Interlink Electronics Inc: Form 10-Q for the period ended Sep 30, 2025

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to uncertainties, assumptions and business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth below in Part II, Item 1A, “Risk Factors,” and in our other reports filed with the Securities and Exchange Commission. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Overview

Interlink Electronics, Inc. is a leading provider of sensors and printed electronics used extensively in HMI devices and IoT solutions. Our broad product and technology portfolio encompasses force, piezo-electric, rugged HMI, wearable sensors for textiles and fabrics, gas sensors, instruments, and systems. Our customers, including global blue-chip companies, trust our products and solutions which span various markets, including medical, industrial, automotive, wearables, IoT, and other specialty markets. Our technical and engineering expertise in materials science, manufacturing, embedded electronics, firmware, and software enables us to create and deliver high-quality, cost-effective custom solutions tailored to our customers’ unique requirements.

Our principal products are:

Force/Touch Sensors. We design, develop, manufacture and sell a range of force-sensing technologies that incorporate our proprietary materials technology, firmware and software into a portfolio of standard products and custom solutions. These include sensor components, subassemblies, modules and products that support effective, efficient cursor control and novel three-dimensional user inputs. Our HMI technology platforms are deployed in a wide range of markets, including medical, industrial, automotive, and consumer products. The application of our HMI technology platforms includes vehicle entry, vehicle multi-media control interface, rugged touch controls, presence detection, collision detection, speed and torque controls, pressure mapping, biological monitoring and others. Through our 2023 acquisition of Calman, which brought us over 25 years of HMI design and manufacturing expertise as a leading provider of specialized printed electronics, we offer customized membrane keypads, graphic overlays, printed electronics and industrial label products for use in a wide range of fields, from industrial instrumentation, process control and monitoring to medical and diagnostic devices and defense systems. Additionally, through our 2024 acquisition of Conductive Transfers, which deepened our innovative patented processes for integration of printed electronic technologies, we offer functional e-textiles and wearable technology, including heated clothing and personal protection equipment, and other products in development for medical and automotive environments and other wearable form-factors.

Gas and Environmental Sensors. We entered the gas and environmental sensing market in 2022 through our acquisition of the business assets of SPEC and KWJ, early pioneers in miniaturized, low-cost gas and environmental sensing technologies. Following our acquisition of these operations, we now offer electrochemical gas-sensing technology products and solutions for industry, community, health and home, with uses in fields such as safety, personal wellness and air quality monitoring.

We sell our products and solutions globally to a diverse array of customers that include Fortune Global 500 companies with the world’s most recognizable brands, as well as start-ups, design houses, original design and equipment manufacturers, and universities. Our technology has been deployed in numerous markets, such as medical, industrial automation, consumer electronics, automotive, defense and environmental monitoring. Our global presence in the United States, China, United Kingdom, Hong Kong, Singapore and Japan allows us to broadly provide sales and engineering support services to our existing and future worldwide customers. We manufacture our products in a state-of-the-art facility in Shenzhen, China, and in our advanced and proprietary facilities in Fremont, California; Irvine, Scotland; and Barnsley, England. We control 100% of the manufacturing and shipping process, which enables us to respond quickly to customer product demand and design requirements.

We have invested significantly in the expansion of our technology platforms through our own internal development to ensure we continue to provide the market with leading-edge solutions that are seamless to deploy and designed to perform flawlessly. Having previously built an R&D organization in Singapore to develop new product offerings that will meet the market’s growing demand for touch technology and smart surfaces, we relocated a majority of our R&D and product development efforts to Camarillo, California, where we have established a Global Product Development and Materials Science Center. Combined with the advanced and proprietary facilities in Silicon Valley, Scotland, and England that were acquired in connection with the acquisitions of SPEC/KWJ, Calman, and Conductive Transfers, we believe this will allow us to grow our business and be more closely aligned with current and future top-tier customers. We also plan to explore potential strategic relationships with companies and technology institutes that will support our growth initiatives.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected.

A description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2025. There have been no changes to our critical accounting policies and estimates described in the Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

Recently Issued and Adopted Accounting Pronouncements

We reviewed all recently issued accounting pronouncements and concluded they are all not applicable or not expected to be material to our financial statements.

Results of Operations

The following table sets forth certain unaudited condensed consolidated statements of operations data for the periods indicated. The percentages in the table are based on revenues.

(in thousands, except percentages)

Comparison of Three Months Ended September 30, 2025 and 2024

Revenue by the markets we serve is as follows:

(in thousands, except percentages)

We sell our custom products into the medical, industrial, automotive and other specialty markets. We sell our standard products to customers in many markets through various distribution networks. The ultimate customer for our products may come from different markets that are often unknown to us at the time of sale. Each market has different product design cycles. Products with longer design cycles often have much longer product life cycles. Medical, industrial, and environmental monitoring products generally have long design and life cycles. We currently have products with life cycles that have exceeded 20 years and are ongoing.

For the three months ended September 30, 2025, compared to the three months ended September 30, 2024, revenues from customers in the medical market and from customers of our standard products were up, while revenues from customers in the industrial and automotive markets were down. The increase in revenue from customers in the medical market was due to increased shipments of our force-sensing products and of our printed electronics in our Calman subsidiary due to higher customer demand, and the decrease in revenue from customers in the industrial market was due to reduced shipments and lower demand on our gas-sensing products. In all markets, the timing of orders from our customers is not always predictable and can be less in some periods and higher in others depending on the level of their demand which is driven by their projects and operating plans.

(in thousands, except percentages)

Our gross profit and gross margin percentage are impacted by various factors including product mix, customer mix, sales volume, and fluctuations in our cost of revenues, which are comprised of material costs, direct and indirect production labor costs, warehousing and logistics costs, facilities costs, and other costs related to production activities. Gross profit was up during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due primarily to higher revenues, while gross margin percentage was up slightly due to higher revenues and favorable changes in our product and customer mix.

(in thousands, except percentages)

Engineering and R&D expenses consist primarily of compensation expenses for employees engaged in research, design and development activities, plus the cost of those employees’ indirect supplies and allocation of facilities expenses. Our R&D team focuses both on internal design development in order to develop our products and solutions, and on custom design development aimed at addressing our customers’ unique design challenges. Engineering and R&D costs for the three months ended September 30, 2025 were down compared to the three months ended September 30, 2024 due to lower engineering employee and consultant compensation costs.

(in thousands, except percentages)

Selling, general and administrative expenses consist primarily of compensation expenses for sales and administrative employees, legal and other professional fees, facilities expenses, communication expenses, and intangible asset amortization expense. Selling, general and administrative costs for the three months ended September 30, 2025 were up compared to the three months ended September 30, 2024 due to increased professional fees and consultant compensation costs.

(in thousands, except percentages)

Other income (expense) consists of non-operating income and expenses, such as gains and losses on marketable securities, foreign currency transaction gains and losses, interest income and expense, and other non-operating income and expenses. Other income (expense) for the three months ended September 30, 2025 was comprised of $5,000 of interest income and offset by $2,000 of foreign currency transaction losses, while other income (expense) for the three months ended September 30, 2024 was comprised of $14,000 of interest income, offset by $33,000 of foreign currency transaction losses.

Income taxes were 8.4% of pre-tax income/loss for the three months ended September 30, 2025, versus 5.7% of pre-tax income/loss for the three months ended September 30, 2024. Our income tax expense/benefit and rate are impacted by the mix of domestic and foreign pre-tax earnings and losses, permanent differences between book income/loss and taxable income/loss, and our ability to utilize net operating loss carryforwards (“NOLs”). Accordingly, our effective tax rate typically will vary from the U.S. statutory tax rate of 21% from quarter to quarter. The effective tax rates for the three-month periods ended September 30, 2025 and 2024 were impacted by the amount of our foreign pre-tax income/loss and the tax expense/benefit thereon while not realizing a benefit on our domestic pre-tax loss and certain foreign losses due to the valuation allowances thereon.

Discrete tax events may cause our effective rate to fluctuate on a quarterly basis. Certain events, including, for example, acquisitions and other business changes, which are difficult to predict, may also cause our effective tax rate to fluctuate. We are subject to changing tax laws, regulations, and interpretations in multiple jurisdictions. Corporate tax reform continues to be a priority in the U.S. and other jurisdictions. Additional changes to the tax system in the U.S. could have significant effects, positive and negative, on our effective tax rate and on our deferred tax assets and liabilities.

Comparison of Nine Months Ended September 30, 2025 and 2024

Revenue by the markets we serve is as follows:

(in thousands, except percentages)

For the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, revenues from customers in the industrial and automotive markets and from customers of our standard products were up, while revenues were down from our medical market customers. The increase in revenue from customers in the industrial and automotive markets was due to increased shipments of our force-sensing and gas-sensing products and solutions due to higher customer demand, while the decrease in revenue from customers in the medical market was primarily due to lower shipments to some of our larger medical customers according to their demand and production plans. In all markets, the timing of orders from our customers is not always predictable and can be less in some periods and higher in others depending on the level of their demand which is driven by their projects and operating plans.

(in thousands, except percentages)

Gross profit was up slightly during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due primarily to higher revenues, while gross margin percentage was down slightly due to changes in our product and customer mix.

(in thousands, except percentages)

26

Engineering and R&D costs for the nine months ended September 30, 2025 were down compared to the nine months ended September 30, 2024 due to lower engineering employee and consultant compensation costs.

(in thousands, except percentages)

Selling, general and administrative costs for the nine months ended September 30, 2025 were generally flat compared to the nine months ended September 30, 2024 due primarily to lower sales and administrative compensation expense on lower headcount, offset by higher costs incurred for consultants and professional services.

(in thousands, except percentages)

Other income (expense) for the nine months ended September 30, 2025 was comprised of $18,000 of interest income and $15,000 of foreign currency transaction gains, while other income (expense) for the nine months ended September 30, 2024 was comprised of $46,000 of interest income, offset by $17,000 of foreign currency transaction losses.

Income taxes were 2.1% of pre-tax income/loss for the nine months ended September 30, 2025, versus 4.0% for the nine months ended September 30, 2024. Our income tax expense/benefit and rate are impacted by the mix of domestic and foreign pre-tax earnings and losses, permanent differences between book income/loss and taxable income/loss, and our ability to utilize net operating loss carryforwards (“NOLs”).

Liquidity and Capital Resources

Cash requirements for working capital and capital expenditures have historically been funded from cash balances on hand, cash generated from operations, and sales of equity securities. As of September 30, 2025, we had cash and cash equivalents of $3.0 million, working capital of $4.9 million and no indebtedness. Cash and cash equivalents consist of cash and money market funds. Of our $3.0 million of cash, $1.8 million was held by foreign subsidiaries. If these funds are needed for our operations in the U.S. or for acquisitions, we have several methods to repatriate without significant tax effects, including repayment of intercompany loans or distributions of previously taxed income. Certain methods of distribution may require us to incur U.S. or foreign taxes to repatriate these funds.

We believe that our existing cash and cash equivalents balances will be sufficient to maintain our current operations considering our current financial condition, obligations, and other expected cash flows. If our circumstances change, however, we may require additional cash. If we require additional cash, we may attempt to raise additional capital through equity, equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we could be subject to fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to raise additional needed funds, we may also take measures to reduce expenses to offset any shortfall.

Cash Flow Analysis

Our cash flows from operating, investing and financing activities are summarized as follows:

(in thousands)

Net Cash Provided By (Used In) Operating Activities

For the nine months ended September 30, 2025, the $244,000 of cash provided by operating activities was attributable to net loss of $1,041,000, adjusted for non-cash charges of $511,000 and cash provided by changes in operating assets and liabilities of $774,000. For the nine months ended September 30, 2024, the $144,000 of cash used in operating activities was attributable to net loss of $1,571,000, adjusted for non-cash charges of $638,000 and cash provided by changes in operating assets and liabilities of $789,000.

Accounts receivable decreased from $1.6 million at December 31, 2024 to $1.4 million at September 30, 2025 resulting from improved collections and lower days-sales outstanding at September 30, 2025 (41) compared to December 31, 2024 (49). Many of our customers pay promptly and the accounts receivable balance is generally related to the most recent shipments. Inventories were down from $2.0 million at December 31, 2024 to $1.8 million at September 30, 2025; inventory balances fluctuate depending on the timing of materials purchases and product shipments. Prepaid expenses and other current assets were unchanged at $0.3 million at both December 31, 2024 and September 30, 2025; this balance fluctuates with the timing of making prepayments versus when the benefits of those prepayments are consumed. Accounts payable, accrued liabilities, and accrued income taxes increased from $1.0 million at December 31, 2024 to $1.2 million at September 30, 2025; the balances of these working capital liabilities fluctuate due to the timing of purchases and payments on inventories and other accruals of employee compensation and outside services.

Net Cash (Used In) Investing Activities

Net cash used in investing activities of $37,000 for the nine months ended September 30, 2025, and $107,000 for the nine months ended September 30, 2024, consisted of purchases of property, plant, and equipment.

Net Cash (Used In) Financing Activities

Net cash used in financing activities of $193,000 for the nine months ended September 30, 2025 consisted of proceeds of $107,000 from issuance of common stock (net of $81,000 of offering costs), offset by payment of $300,000 of dividends on our Series A Convertible Preferred Stock. Net cash used in financing activities of $300,000 for the nine months ended September 30, 2024 consisted of payment of dividends on our Series A Convertible Preferred Stock. On October 15, 2025, we converted all of our Series A Convertible Preferred Stock into common stock, which will eliminate the payment of $400,000 per annum in dividends previously payable to holders of our preferred stock.

At-The-Market Issuance Sales Agreement

On May 15, 2025, we entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Lake Street Capital Markets, LLC, as sales agent (“Lake Street”), pursuant to which we may offer and sell from time to time, through Lake Street, shares of our common stock having an aggregate offering price of up to $6,000,000. We registered the offer and sale of the common stock pursuant to a shelf registration statement on Form S-3 that we filed with the U.S. Securities and Exchange Commission, which became effective on December 23, 2024, and a prospectus supplement filed with the Securities and Exchange Commission on May 15, 2025. From inception of the Sales Agreement through September 30, 2025, we sold an aggregate of 29,547 shares of common stock under the Sales Agreement, at an average price of $6.37 per share, for gross proceeds of approximately $188,000 and net proceeds of $107,000, after deducting commissions and other offering expenses. As of September 30, 2025, we had approximately $5.8 million of common stock available for sale under the Sales Agreement and the registration statement.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Evaluation of Disclosure Controls and Procedures

The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decision regarding required disclosure.

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO had concluded that as of September 30, 2025, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended September 30, 2025 that materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

This Quarterly Report on Form 10-Q contains forward-looking statements, which are subject to a variety of risks and uncertainties. Actual results could differ materially from those anticipated in those forward-looking statements as a result of various factors, including those set forth in the risk factors relating to our business and common stock contained in Item 1A of our Annual Report on Form 10-K filed with the SEC on March 27, 2025. There have been no material changes to such risk factors during the three months ended September 30, 2025.