789,000$1.2 million and $1.6$1.3 million at December 31, 20172022 and 2016,2021, respectively.

The allowance for slow-moving, excess, orand obsolete inventory is used to state our inventories at the lower of cost or market.net realizable value.  Because the amount of inventory that we will actually recoup through sales cannot be known with certainty at any particular time, we rely on past sales experience, future sales forecasts and our strategic business plans.  Generally, in analyzing our inventory levels, we classify inventory as having been used or unused during the past year and establish an allowance based upon several factors, including, but not limited to, business forecasts, inventory quantities and historical usage profile.

We offer two-year standard warranties to our customers, depending on the specific product and terms of the customer purchase agreement.  Our typical warranties require us to repair and replace defective products during the warranty period at no cost to the customer.  At the time the product revenue is recognized, we record a liability for estimated costs under our warranties.  The costs are estimated based on historical experience.  We periodically assess the adequacy of our recorded liability for product warranties and adjust the amount as necessary.

We account for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized.  The effect of changes in net deferred tax assets and liabilities is recognized on our consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized.  Valuation allowances are provided to the extent that it is more likely than not that some portion, or all, of deferred tax assets will not be realized.  In determining whether a tax asset is realizable, we consider, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results and certain tax planning strategies.  If we fail to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, we may be required to adjustincrease the valuation allowance related to our deferred tax assets in the future.

Not required for smaller reporting companies.

See pages F-1 through F-22.