UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 20182019
 
OR
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to _________
 
Commission file number 001-32644
 
BK TECHNOLOGIES INC.CORPORATION
(Exact name of registrant as specified in its charter)
 
Nevada59-348629783-4064262
(State or other jurisdiction of(I.R.S. Employer
incorporation or organizationorganization)Identification No.)
 
7100 Technology Drive
West Melbourne, Florida 32904
(Address of principal executive offices and Zip Code)
 
Registrant’s telephone number, including area code: (321) 984-1414
 
RELM Wireless CorporationSecurities registered pursuant to Section 12(b) of the Act:
(Former name, former address and former fiscal year, if changed since last report)
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $.60 per shareBKTINYSE American
 
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filer(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
 
There were 13,505,53512,711,958 shares of common stock, $0.60 par value, of the registrant outstanding at July 24, 2018.26, 2019.
 

 
 
 
PART I - FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS
 
BK TECHNOLOGIES INC.CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except share data)
 
 
June 30,
2018
 
 
December 31,
2017
 
 
June 30,
2019
 
 
December 31,
2018
 
 
(Unaudited)
 
 
 
 
 
(Unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $10,723 
 $7,147 
 $7,415 
 $11,268 
Available-for-sale-securities
   
  9,184 
Trade accounts receivable, net
  6,983 
  5,524 
  5,093 
  5,721 
Inventories, net
  12,781 
  14,358 
  13,257 
  11,466 
Prepaid expenses and other current assets
  871 
  772 
  2,132 
  2,401 
Total current assets
  31,358 
  36,985 
  27,897 
  30,856 
    
    
Property, plant and equipment, net
  2,367 
  2,201 
  3,616 
  2,729 
Right-of-use (ROU) asset
  2,652 
   
Investment in securities
  3,389 
   
  2,363 
  1,919 
Deferred tax assets, net
  3,139 
  3,317 
  3,659 
  3,495 
Other assets
  239 
  298 
  196 
  192 
Total assets
 $40,492 
 $42,801 
 $40,383 
 $39,191 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
    
    
Current liabilities:
    
    
Accounts payable
 $3,534 
 $5,971 
 $6,841 
 $5,595 
Accrued compensation and related taxes
  1,615 
  1,364 
  1,324 
  2,014 
Accrued warranty expense
  1,415 
  1,389 
  1,440 
  1,546 
Accrued other expenses and other current liabilities
  974 
  1,159 
  447 
  292 
Dividends payable
  271 
  273 
  254 
  256 
Short-term lease liability
  267 
   
Deferred revenue
  175 
  157 
  219 
  180 
Total current liabilities
  7,984 
  10,313 
  10,792 
  9,883 
    
    
Long-term lease liability
  2,385 
   
Deferred revenue
  1,045 
  481 
  1,974 
  1,596 
Total liabilities
 $9,029 
 $10,794 
  15,151 
  11,479 
Commitments and contingencies
    
    
Stockholders’ equity:
    
    
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding
   
   
Common stock; $.60 par value; 20,000,000 authorized shares; 13,882,937 and 13,844,584 issued and 13,529,983 and 13,652,490 outstanding shares at June 30, 2018 and December 31, 2017, respectively
  8,330 
  8,307 
Common stock; $.60 par value; 20,000,000 authorized shares; 13,922,290 and 13,882,937 issued; and 12,728,116 and 12,817,829 outstanding shares at June 30, 2019 and December 31, 2018, respectively
  8,353 
  8,330 
Additional paid-in capital
  25,730 
  25,642 
  25,988 
  25,867 
Accumulated deficit
  (1,171)
  (5,450)
  (4,467)
  (2,393)
Accumulated other comprehensive income
   
  4,318 
Treasury stock, at cost, 352,954 and 192,094 shares at June 30, 2018 and December 31, 2017, respectively
  (1,426)
  (810)
Treasury stock, at cost, 1,194,174 and 1,065,108 shares at June 30, 2019 and December 31, 2018, respectively
  (4,642)
  (4,092)
Total stockholders’ equity
  31,463 
  32,007 
  25,232 
  27,712 
Total liabilities and stockholders’ equity
 $40,492 
 $42,801 
 $40,383 
 $39,191 
 
See notes to condensed consolidated financial statements.
2

 
BK TECHNOLOGIES INC.CORPORATION
Condensed Consolidated Statements of IncomeOperations
(In thousands, except share and per share data) (Unaudited)
 
 
Three Months Ended
 
 
Six Months Ended
 
 
Three Months Ended
 
 
Six Months Ended
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2019
 
 
June 30,
2018
 
 
June 30,
2019
 
 
June 30,
2018
 
 
 
 
 
 
 
 
  
 
 
 
 
Sales, net
 $13,656 
 $10,762 
 $25,402 
 $18,142 
 $13,294 
 $13,656 
 $20,938 
 $25,402 
Expenses
    
    
    
    
Cost of products
  7,771 
  6,268 
  14,681 
  11,411 
  7,593 
  7,771 
  12,800 
  14,681 
Selling, general and administrative
  4,554 
  3,521 
  8,644 
  6,964 
  5,681 
  4,554 
  10,436 
  8,644 
Total expenses
  12,325 
  9,789 
  23,325 
  18,375 
  13,274 
  12,325 
  23,236 
  23,325 
    
    
Operating income (loss)
  1,331 
  973 
  2,077 
  (233)
  20 
  1,331 
  (2,298)
  2,077 
    
    
Other income (expense):
    
    
Interest income
  19 
  10 
  35 
  18 
Net interest income
  46 
  19 
  101 
  35 
(Loss) gain on investment in securities
  (55)
  617 
  (1,201)
  617 
  (148)
  (55)
  444 
  (1,201)
Loss on disposal of property, plant and equipment
   
   
  (104)
Other expense
  (58)
  (60)
  (225)
  (147)
  (11)
  (58)
  (13)
  (225)
Total other income (expense)
  (94)
  567 
  (1,391)
  384 
Total other (expense) income
  (113)
  (94)
  532 
  (1,391)
    
    
Income before income taxes
  1,237 
  1,540 
  686 
  151 
(Loss) income before income taxes
  (93)
  1,237 
  (1,766)
  686 
    
    
Income tax expense
  (290)
  (222)
  (183)
  (101)
Income tax (expense) benefit
  (154)
  (290)
  201 
  (183)
    
    
Net income
 $947 
 $1,318 
 $503 
 $50 
Net (loss) income
 $(247)
 $947 
 $(1,565)
 $503 
    
    
Net earnings per share-basic
 $0.07 
 $0.10 
 $0.04 
 $0.00 
Net earnings per share-diluted
 $0.07 
 $0.10 
 $0.04 
 $0.00 
Net (loss) income per share-basic and diluted:
 $(0.02)
 $0.07 
 $(0.12)
 $0.04 
Weighted average shares outstanding-basic
  13,532,958 
  13,785,046 
  13,567,778 
  13,759,732 
  12,720,112 
  13,532,958 
  12,740,798 
  13,567,778 
Weighted average shares outstanding-diluted
  13,547,394 
  13,814,690 
  13,595,586 
  13,902,587 
  12,720,112 
  13,547,394 
  12,740,798 
  13,595,586 
  
See notes to condensed consolidated financial statements.
 
3
BK TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2018
 
 
June 30,
2017
 
Net income
 $947 
 $1,318 
 $503 
 $50 
Unrealized gain on available- for-sale securities, net of tax
   
  419 
   
  2,478 
Total comprehensive income
 $947 
 $1,737 
 $503 
 $2,528 
See notes to condensed consolidated financial statements.
42
 
 
BK TECHNOLOGIES INC.CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
 
Six Months Ended
 
 
Six Months Ended
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2019
 
 
June 30,
2018
 
Operating activities
 
 
 
 
 
 
Net income
 $503 
 $50 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
    
Net (loss) income
 $(1,565)
 $503 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
    
Inventories allowances
  (31)
  49 
  49 
  (31)
Deferred taxes
  178 
  100 
Deferred tax benefit
  (164)
  178 
Depreciation and amortization
  439 
  471 
  575 
  439 
Share-based and stock compensation expense
  38 
  16 
Share-based compensation expense
  68 
  38 
Restricted stock unit compensation expense
  73 
  6 
  74 
  73 
Loss (gain) on investment in securities
  1,201 
  (617)
Loss on disposal of property, plant and equipment
   
  104 
(Gain) loss on investment in securities
  (444)
  1,201 
Changes in operating assets and liabilities:
    
    
Trade accounts receivable
  (1,459)
  (1,865)
  628 
  (1,459)
Inventories
  1,608 
  (843)
  (1,840)
  1,608 
Prepaid expenses and other current assets
  (99)
  527 
  269 
  (99)
Other assets
  23 
  (25)
  (4)
  23 
Accounts payable
  (2,437)
  899 
  1,246 
  (2,437)
Accrued compensation and related taxes
  251 
  (838)
  (691)
  251 
Accrued warranty expense
  26 
  410 
  (106)
  26 
Deferred revenue
  582 
  (6)
  417 
  582 
Accrued other expenses and other current liabilities
  (185)
  203 
  155 
  (185)
Net cash provided by (used in) operating activities
  711 
  (1,359)
Net cash (used in) provided by operating activities
  (1,333)
  711 
    
    
Investing activities
    
    
Purchases of property, plant and equipment
  (569)
  (447)
  (1,462)
  (569)
Investment in securities
  (3,741)
   
   
  (3,741)
Proceeds from sale of available-for-sale securities
  8,335 
  897 
   
  8,335 
Net cash provided by investing activities
  4,025 
  450 
Net cash (used in) provided by investing activities
  (1,462)
  4,025 
    
    
Financing activities
    
    
Proceeds from issuance of common stock
   
  183 
  2 
   
Cash dividends declared and paid
  (544)
  (2,477)
  (510)
  (544)
Repurchase of common stock
  (616)
  (217)
  (550)
  (616)
Net cash used in financing activities
  (1,160)
  (2,511)
  (1,058)
  (1,160)
    
    
Net change in cash and cash equivalents
  3,576 
  (3,420)
  (3,853)
  3,576 
Cash and cash equivalents, beginning of period
  7,147 
  10,910 
  11,268 
  7,147 
Cash and cash equivalents, end of period
 $10,723 
 $7,490 
 $7,415 
 $10,723 
    
    
Supplemental disclosure
    
    
Cash paid for interest
 $ 
 $ 
 $
 $ 
Income tax paid
 $ 
 $ 
 $ 
 $ 
Non-cash financing activity
    
    
Restricted stock units issued
 $140 
 $ 
 $140 
 $140 
Cashless exercise of stock options and related conversion of net shares to stockholders’ equity
 $ 
 $27 
 
See notes to condensed consolidated financial statements.

 
5

BK TECHNOLOGIES INC.CORPORATION
Notes to Condensed Consolidated Financial Statements
Unaudited
(in thousands, except share and per share data and percentages)
 
1.      
Condensed Consolidated Financial Statements
 
Basis of Presentation
 
The condensed consolidated balance sheet as of June 30, 2018,2019, the condensed consolidated statements of income and comprehensive incomeoperations for the three and six months ended June 30, 20182019 and 20172018, and the condensed consolidated statements of cash flows for the six months ended June 30, 20182019 and 20172018 have been prepared by BK Technologies Inc.Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. In the opinion of management, all adjustments, which include normal recurring adjustments, necessary for a fair presentation have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 20172018 has been derived from the Company’s audited consolidated financial statements at that date.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2018, as filed with the Securities and Exchange Commission.Commission (“SEC”). The results of operations for the three and six months ended June 30, 20182019 are not necessarily indicative of the operating results for a full year.
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. The Company elected the modified retrospective method upon adoption with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate:
Step 1: Identify the contract with the customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations; and
Step 5: Recognize revenue as the Company satisfies a performance obligation.
ASC 606 provides that revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We generally satisfy performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time, and the revenue is recognized when the installation is complete.

 
Principles of Consolidation
 
The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity.
 
VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.
 
Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership.
 
When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20 percent20% to 50 percent)50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost.
 
The Company has an investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE.
 

Fair Value
 
The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of June 30, 20182019 and December 31, 2017,2018, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.
 
The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the investment in securities. There were no transfers of investment in securities between Level 1 and Level 2 during the three and six months ended June 30, 2019 or 2018.
 
Available-For-Sale Securities
 
Investments reported on the December 31, 2017 balance sheet consisted of marketable equity securities of a publicly held company. As of December 31, 2017, the investment cost was $2,402. On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”)ASU 2016-01 “Financial Instruments,” which amended the guidance in U.S. GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc. (Nasdaq: ITI), which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sales of approximately $849.
 
Other Comprehensive Income
Other comprehensive income consists of net income and unrealized gain on available-for-sale securities, net of taxes.
 
Recently Adopted Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 on “Revenue from Contracts with Customers,” which provided for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance, became effective for annual and interim periods beginning on or after December 15, 2017, and replaced most existing revenue recognition guidance under U.S. GAAP. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgements and estimates and changes in those estimates. It permits the use of either a modified retrospective or cumulative effect transition method. The Company adopted ASU 2014-09 in the first quarter of 2018 and applied the modified retrospective approach. Because the Company’s primary source of revenues is from shipments of products, the adoption of this new guidance did not have any impact on its consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amended the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard became effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. The Company adopted the new guidance, which had a material impact on its retained earnings, as the Company reclassified approximately $4,300 of unrealized gain on investment securities that was previously classified in other comprehensive income.

Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 “Leases,” which amendsamended leasing guidance by requiring companies to recognize a right-of-use (“ROU”) asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability will beis equal to the present value of lease payments. The lease asset will beis based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance isbecame effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. 2018. The Company expects this will result adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of right-of-useROU assets and lease liabilities not currently recorded on the condensed consolidated financial statements. Based on the Company’s lease portfolio as of June 30, 2019, which consisted solely of operating leases, the Company recognized approximately $2,652 of ROU assets and lease liabilities on its consolidated financial statements. Refer to Note 12 (Leases) for further details on leases.
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification”, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective for all filings made on or after November 5, 2018. Given the effective date and the proximity to most filers’ quarterly reports, the SEC permitted deferring the presentation of interim changes in stockholders’ equity in Forms 10-Q until the quarter that began after the date of adoption, November 5, 2018. The Company adopted this rule in the first quarter of 2019, and its adoption did not have a material impact on its consolidated financial statements. Note 7 (Stockholders’ Equity) of the Notes to these condensed consolidated financial statements under existing accounting guidance, but the Company is still evaluating all the Company’s contractual arrangements and the impact that adoption of ASU 2016-02 will have on the Company’s consolidated financial statements.summarizes changes in stockholders’ equity.
Recent Accounting Pronouncements
 
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
 
2.        
Significant Events and Transactions
On June 26, 2018, the Company announced that it received orders totaling approximately $4.5 million for BK Radio-brand KNG-series portable and mobile radios, and related accessories that will be deployed by a California State public safety agency. The orders were partially fulfilled in the second quarter of 2018, and the remainder are anticipated to be fulfilled during the third quarter of 2018.
 
Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock on June 4, 201810, 2019 to stockholders of record as of July 2, 2018.1, 2019. These dividends were paid on July 16, 2018.15, 2019.
 
Effective on June 4, 2018,On July 11, 2019, the Company changedannounced that its nameoperating subsidiary received an order totaling approximately $1,600 for KNG-Series radios and related accessories from “RELM Wireless Corporation”a new California State customer. The order was for KNG-Series Digital P-25 portable and mobile radios with accessories, and was fulfilled in the second quarter of 2019.
On July 10, 2019, the Company announced that its operating subsidiary received an order totaling approximately $3,100 from the U.S. Forest Service (USFS). The order was for KNG-Series Digital P-25 portable and mobile radios with accessories. The order is expected to “BK Technologies, Inc.” The Company’s stock began trading onbe fulfilled in the NYSE American stock exchange under the new ticker symbol “BKTI” on June 5, 2018. Stockholders approved the name change at the annual meetingthird quarter of stockholders held on June 4, 2018.2019.
 
3.       
Allowance for Doubtful Accounts
 
The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $7,033$5,143 and $5,574$5,771 at June 30, 20182019 and December 31, 2017,2018, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables.
 
4.        
Inventories, net
 
The components of inventories, net of allowances for slow-moving, excess or obsolete inventory, consist of the following:
 
 
June 30,
2018
 
 
December 31,
2017
 
 
June 30,
2019
 
 
December 31,
2018
 
Finished goods
 $2,201 
 $2,825 
 $4,290 
 $2,004 
Work in process
  6,408 
  7,111 
  5,581 
  5,750 
Raw materials
  4,172 
  4,422 
  3,386 
  3,712 
 $12,781 
 $14,358 
 $13,257 
 $11,466 
 
Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $758$678 at June 30, 2018,2019, compared with approximately $789$629 at December 31, 2017.2018.
 

 
5.        
Income Taxes
 
IncomeThe Company recorded an income tax expense totalingand benefit, respectively, of approximately $290$154 and $183 has been recorded$201 for the three and six months ended June 30, 2018,2019, respectively, compared with $222an income tax expense of approximately $290 and $101,$183, respectively, for the same periods last year.
 
The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year.  The tax provision in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by pre-tax book income) from period to period.  For 2018, the Company generally expects its effective tax rate to decline compared to 2017, primarily due to the implementation of the Tax Cuts and Jobs Act enacted in December 2017, which, among other things, reduced the U.S. federal corporate tax rate from 35% to 21%.
 
As of June 30, 2018 and December 31, 2017,2019, the Company’s net deferred tax assets totaled approximately $3,139$3,659, and $3,317, respectively,were primarily derived from research and are primarily composed ofdevelopment tax credits, accrued expenses and net operating loss carryforwards (“NOLs”) and research and development costs and tax credits.  As of June 30, 2018, these NOLs total approximately $4,422 for federal and $13,323 for state purposes, with expirations starting in 2018 through 2030..
 
In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years to utilize its NOLs prior to their expiration.years. The Company analyzesanalyzed all positive and negative evidence to determine if, based on the weight of available evidence, the Companyit is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts and product introductions, as well as historical operating results and certain tax planning strategies.
 
Based on management’sthe analysis of all available evidence, both positive and negative, the Company’s managementCompany has concluded that the Company does not haveit has the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Management estimated that as of June 30, 2018, it is more likely than not that approximately $83 of the Company’s deferred tax asset will not be realized due to the inability to generate sufficient Florida taxable income in the necessary period to fully utilize its Florida NOLs. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additionala valuation allowance related to the deferred tax assets recognized as of June 30, 2018.2019.
 
6.       
Investment in Securities
 
The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP, was established for the purpose of investing in securities.
 
As of June 30, 2018,2019, the Company indirectly held approximately $225$202 in cash and 477,282 shares of 1347 Property Insurance Holdings, Inc. (Nasdaq: PIH) with fair value of $3,389,$2,363, through an investment in FGI 1347 Holdings, LP. These shares were purchased in March and May 2018 for approximately $3,741. For the three and six months ended June 30, 2018,2019, the Company recognized an unrealized loss on the investment of approximately $148, compared with an unrealized loss of $55 andfor the same period last year. For the six months ended June 30, 2019, the Company recognized an unrealized gain on the investment of approximately $444, compared with an unrealized loss of $352 respectively.for the same period last year.
 
Affiliates of Fundamental Global Investors, LLC serve as the general partner and the investment manager of FGI 1347 Holdings, LP, and the Company is the sole limited partner. As of June 30, 2018,2019, the Company and the affiliates of Fundamental Global Investors, LLC, including without limitation Ballantyne Strong, Inc., beneficially owned in the aggregate 2,639,3622,714,362 shares of PIH’s common stock, representing approximately 44.1%45.1% of PIH’s outstanding shares. Fundamental Global with its affiliates is the largest stockholder of the Company. Mr. Kyle Cerminara, Chairman of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Chief Executive Officer and Chairman of the Board of Directors of Ballantyne Strong. Mr. Lewis M. Johnson, Co-Chairman of the Company,Company’s Board of Directors, is President, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as a directorCo-Chairman of the Board of Directors of Ballantyne Strong. Messrs. Cerminara and Johnson also serve as Chairman and Co-Chairman, respectively, of the Board of Directors of PIH.
 

 
7.       
Stockholders’ Equity
 
The changes in condensed consolidated stockholders’ equity for the three and six months ended June 30, 2019 and 2018 are as follows:
 
 
Common Stock Shares
 
 
Common Stock Amount
 
 
Additional Paid-In Capital
 
 
Accumulated
Deficit
 
 
Other
Comprehensive
Income
 
 
Treasury
Stock
 
 
Total
 
 
Common Stock Shares
 
 
Common Stock Amount
 
 
Additional Paid-In Capital
 
 
Accumulated Deficit
 
 
Other Comprehensive Income
 
 
Treasury Stock
 
 
Total
 
Balance at December 31, 2017
  13,844,584 
 $8,307 
 $25,642 
 $(5,450)
 $4,318 
 $(810)
 $32,007 
  13,844,584 
 $8,307 
 $25,642 
 $(5,450)
 $4,318 
 $(810)
 $32,007 
Share-based compensation expense
   
  21 
   
  21 
Restricted stock unit compensation expense
   
  34 
   
  34 
Dividends declared ($0.02 per share)
   
  (271)
   
  (271)
Net loss
   
  (443)
   
  (443)
Effect of adoption of ASU 2016-01
   
  4,318 
  (4,318)
   
Repurchase of common stock
   
  (357)
Balance at March 31, 2018
  13,844,584 
  8,307 
  25,697 
  (1,846)
   
  (1,167)
  30,991 
Restricted stock units issued
  38,353 
  23 
  (23)
   
  38,353 
  23 
  (23)
   
Share-based compensation expense
   
  38 
   
  38 
   
  17 
   
  17 
Restricted stock unit compensation expense
   
  73 
   
  73 
   
  39 
   
  39 
Dividends declared
   
  (542)
   
  (542)
Dividends declared ($0.02 per share)
   
  (271)
   
  (271)
Net income
   
  503 
   
  503 
   
  946 
   
  946 
Effect of adoption of ASU 2016-01
   
  4,318 
  (4,318)
   
   
Repurchase of common stock
   
  (616)
   
  (259)
Balance at June 30, 2018
  13,882,937 
 $8,330 
 $25,730 
 $(1,171)
 $ 
 $(1,426)
 $31,463 
  13,882,937 
 $8,330 
 $25,730 
 $(1,171)
 $ 
 $(1,426)
 $31,463 
 

 
 
Common Stock Shares
 
 
Common Stock Amount
 
 
Additional Paid-In Capital
 
 
Accumulated Deficit
 
 
Treasury Stock
 
 
Total
 
Balance at December 31, 2018
  13,882,937 
 $8,330 
 $25,867 
 $(2,393)
 $(4,092)
 $27,712 
Stock options exercised and issued
  1,000 
   
  2 
   
   
  2 
Share-based compensation expense
   
   
  31 
   
   
  31 
Restricted stock unit compensation expense
   
   
  41 
   
   
  41 
Dividends declared ($0.02 per share)
   
   
   
  (254)
   
  (254)
Net loss
   
   
   
  (1,318)
   
  (1,318)
Repurchase of common stock
   
   
   
   
  (337)
  (337)
Balance at March 31, 2019
  13,883,937 
  8,330 
  25,941 
  (3,965)
  (4,429)
  25,877 
Restricted stock units issued
  38,353 
  23 
  (23)
   
   
   
Share-based compensation expense
   
   
  37 
   
   
  37 
Restricted stock unit compensation expense
   
   
  33 
   
   
  33 
Dividends declared ($0.02 per share)
   
   
   
  (255)
   
  (255)
Net loss
   
   
   
  (247)
   
  (247)
Repurchase of common stock
   
   
   
   
  (213)
  (213)
Balance at June 30, 2019
  13,922,290 
 $8,353 
 $25,988 
 $(4,467)
 $(4,642)
 $25,232 


8.       
IncomeLoss per Share
 
The following table sets forth the computation of basic and diluted (loss) income per share:
 
 
Three Months Ended
 
 
Six Months Ended
 
 
Three Months Ended
 
 
Six Months Ended
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2019
 
 
June 30,
2018
 
 
June 30,
2019
 
 
June 30,
2018
 
Numerator:
 
 
 
 
 
 
Net income (numerator for basic and diluted earnings per share)
 $947 
 $1,318 
 $503 
 $50 
Net (loss) income (numerator for basic and diluted income per share)
 $(247)
 $947 
 $(1,565)
 $503 
Denominator:
    
    
Denominator for basic earnings per share weighted average shares
  13,532,958 
  13,785,046 
  13,567,778 
  13,759,732 
Denominator for basic (loss) income per share weighted average shares
  12,720,112 
  13,532,958 
  12,740,798 
  13,567,778 
Effect of dilutive securities:
    
    
Options and restricted stock units
  14,436 
  29,644 
  27,808 
  142,855 
   
  14,436 
   
  27,808 
Denominator:
    
    
Denominator for diluted earnings per share weighted average shares
  13,547,394 
  13,814,690 
  13,595,586 
  13,902,587 
Basic income per share
 $0.07 
 $0.10 
 $0.04 
 $0.00 
Diluted income per share
 $0.07 
 $0.10 
 $0.04 
 $0.00 
Denominator for diluted (loss) income per share weighted average shares
  12,720,112 
  13,547,394 
  12,740,798 
  13,595,586 
Basic (loss) income per share
 $(0.02)
 $0.07 
 $(0.12)
 $0.04 
Diluted (loss) income per share
 $(0.02)
 $0.07 
 $(0.12)
 $0.04 
 
Approximately 435,000564,500 stock options and 3,768116,667 restricted stock units for the three and six months ended June 30, 2018,2019, and 178,500435,000 stock options and 9,0503,768 restricted stock units granted for the three and six months ended June 30, 2017,2018, were excluded from the calculation because they were anti-dilutive.
 

9.       
Non-Cash Share-Based Employee Compensation
 
The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $17$37 and $38$68 for the three and six months ended June 30, 2018,2019, respectively, compared with $14$17 and $16,$38, respectively, for the same periods last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.
 
The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The non-cash share-based employee compensation expense recorded in the three and six months ended June 30, 20182019 was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) of the Notes to the Company’s Consolidated Financial Statementsconsolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018.

 
A summary of activity under the Company’s stock option plans during the six months ended June 30, 20182019 is presented below:
 
As of January 1, 2018
 
Stock Options
 
 
Wgt. Avg.
Exercise
Price ($)
Per Share
 
 
Wgt. Avg.
Remaining
Contractual
Life (Years)
 
 
Wgt. Avg.
Grant Date
Fair Value ($)
Per Share
 
 
Aggregate
Intrinsic
Value ($)
 
As of January 1, 2019
 
Stock Options
 
 
Wgt. Avg.
Exercise
Price ($)
Per Share
 
 
Wgt. Avg.
Remaining
Contractual
Life (Years)
 
 
Wgt. Avg.
Grant Date
Fair Value ($)
Per Share
 
 
Aggregate
Intrinsic
Value ($)
 
Outstanding
  354,500 
  4.46 
   
  1.79 
   
  460,500 
  4.22 
   
  1.76 
   
Vested
  113,000 
  3.75 
   
  2.23 
   
  156,900 
  4.03 
   
  2.05 
   
Nonvested
  241,500 
  4.80 
   
  1.58 
   
  303,600 
  4.32 
   
  1.61 
   
    
    
Period activity
    
    
Issued
  130,000 
  3.72 
   
  1.62 
   
  120,000 
  4.12 
   
  2.11 
   
Exercised
   
  1,000 
  1.89 
   
  0.71 
   
Forfeited
  23,500 
  5.10 
   
  1.37 
   
  15,000 
  5.10 
   
  1.37 
   
Expired
   
   
    
    
As of June 30, 2018
    
As of June 30, 2019
    
Outstanding
  461,000 
  4.22 
  7.58 
  1.76 
  40,560 
  564,500 
  4.18 
  7.23 
  1.85 
  176,100 
Vested
  143,000 
  4.01 
  3.91 
  2.06 
  38,560 
  205,800 
  4.11 
  4.57 
  1.94 
  86,020 
Nonvested
  318,000 
  4.31 
  9.23 
  1.63 
  2,000 
  358,700 
  4.22 
  8.75 
  1.80 
  90,080 
 
Restricted Stock Units
On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which will vest in five equal annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company.
 
On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which will vestvested on June 4, 2019, subject to continued service through such vesting date. 2019.
On June 15, 2017, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 15, 2018.
The Company recorded non-cash restricted stock unit compensation expense of $39$32 and $73$74 for the three and six months ended June 30, 2018,2019, respectively, compared with $6$39 and $0$73, respectively, for the same periods last year.
 

10.    
Commitments and Contingencies
 
From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On 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 assertedThere were no pending material 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 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 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 $2,000, less the amount of commissions paid by the Company with respect to 2018,legal matters as described above. The settlement agreement settled all claims raised by TSG in its lawsuit against the Company. In December 2017, the Company recorded an estimated commission amount of approximately $536. For the six months ended June 30, 2018, the Company paid $231 in commissions to TSG. As of June 30, 2018, the Company estimated and recorded an additional commission amount of approximately $290 for the remaining six months of 2018.2019.
 
Purchase Commitments
 
As of June 30, 2018,2019, the Company had purchase orders to suppliers for inventory of approximately $6,380.$12,131.

 
Significant Customers
 
Sales to the United States government agencies represented approximately $4,776 (35.0%$4,021 (30.2%) and $8,769 (34.5%$9,421 (45.0%) of the Company’s net total sales for the three and six months ended June 30, 2018,2019, respectively, compared with approximately $3,018 (28.0%$4,776 (35.0%) and $5,935 (32.7%$8,769 (34.5%), respectively, for the same periods last year. Accounts receivable from agencies of the United States government were $1,260$690 as of June 30, 2018,2019, compared with approximately $924$1,260 at the same date last year.
 
11.  
Debt
 
On March 28, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation, RELM Communications, Inc., a subsidiary of BK Technologies, Inc., and Silicon Valley Bank, as lender (“SVB”), entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”). The Company has aLoan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its secured revolving credit facility (the “Credit Facility”) was maintained.
Pursuant to the Loan and Security Agreement, the Credit Facility continues to provide BK Technologies, Inc. with Silicon Valley Bank witha maximum borrowing availability of $1,000 (subjectand BK Technologies, Inc. continues to abe subject to substantially the same customary borrowing base)terms and aconditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5,000 during any twelve-month period, is permitted so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. Any borrowings under the Credit Facility will bear interest at the variable interest rate equal to 25 basis points above the Wall Street Journal prime rate. The maturity date of the Credit Facility has been extended to December 26, 2018. As2019.
 The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of June 30, 2018,“Quick Assets” to the Companysum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00; provided that “Net Cash” (defined as the difference between unrestricted cash on deposit with SVB minus any outstanding advances under the Credit Facility) is required to be at least $1,000; and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of no greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations are collateralized by substantially all of its assets, principally accounts receivable and inventory.
 BK Technologies, Inc. was in compliance with all covenants under the loanLoan and security agreement,Security Agreement as amended, governing this revolving credit facility. For a description of such covenants and the other terms and conditions of the loan and security agreement, as amended, reference is made to Note 5 (Debt)date of filing this report. As of the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Asdate of June 30, 2018,filing this report, there were no borrowings outstanding under the revolving credit facilityCredit Facility.
12.    
Leases
The Company adopted ASU No. 2016-02, “Leases” (Topic 842) on January 1, 2019 and thereapplied the modified retrospective approach to adoption whereby the standard is applied only to the current and future periods. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

Lease costs consist of the following:
 
 
Three Months ended
June 30,
2019
 
 
Six Months ended
June 30,
2019
 
Operating lease cost
 $134 
 $268 
Short-term lease cost
  6 
  10 
Variable lease cost
  31 
  63 
Total lease cost
 $171 
 $341 
Supplemental cash flow information related to leases was $1,000as follows:
 
 
Three Months ended
June 30,
2019
 
 
Six Months ended
June 30,
2019
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
 
 
Operating cash flows (fixed payments)
 $118 
 $236 
Operating cash flows (liability reduction)
  78 
  156 
 
    
    
Right-of-use assets obtained in exchange for lease obligations:
    
    
Operating leases
  
  2,840 
Other information related to operating leases was as follows:
June 30,
2019
Weighted average remaining lease term (in years)
7.91
Weighted average discount rate
5.50%
Maturity of borrowing available under the revolving credit facility.lease liabilities as of June 30, 2019 are as follows:
 
 
June 30,
2019
 
Remaining six months of 2019
 $236 
2020
  401 
2021
  431 
2022
  439 
2023
  448 
Thereafter
  1,394 
Total payments
  3,349 
Less: imputed interest
  697 
Total liability
 $2,652 
 

 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
SPECIAL NOTE CONCERNING
FORWARD-LOOKING STATEMENTS
 
We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including the statements about our plans, objectives, expectations and prospects. You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “should,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek”“seek,” “are encouraged” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
 
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 and in our subsequent filings with the Securities and Exchange Commission, and include, among others, the following:
 
● 
changes or advances in technology;
 
the success of our land mobile radio product line;
 
successful introduction of new products and technologies;
 
competition in the land mobile radio industry;
 
general economic and business conditions, including federal, state and local government budget deficits and spending limitations;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;
 
heavy reliance on sales to agencies of the United States government;U.S. Government;
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;
 
retention of executive officers 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;
 

● 
government regulation;
 
our business with manufacturers located in other countries;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;
 
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;systems;
 
availability of adequate insurance coverage;
 
maintenance of our NYSE American listing; and
 
the effect on our stock price and ability to raise equity capital of future sales of shares of our common stock.
 
We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report. Readers are cautioned not to place undue reliance on these forward-looking statements.
 
Reported dollar amounts in the management’s discussion and analysis (“MD&A”) are disclosed in millions or as whole dollar amounts.
 
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report and the MD&A, consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018.
 
Executive Overview
 
BK Technologies Corporation is a holding company, with a wholly-owned operating subsidiary, BK Technologies, Inc. We design, manufacture and market two-way land mobile radios, repeaters, base stations and related components and subsystems.
 
Two-way land mobile radios can be hand-held (portable) or installed in vehicles (mobile). Repeaters expand the range of two-way land mobile radios, enabling them to operate over a wider area. Base station components and subsystems are installed at radio transmitter sites to improve performance by enhancing the signal and reducing or eliminating signal interference and enabling the use of one antenna for both transmission and reception. We incorporate both analog and digital technologies in our products. Our digital technology is compliant with the Project 25 standard of the Association of Public-Safety Communications Officials (“APCO Project 25,” or “P-25”). Later in 2018, we plan to introduceOfficials. We offer products under two brand names: BK Radio and RELM. Generally, BK Radio-branded products serve the first model in our line of multi-bandgovernment and public safety market, while RELM-branded products to complement our existing KNG products.serve the business and industrial market.
 
Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.,” and our common stock began trading on the NYSE American stock exchange under the new ticker symbol “BKTI” on June 5, 2018. Our stockholders approved the name change at the annual meetingAnnual Meeting of stockholdersStockholders held on June 4, 2018.
 
We conduct business under
On March 28, 2019, we implemented a holding company reorganization. The reorganization created a new holding company, BK Technologies Corporation, which became the namenew parent company of BK Technologies, Inc. The holding company reorganization was intended to create a more efficient corporate structure and offer products under two brand names: BK Radio and RELM. Generally, BK Radio-branded products serveincrease operational flexibility. We did not incur any material operational or financial impacts. The holding company reorganization was effected through a merger transaction that was a tax-free transaction for U.S. federal income tax purposes for our stockholders. No stockholder vote was required to effect the government and public safety market, while RELM-branded products serve the business and industrial market.merger transaction.
 

As part of the holding company reorganization, stockholders of our predecessor, BK Technologies, Inc., became stockholders of BK Technologies Corporation, on a one-for-one basis, with the same number of shares and same ownership percentage of common stock that they held immediately prior to the holding company reorganization. Following the reorganization, BK Technologies Corporation replaced BK Technologies, Inc. as the publicly traded entity, and shares of BK Technologies Corporation were listed on the NYSE American under the symbol “BKTI,” which is the same symbol as previously used by BK Technologies, Inc. In addition, the common stock of BK Technologies Corporation was assigned a new CUSIP Number: 05587G 104. The holding company has the same directors and executive officers as its predecessor, BK Technologies, Inc.
 
For the purpose of this report, references to “we” or the “Company” or our management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates.
Second Quarter Summary
 
OurOverall, our financial and operating results for the three and six months ended June 30, 2018 improved significantly2019 declined compared with the same periods last year. Sales grew for both the second quarter and the six month periods of 2018 compared with the same periods last year. Gross profit margins increased duringFor the second quarter of 2018 compared with the2019, sales were within 97.3% of sales for last year’s second quarter last year and compared with the preceding quarter of 2018. Consequently, we recognized operating incomequarter. Sales for the first six months of 2018, as compared to an operating lossended June 30, 2019 were 17.6% below sales for the same period last year, which was attributed primarily to sales in the first quarter of 2019. Gross profit margins for the second quarter of 2019 were comparable to the second quarter last year. AlsoFor the six month period of 2019, however, gross profit margins were adversely impacted by lower sales and manufacturing levels during the first quarter of 2019. Engineering and product development expenses for the second quarter and six monthsmonth periods of 2018,2019 exceeded expenses for the comparable periods last year. The second quarter of 2019 yielded operating income; an improvement from an operating loss in the first quarter of 2019. For the six month period of 2019, we generated positive cash flow and reduced inventory.recognized an operating loss compared with operating income for the same period last year.
 
For the second quarter of 2018,2019, our sales increased 26.9%decreased 2.7% to approximately $13.7$13.3 million, compared with approximately $10.8$13.7 million for the same quarter last year. For the six months ended June 30, 2018,2019, sales increased 40.0%decreased 17.6% to approximately $25.4$20.9 million, compared with $18.1$25.4 million for the same period last year.
 
Gross profit margins as a percentage of sales for the second quarter of 2018 grew to2019 were approximately 43.1%42.9%, compared with 41.8%43.1% for the second quarter last year. For the six month period ended June 30, 2018,2019, gross profit margins as a percentage of sales increaseddecreased to 42.2%38.9%, compared with 37.1%42.2% for the same period last year.
 
For the second quarter of 2018, selling,Selling, general and administrative expenses (“SG&A”) for the second quarter of 2019 totaled approximately $4.6$5.7 million (33.3%(42.7% of sales), compared with approximately $3.5$4.6 million (32.7%(33.3% of sales) for the same quarter last year. SG&A expenses for the first six months of 20182019 totaled approximately $8.6$10.4 million (34.0%(49.8% of sales), compared with approximately $7.0$8.6 million (38.4%(34.0% of sales) for the same period last year.
 
Operating income forFor the second quarter ended June 30, 2018, increased 36.8% toof 2019, we recognized operating income of approximately $20,000, compared with approximately $1.3 million compared with approximately $973,000 for the same quarter last year. For the six month period of 2018, operating income increased to approximately $2.1 million, compared with2019, we reported an operating loss of approximately $233,000$2.3 million, compared with operating income of approximately $2.1 million for the same period last year.
 

For the three and six months ended June 30, 2018,second quarter of 2019, we recognized an unrealized loss totaling $55,000 and $352,000, respectively,$148,000 on our investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated variable interest entity. No comparableThis compares with an unrealized loss was incurredof $55,000 on the investment for the second quarter last year. For the six month period ended June 30, 2019, we recognized unrealized gain of approximately $444,000, compared with an unrealized loss of $352,000 for last year’s three and six month periods.period. Also for the six months ended June 30, 2018, we recognized a loss on the sale of securities totaling approximately $849,000, compared with a $617,000 gain for the same period last year. Other expense for the three and six months ended June 30, 2018 totaled approximately $58,000 and $225,000, respectively, compared with approximately $60,000 and $147,000 for the same periods last year.$849,000.
 
Pretax incomeNet loss for the three months ended June 30, 2018, totaled approximately $1.2 million, compared with approximately $1.5 million for the same quarter last year. For the six months ended June 30, 2018, pretax income totaled approximately $686,000, compared with approximately $151,000 for the same period last year.
For the three and six months ended June 30, 2018, we recognized income tax expense totaling approximately $290,000 and $183,000, respectively, compared with $222,000 and $101,000, respectively, for the same periods last year. Our income tax expense is largely non-cash due to utilization of our net operating loss carryforwards (“NOLs”).
Net income for the three months ended June 30, 20182019 was approximately $947,000$247,000 ($0.070.02 per basic and diluted share), compared with net income of approximately $1.3 million$947,000 ($0.100.07 per basic and diluted share) for the same quarter last year. For the six months ended June 30, 2018,2019, net incomeloss totaled approximately $503,000$1.6 million ($0.040.12 per basic and diluted share), compared with net income of approximately $50,000$503,000 ($0.000.04 per basic and diluted share) for the same period last year.
 
As of June 30, 2018,2019, working capital totaled approximately $23.4$17.1 million, of which approximately $17.7$12.5 million was comprised of cash, cash equivalents and trade receivables. As of December 31, 2017,2018, working capital totaled approximately $26.7$21.0 million, of which approximately $12.7$17.0 million was comprised of cash, cash equivalents and trade receivables.

 
Results of Operations
 
As an aid to understanding our operating results for the periods covered by this report, the following table shows selected items from our condensed consolidated statements of incomeoperations expressed as a percentage of sales:
 
 
Percentage of SalesThree Months Ended
 
 
Percentage of SalesSix Months Ended
 
 
Percentage of Sales
Three Months Ended
 
 
Percentage of Sales
Six Months Ended
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2018
 
 
June 30,
2017
 
 
June 30,
2019
 
 
June 30,
2018
 
 
June 30,
2019
 
 
June 30,
2018
 
Sales
  100.0%
  100.0%
  100.0%
  100.0%
  100.0%
  100.0%
  100.0%
  100.0%
Cost of products
  (56.9)
  (58.2)
  (57.8)
  (62.9)
  (57.1)
  (56.9)
  (61.1)
  (57.8)
Gross margin
  43.1 
  41.8 
  42.2 
  37.1 
  42.9
  43.1 
  38.9
  42.2 
Selling, general and administrative expenses
  (33.3)
  (32.7)
  (34.0)
  (38.4)
  (42.7)
  (33.3)
  (49.8)
  (34.0)
Other income (expense)
  (0.7)
  5.2 
  (5.5)
  2.1 
  (0.8)
  (0.7)
  2.5 
  (5.5)
Income before income taxes
  9.1 
  14.3 
  2.7 
  0.8 
Income tax expense
  (2.1)
  (2.1)
  (0.7)
  (0.5)
Net income
  7.0%
  12.2%
  2.0%
  0.3%
(Loss) income before income taxes
  (0.9)
  9.1 
  (8.4)
  2.7 
Income tax (expense) benefit
  (1.2)
  (2.1)
 1.0
  (0.7)
Net (loss) income
  (1.8)%
  7.0%
  (7.5)%
  2.0%
 
Net Sales
 
For the second quarter ended June 30, 2018,2019, net sales increased 26.9% tototaled approximately $13.7$13.3 million, compared with approximately $10.8$13.7 million for the same quarter last year. ForSales for the six months ended June 30, 2018, net sales increased 40.0% to2019 totaled approximately $25.4$20.9 million, compared with approximately $18.1$25.4 million for the samesix month period last year.
 
The increase in totalNet sales for the second quarter of 2019 were comparable with sales for the second quarter last year, and six months ended June 30, 2018increased 73.9% ($5.7 million) from the first quarter this year, which was attributed primarilyadversely impacted by the shutdown of the federal government in the United States and sluggish sales to state and local government agency customers. Subsequent to the shutdown, orders from federal government customers improved during the second quarter. Sales to state public safety agencies also improved during the second quarter, including orders fora previously announced order from the Statestate of California, and new state agency customers. Sales to state agencies were supplemented by demand from federal agencies, as well as international customers.which was fulfilled during the second quarter of 2019.
 
SalesWe are encouraged by our funnel of sales prospects, for the remainder of 2018 and into next year appear promising as we look to grow our market share, particularlyincluding potential new customers in thefederal, state and local arena. Accordingly, we are investing in additionalpublic safety agencies. Our sales and marketing resources have been expanded and strengthened in order to capitalize on new opportunities.these opportunities in the future.
 

Cost of Products and Gross Profit Margin
 
Gross profit marginmargins as a percentage of sales for the second quarter ended June 30, 2018 increased to 43.1%2019 were approximately 42.9%, compared with 41.8%43.1% for the same quarter last year, and improved from 31.9% for the first quarter this year. For the six monthsmonth period ended June 30, 2018,2019, gross profit margins increased to 42.2%were approximately 38.9%, compared with 37.1%42.2% for the same period last year.
 
Our cost of products and gross profit marginmargins are derived primarily from material, labor and overhead costs, product mix, manufacturing volumes and pricing. TheFor the second quarter of 2019, the improvement in gross profit margins for bothfrom the secondpreceding quarter was a reflection of higher sales and six month period was attributed primarily to increased salesmanufacturing volumes combined with a more favorable mix of product sales. Additionally,Gross profit margins for the first quarter of 2019 were adversely impacted by increased productionmaterial costs for certain components and a mix of sales weighted more heavily toward lower margin products. Also, lower manufacturing volumes enabled usin the first quarter contributed to more effectively utilizesuboptimal utilization and absorb our baseabsorption of manufacturing overhead expenses, and we are realizing benefits associated with manufacturing and quality improvement programs. Comparatively, last year’s first two quarters included certain product enhancement expensessupport expenses. Anticipated sales growth and the discontinuationexpected production and sale of a product development initiative.new products should favorably impact overall gross profit margins in the future.
 
We continue to utilize contract manufacturing relationships for production efficiencies and to manage material and labor costs. We anticipate that our current contract manufacturing relationships or comparable alternatives will be available to us in the future. We may encounter product cost and competitive pricing pressures in the future. However, the extent of their impact on gross margins, if any, is uncertain.
 

Selling, General and Administrative Expenses
 
SG&A expenses consist of marketing, sales, commissions, engineering, product development, management information systems, accounting, headquarters and non-cash share-based employee compensation expenses.
 
SG&A expenses for the second quarter ended June 30, 20182019 totaled approximately $5.7 million, or 42.7% of sales, compared with approximately $4.6 million, or 33.3% of sales, compared with approximately $3.5 million, or 32.7% of sales, for the second quarter last year. For the six months ended June 30, 2018,2019, SG&A expenses totaled approximately $10.4 million, or 49.8% of sales, compared with approximately $8.6 million, or 34.0% of sales, compared with approximately $7.0 million, or 38.4% of sales, for the samesix month period last year.
 
Engineering and product development expenses for the second quarter of 20182019 totaled approximately $1.9$3.1 million (13.8%(23.3% of total sales), compared with $1.2approximately $1.9 million (11.1%(13.8% of total sales) for the same quarter last year. For the six-month period,six months ended June 30, 2019, engineering and product development expenses totaled approximately $3.7$5.2 million (14.6%(25.1% of total sales), compared with approximately $2.1$3.7 million (11.6%(14.5% of total sales) for the samesix month period last year. The increase in engineering expenses was driven by costs related toDuring the first six months of 2019, we launched two new product development.development initiatives relating to a new line of portable and mobile radios to succeed our current KNG line, while also continuing to invest in the development of our BKR 9000 multiband product.
 
Marketing and selling expenses for the second quarter of 20182019 totaled approximately $1.6$1.3 million (11.7%(9.6% of sales), compared with approximately $1.3$1.6 million (12.0% of sales) for the second quarter last year. For the six-month period,six months ended June 30, 2019, marketing and selling expenses totaled approximately $2.9$2.7 million (11.4%(12.9% of sales), compared with $2.6approximately $2.9 million (14.4%(11.2% of sales) for the same period last year. The increase for both periods is attributed primarily to. Sales incentive commission expenses decreased as a result of lower sales, commissions and incentive compensation directly related towhich were partially offset by expenses associated with additional sales performance.staff.
 
General and administrative expenses for the second quarter of 20182019 totaled approximately $1.0$1.3 million (7.3%(9.8% of total sales), compared with approximately $1.1$1.0 million (10.2%(7.5% of total sales) for the samesecond quarter last year. For the six-month period,six months ended June 30, 2019, general and administrative expenses totaled approximately $2.5 million (11.9% of sales), compared with approximately $2.1 million (8.2% of sales), compared with $2.2 million (12.3% of sales) for the samesix month period last year. The decreaseincrease in costs for both periodsgeneral and administrative expenses was attributed primarily to one-time costs incurred last year related to changes in senior leadership. Those cost decreases were partially offset by expenses associated with changing the Company’s name.corporate headquarters, including our holding company reorganization, and upgrading our information technology security and capabilities.

 
Operating (Loss) Income
 
Operating income for the second quarter ended June 30, 2018 increased 36.8% to2019 totaled approximately $1.3 million (9.7%$20,000 (0.2% of sales), compared with operating income of approximately $973,000 (9.0%$1.3 million (9.7% of sales) for the same quarter last year. For the six months ended June 30, 2018,2019, our operating income increased toloss totaled approximately $2.1$2.3 million (8.2%(11.0% of sales), compared with an operating lossincome of approximately $233,000 (1.3% of sales)$2.1 million for the samesix month period last year. The increasedecline in operating income for the quarter, and the operating loss for the six month period, of 2019 was attributed primarily to lower sales growth and improved gross profit margins, which were partially offset bycombined with increased product development expenses.
 
Other Income (Expense)
 
We recorded net interest income of $19,000approximately $46,000 for the second quarter ended June 30, 2018,2019, compared with $10,000approximately $19,000 for the second quarter last year. For the six months ended June 30, 2018,2019, net interest income totaled approximately $35,000,$101,000, compared with approximately $18,000$35,000 for the samesix month period last year. Interest income increased primarily as a result of oura higher cash balance.balance compared with the prior year’s periods. Interest expense may be incurred from time to time on outstanding borrowings under our revolving credit facilitythe Credit Facility (defined below) and earn interest income on our cash balances. The interest rate on such revolving credit facilityCredit Facility as of June 30, 20182019 was the Wall Street Journal prime rate plus 25 basis points (5.25%(5.75% as of June 30, 2018)2019). We had no outstanding borrowings as of June 30, 2019.
 
For the three and six months ended June 30, 2018,2019, we recognized an unrealized loss of approximately $55,000 and $352,000, respectively,$148,000 on our investment in 1347 Property Insurance Holdings, Inc. (Nasdaq: PIH). IFor the six months ended June 30, 2019, we recognized an unrealized gain of approximately $444,000 on the same investment. Duringn March and May 2018, we indirectly purchased 477,282 shares of common stock of PIH, for approximately $3.7 million, through an investment in FGI 1347 Holdings, LP, a consolidated variable interest entity of which we are the sole limited partner. For the three and six months ended June 30, 2017, we recognized a gain of $617,000 on the sales of available-for-sales securities.

During the first six months ended June 30, 2018, we sold 1,317,503 shares of Iteris, Inc., which cost approximately $2.4 million, for approximately $8.3 million, and recognized a loss of approximately $849,000.
 
For the three and six months ended June 30, 2018,2019, we recognized other expenses totaling approximately $58,000$11,000 and $225,000,$13,000, respectively, compared with approximately $60,000$58,000 and $147,000,$225,000, respectively, for the same periods last year. TheseOther expenses in 2018 were primarily attributed the disposal of assets related to a discontinued product initiative and exchange losses related to sales under a Canadian dollar-denominated contract. Also during last year’s first quarter, we recorded a non-recurring loss of approximately $104,000 on the disposal of assets related to a discontinued product initiative.
 
Income Taxes
 
We recorded an income tax expense of approximately $154,000 for the three months ended June 30, 2019, compared with income tax expense of approximately $290,000 and $183,000, respectively, for the three andsecond quarter last year. For the six months ended June 30, 2018,2019, we recorded an income tax benefit of approximately $201,000, compared with income tax expense of approximately $222,000 and $101,000, respectively,$183,000 for the same periodssix month period last year.
 
Our income tax provision is based on management’s estimate of the effective tax rate for the full year.  The tax provision in any period will be affected by, among other things, permanent, as well as temporary, differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, we may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by pre-tax book income) from period to period.  For 2018,2019, we generally expects itsexpect our effective tax rate to decline comparedbe comparable to 2017, primarily due to the implementation of the Tax Cuts and Jobs Act enacted in December 2017, which, among other things, reduced the U.S. federal corporate tax rate from 35% to 21%.last year.
 
As of June 30, 2018,2019, our net deferred tax assets totaled approximately $3.14$3.7 million, and arewere primarily composed of NOLs.  These NOLs total approximately $4.42 million for federalderived from research and $13.32 million for state purposes, with expirations starting in 2018 through 2030.development tax credits and accrued expenses.
 
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.years. We analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon our conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts and product introductions, as well as historical operating results and certain tax planning strategies.
 

Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Management estimates that as of June 30, 2018, it is more likely than not that approximately $83,000 of the deferred tax asset will not be realized due to the inability to generate sufficient Florida taxable income in the necessary period to fully utilize the Florida NOLs. We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2018.2019.
 
Liquidity and Capital Resources
 
For the six months ended June 30, 2018,2019, net cash used in operating activities totaled approximately $1.3 million, compared with cash provided by operating activities totaled approximately $711,000, compared with cash used in operating activities of approximately $1.4$0.7 million for the same period last year.  Cash provided byused in operating activities for the six months ended June 30, 2019, was primarily related to a net income, adjusted byloss, an increase in inventories, a decrease in accrued compensation, and unrealized lossgains on investment in securities, and a decrease in inventories, which were partially offset by a decrease inincreased accounts payable and an increase in tradedecreased accounts receivable.

 
For the six months ended June 30, 2018,2019, we had a net loss of approximately $1.6 million, compared with net income of approximately $503,000 compared with approximately $50,000 for the same period last year. Accrued compensation decreased approximately $691,000 for the 2019 period, which was attributed primarily to the payment of sales and management incentive compensation. For the same period last year, accrued compensation increased approximately $251,000. Net inventories decreasedincreased during the six months ended June 30, 20182019 by approximately $1.6$1.8 million, compared with an increasea decrease of $843,000approximately $1.6 million for the same period last year. The 2018 decreaseincrease for the six months period of 2019 was primarily attributedattributable to an increasematerial purchases combined with a decrease in sales. The lossUnrealized gains on investment in securities for the six months ended June 30, 20182019 totaled approximately $1.2 million,$444,000, compared with a gainlosses of approximately $617,000$1.2 million for the same period last year. For additional information pertaining to our investment in securities, refer to Notes 1 (Condensed Consolidated Financial Statements) and 6 (Investment in Securities) to the condensed consolidated financial statements found on pages 7 and 9, respectively, ofincluded in this report. Accounts receivable increaseddecreased approximately $1.5 million$628,000 during the six months ended June 30, 2018,2019, compared with $1.9an increase of approximately $1.5 million for the same period last year, reflecting sales that were consummated lateryear. The decrease in the respective quarter that had not yet completed their collection cycle.accounts receivable was attributable to collections. Accounts payable for the six months ended June 30, 2018, decreased2019, increased approximately $1.2 million, compared with a decrease of approximately $2.4 million compared with an increase of approximately $899,000 for the same period last year, primarily due to timing of payments to material suppliers. Depreciation and amortization totaled approximately $439,000$575,000 for the six months ended June 30, 2018,2019, compared with approximately $471,000$439,000 for the same period last year.
 
Cash provided byused in investing activities for the six months ended June 30, 20182019 totaled approximately $1.5 million and was attributed to purchases of property, plant and equipment. For the same period last year, cash provided by investing activities totaled approximately $4.0 million, compared with approximately $450,000 for the same period last year. Proceedscomprised primarily of proceeds from the sale of available-for-sale securities totaledtotaling approximately $8.3 million, for the six months ended June 30, 2018, compared with approximately $897,000 for the same period last year. We utilized approximately $3.7 million forwhich was partially offset by an investment in FGI 1347 Holdings, LP. There was no comparable investment for the same period last year. For the six months ended June 30, 2018,LP of approximately $3.7 million, and purchases of property, plant and equipment totaledtotaling approximately $569,000, compared with approximately $447,000 for the same period last year.$569,000.
 
For the six months ended June 30, 2018,2019, approximately $1.2$1.1 million was used in financing activities, primarily related to our capital return program, which included quarterly dividends totaling approximately $544,000$510,000 and stock repurchases totaling approximately $616,000.$550,000. For the same period last year, approximately $2.5 million$544,000 was used to pay dividends and approximately $217,000$616,000 was used for stock repurchases. For the same period last year, we also received approximately $183,000 from the issuance of common stock upon the exercise of stock options.
 
We haveOn March 28, 2019, BK Technologies, Inc., our wholly-owned subsidiary, and RELM Communications, Inc., a wholly-owned subsidiary of BK Technologies, Inc., entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”). The Loan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its secured revolving credit facility (the “Credit Facility”) was maintained.

Pursuant to the Loan and Security Agreement, the Credit Facility continues to provide BK Technologies, Inc. with Silicon Valley Bank witha maximum borrowing availability of $1.0 million, and aBK Technologies, Inc. continues to be subject to substantially the same customary borrowing terms and conditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5.0 million during any twelve-month period, is permitted so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. Any borrowings under the Credit Facility will bear interest at the variable interest rate equal to 25 basis points above the Wall Street Journal prime rate. The maturity date of the Credit Facility has been extended to December 26, 2018. As2019.
 The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of June 30, 2018,“Quick Assets” to the sum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00; provided that “Net Cash” (defined as the datedifference between unrestricted cash on deposit with SVB minus any outstanding advances under the Credit Facility) is required to be at least $1.0 million; and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of this report, we wereno greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations are collateralized by substantially all of its assets, principally accounts receivable and inventory.
 BK Technologies, Inc. was in compliance with all covenants under the loanLoan and security agreement,Security Agreement as amended, governing the revolving credit facility. For a description of such covenants and the other terms and conditions of the loan and security agreement, as amended, reference is made to Note 5 (Debt)date of our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
filing this report. As of June 30, 2018,2019 and the date of filing this report, there were no borrowings outstanding under the revolving credit facility. As of June 30, 2018,Credit Facility and the date of this report, there was $1.0 million of borrowing available under the revolving credit facility.Credit Facility.
 
Our cash and cash equivalents balance at June 30, 20182019 was approximately $10.7$7.4 million.  We believe these funds combined with anticipated cash generated from operations and borrowing availability under our revolving credit facilityCredit Facility are sufficient to meet our working capital requirements for the foreseeable future. However, financial and economic conditions could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all. We also face other risks that could impact our business, liquidity and financial condition. For a description of these risks, see “Item 1A. Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

2018.
 
Critical Accounting Policies
 
In response to the Securities and Exchange Commission’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, we have selected for disclosure our revenue recognition process and our accounting processes involving significant judgments, estimates and assumptions.  These processes affect our reported revenues and current assets and are, therefore, critical in assessing our financial and operating status.  We regularly evaluate these processes in preparing our financial statements.  The processes for revenue recognition, allowance for collection of trade receivables, allowance for excess or obsolete inventory, software development and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances.  These estimates and assumptions, if incorrect, could adversely impact our operations and financial position. The Company adopted ASU No. 2014-09, "Revenue from Contracts with Customers", and all the related amendments (collectively “Topic 606”) in the first quarter of 2018 and applied the modified retrospective approach.  Under Topic 606, revenue is recognized when control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred.  The adoption of Topic 606 did not have, and is not expected to have, a material effect on the timing or amount of revenue recognized as compared with the Company’s previous revenue recognition practices because the Company’s primary source of revenues is from shipments of products.  
 
There were no other changes to our critical accounting policies during the quarter ended June 30, 2018,2019, as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018.
 
Item 4.
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Our President (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) andor 15d-15(e)) as of June 30, 2018.2019. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective as of June 30, 2018.2019.
 
Changes in Internal Control over Financial Reporting
 
During the three months ended June 30, 2018,2019, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


 

PART II-OTHER INFORMATION
 
Item 1A.
RISK FACTORS
Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors as disclosed in our Annual Report, except as follows:
As a holding company, BK Technologies Corporation is dependent on the operations and funds of its subsidiaries
On March 28, 2019, we completed a reorganization pursuant to which BK Technologies Corporation became a holding company with no business operations of its own. 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. As a result, we rely on cash flows from subsidiaries to meet our obligations, including payment of dividends to our stockholders. Additionally, our subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to BK Technologies Corporation, as the new holding company. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility. The anticipated benefits of this reorganization may not be obtained if circumstances prevent us from taking advantage of the opportunities that we expect it may afford us. As a result, we may incur the costs of a holding company structure without realizing the anticipated benefits, which could adversely affect our reputation, financial condition, and operating results.
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Issuer Purchases of Equity Securities
 
Period
 
Total Number of Shares Purchased
 
 
Average  Price Paid Per Share (1)  
 
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
 
 
Maximum Number of
Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2)
 
04/01/18-04/30/18
  21,084 
 $3.92 
  21,084 
  693,602(2)
 
05/01/18-05/31/18
  23,635 
 $3.72 
  23,635 
  669,967 
 
06/01/18-06/30/18
  22,721 
 $3.77 
  22,721 
  647,246 
 
Total
  67,440 
 $3.80 
  67,440 
 
    
Period
 
Total Number of Shares Purchased
 
 
Average Price Paid Per Share (1)
 
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
 
 
Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2)
 
04/01/19-04/30/19
  27,489 
 $4.12 
  27,489 
  280,068 
05/01/19-05/31/19
  13,619 
 $4.05 
  13,619 
  266,449 
06/01/19-06/30/19
  10,023 
 $4.05 
  10,023 
  256,426 
Total
  51,131 
 $4.07 
  51,131 
    
 
(1)
Average price paid per share of common stock repurchased is the executed price, including commissions paid to brokers.
 
(2)
The Company has a repurchase program of up to 1 million shares of the Company’s common stock that can be purchased, from time to time, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act. The repurchase program was initially announced in May 2016 and expanded in June 2017 and has no termination date.
 

Item 6.
EXHIBITS
 
Exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index below.
 

Exhibit Index
 
Exhibit
Number
 Description
 Articles of Incorporation(1)Merger, filed with the Nevada Secretary of State on March 28, 2019 (Incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
 Certificate of Amendment to Articles of Incorporation (2001)(2)of BK Technologies Corporation (Incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K12B filed March 28, 2019)
 CertificateBylaws of AmendmentBK Technologies Corporation (Incorporated by reference from Exhibit 3.3 to Articles of Incorporation (2018)(3)
Second Amended and Restated Bylaws(4)the Company’s Current Report on Form 8-K12B filed March 28, 2019)
 Certification of Principal Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Certification of Principal Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted purs  uantpursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K)
 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K)
Exhibit 101.INS XBRL Instance Document
Exhibit 101.SCH XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF XBRL Taxonomy Definition Linkbase Document
 
(1) 
Incorporated by reference from Exhibit 3(i) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997.
(2) 
Incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
(3) 
Incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 4, 2018.
(4) 
Incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed June 4, 2018.
 
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 BK TECHNOLOGIES INC.CORPORATION
 (The “Registrant”)
  
Date: August 1, 20186, 2019By:/s/ Timothy A. Vitou                                                                  
 
Timothy A. Vitou
President
(Principal executive officer and duly
authorized officer)
  
Date: August 1, 20186, 2019By:/s/ William P. Kelly                                                                 
 
William P. Kelly
Executive Vice President and
Chief Financial Officer
(Principal financial and accounting
officer and duly authorized officer)
  
 
 
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