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What changed in BK Technologies Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BK Technologies Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+254 added−225 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-16)

Top changes in BK Technologies Corp's 2023 10-K

254 paragraphs added · 225 removed · 189 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

37 edited+11 added−5 removed49 unchanged
Biggest changeConsistent with that strategy, we have successfully utilized a hybrid of Florida-based internal manufacturing capability in concert with outside contract arrangements for different manufacturing processes. In recent years, the breadth of our internal manufacturing capabilities has been expanded. Our outside manufacturing contract arrangements have been managed and updated to meet our present requirements, including increasing relationships with American concerns.
Biggest changeManufacturing and Raw Materials Our manufacturing strategy is to utilize the highest quality and most cost-effective resources available for every aspect of our manufacturing. Consistent with that strategy, we have successfully utilized a hybrid of Florida-based internal manufacturing capability in concert with outside contract arrangements for different manufacturing processes.
We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, Project 25 (“P25”) compliant radio at a lower cost relative to comparable offerings. The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over the public cellular networks.
We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, Project 25 (“P25”) compliant radio at a lower cost relative to comparable offerings. The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over public cellular networks.
We are the resulting corporation from the reincorporation merger of our predecessor, Adage, Inc., a Pennsylvania corporation, which reincorporated from Pennsylvania to Nevada effective as of January 30, 1998. Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.” On March 28, 2019, we implemented a holding company reorganization.
We are the corporation resulting from the reincorporation merger of our predecessor, Adage, Inc., a Pennsylvania corporation, which reincorporated from Pennsylvania to Nevada effective as of January 30, 1998. Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.” On March 28, 2019, we implemented a holding company reorganization.
The actual timing, manner and number of shares repurchased under the program will be determined by management and the Board of Directors at their discretion, and will depend on several factors, including the market price of our common shares, general market and economic conditions, alternative investment opportunities, and other business considerations in accordance with applicable securities laws and exchange rules.
The actual timing, manner and number of shares repurchased under the program will be determined by management and the Board of Directors at their discretion, and will depend on several factors, including the market price of our Common Stock, general market and economic conditions, alternative investment opportunities, and other business considerations in accordance with applicable securities laws and exchange rules.
Generally, BK Technologies-branded products serve the government markets including but not limited to emergency response, public safety, homeland security and military customers of federal, state, and municipal government agencies, as well as various industrial and commercial enterprises.
Generally, BK Technologies-branded products serve government markets, including, but not limited to, emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises.
Certain of our products are subject to various federal, state, local and international laws governing chemical substances in electronic products. During 2022, compliance with these U.S. federal, state and local and international laws did not have a material effect on our capital expenditures, earnings or competitive position.
Certain of our products are subject to various federal, state, local and international laws governing chemical substances in electronic products. During 2023, compliance with these U.S. federal, state and local and international laws did not have a material effect on our capital expenditures, earnings or competitive position.
In most instances, our KNG and BKR-branded products serve this market and are sold either directly to end-users or through two-way communications dealers. The BKRplay smartphone application and InteropONE POC service have been designed to service this market and are expected to be sold directly to end-users or through SaaS resellers.
In most instances, our KNG and BKR-branded products serve this market and are sold either directly to end-users or through two-way communications dealers. The BKRplay smartphone application and InteropONE POC service have been designed to service this market and are sold directly to end-users or through SaaS resellers.
As cellular coverage continues to improve terrestrially and soon from low earth orbit satellites, the opportunity to further extend mobile applications from public safety vehicles to the first responder’s smartphone opens a new era of services and opportunities. Description of Radio Products and P25 CAP Compliance We offer products under the company brand name BK Technologies.
As cellular coverage continues to improve terrestrially and soon from low earth orbit satellites, the opportunity to further extend mobile applications from public safety vehicles to the first responder’s smartphone opens a new era of services and opportunities. 3 Table of Contents Description of Radio Products and P25 CAP Compliance We offer products under the company brand name BK Technologies.
Likewise, the cost of end user LMR radios can range from under $100 for a basic analog portable, to thousands of dollars for a fully featured P25 digital unit. LMR systems are the most widely used and longest-used form of wireless dispatch communications in the U.S., having been first placed in service in 1921.
Likewise, the cost of end user LMR radios can range from under $100 for a basic analog portable, to thousands of dollars for a fully featured P25 digital unit. 2 Table of Contents LMR systems are the most widely used and longest-used form of wireless dispatch communications in the U.S., having been first placed in service in 1921.
Radio users in the business and industrial market utilize alternative digital technologies (e.g., Digital Mobile Radio) and analog LMR products. 2 Table of Contents Presently, the market is dominated by one supplier, Motorola Solutions, Inc., which offers a broader range of products than we do.
Radio users in the business and industrial market utilize alternative digital technologies (e.g., Digital Mobile Radio) and analog LMR products. Presently, the market is dominated by one supplier, Motorola Solutions, Inc., which offers a broader range of products than we do.
On December 17, 2021, a share repurchase program was authorized under which we may repurchase up to an aggregate of $5 million of its common shares. Share repurchases under this program were authorized to begin immediately. The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations.
On December 17, 2021, a share repurchase program was authorized under which we may repurchase up to an aggregate of $5 million of our Common Stock. Share repurchases under this program were authorized to begin immediately. The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations.
All operating activities described herein are undertaken by our operating subsidiary. In business for over 70 years, BK consists of two business units: Radio and SaaS. The Radio business unit designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”). Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile).
All operating activities described herein are undertaken by our operating subsidiary. In business for over 70 years, BK operates two key business units: Radio and SaaS. The Radio business unit designs, manufactures and markets wireless communications products consisting of two-way land mobile radios (“LMRs”). Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile).
Government represented approximately 38% and 36% of our total sales for the years ended December 31, 2022 and 2021, respectively. These sales were primarily to various government agencies, including those within the DHS, the U.S. Department of Defense (“DOD”), the USFS and the U.S. Department of Interior (“DoI”).
Government represented approximately 49% and 38% of our total sales for the years ended December 31, 2023 and 2022, respectively. These sales were primarily to various government agencies, including those within the DHS, the U.S. Department of Defense (“DOD”), the USFS and the U.S. Department of Interior (“DoI”).
Backlog Our backlog of unshipped customer orders was approximately $27.0 million and $13.1 million as of December 31, 2022 and 2021, respectively. Changes in the backlog are attributed primarily to the timing of orders and their fulfillment, which can be impacted by factors related to our supply chain.
Backlog Our backlog of unshipped customer orders was approximately $16.0 million and $27.0 million as of December 31, 2023 and 2022, respectively. Changes in the backlog are attributed primarily to the timing of orders and their fulfillment, which can be impacted by factors related to our supply chain.
We have modified our business practices and implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing and remote work practices, including restricting employee travel, modifying employee work locations, implementing social distancing and enhanced sanitary measures in our facilities, and cancelling attendance at events and conferences.
During the COVID-19 pandemic, we modified our business practices and implemented certain policies at our offices in accordance with best practices to accommodate, and at times mandate, social distancing and remote work practices, including restricting employee travel, modifying employee work locations, implementing social distancing and enhanced sanitary measures in our facilities, and cancelling attendance at events and conferences.
Their primary development focus has been the design of a new line of next-generation P25 digital products, the BKR Series, which are in the process of supplanting our KNG products. The first product in this line, the VHF BKR5000 portable radio was introduced in August 2020.
Their primary development focus has been the design of a new line of next-generation P25 digital products, the BKR Series, which are in the process of supplanting our KNG products. The first product in this line, the VHF BKR5000 portable radio was introduced in August 2020. The second product, the all-band BKR9000 portable radio was released in April 2023.
Information Relating to Domestic and Export Sales The following table summarizes our sales of LMR products by customer location: 2022 2021 (in millions) United States $ 49.4 $ 43.1 International 1.6 2.3 Total $ 51.0 $ 45.4 Additional financial information is provided in the Consolidated Financial Statements included in this report. 6 Table of Contents
Information Relating to Domestic and Export Sales The following table summarizes our sales of LMR products by customer location: 2023 2022 (in millions) United States $ 71.0 $ 49.4 International 3.1 1.6 Total $ 74.1 $ 51.0 Additional financial information is provided in the Consolidated Financial Statements included in this report. 7 Table of Contents
We also work with our contract manufacturers to improve process control and product design and conduct periodic on-site inspections. 4 Table of Contents We rely upon a limited number of both American and foreign suppliers for several key products and components. Approximately 61% of our material, subassembly and product procurements in 2022 were sourced from nine suppliers.
We also work with our contract manufacturers to improve process control and product design and conduct periodic on-site inspections. We rely upon a limited number of both American and foreign suppliers for several key products and components. Approximately 69% of our material, subassembly and product procurements in 2023 were sourced from twelve suppliers.
Human Capital Resources As of December 31, 2022, we had 148 employees, most of whom are located at our West Melbourne, Florida facility; 84 of these employees are engaged in direct manufacturing or manufacturing support, 31 in engineering, 21 in sales and marketing, and 12 in headquarters, accounting and human resources activities.
Human Capital Resources As of December 31, 2023, we had 145 employees, most of whom are located at our West Melbourne, Florida facility; 79 of these employees are engaged in direct manufacturing or manufacturing support, 32 in engineering, 22 in sales and marketing, and 12 in headquarters, accounting and human resources activities.
We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. In addition, certain components are obtained from single sources. During the first half of 2022, our operations were materially impaired due to delays from single-source suppliers.
We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. In addition, certain components are obtained from single sources. During 2022, due to lingering COVID-related supply chain disruptions, our operations were materially impaired due to delays from single-source suppliers.
Sales to government and public safety users represented substantially all of our sales for 2022 and 2021. Engineering, Research and Development Our engineering and product development activities are conducted by a team of 31 employees.
Sales to government and public safety users represented substantially all of our sales for 2023 and 2022. 4 Table of Contents Engineering, Research and Development Our engineering and product development activities are conducted by a team of 32 employees.
Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414. Available Information Our Internet website address is www.bktechnologies.com.
Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414. Available Information Our Internet website address is www.bktechnologies.com. The information contained on our website is not incorporated by reference in this report.
We manage the risk of such delays by securing secondary sources, where possible, and redesigning products in response to component shortages or obsolescence. We strive to maintain strong relationships with all of our suppliers. We anticipate that the current relationships, or others that are comparable, will be available to us in the future.
We manage the risk of such delays by securing secondary sources, where possible, and redesigning products in response to component shortages or obsolescence. We strive to maintain strong relationships with all of our suppliers.
As a public company, we are also subject to regulations of the SEC and the stock exchange on which we are listed (NYSE American). 5 Table of Contents Some of our operations use substances regulated under various federal, state, local and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites, as well as relating to the protection of the environment.
Some of our operations use substances regulated under various federal, state, local and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites, as well as relating to the protection of the environment.
The second product, the all-band BKR9000 portable radio is scheduled to be released in 2023. Our KNG and BKR products also provide P25 compliant encrypted operation for secured communication, GPS location and network authentication capabilities. A segment of our engineering team is responsible for product specifications based on customer requirements and participates in quality assurance activities.
Our KNG and BKR products also provide P25 compliant encrypted operation for secured communication, GPS location and network authentication capabilities. A segment of our engineering team is responsible for product specifications based on customer requirements and participates in quality assurance activities. They also have primary responsibility for applied and production engineering.
BKRplay is available to download free of charge from the Google Play or Apple App stores. 3 Table of Contents Description of Markets Government and Public Safety Market The government and public safety market includes military, fire, rescue, law enforcement, homeland security and emergency medical responder personnel, both domestic and international.
BKRplay is available to download from the Google Play or Apple App stores. We presently have three pending U.S. patent applications for the SaaS services products. Description of Markets Government and Public Safety Market The government and public safety market includes military, fire, rescue, law enforcement, homeland security and emergency medical responder personnel, both domestic and international.
These types of mandates may provide us with new business opportunities or may require us to modify all or some of our products so that they can continue to be manufactured and marketed, which may lead to an increase in our capital expenditures and research and development expenses.
These types of mandates may provide us with new business opportunities or may require us to modify all or some of our products so that they can continue to be manufactured and marketed, which may lead to an increase in our capital expenditures and research and development expenses. 6 Table of Contents As a public company, we are also subject to regulations of the SEC and the stock exchange on which we are listed (NYSE American).
Seasonal Impact We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year budgets and appropriations.
We anticipate that current relationships, or others that are comparable, will be available to us in the future. 5 Table of Contents Seasonal Impact We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year budgets and appropriations.
We plan to expand our internal manufacturing capabilities and U.S.-based relationships, combined with other American manufacturers and suppliers where it furthers our business objectives. This strategy allows us to effectively manage quality, product costs and lead-times while focusing other resources on our core technological competencies of product design and development.
Their scope may also be expanded to include new products in the future. We plan to expand our contract manufacturing relationships and suppliers where it furthers our business objectives. This strategy allows us to effectively manage quality, product costs and lead-times while focusing other resources on our core technological competencies of product design and development.
In addition, our Code of Business Conduct and Ethics, Code of Ethics for the CEO and Senior Financial Officers, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter and other corporate governance policies are available on our website, under “Investor Relations.” The information contained on our website is not incorporated by reference in this report.
In addition, our Code of Business Conduct and Ethics, Code of Ethics for the CEO and Senior Financial Officers, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter and other corporate governance policies are available on our website, under “Investor Relations.” A copy of any of these materials may be obtained, free of charge, upon request from our investor relations department.
Manufacturing agreements and purchase orders govern the business relationship with the contract manufacturers. These agreements and purchase orders have various terms and conditions and may be renewed or modified upon agreement by both parties. Their scope may also be expanded to include new products in the future.
Generally, the contract manufacturers procure raw materials from BK-approved sources and complete manufacturing activities in accordance with our specifications. Manufacturing agreements and purchase orders govern the business relationship with the contract manufacturers. These agreements and purchase orders have various terms and conditions and may be renewed or modified upon agreement by both parties.
Built around an intelligent interface between a smartphone and our BK radio, BKRplay services deliver an enhanced customer experience which increases the sales reach of our radios.
BKRplay is BK’s public safety smartphone application which provides access to the InteropONE service, as well as a host of other capabilities which make the first responder safer and more efficient. Built around an intelligent interface between a smartphone and our BK radio, BKRplay services deliver an enhanced customer experience which increases the sales reach of our radios.
Intellectual Property We presently have two U.S. patents in force, and we have four pending U.S. patent applications. We have registered U.S. trademarks related to the names “BK Technologies,” “BK Radio” and “Radios for Heroes” and have applied for registration of “BKR”, “BKRplay”, and “InteropONE”.
We have registered U.S. trademarks related to the names “BK Technologies,” “BK Radio” and “Radios for Heroes”, and have applied for registration of “BKR”, “BKRplay” and “InteropONE”. We rely on trade secret laws and employee and third-party nondisclosure agreements to protect our intellectual property rights.
A copy of any of these materials may be obtained, free of charge, upon request from our investor relations department. The SEC maintains an internet site that contains reports, proxy and information statements, and other information filed by the Company at http://www.sec.gov.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information filed by the Company at http://www.sec.gov.
This hybrid approach has been instrumental in ramping up our production capacity while controlling our product costs and managing our product quality. Contract manufacturers produce various subassemblies and products on our behalf. Generally, the contract manufacturers procure raw materials from BK-approved sources and complete manufacturing activities in accordance with our specifications.
Our outside manufacturing contract arrangements have been managed, updated and expanded to meet our present requirements. This hybrid approach has been instrumental in ramping up our production capacity while controlling our product costs and managing our product quality. Contract manufacturers produce various products and subassemblies on our behalf.
The net proceeds from the offering have been used primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.
After adjusting for the Reverse Stock Split, the number of shares issuable under the terms of the Sales Agreement is 845,070 shares of our Common Stock. The Company intends to use the net proceeds from the offering primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.
All reports that the Company files with or furnishes to the SEC also are available free of charge via the SEC’s website. 1 Table of Contents Significant Events During 2022, pursuant to our capital return program, we declared and paid three quarterly dividends. The dividends declared in April, June and September 2022 were $0.03 per share.
During 2022, pursuant to our capital return program, we declared and paid three quarterly dividends. The dividends declared in April, June and September 2022 were $0.03 per share. The Company announced the suspension of its quarterly cash dividend program in March 2023.
Removed
On June 9, 2021, we closed a public offering of 4,249,250 shares of our common stock at a price of $3.00 per share, for net proceeds of $11,559,000 after deducting underwriting discounts, commissions and offering expenses.
Added
All reports that the Company files with or furnishes to the SEC also are available free of charge via the SEC’s website. 1 Table of Contents Significant Events On November 6, 2023, the Company entered into a Master Service Agreement (the “EW MSA”) with East West Manufacturing, LLC, a Georgia limited liability company (“EW”), for the manufacturing production of certain land mobile radio (“LMR”) products and accessories.
Removed
The shares sold in the offering included the exercise in full by the underwriters of their over-allotment option to purchase up to 554,250 shares of common stock in addition to the 3,695,000 shares which the underwriters initially agreed to purchase. ThinkEquity, a division of Fordham Financial Management, Inc., acted as sole book-running manager for the offering.
Added
In connection with the EW MSA, the Company and EW also entered into a Transition Services Agreement to govern the transition of manufacturing production to EW. Also, in connection with the EW MSA, the Company and EW entered into a Stock Purchase Agreement, pursuant to which EW purchased 77,520 shares of Common Stock with a value equal to $1,000,000.
Removed
The Company expects to launch the service in the first quarter of 2023. BKRplay is BK’s public safety smartphone application which provides access to the InteropONE service, as well as a host of other capabilities which make the first responder safer and more efficient.
Added
The number of shares of stock was determined based upon a price per share of $12.90, which is equal to the average of the closing price of the Common Stock on the NYSE American exchange for the 30 most recent trading days prior to November 6, 2023, rounded up to the nearest whole number of shares.
Removed
They also have primary responsibility for applied and production engineering. For 2022 and 2021, our engineering and development expenses were approximately $9.6 million and $8.1 million, respectively. The increased expenditures in 2022 were primarily attributed to engineering staff expenses, which are focused on new BKR product development initiatives.
Added
Additionally, EW purchased a warrant (“Warrant”), with a five-year term to purchase up to 135,300 shares of Common Stock at an exercise price per share of $15.00. The Company executed a Reverse Stock Split approved by the board of directors on March 23, 2023, which became effective at 5:00 p.m. Eastern Time on April 21, 2023.
Removed
We rely on trade secret laws and employee and third-party nondisclosure agreements to protect our intellectual property rights. Manufacturing and Raw Materials Our Made in America manufacturing strategy is to utilize the highest quality and most cost-effective resources available for every aspect of our manufacturing.
Added
Shares of Common Stock underlying outstanding stock options and restricted stock units were proportionately reduced, and the respective exercise prices were proportionately increased in accordance with the terms of the agreements governing such securities.
Added
Accordingly, all shares and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the Reverse Stock Split.
Added
On March 23, 2023, the board of directors (the “Board” or “Board of Directors”) of the Company approved a one (1)-for-five (5) reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $0.60 per share (the “Common Stock”), and on April 4, 2023, the Company filed with the Secretary of State of the State of Nevada a Certificate of Change to its Articles of Incorporation to effect the Reverse Stock Split.
Added
On January 31, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), relating to the sale of shares of our Common Stock.
Added
In accordance with the terms of the Sales Agreement, we may offer and sell shares of our Common Stock from time to time up to an aggregate offering price of $15,000,000 through or to the Sales Agent, acting as sales agent or principal.
Added
On December 27, 2023, the Company notified the Sales Agent that it was terminating the Sales Agreement as of December 29, 2023, as per the terms of the Sales Agreement. The Company’s “shelf” registration statement on Form S-3 that was filed with the SEC on December 11, 2020, and amended December 21, 2020, expired on December 29, 2023.
Added
For 2023 and 2022, our engineering and development expenses were approximately $9.3 million and $9.6 million, respectively. Intellectual Property We presently have four U.S. patents in force, and we have four pending U.S. patent applications.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

70 edited+32 added−10 removed86 unchanged
Biggest changeEven after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable.
Biggest changeFurthermore, the extent to which our mitigation efforts for these uncertainties are successful, if at all, is not presently ascertainable, but could have an adverse impact on the Company’s business, financial condition and results of operations. We carry substantial quantities of inventory, and inaccurate estimates of necessary inventory could materially harm our business, financial condition and operating results.
Negative audit findings could also result in investigations, termination of a contract, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. All contracts with the U.S. Government are subject to cancellation at the convenience of the U.S. Government.
Negative audit findings could also result in investigations, termination of a contract, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. All contracts with the U.S. Government are subject to cancellation at the convenience of the U.S.
Competition for qualified personnel in our industry is intense, and we may be unable to hire or retain necessary personnel. The inability to attract and retain qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
Competition for qualified personnel in our industry is intense, and we may be unable to hire or retain the necessary personnel. The inability to attract and retain qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
As a public company, we are also subject to regulations of the SEC and the stock exchange on which we are listed. These laws and regulations are complex, change frequently, have tended to become more stringent over time and increase our cost of doing business.
As a public company, we are also subject to the regulations of the SEC and the stock exchange on which we are listed. These laws and regulations are complex, change frequently, have tended to become more stringent over time and increase our cost of doing business.
We rely on a combination of contract, trademark and trade secret laws to protect our intellectual property rights, and failure to effectively utilize or successfully assert these rights could negatively impact us Currently, we have two approved and four pending applications for US patents. We have several trademarks related to the names “BK Technologies,” “BK Radio”, and “Radios for Heroes”.
We rely on a combination of contract, trademark and trade secret laws to protect our intellectual property rights, and failure to effectively utilize or successfully assert these rights could negatively impact us. Currently, we have four approved and four pending applications for US patents. We have several trademarks related to the names “BK Technologies,” “BK Radio” and “Radios for Heroes”.
Any of these events could have a material adverse effect on our business, financial condition and results of operations. Our business is partially dependent on U.S. Government contracts, which are highly regulated and subject to terminations and oversight audits by U.S. Government representatives that could result in adverse findings and negatively impact our business Our U.S.
Any of these events could have a material adverse effect on our business, financial condition and results of operations. Our business is dependent on U.S. Government contracts, which are highly regulated and subject to terminations and oversight audits by U.S. Government representatives that could result in adverse findings and negatively impact our business. Our U.S.
Failure to comply with or to respond to changes in these requirements and regulations could result in penalties on us, such as fines, restrictions on operations or a temporary or permanent closure of our facility. These penalties could have a material adverse effect on our business, operating results and financial condition.
Failure to comply with or to respond to changes in these requirements and regulations could result in penalties on us, such as fines, restrictions on operations or the temporary or permanent closure of our facility. These penalties could have a material adverse effect on our business, operating results and financial condition.
Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations and cash flows. 15 Table of Contents Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, information technology systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques, implement adequate preventative measures or remediate any intrusion on a timely or effective basis.
Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations and cash flows. 17 Table of Contents Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, information technology systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques, implement adequate preventative measures or remediate any intrusion on a timely or effective basis.
Any significant delay in our ability to obtain adequate quantities of our products from our current or alternative contract manufacturers could have a material adverse effect on our business, financial condition and results of operations. 12 Table of Contents In addition, our dependence on limited and sole source suppliers of components involves several risks, including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component quality.
Any significant delay in our ability to obtain adequate quantities of our products from our current or alternative contract manufacturers could have a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents In addition, our dependence on limited and sole source suppliers of components involves several risks, including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component quality.
Natural disasters, acts of war or terrorism and other catastrophic events beyond our control could have a material adverse effect on our operations and financial condition The occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our suppliers or manufacturers are located, or acts of war or terrorism (wherever located around the world) or military activities disrupting transportation, communication or utility systems or otherwise causing damage to our business, employees, suppliers, manufacturers and customers; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks, could have a material adverse effect on our business, financial condition and results of operations.
The occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our suppliers or manufacturers are located, or acts of war or terrorism (wherever located around the world) or military activities disrupting transportation, communication or utility systems or otherwise causing damage to our business, employees, suppliers, manufacturers and customers; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks, could have a material adverse effect on our business, financial condition and results of operations.
From time to time, we also have cash in financial institutions in excess of federally insured limits, which funds might be at risk of loss should such financial institutions face financial difficulties. The terms of the credit agreement with Alterna Capital Solutions, LLC contains restrictive covenants that may limit our operating flexibility or that of our subsidiaries.
From time to time, we also have cash in financial institutions in excess of federally insured limits, which funds might be at risk of loss should such financial institutions face financial difficulties. The terms of the credit agreement with Alterna Capital Solutions, LLC contain restrictive covenants that may limit our operating flexibility or that of our subsidiaries.
We may not be able to compete successfully and competitive pressures may materially and adversely affect our business, results of operations and financial condition. 7 Table of Contents An increase in the demand for P-25 products could benefit competitors that are better financed and positioned to meet such demand.
We may not be able to compete successfully, and competitive pressures may materially and adversely affect our business, results of operations and financial condition. 8 Table of Contents An increase in the demand for P-25 products could benefit competitors that are better financed and positioned to meet such demand.
We may lose all or part of our investment relating to such companies if their value decreases as a result of their financial performance or for any other reason. If our interests differ from those of other investors in companies over which we do not have control, we may be unable to effect any change at those companies.
We may lose all or part of our investment relating to such companies if their value decreases as a result of their financial performance or for any other reason. If our interests differ from those of other investors in companies over which we do not have control, we may be unable to affect any change at those companies.
Our business, financial condition and operating results may be materially and adversely affected by, among other things, changes in the general political, social, health and economic conditions in foreign countries in which we maintain sourcing relationships, unfavorable changes in U.S. trade legislation and regulations, the imposition of governmental economic sanctions on countries in which we do business or other trade barriers, threats of war, terrorism or governmental instability, labor disruptions, the impact of public health epidemics on employees and the global economy, such as the coronavirus currently impacting China, which may cause our manufacturers or suppliers to temporarily suspend operations in the affected region, potentially negatively impacting our product launch timing and shipments, currency controls, fluctuating exchange rates with respect to contracts not denominated in U.S. dollars, and unanticipated or unfavorable changes in government policies with respect to laws and regulations, anti-inflation measures and method of taxation.
Our business, financial condition and operating results may be materially and adversely affected by, among other things, changes in the general political, social, health and economic conditions in foreign countries in which we maintain sourcing relationships, unfavorable changes in U.S. trade legislation and regulations, the imposition of governmental economic sanctions on countries in which we do business or other trade barriers, threats of war, terrorism or governmental instability, labor disruptions, the impact of public health epidemics on employees and the global economy, which may cause our manufacturers or suppliers to temporarily suspend operations in the affected region, potentially negatively impacting our product launch timing and shipments, currency controls, fluctuating exchange rates with respect to contracts not denominated in U.S. dollars, and unanticipated or unfavorable changes in government policies with respect to laws and regulations, anti-inflation measures and method of taxation.
This could lead to risk of litigation or reputational damage relating to our ESG policies or performance. 13 Table of Contents Further, possible actions to address ESG issues may not maximize short-term financial results and may yield financial results that conflict with the market’s expectations.
This could lead to the risk of litigation or reputational damage relating to our ESG policies or performance. 15 Table of Contents Further, possible actions to address ESG issues may not maximize short-term financial results and may yield financial results that conflict with the market’s expectations.
Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing. In planning for the possible disruption of our business, we took steps to reduce expenses throughout the Company.
Any employees that test positive for COVID-19 are quarantined and, if possible, work remotely in accordance with accepted safety practices until after passing subsequent testing. In planning for the possible disruption of our business, we took steps to reduce expenses and control costs throughout the Company in 2022.
In addition, a significant increase in inflation rates or currency fluctuations could have an adverse impact on the profitability of longer-term contracts. Our investment strategy may not be successful, which could adversely impact our financial condition We may invest part of our cash balances in public companies.
In addition, a significant increase in inflation rates or currency fluctuations could have an adverse impact on the profitability of longer-term contracts. 12 Table of Contents Our investment strategy may not be successful, which could adversely impact our financial condition. We may invest part of our cash balances in public companies.
Government security regulations, employment practices, protection of criminal justice data, protection of the environment, accuracy of records, proper recording of costs, foreign corruption and the False Claims Act. 8 Table of Contents Generally, U.S. Government contracts are subject to oversight audits by U.S. Government representatives and could result in adjustments to our contracts.
Government security regulations, employment practices, protection of criminal justice data, protection of the environment, accuracy of records, proper recording of costs, foreign corruption and the False Claims Act. Generally, U.S. Government contracts are subject to oversight audits by U.S. Government representatives and could result in adjustments to our contracts.
We, therefore, remain potentially vulnerable to additional known or yet unknown threats, as in some instances, we, our distributors, manufacturers, suppliers and other partners, may be unaware of an incident or its magnitude and effects. We also face the risk that we expose our customers or partners to cybersecurity attacks.
We, therefore, remain potentially vulnerable to additional known or yet unknown threats, as in some instances, we, our distributors, manufacturers, suppliers and other partners, may be unaware of an incident or its magnitude and effects. We also face the risk of exposing our customers or partners to cybersecurity attacks.
Bringing such products to market and achieving a significant market penetration for them will continue to require time and expenditures of funds, and we may be unable to successfully do so.
Bringing such products to market and achieving a significant market penetration for them will continue to require time and expenditure of funds, and we may be unable to successfully do so.
FG may have interests that differ from those of our other stockholders and may vote in a way with which our other stockholders disagree, and which may be adverse to their interests.
FG may have interests that differ from those of our other stockholders and may vote in a way with which our other stockholders disagree and which may be averse to their interests.
In addition, from time to time, we implement updates to our information technology systems and software, which can disrupt or shutdown our information technology systems. We may not be able to successfully integrate and launch these new systems as planned without disruption to our operations.
In addition, from time to time, we implement updates to our information technology systems and software, which can disrupt or shut down our information technology systems. We may not be able to successfully integrate and launch these new systems as planned without disruption to our operations.
The insurance that we maintain may not fully cover all potential exposures We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We are potentially at risk if one or more of our insurance carriers fail.
We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We are potentially at risk if one or more of our insurance carriers fail.
In addition, contacts with government officials and participation in political activities are areas that are tightly controlled by federal, state, local and international laws. Failure to comply with these laws could cost us opportunities to seek certain government sales opportunities or even result in fines, prosecution or debarment.
Government. 9 Table of Contents In addition, contacts with government officials and participation in political activities are areas that are tightly controlled by federal, state, local and international laws. Failure to comply with these laws could cost us opportunities to seek certain government sales opportunities or even result in fines, prosecution or debarment.
Our business is subject to the economic, political, and other risks of manufacturing products in foreign countries We engage in business with manufacturers, some of which are located in other countries. Approximately 17% of our material, subassembly and product procurements in 2022 were sourced internationally.
Our business is subject to the economic, political, and other risks of manufacturing products in foreign countries. We engage in business with manufacturers, some of which are located in other countries. Approximately 16% of our material, subassembly and product procurements in 2023 were sourced internationally.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine and the Israeli–Palestinian conflict in the Middle-East.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from conflicts in Ukraine, the Middle-East or any other geopolitical tensions.
The lead-time required for some of our components is up to as six months. If we are unable to accurately predict our component needs, or if our component supply is disrupted, we may miss market opportunities by not being able to meet the demand for our products.
The lead-time required for some of our proprietary components is up to as long as twelve to eighteen months. If we are unable to accurately predict our component needs, or if our component supply is disrupted, we may miss market opportunities by not being able to meet the demand for our products.
For the year ended December 31, 2022, approximately 37.5% of our sales were to agencies and departments of the U.S. Government, including but not limited to, agencies of the DHS, DoA, DoD and DoI. We may be unable to maintain this government business.
For the year ended December 31, 2023, approximately 49% of our sales were to agencies and departments of the U.S. Government, including but not limited to, agencies of the DHS, DoA, DoD and DoI. We may be unable to maintain this government business.
Approximately 61% of our material, subassembly and product procurements in 2022 were sourced from nine suppliers. We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. Disruption or termination of the supply of these components could delay shipments of our products.
Approximately 95% of our material, subassembly, and product procurements in 2023 were sourced from twelve suppliers. We place purchase orders from time to time with these suppliers and have no guaranteed supply arrangements. Disruption or termination of the supply of these components could delay shipments of our products.
These risk factors should be read in conjunction with the MD&A in Part II, Item 7 of this Annual Report on Form 10-K, and the Consolidated Financial Statements and notes thereto. This Annual Report on Form 10-K is qualified in its entirety by these risk factors.
These risk factors should be read in conjunction with the MD&A in Part II, Item 7 of this Annual Report on Form 10-K, and the Consolidated Financial Statements and notes thereto. This Annual Report on Form 10-K is qualified in its entirety by these risk factors. We depend on the success of our LMR product line.
The ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
The ultimate duration and impact of the COVID-19 pandemic on our supply chain and geopolitical factors to our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the geopolitical factors on the global economy, which are uncertain and cannot be predicted at this time.
P-25 products have been brought to the market by an increasing number of our competitors. Our first P-25 portable radio was brought to market in 2003, and in recent years we introduced two new lines of P-25 products, the KNG and KNG2 Series. We are currently developing a new line of P-25 digital products, the BKR Series.
P-25 products have been brought to the market by an increasing number of our competitors. Our first P-25 portable radio was brought to market in 2003, and in recent years we introduced a new line of P-25 products, the BKR Series.
In addition, we cannot predict when or if Congress will repeal and/or replace certain health care programs and regulations at the federal level and the impact such changes would have on our business. A continued increase in health care costs could have a material adverse effect on us.
In addition, we cannot predict when or if Congress will repeal and/or replace certain health care programs and regulations at the federal level and the impact such changes would have on our business. A continued increase in health care costs could have a material adverse effect on us. The insurance that we maintain may not fully cover all potential exposures.
The IPSA line of credit is an accounts receivable and inventory financing facility, with the borrowing base of up to 85% of eligible accounts receivable and up to 75% of net orderly liquidation value of inventory, not to exceed 100% of eligible accounts receivable.
In November 2023, the IPSA was extended for one year. The IPSA line of credit is an accounts receivable and inventory financing facility, with the borrowing base of up to 85% of eligible accounts receivable and up to 75% of net orderly liquidation value of inventory, not to exceed 100% of eligible accounts receivable.
If we are unable to sell this inventory over a commercially reasonable time, in the future we may be required to take inventory markdowns, which would reduce our net sales and/or gross margins.
We carry a significant amount of inventory to service customer requirements in a timely manner. If we are unable to sell this inventory over a commercially reasonable time, in the future we may be required to take inventory markdowns, which would reduce our net sales and/or gross margins.
Even if we successfully develop and launch the BKR Series product line, or any other new products, the development of which is a complex and uncertain process requiring innovation and investment, such products may not achieve market acceptance, which could have a material adverse effect on us.
Even if we successfully develop and launch additional products to the BKR Series product line, or any other new products, the development of which is a complex and requires innovation and investment, such products may not achieve market acceptance, which could have a material adverse effect on us. We are engaged in a highly competitive industry.
In addition, it is critical to our success that we accurately predict trends in customer demand, including seasonal fluctuations, in the future and do not overstock unpopular products or fail to sufficiently stock popular products.
In addition, it is critical to our success that we accurately predict trends in customer demand, including seasonal fluctuations, in the future and do not overstock unpopular products or fail to sufficiently stock popular products. Both scenarios could materially harm our business, financial condition and operating results.
We depend on the success of our LMR product line We currently depend on our LMR products as our sole source of sales.
We currently depend on our LMR products as our sole source of sales.
In addition, our future success will largely depend on the successful introduction and sale of our BKR Series product line, including our initial multiband product, which has been delayed from initial projections and which we may be unable to successfully complete in a timely manner, or at all.
In addition, our future success will largely depend on the successful introduction and sale of additional products to our BKR Series product line, including additional multiband products, which we may be unable to successfully complete in a timely manner.
While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter.
While the impacts of COVID-19 are reflected in our results of operations for 2023 and 2022 respectively, we cannot separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter.
The lead-time required to qualify a new manufacturer could range from approximately two to six months. Despite efforts to do so, we may not be able to identify or qualify new contract manufacturers in a timely and cost-effective manner, and these new manufacturers may not allocate sufficient capacity to us in order to meet our requirements.
Despite efforts to do so, we may not be able to identify or qualify new contract manufacturers in a timely and cost-effective manner, and these new manufacturers may not allocate sufficient capacity to us in order to meet our requirements.
In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain. 14 Table of Contents Our stock price is vulnerable to significant fluctuations, including due to our fluctuating quarterly operating results Our quarterly operating results may fluctuate significantly from quarter to quarter and may be below the expectations of the investment community, resulting in volatility for the market price for our common stock.
In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain. 16 Table of Contents Our stock price is vulnerable to significant fluctuations, including due to our fluctuating quarterly operating results.
A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of ESG measures to their investment decisions.
In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of ESG measures to their investment decisions.
A security breach or other significant disruption of our information technology systems, or those of our distributors, manufacturers, suppliers and other partners, caused by cyber-attack or other means, could have a negative impact on our operations, sales and results of operations From time to time, we may experience cyber-attacks on our information technology systems and the information systems of our distributors, manufacturers, suppliers and other partners, whose systems we do not control.
A security breach or other significant disruption of our information technology systems, or those of our distributors, manufacturers, suppliers and other partners, caused by cyber-attack or other means, could have a negative impact on our operations, sales and results of operations.
These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock. If this happens, we will have greater difficulty accessing the capital markets to raise any additional necessary capital.
These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock. If this happens, we will have greater difficulty accessing the capital markets to raise any additional necessary capital. Any infringement claim against us could have a material adverse effect on our business, financial condition and results of operations.
We depend on a limited number of manufacturers and on a limited number of suppliers of components to produce our products, and the inability to obtain adequate and timely delivery of supplies and manufactured products could have a material adverse effect on us We contract with manufacturers to produce portions of our products.
In general, the IPSA could have an adverse effect on our financial condition or results of operations. We depend on a limited number of manufacturers and on a limited number of suppliers of components to produce our products, and the inability to obtain adequate and timely delivery of supplies and manufactured products could have a material adverse effect on us.
For example, as of December 31, 2022, we held an investment interest in the equity of FG Financial Group, Inc. (Nasdaq: FGF) (“FGF”). through FG Financial Holdings, LLC (“FG Holdings”). These types of investments carry more risk than holding our cash balances as bank deposits or, for example, such conservative investments as treasury bonds or money market funds.
For example, as of December 31, 2023, we held an investment in the Series B common interests of FG Financial Holdings, LLC (“FG Holdings LLC”). These types of investments carry more risk than holding our cash balances as bank deposits or, for example, such conservative investments as treasury bonds or money market funds.
Environmental, social and governance matters may impact our business and reputation. Increasingly, in addition to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social and governance (“ESG”) matters, which are considered to contribute to the long-term sustainability of companies’ performance.
Increasingly, in addition to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social and governance (“ESG”) matters, which are considered to contribute to the long-term sustainability of companies’ performance. A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized.
We have deferred tax assets that we may not be able to utilize under certain circumstances If we incur future operating losses, we may be required to provide some or all of our deferred tax assets with a valuation allowance, resulting in additional non-cash income tax expense.
If we incur future operating losses, we may be required to provide some or all of our deferred tax assets with a valuation allowance, resulting in additional non-cash income tax expense. The change in the valuation allowance may have a material impact on future net income or loss.
The Company used funds obtained from the IPSA line of credit to replace the existing JPMC Credit Agreement and for working capital for the business. The IPSA also has covenants concerning additional financing and indebtedness restrictions. The IPSA provides for the payment of fees by the Subsidiaries and includes customary representations and warranties, indemnification provisions, covenants and events of default.
The Company used funds obtained from the IPSA line of credit to replace the existing JPMC Credit Agreement (the “JPMC Credit Agreement”) and for working capital for the business. The IPSA also has covenants concerning additional financing and indebtedness restrictions.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.
Although the length and impact of the ongoing military conflicts is highly unpredictable, the conflict in both of these regions could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
As of December 31, 2022, FG and its affiliates, owners and managers together hold approximately 16% of the Company’s outstanding shares of common stock. Kyle Cerminara, Chief Executive Officer, Co-Founder, and Partner of FG, is a member of our Board of Directors.
The interests of FG may differ from the interests of our other stockholders. As of December 31, 2023, FG and its affiliates, owners and managers together hold approximately 15% of the Company’s outstanding shares of common stock. Kyle Cerminara, Chief Executive Officer, Co-Founder, and Partner of FG, was Chairman of our Board of Directors until December 14, 2023.
Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. 10 Table of Contents Any of the above-mentioned factors could affect our business, prospects, financial condition, and operating results.
The Board of Directors may also change our investment strategy at any time, and such changes could further increase our exposure, which could adversely impact us.
The Board of Directors may also change our investment strategy at any time, and such changes could further increase our exposure, which could adversely impact us. Fundamental Global GP, LLC (“FG”), with its affiliates, is our largest stockholder, and its interests may differ from the interests of our other stockholders.
Any litigation resulting from any such claim could require us to incur substantial costs and divert significant resources, including the efforts of our management and engineering personnel.
Any litigation resulting from any such claim could require us to incur substantial costs and divert significant resources, including the efforts of our management and engineering personnel. 18 Table of Contents We have deferred tax assets that we may not be able to utilize under certain circumstances.
In addition, the stock market is subject to price and volume fluctuations affecting the market price for the stock of many companies generally, which fluctuations often are unrelated to operating performance.
In addition, the stock market is subject to price and volume fluctuations affecting the market price for the stock of many companies generally, which often are unrelated to operating performance. During the period from January 1, 2020 to December 31, 2023, the trading price of our common stock ranged from $8.30 to $23.05.
Our use of contract manufacturers exposes us to certain risks, including shortages of manufacturing capacity, reduced control over delivery schedules, quality assurance, production yield and costs. If any of our manufacturers terminate production or cannot meet our production requirements, we may have to rely on other contract manufacturing sources or identify and qualify new contract manufacturers.
We contract with manufacturers to produce portions of our products. Our use of contract manufacturers exposes us to certain risks, including shortages of manufacturing capacity, reduced control over delivery schedules, quality assurance, production yield and costs.
We are engaged in a highly competitive industry We face intense competition from other LMR suppliers, and the failure to compete effectively could materially and adversely affect our market share, financial condition and results of operations.
We face intense competition from other LMR suppliers, and the failure to compete effectively could materially and adversely affect our market share, financial condition and results of operations. The largest supplier of LMR products in the world, Motorola Solutions, Inc., currently is estimated to have well in excess of half the market for LMR products.
Some of our competitors are significantly larger and have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we have. Some also have established reputations for success in developing and supplying LMR products, including providing complete, integrated, communications systems and infrastructure. We do not provide complete, integrated, communications systems and infrastructure.
Some also have established reputations for success in developing and supplying LMR products, including providing complete, integrated, communications systems and infrastructure. We do not provide complete, integrated, communications systems and infrastructure.
Any infringement claim against us could have a material adverse effect on our business, financial condition and results of operations As the number of competing products available in the market increases and the functions of those products further overlap, the potential for infringement claims may increase.
As the number of competing products available in the market increases and the functions of those products further overlap, the potential for infringement claims may increase.
The impact to our business, particularly customer orders, is not known with any certainty. However, we received record customer orders of approximately $71 million in 2022. Recently, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products.
During 2022, worldwide shortages of materials, particularly semiconductors and integrated circuits, resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflict between Russia and Ukraine and Israel and Palestinian state.
Both scenarios could materially harm our business, financial condition and operating results. 10 Table of Contents We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs or hedge our risks associated with currency fluctuations We sometimes enter into firm fixed-price contracts.
We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs or hedge our risks associated with currency fluctuations. We sometimes enter into firm fixed-price contracts. If our initial cost estimates are incorrect, we can lose money on these contracts.
The change in the valuation allowance may have a material impact on future net income or loss. 16 Table of Contents We may be unable to obtain components and parts that are verified to be Democratic Republic of Congo (“DRC”) conflict-free, which could result in reputational damage The Dodd-Frank Wall Street Reform and Consumer Protection Act includes disclosure requirements regarding the use of tin, tantalum, tungsten and gold (which are defined as “conflict minerals”) in our products and whether these materials originated from the DRC or an adjoining country.
The Dodd-Frank Wall Street Reform and Consumer Protection Act includes disclosure requirements regarding the use of tin, tantalum, tungsten and gold (which are defined as “conflict minerals”) in our products and whether these materials originated from the DRC or an adjoining country.
If we fail to promote and maintain our brand and reputation successfully, our business, results of operations and prospects could be materially harmed. 11 Table of Contents We face a number of risks related to challenging economic conditions. Current economic conditions in the U.S. and elsewhere remain uncertain.
Any event that has the potential to negatively impact on our reputation could lead to lost sales, loss of new opportunities and retention and recruiting difficulties. If we fail to promote and maintain our brand and reputation successfully, our business, results of operations and prospects could be materially harmed. We face a number of risks related to challenging economic conditions.
Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K. 9 Table of Contents Any outbreak or worsening of an outbreak of contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations, financial condition and results of operations.
The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K. Cyber-attacks and other security threats and disruptions could have a material adverse effect on our business.
While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been some delays and longer delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years.
While, generally, we were able to procure the material necessary to manufacture our products and fulfill customer orders, there were delays and longer delivery times within our supply chain that reached a peak in 2022. The impact on our operations of such shortages significantly impacted our manufacturing operations and financial results.
These challenging economic conditions could materially and adversely impact our business, liquidity and financial condition in a number of ways, including: · Potential deferment or reduction of purchases by customers : Significant deficits and limited appropriations confronting our federal, state and local government customers may cause them to defer or reduce purchases of our products.
However, it is possible that those steps will not be successful, and that the combination of inflation and reduced demand for our LMR products will adversely affect our profitability. 13 Table of Contents · Potential deferment or reduction of purchases by customers : Significant deficits and limited appropriations confronting our federal, state and local government customers may cause them to defer or reduce purchases of our products.
In general, the IPSA could have an adverse effect on our financial condition or results of operations.
Natural disasters, acts of war or terrorism and other catastrophic events beyond our control could have a material adverse effect on our operations and financial condition.
Removed
The largest supplier of LMR products in the world, Motorola Solutions, Inc., currently is estimated to have well in excess of half the market for LMR products. This supplier is also the world’s largest supplier of P-25 products.
Added
This supplier is also the world’s largest supplier of P-25 products. Some of our competitors are significantly larger and have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we have.
Removed
Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
Added
Changes in U.S. trade policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on us. The U.S. may continue to alter its approach to international trade, which may impact existing bilateral or multi-lateral trade agreements and treaties with foreign countries.
Removed
This included suspending all Company travel for a period of time, as well as our participation in trade shows and other business meetings, instituting strict inventory control and decreasing expenditures. We also implemented workforce reductions during the third quarter of 2020 and suspended the employer’s 401K match.
Added
The U.S. has imposed tariffs on certain foreign goods and may increase tariffs or impose new ones, and certain foreign governments have retaliated and may continue to do so. We derive a majority of our revenues from international sales, which makes us especially vulnerable to increased tariffs.
Removed
The impact on our operations of such shortages, or additional shortages that may surface, is uncertain, but could potentially impact our future sales, manufacturing operations and financial results.
Added
Changes in U.S. trade policy have created ongoing turmoil in international trade relations, and it is unclear what future actions governments will or will not take with respect to tariffs or other international trade agreements and policies.
Removed
However, our results of operations in future periods may continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.
Added
Ongoing or new trade wars or other governmental action related to tariffs or international trade agreements or policies could reduce demand for our products and services, increase our costs, reduce our profitability, adversely impact our supply chain or otherwise have a material adverse effect on our business and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeRental, maintenance and tax expenses for this facility were approximately $688,000 and $556,000 in 2022 and 2021, respectively. We lease approximately 6,857 square feet of office space at Sawgrass Technology Park, 1619 NW 136 th Avenue in Sunrise, Florida. This lease will expire on December 31, 2025.
Biggest changeRental, maintenance and tax expenses for this facility were approximately $596,000 and $688,000 in 2023, and 2022, respectively. We lease approximately 6,857 square feet of office space at Sawgrass Technology Park, 1619 NW 136 th Avenue in Sunrise, Florida. This lease will expire on December 31, 2025.
Annual rental, maintenance and tax expenses for the facility were approximately $203,000 and $208,000 in 2022 and 2021, respectively.
Annual rental, maintenance and tax expenses for the facility were approximately $212,000 and $203,000 in 2023, and 2022, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. There were no pending material claims or legal matters as of December 31, 2022.
Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. There were no pending material claims or legal matters as of December 31, 2023. Item 4. Mine Safety Disclosures. Not applicable. 20 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Still be Purchased Under the Plans or Programs October 1-31, 2022 — — — $ 5,000,000 November 1-30, 2022 — — — $ 5,000,000 December 1–31, 2022 — — — $ 5,000,000 TOTAL — $ — — $ 5,000,000 18 Table of Contents Item 6. [Reserved]
Biggest changeISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Still be Purchased Under the Plans or Programs October 1-31, 2023 — — — $ 5,000,000 November 1-30, 2023 — — — $ 5,000,000 December 1–31, 2023 — — — $ 5,000,000 TOTAL — $ — — $ 5,000,000 21 Table of Contents On January 31, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), relating to the sale of shares of our Common Stock.
The authorization of the share repurchase program does not require BK Technologies to acquire any particular number of shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The Company has not purchased shares of our common stock under this program in 2021 and 2022.
The authorization of the share repurchase program does not require BK Technologies to acquire any particular number of shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The Company has not purchased shares of our common stock under this program in 2023 and 2022.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information. Our common stock trades on the NYSE American under the symbol “BKTI.” (b) Holders. On March 1, 2023, there were 517 holders of record of our common stock. (c) Dividends. We have historically paid quarterly cash dividends.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information. Our common stock trades on the NYSE American under the symbol “BKTI.” (b) Holders. On March 1, 2024, there were 128 holders of record of our common stock. (c) Dividends.
Past performance is no guarantee of future results. We receive dividends from our wholly owned subsidiary, BK Technologies, Inc., to fund past dividends to our stockholders. (d) Issuer Purchases of Equity Securities. On December 17, 2021, the board authorized a share repurchase program which permits the Company to purchase up to an aggregate of $5 million of its common shares.
Past performance is no guarantee of future results. We received dividends from our wholly owned subsidiary, BK Technologies, Inc., to fund past dividends to our stockholders. (d) Issuer Purchases of Equity Securities.
The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations.
On December 21, 2021, the Company announced that the Board has authorized a share repurchase program which permits the Company to purchase up to an aggregate of $5 million of its common shares. The program does not have an expiration date. Any repurchases would be funded using cash on hand and cash from operations.
Added
During 2022, pursuant to our capital return program, we declared and paid three quarterly dividends. The dividends declared in April, June and September 2022 were $0.03 per share. The Company announced the indefinite suspension of its quarterly cash dividend program in March 2023.
Added
In accordance with the terms of the Sales Agreement, we may offer and sell shares of our Common Stock from time to time up to an aggregate offering price of $15,000,000 through or to the Sales Agent, acting as sales agent or principal.
Added
After adjusting for the Reverse Stock Split, the number of shares issuable under the terms of the Sales Agreement is 845,070 shares of our Common Stock. The Company intends to use the net proceeds from the offering primarily for general corporate purposes, which may include working capital, capital expenditures, operational purposes, strategic investments and potential acquisitions in complementary businesses.
Added
As of December 31, 2023, the Company sold approximately $50,000. On December 27, 2023, the Company notified the Sales Agent that it was terminating the Sales Agreement as of December 29, 2023, as per the terms of the Sales Agreement.
Added
The Company’s “shelf” registration statement on Form S-3 that was filed with the SEC on December 11, 2020, and amended December 21, 2020, expired on December 29, 2023. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGovernment and foreign governments’ trade and tariff policies; our inventory and debt levels; protection of our intellectual property rights; fluctuation in our operating results and stock price; acts of war or terrorism, natural disasters and other catastrophic events; any infringement claims; data security breaches, cyber attacks and other factors impacting our technology systems; availability of adequate insurance coverage; maintenance of our NYSE American listing; risks related to being a holding company; and the effect on our stock price and ability to raise equity capital of future sales of shares of our common stock.
Biggest changeGovernment and foreign governments’ trade and tariff policies; our inventory and debt levels; protection of our intellectual property rights; fluctuation in our operating results and stock price; any infringement claims; data security breaches, cyber-attacks and other factors impacting our technology systems; availability of adequate insurance coverage; maintenance of our NYSE American listing; risks related to being a holding company; and the effect on our stock price and ability to raise equity capital of future sales of shares of our common stock. 22 Table of Contents 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.
We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, P25 compliant radio at a lower cost relative to comparable offerings. The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over the public cellular networks.
We believe that our products and solutions provide superior value by offering a high specification, ruggedized, durable, reliable, feature rich, P25 compliant radio at a lower cost relative to comparable offerings. The SaaS business unit focuses on delivering innovative, public safety smartphone applications which operate ubiquitously over public cellular networks.
The line of credit was collateralized by a blanket lien on all personal property of BK Technologies, Inc. pursuant to the terms of the Continuing Security Agreement with JPMC. BK Technologies Corporation and each subsidiary of BK Technologies, Inc., were guarantors of the obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty.
The line of credit was collateralized by a blanket lien on all personal property of BK Technologies, Inc. pursuant to the terms of the Continuing Security Agreement with JPMC. BK Technologies Corporation and each subsidiary of BK Technologies, Inc., were guarantors of the obligations under the JPMC Credit Agreement, in accordance with the terms of the Continuing Guaranty.
Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile). Generally, BK Technologies-branded products serve the government markets including but not limited to emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises.
Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile). Generally, BK Technologies-branded products serve government markets including but not limited to emergency response, public safety, homeland security and military customers of federal, state and municipal government agencies, as well as various industrial and commercial enterprises.
Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.” Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414. Customer demand and orders for our products were strong during 2022.
Effective on June 4, 2018, we changed our corporate name from “RELM Wireless Corporation” to “BK Technologies, Inc.” Our principal executive offices are located at 7100 Technology Drive, West Melbourne, Florida 32904 and our telephone number is (321) 984-1414. Customer demand and orders for our products were strong during 2022 and 2023.
The engineering expense of $9.6 million for 2022, includes a one-time write-off of $646,000 of new product development components that were not included in the final design of the BKR 9000 radio. Engineering and product development expenses are primarily related to the continued design and development of BKR Series, a new line of portable and mobile radios.
The engineering expense of $9.6 million for 2022, included a one-time write-off of $646,000 of new product development components that were not included in the final design of the BKR 9000 radio. Engineering and product development expenses are primarily related to the continued design and development of BKR Series, a new line of portable and mobile radios.
The line of credit was to be repaid in monthly payments of interest only, payable in arrears, with all outstanding principal and interest to be payable in full at maturity. The JPMC Credit Agreement contained certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc.
The line of credit is to be repaid in monthly payments of interest only, payable in arrears, with all outstanding principal and interest to be payable in full at maturity. The JPMC Credit Agreement contained certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc.
Accordingly, we cannot assure that sales will occur under particular contracts, or that our sales prospects will otherwise be realized. As of the end of 2022, our current backlog of customer orders and the funnel of sales prospects is healthy and includes potential new customers in federal, state, and local public safety agencies.
Accordingly, we cannot assure that sales will occur under particular contracts, or that our sales prospects will otherwise be realized. As of the end of 2023, our current backlog of customer orders and the funnel of sales prospects is healthy and includes potential new customers in federal, state, and local public safety agencies.
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 December 31, 2022.
We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of December 31, 2023.
Readers are cautioned not to place undue reliance on these forward-looking statements. 19 Table of Contents Executive Summary BK Technologies Corporation (NYSE American: BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides public safety grade communications products and services which make first responders safer and more efficient.
Readers are cautioned not to place undue reliance on these forward-looking statements. Executive Summary BK Technologies Corporation (NYSE American: BKTI) (together with its wholly owned subsidiaries, “BK,” the “Company,” “we” or “us”) is a holding company that, through BK Technologies, Inc., its operating subsidiary, provides public safety grade communications products and services which make first responders safer and more efficient.
Forward-looking statements include, but are not limited to, the following: changes or advances in technology; the success of our SaaS and Radio business lines and the products offered thereunder; successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated SaaS products, and our new multiband radio product and other related products in the planned new BKR Series product line; competition in the LMR industry; general economic and business conditions, including federal, state and local government budget deficits and spending limitations and any impact from a prolonged shutdown of the U.S.
Forward-looking statements include, but are not limited to, the following: changes or advances in technology; the success of our SaaS and Radio business lines and the products offered thereunder; successful introduction of new products and technologies, including our ability to successfully develop and sell our anticipated SaaS products, and our new multiband radio product and other related products in the BKR Series product line; competition in the LMR industry; general economic and business conditions, including higher inflation and its impacts, federal, state and local government budget deficits and spending limitations, any impact from a prolonged shutdown of the U.S.
For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. 26 Table of Contents Allowance for Product Warranty We offer two-year standard warranties to our customers, depending on the specific product and terms of the customer purchase agreement.
For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. 29 Table of Contents Allowance for Product Warranty We offer two-year or five-year standard warranties to our customers, depending on the specific product and terms of the customer purchase agreement.
Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, we established a valuation allowance of $3,356,000.
Based on our analysis of all available evidence, both positive and negative, we have concluded that we do not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, we established a valuation allowance of $4,398,000.
The Credit Agreement provided for a revolving line of credit of up to $5 million, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the Credit Agreement may have or were used for general corporate purposes.
The JPMC Credit Agreement provided for a revolving line of credit of up to $5 million, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. Proceeds of borrowings under the JPMC Credit Agreement were used for general corporate purposes.
All operating activities described herein are undertaken by our operating subsidiary. In business for over 70 years, BK operates two business units through its operating subsidiary, BK Technologies, Inc.: Radio and SaaS. The Radio business unit designs, manufactures and markets American-made wireless communications products consisting of two-way land mobile radios (“LMRs”).
All operating activities described herein are undertaken by our operating subsidiary. In business for over 70 years, BK has operated two business units through its operating subsidiary, BK Technologies, Inc.: Radio and SaaS. The Radio business unit designs, manufactures and markets wireless communications products consisting of two-way land mobile radios (“LMRs”).
Customer demand and orders for our products were strong in 2022. Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue. Accordingly, as of December 31, 2022, these orders were carried in backlog, and we anticipate fulfilling many of them during the first half of 2023.
Customer demand and orders for our products were strong in 2023 and 2022. Supply chain constraints limited our ability to manufacture the quantities needed to convert the orders into shipments and sales revenue in 2022. Accordingly, as of December 31, 2022, these orders were carried in backlog, and we fulfilled 76% of them during the first half of 2023.
The Company used the funds obtained from the IPSA to replace the existing JPMC Credit Agreement described below and for working capital for the business. On January 13, 2020, BK Technologies, Inc., our wholly owned subsidiary, entered into the $5 million Credit Agreement with JPMC.
The Company used the funds obtained from the IPSA to replace the existing JPMC Credit Agreement described below and for working capital for the business. BK Technologies, Inc., our wholly owned subsidiary, entered into the $5 million Credit Agreement with JPMC.
Slow Moving, Excess or Obsolete Inventory The allowance for slow moving, excess or obsolete inventory was approximately $1.2 million and $1.3 million at December 31, 2022 and 2021, respectively. The allowance for slow-moving, excess, and obsolete inventory is used to state our inventories at the lower of cost or net realizable value.
Slow Moving, Excess or Obsolete Inventory The allowance for slow moving, excess or obsolete inventory was approximately $1.8 million and $1.2 million at December 31, 2023 and 2022, respectively. The allowance for slow-moving, excess and obsolete inventory is used to state our inventories at the lower of cost or net realizable value.
The processes for determining the allowance for collection of trade receivables, allowance for excess or obsolete inventory, and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances. These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.
The processes for determining the allowance for credit losses on trade receivables, allowance for excess or obsolete inventory, and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances. These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.
Accounts receivable increased approximately $2.4 million during the year ended December 31, 2022, primarily due to the timing of sales that were consummated later in the year that had not yet completed their collection cycle. For the same period last year, accounts receivable increased approximately $1.8 million.
Accounts receivable decreased approximately $2.7 million during the year ended December 31, 2023, primarily due to the timing of sales that were consummated later in the year in 2022 that had not yet completed their collection cycle. For the same period last year, accounts receivable increased approximately $2.4 million.
However, financial and economic conditions, including those resulting from supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, geopolitical events, and other force majeure events, such as the COVID-19 pandemic, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all.
However, financial and economic conditions, including those resulting from supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, geopolitical events, and other force majeure events, could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all.
Depreciation and amortization totaled approximately $1.4 million for the year ended December 31, 2022, compared with approximately $1.4 million for the prior year. Depreciation and amortization are primarily related to manufacturing and engineering equipment. Cash used in investing activities for the year ended December 31, 2022, totaled approximately $1.8 million, primarily for manufacturing and engineering related equipment.
Depreciation and amortization totaled approximately $1.6 million for the year ended December 31, 2023, compared with approximately $1.4 million for the prior year. Depreciation and amortization are primarily related to manufacturing and engineering equipment. Cash used in investing activities for the year ended December 31, 2023, totaled approximately $2.1 million, primarily for manufacturing and engineering related equipment.
Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition. 21 Table of Contents Results of Operations As an aid to understanding our operating results, the following table shows items from our consolidated statements of operations expressed as a percentage of sales: Percent of Sales for Years Ended December 31, 2022 2021 Sales 100.0 % 100.0 % Cost of products (80.7 ) (64.2 ) Gross margin 19.3 35.8 Selling, general and administrative expenses (41.1 ) (38.5 ) Other (expense) income, net (1.1 ) (0.7 ) (Loss) income before income taxes (22.8 ) (3.3 ) Income tax expense - (0.4 ) Net Income (loss) (22.8 )% (3.7 )% Fiscal Year 2022 Compared With Fiscal Year 2021 Sales, net For 2022, net sales increased approximately $5.6 million to approximately $51.0 million, compared with approximately $45.4 million last year.
Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition. 24 Table of Contents Results of Operations As an aid to understanding our operating results, the following table shows items from our consolidated statements of operations expressed as a percentage of sales: Percent of Sales for Years Ended December 31, 2023 2022 Sales 100.0 % 100.0 % Cost of products (70.0 ) (80.7 ) Gross margin 30.0 19.3 Selling, general and administrative expenses (31.0 ) (41.1 ) Other (expense) income, net (1.9 ) (1.1 ) (Loss) income before income taxes (2.9 ) (22.8 ) Income tax expense (0.1 ) — Net loss (3.0 )% (22.8 )% Fiscal Year 2023 Compared with Fiscal Year 2022 Sales, net For 2023, net sales increased approximately $23.1 million to approximately $74.1 million, compared with approximately $51.0 million last year.
We believe the BKR Series products, our expanded sales force, and our sales funnel, position us well to capture new sales opportunities moving forward. The impacts of material shortages, lead-times, labor shortages, wage pressures, rising inflation, the ongoing military conflict between Russia and Ukraine and other geopolitical events, and the COVID-19 pandemic in coming months and quarters is uncertain.
We believe the BKR Series products, our expanded sales force, and our sales funnel, position us well to capture new sales opportunities moving forward. The impacts of material shortages, lead-times, labor shortages, wage pressures, rising inflation, the ongoing military conflicts in Ukraine and the Middle East and other geopolitical events in coming months and quarters is uncertain.
While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been delays, extended lead times and increased costs within our supply chain. While the progression and duration of these shortages is not known with certainty, they may have a lesser impact our operations for the next few quarters.
While we have generally been able to procure the material necessary to manufacture our products and fulfill customer orders, there have been delays, extended lead times and increased costs within our supply chain. While the progression and duration of these shortages is not known with certainty, they have had a lesser impact on our operations for the last twelve months.
General and administrative expenses for the year ended December 31, 2022, totaled approximately $6.9 million (13.6% of sales), compared with approximately $5.4 million (11.7% of sales) for the prior year. The increase in general and administrative expenses for the year is attributed primarily to corporate management and headquarters related expenses.
General and administrative expenses for the year ended December 31, 2023, totaled approximately $7.6 million (10.3% of sales), compared with approximately $6.9 million (13.6% of sales) for the prior year. The increase in general and administrative expenses for the year is attributed primarily to corporate management and headquarters-related expenses.
Accounts payable for the year ended December 31, 2022, increased approximately $7.0 million, compared with an increase of approximately $0.8 million for the prior year, primarily due to the timing of purchases and longer lead times for materials from suppliers.
Accounts payable for the year ended December 31, 2023, decreased approximately $3.1 million, compared with an increase of approximately $7.0 million for the prior year, primarily due to the timing of purchases and longer lead times for materials from suppliers in 2022.
We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations.
Risk Factors in Part II of this report. We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations.
These development activities are the main focus of our engineering team. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential effects of the COVID-19 pandemic in coming months.
These development activities are the main focus of our engineering team. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages and the potential economic effects of the conflicts in Ukraine and Israel in coming quarters.
The IPSA line of credit is an accounts receivable and inventory financing facility, with the borrowing base of up to 85% of eligible accounts receivable and up to 75% of net orderly liquidation value of inventory, not to exceed 100% of eligible accounts receivable.
In November 2023, the IPSA was extended for one year. The IPSA line of credit is an accounts receivable and inventory financing facility, with the borrowing base of up to 85% of eligible accounts receivable and up to 75% of net orderly liquidation value of inventory, not to exceed 100% of eligible accounts receivable.
Government and our ability to comply with the requirements of contracts, laws and regulations related to such sales; allocations by government agencies among multiple approved suppliers under existing agreements; our ability to comply with U.S. tax laws and utilize deferred tax assets; our ability to attract and retain executive officers, skilled workers and key personnel; our ability to manage our growth; our ability to identify potential candidates for, and consummate, acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation; impact of our capital allocation strategy; risks related to maintaining our brand and reputation; impact of government regulation; rising health care costs; our business with manufacturers located in other countries, including changes in the U.S.
Government and our ability to comply with the requirements of contracts, laws and regulations related to such sales; allocations by government agencies among multiple approved suppliers under existing agreements; our ability to comply with U.S. tax laws and utilize deferred tax assets; our ability to attract and retain executive officers, skilled workers and key personnel; our ability to manage our growth; our ability to identify potential candidates for, and to consummate, acquisition, disposition or investment transactions, and risks incumbent to being a noncontrolling interest stockholder in a corporation; impact of natural disasters, changes in climate, severe weather events, geopolitical events, acts of war or terrorism, global health epidemics or pandemics (such as the COVID-19 pandemic) and catastrophic events on the companies in which the Company holds investments; impact of our capital allocation strategy; risks related to maintaining our brand and reputation; impact of government regulation; impact of rising health care costs; our business with manufacturers located in other countries, including changes in the U.S.
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 this report.
We also face other risks that could impact our business, liquidity, and financial condition. For a description of these risks, see “Item 1A.
Liquidity and Capital Resources For the year ended December 31, 2022, net cash used in operating activities totaled approximately $9.0 million, compared with cash used by operating activities of approximately $6.3 million for the prior year.
Liquidity and Capital Resources For the year ended December 31, 2023, net cash provided by operating activities totaled approximately $1.7 million, compared with cash used by operating activities of approximately $9.0 million for the prior year.
SG&A expenses for the year ended December 31, 2022, totaled approximately $20.9 million (41.1% of sales), compared with approximately $17.5 million (38.5% of sales) for the prior year. Engineering and product development expenses for 2022 totaled approximately $9.6 million (18.8% of sales), compared with approximately $8.1 million (17.9% of sales) for the prior year.
SG&A expenses for the year ended December 31, 2023, totaled approximately $23.0 million (31.1% of sales), compared with approximately $20.9 million (41.1% of sales) for the prior year. Engineering and product development expenses for 2023 totaled approximately $9.3 million (12.6% of sales), compared with approximately $9.6 million (18.8% of sales) for the prior year.
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.
Risk Factors” set forth in this report. 28 Table of Contents 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.
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.
In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years. We analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax assets.
On November 22, 2022, the Company’s Subsidiaries (BK Technologies, Inc. and RELM Communications, Inc.) entered into an Invoice Purchase and Security Agreement (the “IPSA”) with Alterna Capital Solutions, LLC (“Alterna”) for a one-year line of credit with total maximum funding up to $15 million, with an interest rate of Prime plus 1.85% and other monthly administrative fees.
Net proceeds for the issuance of the 135,300 warrants generated $1.0 million, which was paid by a $950,000 reduction in accounts payable and $50,000 in cash. 27 Table of Contents On November 22, 2022, the Company’s Subsidiaries (BK Technologies, Inc. and RELM Communications, Inc.) entered into an Invoice Purchase and Security Agreement (the “IPSA”) with Alterna Capital Solutions, LLC (“Alterna”) for a one-year line of credit with total maximum funding up to $15 million, with an interest rate of Prime plus 1.85% and other monthly administrative fees.
During recent quarters, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies and extended lead times for certain components used in our products.
However, worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products.
Allowance for Collection of Trade Receivables The allowance for doubtful accounts was approximately $50,000 on gross trade receivables of approximately $10.7 million as of December 31, 2022, as compared with $50,000 on gross trade receivables of approximately $8.3 million as of December 31, 2021.
Allowance for Credit Losses The allowance for credit losses was approximately $50,000 on gross trade receivables of approximately $7.9 million as of December 31, 2023, as compared with $50,000 on gross trade receivables of approximately $10.7 million as of December 31, 2022.
Marketing and selling expenses for the year ended December 31, 2022, totaled approximately $4.4 million (8.6% of sales), compared with approximately $4.0 million (8.9% of sales) for the prior year. The increase in marketing and selling expenses for the year are attributed to staff-related and other sales and go-to-market expenses, which were partially offset by decreased commissions.
Marketing and selling expenses for the year ended December 31, 2023, totaled approximately $6.1 million (8.2% of sales), compared with approximately $4.4 million (8.6% of sales) for the prior year. The increase in marketing and selling expenses for the year are attributed to staff-related and other sales and go-to-market expenses for the BKR9000 product.
The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain, labor shortages, wage pressures, rising inflation, and other force majeure events, such as the COVID-19 pandemic.
The BKR Series is envisioned as a comprehensive line of new products, which will include additional models in coming quarters and years. The timing of developing additional BKR Series products and bringing them to market could be impacted by various factors, including potential impacts related to our supply chain, labor shortages, wage pressures, rising inflation, and other force majeure events.
While the current impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter.
While the impacts of COVID-19 are reflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. For additional risks relating to the COVID-19 pandemic and geopolitical conflicts in Ukraine and Israel, see Item 1A.
On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743,000 to finance various items of manufacturing equipment. The loan is collateralized by the equipment purchased using the proceeds.
On April 6, 2021, BK Technologies, Inc., a wholly owned subsidiary of BK Technologies Corporation, and JPMC, as a lender, entered into a Master Loan Agreement in the amount of $743 to finance various items of manufacturing equipment (the “JPMC Credit Agreement”). The Company used funds obtained from the Line of Credit to replace the JPMC Credit Agreement.
The tax expense in any period may 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 fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period.
Our income tax provision is based on the effective tax rate for the year. The tax expense in any period may 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.
The Subsidiaries have granted Alterna a security interest in all of their respective personal property to secure their obligations under the IPSA.
The Subsidiaries have granted Alterna a security interest in all of their respective personal property to secure their obligations under the IPSA. The Subsidiaries entered into a cross-guarantee, guaranteeing each other’s obligations under the IPSA, and BK also provided a guaranty of the Subsidiaries’ obligations under the IPSA.
The Credit Agreement contained one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20 million at any fiscal quarter end. The IPSA provides for the payment of fees by the Subsidiaries and includes customary representations and warranties, indemnification provisions, covenants, and events of default.
The Credit Agreement contained one financial covenant requiring BK Technologies, Inc., to maintain a tangible net worth of at least $20 million at any fiscal quarter end.
There were no changes to our critical accounting policies during the twelve months ended December 31, 2022.
There were no changes to our critical accounting policies during the twelve months ended December 31, 2023, other than the adoption of ASU 2016-13 described above.
For the prior year, cash used in investing activities totaled approximately $2.3 million, primarily for purchases of engineering and manufacturing related equipment. 24 Table of Contents For the year ended December 31, 2022, cash of approximately $2.1 million was provided by financing activities.
For the prior year, cash used in investing activities totaled approximately $1.8 million, primarily for purchases of engineering and manufacturing related equipment. For the year ended December 31, 2023, cash of approximately $2.0 million was provided by financing activities. During the year, we received proceeds of approximately $74.9 million from the IPSA with Alterna Capital Solutions LLC described below.
As noted above, all amounts owed under the Credit Agreement with JPMC were paid in full with proceeds from the IPSA. Borrowings under the JPMC Credit Agreement were to bear interest at the secured overnight financing rate plus a margin of 2.0%.
The outstanding balance of this credit facility was paid in full in November 2022, once the Company received the new IPSA funding. Borrowings under the JPMC Credit Agreement were to bear interest at the secured overnight financing rate plus a margin of 2.0%.
In 2022 we recognized other expenses, net totaling approximately 553,000, primarily attributed to net realized and unrealized losses from our investment in FG Financial Group, Inc. This compares with other expense of $318,000 last year, which was also primarily related to an unrealized loss from the investment in FG Financial Group, Inc.
This compares with other expense of $0.6 million last year, which was also primarily related to an unrealized loss from the investment in FG Financial Group, Inc. and net interest expense. For 2023 the pretax loss totaled approximately $2.2 million, compared with pretax loss of approximately $11.6 million for the prior year.
Impact of COVID-19 Pandemic and Supply Chain In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020. The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020.
During 2022, we declared three and paid four quarterly dividends, utilizing cash of approximately $2.0 million. Impact of COVID-19 Pandemic and Supply Chain In December 2019, a novel strain of the coronavirus (COVID-19) surfaced, which spread globally and was declared a pandemic by the World Health Organization in March 2020.
The Subsidiaries entered into a cross-guarantee, guaranteeing each other’s obligations under the IPSA, and BK also provided a guaranty of the Subsidiaries’ obligations under the IPSA As of December 31, 2022, and the date of filing this report, approximately $6.0 million and $5.6 in borrowings were outstanding under the IPSA, respectively.
As of December 31, 2023, and the date of filing this report, approximately $6.5 million and $6.6 million, respectively, in borrowings were outstanding under the IPSA.
During the year, we received proceeds of approximately $9.7 million from the IPSA with Alterna, This was partially offset by credit facility repayments of $5.3 million and loan repayments of approximately $277,000. For the same period last year, we closed a public offering of our common stock, generating net proceeds of approximately $11.6 million.
For the prior year, we received proceeds of approximately $9.7 million from our IPSA revolving credit facility with Alterna Capital Solutions, LLC and the Credit Agreement with JPMC described below, that was partially offset by credit facility repayments of $5.3 and loan repayments of approximately $277,000.
As of December 31, 2022, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue. In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years.
As a result, we may experience fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period. As of December 31, 2023, our net deferred tax assets totaled approximately $4.1 million, and were primarily derived from research and development tax credits, operating loss carryforwards and deferred revenue.
Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders. Consequently, these orders were carried in backlog, and we anticipate fulfilling many of these orders during the first half of 2023. For 2022, sales grew approximately 12.3% to approximately $51.0 million, compared with $45.4 million for the prior year.
Supply chain constraints limited our ability to manufacture the quantities needed to ship and fulfill all the orders in 2022. Consequently, approximately $27 million customer orders were carried in backlog, and we fulfilled approximately 76% of those orders during the first half of 2023 and most of the remainder as of December 31, 2023.
Operating Loss For the year ended December 31, 2022, our operating loss totaled approximately $11.1 million (21.7% of sales), compared with operating loss of approximately $1.2 million (2.6% of sales), for the prior year.
Operating Loss For the year ended December 31, 2023, our operating loss totaled approximately $0.8 million (1.0% of sales), compared with operating loss of approximately $11.1 million (21.7% of sales), for the prior year. The operating loss for the year is attributed primarily to increased engineering and administrative expenses, related to the introduction of the BKR9000 product.
Cash used in operating activities for the year was primarily related to a net loss, increased inventory, and increases in accounts receivable, which were partially offset by increased accounts payable and depreciation and amortization. For 2022, we had a net loss of approximately $11.6 million, compared with net loss of approximately $1.7 million for the prior year.
Cash provided by operating activities for the year was primarily related to an increase in deferred revenues, a decrease in accounts receivable and depreciation and amortization, which were partially offset by decreases in accounts payable, increases in inventories, and the net loss.
The Master Loan Agreement is payable in 48 equal monthly principal and interest payments of approximately $16,000 beginning on May 8, 2021, matures on April 8, 2025, and bears a fixed interest rate of 3.0%. 25 Table of Contents Our cash and cash equivalents balance at December 31, 2022, was approximately $1.9 million.
The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 monthly principal and interest payments of approximately $8 beginning on October 25, 2019 and maturing on September 25, 2024, and bears a fixed interest rate of 5.11% Our cash and cash equivalents balance at December 31, 2023, was approximately $3.5 million.
Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing.
Cost of Products and Gross Profit Margin Gross profit margins as a percentage of sales for 2023 were approximately 30.0%, compared with 19.3% for the prior year. 25 Table of Contents Our cost of products and gross profit margins are primarily derived from material, labor and overhead costs, product mix, manufacturing volumes and pricing.
Gross profit margins for the year ended December 31, 2022, decreased compared with the same period last year primarily due to increased material, component and freight costs related primarily to supply chain factors, as well as one-time inventory adjustment related to certain components of our BKR product line.
Gross profit margins for the year ended December 31, 2023, increased compared with the same period last year primarily due to decreased material, component and freight costs related primarily to improvement in supply chain factors. We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs.
Net interest expense was attributed primarily to our credit facility and equipment financing. Gain/Loss on Investment For the year ended December 31, 2022, we recognized a realized and unrealized loss of approximately $313,000 on our investment in FG Financial Group, Inc., compared with an unrealized loss of approximately $219,000 for the prior year.
Other (Expense) Income Interest (Expense) Income We recorded net interest expense of approximately $575,000 for the year ended December 31, 2023, compared with approximately $144,000 for the prior year. Net interest expenses were attributed primarily to our credit facility and equipment financing.
The net loss for 2022 totaled approximately $11.6 million ($0.69 per basic share), compared with net loss of approximately $1.7 million ($0.11 per basic share) last year. 20 Table of Contents As of December 31, 2022, working capital totaled approximately $13.2 million, of which $12.5 million was comprised of cash, cash equivalents and trade receivables.
As of December 31, 2023, working capital totaled approximately $16.8 million, of which $11.4 million was comprised of cash, cash equivalents and trade receivables. This compares with working capital totaling approximately $13.2 million at 2022 year-end, which included $12.5 million of cash, cash equivalents and trade receivables.
We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs. While we anticipate continuing to do so in the future, we have increased, and are continuing to increase, our utilization of U.S.-based resources, which provides greater security and control over our production.
While we anticipate continuing to do so in the future, we have increased, and are continuing to increase, our utilization of contract manufacturing resources, which provides increased flexibility for our production capacity to meet increased demand. We believe that our current manufacturing capabilities and contract relationships or comparable alternatives will continue to be available to us.
While, generally, we have been able to procure the material necessary to manufacture our products and fulfill customer orders in 2022, there have been some delays and longer delivery times within our supply chain. While the progression and duration of these shortages is not known with certainty, they may last for several quarters or years.
While, generally, we were able to procure the material necessary to manufacture our products and fulfill customer orders in 2022, there were some delays and longer delivery times within our supply chain. During 2023, we were able to achieve incremental improvement for the COVID-19 supply chain disruption challenges to that of more normal pre-pandemic experience.
Such effects have the potential to adversely impact our customers and our supply chain, which could adversely affect our future sales, operations, and financial results. 22 Table of Contents Cost of Products and Gross Profit Margin Gross profit margins as a percentage of sales for 2022 were approximately 19.3%, compared with 35.8% for the prior year.
Such effects have the potential to adversely impact our customers and our supply chain, which could adversely affect our future sales, operations, and financial results.
Sales for the year ended December 31, 2022, were attributed primarily to federal, state and municipal public safety agencies, some of which were new customers.
Although supply chain factors continued to impact production costs for certain components during 2023, we have been able to achieve incremental improvement and fulfill customer requirements. The increase in sales for the year ended December 31, 2023, was attributed primarily to the BKR5000 portable LMR product to federal, state and municipal public safety agencies, some of which were new customers.
Government; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contacts; heavy reliance on sales to agencies of the U.S.
Government, the effects of natural disasters, changes in climate, severe weather events, geopolitical events, acts of war or terrorism, global health epidemics or pandemics (such as the COVID-19 pandemic) and catastrophic events, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contracts; heavy reliance on sales to agencies of the U.S.
Income Tax/(Expense) Benefit We recorded no income tax expense for the year ended December 31, 2022, compared with income tax expense of $187,000 for the prior year. Our income tax provision is based on the effective tax rate for the year.
Gain/Loss on Investments For the year ended December 31, 2023, we recognized an unrealized loss of approximately $740,000 on our investment in FG Financial Holdings, LLC compared with an unrealized loss on investments of approximately $313,000 for the prior year. 26 Table of Contents Income Tax/(Expense) Benefit We recorded $54,000 and no income tax expense for the years ended December 31, 2023 and 2022, respectively.
The impact to our business in 2021, particularly customer orders, is not known with any certainty However, we received record customer orders of approximately $70 million in 2022. Worldwide shortages of materials, particularly semiconductors and integrated circuits, have resulted in limited supplies, extended lead times, and increased our costs and inventory levels for certain components used in our products.
Although in the future we may encounter new product costs and competitive pricing pressures, the extent of their impact on gross margins, if any, is uncertain. During the last two years, worldwide shortages of materials, including semiconductors and integrated circuits, have resulted in limited supplies and extended lead times for certain components used in our products.
Selling, general and administrative (“SG&A”) expenses for 2022 totaled approximately $20.9 million (41.1% of sales), compared with $17.5 million (38.5% of sales) last year. We recognized an operating loss in 2022 of approximately $11.1 million, which was attributed primarily to increased product costs and operating expenses. For the prior year we recognized an operating loss of approximately $1.2 million.
Gross profit margins as a percentage of sales in 2023 were 30.0%, compared with 19.3% for the prior year, generally reflecting decreases in material, component and freight costs related to supply chain challenges experienced in 2022. Selling, general and administrative (“SG&A”) expenses for 2023 totaled approximately $23.0 million (31.1% of sales), compared with $20.9 million (41.1% of sales) last year.
For 2022 the pretax loss totaled approximately $11.6 million, compared with pretax loss of approximately $1.5 million for the prior year. We recognized no tax expense in 2022, compared with approximately $187,000 for the prior year. Our income tax expense for 2021 was largely non-cash as a result of deferred items.
We recognized $54,000 and no tax expense in 2023 and 2022, respectively. The net loss for 2023 totaled approximately $2.2 million ($0.65 per basic share), compared with net loss of approximately $11.6 million ($3.44 per basic share) last year.
Net inventories increased during the year ended December 31, 2022, by approximately $5.1 million, compared with an increase of approximately $7.1 million for the prior year. The increase was primarily attributable to extended supply-chain lead times, which impacted material purchases and sales shipments, as well as material for planned new product introductions.
For 2023, we had a net loss of $2.2 million, compared with net loss of approximately $11.6 million for the prior year. Net inventories increased during the year ended December 31, 2023, by approximately $2.4 million, compared with an increase of approximately $5.1 million for the prior year.
During the year, we received proceeds of approximately $5.7 million from our revolving credit facility and from financing related to the purchase of manufacturing equipment, that was partially offset by loan repayments of approximately $3.7 million. We used cash of approximately $2.0 million and $1.2 million to pay quarterly dividends for the years ended December 31, 2022 and 2021, respectively.
We discontinued the quarterly dividend program in 2023 and used cash of approximately $2.0 million to pay quarterly dividends for the year ended December 31, 2022.
The growth was attributed primarily to state and local public safety agencies, as well as the first model in our BKR line of products. Gross profit margins as a percentage of sales in 2022 were 19.3%, compared with 35.8% for the prior year, generally reflecting increases in material, component and freight costs.
For 2023, sales grew approximately 45.4% to approximately $74.1 million, compared with $51.0 million for the prior year. The growth was attributed primarily to the backlog described above, as well as the launch of the first model in our BKR line of products.
Removed
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.
Added
We recognized an operating loss in 2023 of approximately $0.8 million, which was attributed primarily to increased operating expenses related to the introduction of the BKR9000 multi-band portable radio product.
Removed
This compares with working capital totaling approximately $25.2 million at 2021 year-end, which included $18.8 million of cash, cash equivalents and trade receivables. During 2022, we declared three and paid four quarterly dividends, utilizing cash of approximately $2.0 million.
Added
For the prior year we recognized an operating loss of approximately $11.1 million. 23 Table of Contents In 2023 we recognized other expenses, net totaling approximately $1.4 million, primarily attributed to net unrealized losses from our investment in FG Financial Holdings, LLC and net interest expense.
Removed
In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing. We are considered an “essential business” that is supporting first responders and our manufacturing operations have remained open throughout the pandemic.
Added
The challenges posed by the COVID-19 pandemic on the global economy increased significantly in the first several months of 2020, and have since diminished, though there are lingering effects as noted below. Coming out of the COVID-19 pandemic, we received record customer orders of approximately $70 million in 2022.

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