Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE CONCERNING

FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, including any information incorporated by reference in this report, therefore, contains statements about future events and expectations which are "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including the statements about our plans, objectives, expectations and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can expect to identify these statements by forward-looking words such as "may," "might," "could," "would," "should," "will," "anticipate," "believe," "plan," "estimate," "project," "expect," "intend," "seek," "are encouraged," and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. We also may make forward-looking statements in other documents that are filed or furnished with the U.S. Securities and Exchange Commission (the "SEC"). In addition, we may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others. Forward-looking statements include, but are not limited to, the following: changes or advances in technology; the success of our Solutions 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 current and anticipated Solutions products, and our new multiband radio product and other related products in the BKR Series product line; competition in the land mobile radio ("LMR") industry; general economic and business conditions, including the impacts of high inflation, fluctuating interest rates, tariffs and other trade barriers and restrictions, labor and supply shortages and disruptions, federal, state, and local government budget deficits and spending limitations, any impact from a prolonged shutdown 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 crises and other catastrophic events, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, including a potential U.S. or global downturn or recession; the availability, terms and deployment of capital; reliance on contract manufacturers and suppliers; risks associated with fixed-price contracts; heavy reliance on sales to agencies of the U.S. Government and our ability to comply with the requirements of contracts, laws, and regulations related to such sales; allocations by government agencies among multiple approved suppliers under existing agreements; our ability to comply with U.S. tax laws and utilize deferred tax assets; our ability to attract and retain executive officers, skilled workers, and key personnel; our ability to manage our growth; our ability to identify potential candidates for, and consummate, acquisition, disposition or investment transactions; 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 the effects of changes in the U.S. Government and foreign governments' trade and tariff policies, such as recent increases in tariffs by the U.S. and the imposition of increased tariffs and other trade barriers and retaliatory measures by foreign governments; our inventory and debt levels; our ability to comply with the terms, including financial covenants, of our outstanding debt, including fluctuating interest rates; 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 or third-party information technology systems upon which we rely; widespread outages, interruptions or other failures of operational, communication or other systems; availability of adequate insurance coverage; environmental, social and governance matters; maintenance of our NYSE American listing; risks related to being a holding company; our ability to remediate the material weakness in our internal control over financial reporting; and the effect on our stock price and ability to raise capital through future sales of shares of our common stock.

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

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in "Part I-Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 , "Part II - Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q, and in our subsequent filings with the SEC. We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report. Readers are cautioned not to place undue reliance on these forward-looking statements.

Reported dollar amounts in the management's discussion and analysis ("MD&A") section of this report are disclosed in millions or as whole dollar amounts.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report and the MD&A, consolidated financial statements, and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025.

Executive Summary

BK Technologies Corporation (NYSE American: BKTI) (together with its wholly owned subsidiaries, "BK," "BK Technologies," 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 designed to make first responders safer and more efficient. All operating activities described herein are undertaken by our operating subsidiary.

In business for over 70 years, BK operates one business segment through its operating subsidiary, BK Technologies, Inc. BK has two product groups within the segment: LMR Radio and Solutions.

The LMR Radio product group designs, manufactures, and markets wireless communications products consisting of two-way LMRs. Two-way LMRs can be radios that are hand-held (portable) or installed in vehicles (mobile).

Generally, BK Technologies-branded products serve the government markets, including, but not limited to, emergency response, public safety, homeland security, and military customers of federal, state, and municipal government agencies, as well as various industrial and commercial enterprises. We believe that our products and solutions provide superior value by offering high specification, ruggedized, durable, reliable, feature-rich, Project 25 ("P25") compliant radios at a lower cost relative to comparable offerings.

The Solutions product group focuses on delivering innovative, public safety smartphone applications that operate ubiquitously over public cellular networks. We presently have one U.S. patent in force and two pending U.S. patent applications. Going forward, we plan to continue to expand the Solutions product group to include public safety solutions that provide for improved interoperability, intended to make the first responder safer and more efficient when operating in the field. We intend for the Solutions product group to build a portfolio of solutions under a new brand, BK ONE. BK ONE includes SaaS solutions as well as other future software and hardware applications. When tethered to our radios, the combined solution will offer a unique capability which increases the sales reach of our radios. We previously introduced InteropONE in October 2022, a Push-to-talk-Over-Cellular SaaS service, and in March 2025, we launched RelayONE, a rapidly deployed portable repeater kit designed to extend range and facilitate interoperability among different types of public safety and military radios.

The Company continues to monitor the impacts of various macroeconomic trends, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, the impact of the ongoing U.S. federal government shutdown, and global or local recession. Such changes in domestic and global macroeconomic conditions may lead to increased costs for the business. Additionally, these macroeconomic trends could adversely affect the Company's customers, which could impact their willingness to spend on the Company's products and services, or their ability to make payments, which could harm the collection of accounts receivable and financial results. The world's financial markets remain susceptible to significant stresses, resulting in reductions in available credit and government spending, economic downturn or stagnation, foreign currency fluctuations and volatility in the valuations of securities generally. As a result, the Company's ability to access capital markets and other funding sources in the future may not be available on commercially reasonable terms, if at all. The rapid development and fluidity of these situations precludes any prediction as to the ultimate impact they will have on the Company's business, financial condition, results of operation and cash flows, which will depend largely on future developments.

For the three months ended September 30, 2025, sales increased approximately 21.0% to approximately $24.4 million, compared with $20.2 million for the same period of fiscal year 2024. The increase was attributed primarily to the shipments of BKR series radio product and accessories sales. Gross profit margins as a percentage of sales for the three months ended September 30, 2025, were 49.9%, compared with 38.8% for the comparative fiscal year 2024 quarter, generally reflecting price increases related to tariffs, radio product and accessories sales mix and material cost improvements related to cost reduction initiatives. Selling, general, and administrative ("SG&A") expenses for the three months ended September 30, 2025, totaled approximately $7.3 million (30.1% of sales), compared with $5.2 million (25.9% of sales) in the same period of fiscal year 2024. We recognized operating income for the three months ended September 30, 2025, of approximately $4.8 million, compared with operating income of approximately $2.6 million for the same period of fiscal year 2024.

For the three months ended September 30, 2025, we recognized other income, net totaling approximately $43,000. This compares with other expenses, net totaling $7,000 for the same period of fiscal year 2024.

For the three months ended September 30, 2025, the pretax income totaled approximately $4.9 million, compared with pretax income of approximately $2.6 million for same period of fiscal year 2024.

We recognized tax expense of $1.5 million for the three-month period ended September 30, 2025, and approximately $247,000 for the same period of fiscal year 2024.

Net income for the three months ended September 30, 2025, totaled approximately $3.4 million ($0.93 per basic and $0.87 per diluted share), compared with a net income of approximately $2.4 million ($0.67 per basic and $0.63 per diluted share) for the same period last year. The primary factors for the improvement for the three months ended September 30, 2025, compared to the same period of fiscal year 2024, were radio product and accessories sales mix and lower raw material costs related to cost reduction efforts.

As of September 30, 2025, working capital totaled approximately $33.8 million, of which $29.1 million was comprised of cash, cash equivalents, and trade receivables. This compares with working capital totaling approximately $23.0 million at 2024 year-end, which included $14.4 million of cash, cash equivalents, and trade receivables.

We may experience fluctuations in our quarterly results, in part, due to governmental customer spending patterns that are influenced by government fiscal year-end budgets and appropriations. We may also experience fluctuations in our quarterly results, in part, due to our sales to federal and state agencies that participate in wildland fire-suppression efforts, which may be greater during the summer season when forest fire activity is heightened. In some years, these factors may cause an increase in sales for the second and third quarters, compared with the first and fourth quarters of the same fiscal year. Such increases in sales may cause quarterly variances in our cash flow from operations and overall financial condition. The Company's guidance reflects our current understanding of the potential impact of tariffs and the current administration's efforts to reduce federal expenditures, and to the extent it can be calculated, the estimated amount of the impacts are included in current guidance.

Available Information

Our Internet website address is www.bktechnologies.com. The information contained on or accessible from our website is not incorporated by reference in this report. Any reference to our website is intended to be an inactive textual reference only. We make available on our Internet website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to these reports as soon as practicable after we file such material with, or furnish it to, the SEC. In addition, our Code of Business Conduct and Ethics, Code of Ethics for the CEO and Senior Financial Officers, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter, and other corporate governance policies are available on our website under "Investor Relations." 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. All reports that the Company files with or furnishes to the SEC also are available free of charge via the SEC's website.

Third Quarter and Nine Months Summary

Customer demand and new orders for our products was $34.3 million during the three months ended September 30, 2025, compared to $21.8 million for the same period of fiscal year 2024. Customer demand and new orders for our products of $69.3 million were recorded during the nine months ended September 30, 2025, compared to $72.4 million for the same period of fiscal year 2024. The decrease in new orders for the nine months ended September 30, 2025, compared to the same period last year was primarily due to higher state agency orders in the first nine months of 2024.

For the third quarter of 2025, sales increased 21.0% to approximately $24.4 million, compared with approximately $20.2 million of sales for the third quarter of fiscal year 2024. Sales for the nine months ended September 30, 2025, totaled approximately $64.6 million, an increase of 10.2% compared with approximately $58.7 million for the nine-month period last year. Gross profit margin as a percentage of sales for the third quarter of 2025 was approximately 49.9%, compared with 38.8% for the same period of fiscal year 2024, generally reflecting price increases related to tariffs, radio product and accessories sales mix and the full impact of material cost improvements related to the transition of manufacturing production to East West Manufacturing, LLC compared to the third quarter of fiscal year 2024. Selling, general, and administrative ("SG&A") expenses for the third quarter of 2025 totaled approximately $7.3 million, which was 40.6% higher than the SG&A expenses of approximately $5.2 million for the third quarter of fiscal year 2024. The increase in SG&A expenses was attributed primarily due to new product development costs, and accrual of fiscal year 2025 incentive bonus expenses. These factors yielded operating income of approximately $4.8 million for the three-month period ended September 30, 2025, compared with operating income of approximately $2.6 million for the same period of fiscal year 2024.

For the third quarter of 2025, we recognized other net income of approximately $43,000 on interest income on our cash investments and other expenses, compared to approximately $7,000 other expense, primarily related to other expenses for the same period of fiscal year 2024.

Net income for the three months ended September 30, 2025, was approximately $3.4 million ($0.93 per basic and $0.87 per diluted share), compared with net income of approximately $2.4 million ($0.67 per basic and $0.63 per diluted share) for the same quarter last year. The primary factors for the improvement for the three-month period ended September 30, 2025, compared to the same period of fiscal year 2024, were radio product and accessories sales mix and the full impact of material cost improvements related to the transition of manufacturing production to East West Manufacturing, LLC. during fiscal year 2024.

As of September 30, 2025, working capital totaled approximately $33.8 million, of which approximately $29.1 million was comprised of cash, cash equivalents and trade receivables. As of December 31, 2024, working capital totaled approximately $23.0 million, of which approximately $14.4 million was comprised of cash, cash equivalents and trade receivables.

Results of Operations

As an aid to understanding our operating results for the periods covered by this report, the following table shows selected items from our condensed consolidated statements of operations expressed as a percentage of sales:

		Percentage of Sales								Percentage of Sales
		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2025				2024				2025				2024
Sales			100.0	%			100.0	%			100.0	%			100.0	%
Cost of products			(50.1	)			(61.2	)			(51.8	)			(63.1	)
Gross margin			49.9				38.8				48.2				36.9
Selling, general and administrative expenses			(30.1	)			(25.9	)			(30.0	)			(27.4	)
Other income (expense)			0.2				(0.0	)			(0.1	)			(0.7	)
Income before income taxes			20.0				12.9				18.1				8.8
Income tax (expense)			(5.9	)			(1.2	)			(3.7	)			(0.8	)
Net income			14.1	%			11.7	%			14.4	%			8.0	%

(1) Amounts may not foot due to rounding

Net Sales

For the third quarter ended September 30, 2025, net sales increased 21.0% to approximately $24.4 million, compared with approximately $20.2 million for the same quarter of fiscal year 2024. Sales for the nine months ended September 30, 2025, totaled approximately $64.6 million, compared with approximately $58.7 million for the nine-month period last year.

Sales for the third quarter and nine months ended September 30, 2025, were attributed primarily to Federal, state and local public safety opportunities. From a product perspective, the primary contributor to orders and shipments during the third quarter and nine months ended September 30, 2025, was our BKR series radios and related accessories. The BKR Series is envisioned as a comprehensive line of new products, which includes new models such as the BKR 9000, which achieved first sales in the second quarter of 2023.

We believe that the BKR Series products should increase our addressable market by expanding the number of Federal, state and local public safety customers that may purchase our products. However, the timing and size of orders from agencies at all levels can be unpredictable and subject to budgets, priorities, and other factors.

While the potential impacts of the current administration's tariff policies, the ongoing government shutdown, material shortages, lead-times, high inflation and ongoing geopolitical conflicts in Ukraine and the Middle East and other geopolitical events remain uncertain in the coming months and quarters, such effects have the potential to adversely impact our customers and our supply chain. Such negative effects on our customers and suppliers could adversely affect our future sales, gross profit margins, operations and financial results.

Cost of Products and Gross Profit Margin

Gross profit margins as a percentage of sales for the third quarter ended September 30, 2025, were approximately 49.9% compared with 38.8% for the same quarter of fiscal year 2024. Gross profit margins as a percentage of sales for the nine months ended September 30, 2025, were approximately 48.2% compared with 36.9% for the same period of fiscal year 2024. Our cost of products and gross profit margins are primarily derived from material, labor, and overhead costs, product mix, manufacturing volumes and pricing. The increase in gross profit margins for the three- and nine-months ended September 30, 2025, compared to the same periods of fiscal year 2024, generally reflect price increases related to tariffs, radio product and accessories sales mix and the full impact of material cost improvements related to the transition of manufacturing production to East West Manufacturing, LLC., during fiscal year 2024.

We utilize a combination of internal manufacturing capabilities and contract manufacturing relationships for production efficiencies and to manage material and labor costs. During the year ended December 31, 2024, we completed the transfer of manufacturing most of our products and accessories to East West Manufacturing, LLC. We believe that our current manufacturing capabilities and contract relationships or comparable alternatives will continue to be available to us. However, we may encounter new product costs and competitive pricing pressures in the future and the extent of their impact on gross margins, if any, is uncertain.

Selling, General and Administrative Expenses

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

SG&A expenses for the quarter ended September 30, 2025, totaled approximately $7.3 million (30.1% of sales), compared with approximately $5.2 million (25.9% of sales) for the same quarter of fiscal year 2024. For the nine months ended September 30, 2025, SG&A expenses increased by $3.4 million, or 21.0%, to approximately $19.4 million (30.0% of sales), compared with approximately $16.1 million (27.4% of sales), for the nine-month period last year.

Engineering and product development expenses for the third quarter of 2025 totaled approximately $2.8 million (11.4% of sales), compared with approximately $1.9 million (9.2% of sales) for the same quarter of fiscal year 2024. For the nine months ended September 30, 2025, engineering and product development expenses totaled approximately $7.8 million (12.1% of sales), compared with approximately $5.9 million (10.1% of sales) for the nine-month period last year. The increase in engineering expenses was attributed primarily to non-capitalizable development costs for the BKR multi-band mobile radio product and restricted stock unit issuance costs described in Note 8 (Non-Cash Share-Based Employee Compensation) to the condensed consolidated financial statements included in this report. Most of these activities were being performed by our internal engineering team and were their primary focus, combined with sustaining engineering support for our existing products. The precise date for developing and introducing new products is uncertain and can be impacted by, among other things, supply chain shortages, including the impact of tariffs and certain component lead times in coming months and quarters.

Marketing and selling expenses for the third quarter of 2025 totaled approximately $2.1 million (8.7% of sales), compared with approximately $1.5 million (7.2% of sales) for the third quarter of fiscal year 2024. For the nine months ended September 30, 2025, marketing and selling expenses increased approximately $1.3 million, or 28.0%, to approximately $5.9 million (9.1% of sales), compared with approximately $4.6 million (7.9% of sales) for the same period last year. The increase in marketing and selling expenses for the three and nine months ended September 30, 2025 was attributed primarily to additional salespeople and increased trade show participation.

Other general and administrative expenses for the third quarter of 2025 totaled approximately $2.4 million (10.0% of sales), compared with approximately $1.9 million (9.4% of sales) for the same period of fiscal year 2024. For the nine months ended September 30, 2025, other general and administrative expenses totaled approximately $5.7 million (8.8% of sales), compared with approximately $5.5 million (9.4% of sales) for the nine-month period last year. The increase in other general and administrative expenses for the three and nine months ended September 30, 2025, was attributed primarily to non-cash stock compensation and the non-recurring nature of certain corporate consulting expenses compared to the nine months ended September 30, 2024.

Operating Income

Operating income for the quarter ended September 30, 2025, totaled approximately $4.8 million (19.8% of sales), compared with operating income of approximately $2.6 million (12.9% of sales) for the same period of fiscal year 2024. For the nine months ended September 30, 2025, our operating income totaled approximately $11.8 million (18.2% of sales), compared with operating income of approximately $5.6 million (9.6% of sales) for the nine-month period last year. The operating income improvement for the three and nine months ended September 30, 2025, compared to the same periods last year, was attributed to higher gross profit margins related to improved product sales mix and the full impact of material cost improvements related to the transition of manufacturing production to East West Manufacturing, LLC., during fiscal year 2024.

Other Income (Expense)

We recorded net interest income of approximately $94,000 for the quarter ended September 30, 2025, compared with approximately $1,000 net interest expense for the third quarter of fiscal year 2024. For the nine months ended September 30, 2025, net interest income totaled approximately $136,000, compared with net interest expense of approximately $281,000 for the nine-month period last year. Net interest expense for the nine months of 2024 was primarily the result of our Alterna IPSA Line of Credit, which was paid in full in September 2024 and terminated in October 2024.

On January 25, 2024, the Company redeemed its Series B common membership interests (the "Interests") of FG Holdings LLC and withdrew from FG Holdings LLC. In exchange for its Interests, the Company received 52,000 shares of our Common Stock, with an approximate fair value of $0.7 million on the date of the transaction and recorded a realized loss of approximately $0.1 million on the investment during the first quarter of 2024. The shares received by the Company are held as treasury stock, increasing the total number of treasury shares held by the Company to 342,080.

Income Taxes

We recorded approximately $1.5 million and $247,000 tax expense for the three months ended September 30, 2025, and 2024, respectively. For the nine months ended September 30, 2025, and 2024, we recorded $2.4 million and $0.5 million tax expense, respectively

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. 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 September 30, 2025, our net deferred tax assets totaled approximately $5.5 million and were primarily derived from capitalized research and development expenses and deferred revenue.

In order to fully utilize the net deferred tax assets, we will need to generate sufficient taxable income in future years. We analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon our conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

Based on our analysis of all available evidence, both positive and negative, we have concluded that, except for the capital loss carryforward of approximately $802,000, we will have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. 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 September 30, 2025.

On July 4, 2025, new U.S tax legislation (referred to as the "One Big Beautiful Bill Act" or "OBBBA") was enacted in the U.S. The OBBBA makes permanent the extension of certain provisions of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. Additionally, the OBBBA makes changes to certain U.S. corporate tax provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing the impact of the OBBBA on its consolidated financial statements.

Liquidity and Capital Resources

For the nine months ended September 30, 2025, net cash provided by operating activities totaled approximately $16.4 million, compared with cash provided by operating activities of approximately $9.0 million for the same fiscal year period of 2024. Cash provided by operating activities for the nine months ended September 30, 2025, was primarily related to net income of $9.3 million and an increase of $4.5 million in accounts payable, partially offset by an increase of $1.8 million in inventories. Cash provided by operating activities for the nine months ended September 30, 2024, was primarily related to net income of $4.7 million and a $5.3 million reduction in inventory, somewhat offset by a $1.6 million increase in accounts receivable and a $3.9 million decrease in accounts payable.

For the first nine months of 2025, we had net income of approximately $9.3 million, compared with a net income of approximately $4.7 million for the same period of fiscal year 2024. Accounts receivable increased approximately $0.2 million during the nine months ended September 30, 2025, compared with an increase of approximately $1.6 million for the same period of fiscal year 2024, primarily due to the timing of customer collections in the first nine months of fiscal year 2025 and 2024. Inventories increased during the nine months ended September 30, 2025, by approximately $1.8 million compared to a decrease of approximately $5.3 million for the same period of fiscal year 2024. The increase in inventories during the nine months ended September 30, 2025 was primarily attributed to an increase in finished goods in 2025 somewhat offset by a decrease in raw materials. Accounts payable for the nine months ended September 30, 2025, increased approximately $4.5 million, compared with a decrease of approximately $3.9 million for the same period of fiscal year 2024, primarily due to the increased contract manufacturing production to East West Manufacturing LLC, during of 2024. Accrued other expenses decreased during the first nine months of 2025 by approximately $1.3 million compared with an increase of $0.8 million for the same period of fiscal year 2024. Depreciation and amortization totaled approximately $1.3 million for the nine months ended September 30, 2025, compared with approximately $1.3 million for the same period of fiscal year 2024. Depreciation and amortization are primarily related to manufacturing and engineering equipment. There were no realized or unrealized losses on investments for the nine months ended September 30, 2025, compared to approximately $0.1 million for the same period of fiscal year 2024. For additional information pertaining to our investments, refer to Note 1 (Condensed Consolidated Financial Statement) included in this report.

Cash used in investing activities for the nine months ended September 30, 2025, totaled approximately $2.4 million, compared with approximately $1.6 million for the same period of fiscal year 2024. The cash used for the nine-month period ended September 30, 2025, was attributed primarily to capitalized product development costs and purchases of engineering equipment and tooling, compared to cash used for the nine-month period ended September 30, 2024, which was also primarily attributed to capitalized development costs and the purchase of engineering and manufacturing related equipment.

For the nine months ended September 30, 2025, approximately $0.4 million was provided by financing activities, compared with cash used in financing activities of approximately $6.6 million for the same period of fiscal year 2024. During the first nine months of 2024, we received cash of approximately $46.4 million from our Alterna Capital Solutions, LLC revolving credit facility, net of repayments totaling approximately $53.0 million.

Our cash and cash equivalents balance on September 30, 2025, was approximately $21.5 million. We believe these funds, combined with anticipated cash generated from operations and borrowing availability under our Fifth Third credit agreement, are sufficient to meet our working capital requirements for the foreseeable future. We may, depending on a variety of factors, including market conditions for capital raises, the trading price of our common stock and opportunities for uses of any proceeds, engage in public or private offerings of equity or debt securities to increase our capital resources. However, financial and economic conditions, including those resulting from supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, geopolitical events, a prolonged U.S. federal government shutdown, the impacts of tariffs, and other force majeure events, could result in volatility in the financial and capital markets and could limit our access to credit and impair our ability to raise capital, if needed, on acceptable terms or at all. We also face other risks that could impact our business, liquidity, and financial condition.

On October 30, 2024, the Company's subsidiary, BK Technologies, Inc. entered into a Revolving Loan Commitment with Fifth Third Bank, National Association ("Fifth Third") which was amended on October 30, 2025 (as amended, the "RLC"). The Fifth Third RLC provides for a revolving line of credit with a maximum commitment of $6 million, with an accordion feature, if certain conditions are met, for up to an additional $8 million of borrowing capacity, totaling a maximum commitment of $14 million. The RLC will mature on October 30, 2028. Each advance shall accrue interest on the outstanding principal amount thereof at a range of SOFR plus 1.75% to 2.25% per annum, based on certain total debt coverage ratios. Each advance may be prepaid at any time without penalty and the entire line of credit commitment may be permanently terminated by BK Technologies, Inc. at any time upon 10 days' prior written notice to the lender without penalty. The Company has not utilized funding and there were no borrowings under the RLC agreement as of September 30, 2025, and as of the date of filing this report.

BK Technologies, Inc.'s repayment obligations under the RLC are guaranteed by the Company and secured by a pledge of essentially all of the assets of the Company, BK Technologies, Inc. The Company is subject to customary negative covenants, including with respect to our ability to incur additional indebtedness, encumber and dispose of their assets and enter into affiliate transactions. BK Technologies, Inc. must also comply with: (i) a maximum total funded debt ratio of 2.00 to 1.00; (ii) a fixed charge coverage ratio of 1.2 to 1.0 as measured on a rolling twelve-month basis, each measured at the end of each fiscal quarter and (iii) a requirement that the outstanding principal balance under the RLC will be $0 for at least 30 consecutive days during each annual period ending on October 30.

The Fifth Third RLC agreement provided for customary events of default, including: (1) failure to pay principal, interest or fees under the RLC when due and payable; (2) failure to comply with other covenants and agreements contained in the Revolving Loan Commitment agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, Fifth Third may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the RLC agreement.

Critical Accounting Policies

Our critical accounting policies include our revenue recognition process and our accounting processes involving significant judgments, estimates and assumptions. These processes affect our reported revenues and current assets and are, therefore, critical in assessing our financial and operating status. We regularly evaluate these processes in preparing our financial statements. The processes for revenue recognition, allowance for collection of trade receivables, allowance for excess or obsolete inventory and income taxes involve certain assumptions and estimates that we believe to be reasonable under present facts and circumstances. These estimates and assumptions, if incorrect, could adversely impact our operations and financial position.

There were no other changes to our critical accounting policies during the nine months ended September 30, 2025.