What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-12 · 60 added, 93 removed, 90 unchanged (63% of the section changed)

8 unchanged sentences

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.

Executive 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.

is a leading global provider of advanced sensing technologies and printed electronics solutions that enable Human-Machine Interface (“HMI”) devices and Internet-of-Things (“IoT”) applications.

Our broad product and technology portfolio spans force and touch sensors, piezoelectric sensors, rugged HMI devices, wearable and textile-based sensors, electrochemical gas and environmental sensors, instruments, and fully integrated systems.

Our business is organized around two technology platforms:

Force/Touch Sensing and HMI Solutions .

Our force-sensing resistor (“FSR®”) technology, together with piezoelectric sensing, printed electronics, rugged interface devices, and emerging smart textile platforms, enables intuitive, durable, and low-power user input solutions.

These technologies are deployed in applications such as vehicle entry and control systems, industrial and medical interfaces, presence and pressure detection, wearable monitoring, and other three-dimensional input environments.

Through our acquisitions of Calman in 2023 and Conductive Transfers Limited in 2024, we expanded our capabilities in customized membrane keypads, graphic overlays, industrial labeling, conductive textiles, and integrated printed electronic systems.

These additions enhance our vertical integration, broaden our intellectual property portfolio, and strengthen our presence in European markets.

We are increasingly positioning our HMI offerings as integrated subsystems that combine sensing hardware with proprietary firmware, signal processing, and system-level design.

Gas and Environmental Sensing Solutions .

We entered the gas and environmental sensing market in 2022 through the acquisition of the assets of SPEC Sensors and KWJ Engineering.

We now design and manufacture miniaturized electrochemical gas sensors, instruments, and monitoring systems for safety, health, air quality, and industrial applications.

Our products are designed to address growing demand for compact, low-power, and cost-effective sensing solutions suitable for wireless, wearable, and IoT deployments.

We prioritize revenue growth in targeted strategic markets, gross margin expansion driven by favorable product mix and operational efficiencies, disciplined capital allocation, and the ongoing advancement of differentiated sensing platforms.

Our strategy emphasizes higher-margin, application-specific solutions built on scalable technology foundations.

A substantial portion of our revenue is generated from custom solutions developed in close collaboration with OEM customers.

Although these engineering and product development engagements often involve extended design cycles, they frequently lead to multi-year production programs that provide long-term revenue visibility and strengthen customer relationships.

We maintain a global operational footprint to support our customers and manufacturing strategy.

We manufacture our force-sensing and printed electronic products at our facilities in Shenzhen, China, and Irvine, Scotland, and our gas and environmental sensors and

instruments at the facility in Fremont, California.

Our vertically integrated manufacturing approach allows us to maintain control over proprietary processes, quality standards, and supply chain responsiveness.

Critical Accounting Policies and Estimates

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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

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The percentages in the table are based on revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except percentages)

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Income tax expense (benefit)

Comparison of Three Months Ended September 30, 2025 and 2024

Comparison of Three Months Ended March 31, 2026 and 2025

Revenue by the markets we serve is as follows:

Three Months Ended September 30,

Three Months Ended March 31,

(in thousands, except percentages)

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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.

Medical, industrial, and other specialty markets such as 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.

Revenues were up in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 for customers in the medical and automotive markets and for customers of our standard products, and were down for customers in the industrial market.

The increase in revenue from customers in the medical market was due to increased shipments of our force-sensing products and of our Calman subsidiary’s printed electronics due to higher customer demand, while the increase in revenue from customers in the automotive market was due to new innovation and automation products for that market.

The decrease in revenue from customers in the industrial market was due to reduced shipments and lower demand for 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.

Three Months Ended September 30,

Three Months Ended March 31,

(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.

Three Months Ended September 30,

Gross profit and gross margin percentage were up during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due primarily to higher revenues and favorable changes in our product and customer mix.

Three Months Ended March 31,

(in thousands, except percentages)

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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.

Three Months Ended September 30,

Engineering and R&D costs for the three months ended March 31, 2026 were down compared to the three months ended March 31, 2025 due to lower engineering employee and consultant compensation costs.

Three Months Ended March 31,

(in thousands, except percentages)

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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.

Three Months Ended September 30,

Selling, general and administrative costs for the three months ended March 31, 2026 were up compared to the three months ended March 31, 2025 due to slightly higher costs for compensation, professional fees and consultants.

Three Months Ended March 31,

(in thousands, except percentages)

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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”).

Other income (expense) for the three months ended March 31, 2026 was comprised of $2,000 of interest income, $52,000 of foreign currency transaction gains, and $6,000 of other income, while other income (expense) for the three months ended March 31, 2025 was comprised of $6,000 of interest income offset by $(1,000) of foreign currency transaction losses.

Three Months Ended March 31,

(in thousands, except percentages)

Income tax expense (benefit)

Income taxes were 13.3% of pre-tax loss for the three months ended March 31, 2026, versus 4.6% of pre-tax loss for the three months ended March 31, 2025.

Our income taxes 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.

The effective tax rates for the three-month periods ended March 31, 2026 and 2025 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 due to the valuation allowances thereon.

Discrete tax events may cause our effective rate to fluctuate on a quarterly basis.

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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:

Nine Months Ended September 30,

(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.

Nine Months Ended September 30,

(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.

Nine Months Ended September 30,

(in thousands, except percentages)

Engineering, research and development

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.

Nine Months Ended September 30,

(in thousands, except percentages)

Selling, general and administrative

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.

Nine Months Ended September 30,

(in thousands, except percentages)

Other income (expense), net

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.

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 requirements for working capital, capital expenditures, and acquisition activities have historically been funded from our cash balances, cash generated from operations, and issuances of equity securities.

As of March 31, 2026, we had cash and cash equivalents of $2.1 million, working capital of $4.4 million and no indebtedness.

Cash and cash equivalents consist of cash and money market funds.

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

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

Net cash provided by (used in) operating activities

Net cash (used in) operating activities

Net cash (used in) investing activities

Net cash (used in) financing activities

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).

Net Cash (Used In) Operating Activities

For the three months ended March 31, 2026, the $543,000 of cash used in operating activities was attributable to net loss of $338,000, adjusted for non-cash charges of $145,000 and cash used in changes in operating assets and liabilities of $350,000.

For the three months ended March 31, 2025, the $271,000 of cash used in operating activities was attributable to net loss of $805,000, adjusted for non-cash charges of $142,000 and cash provided by changes in operating assets and liabilities of $392,000.

Accounts receivable increased from $1.5 million at December 31, 2025 to $1.7 million at March 31, 2026 due to higher sales in the three months ended March 31, 2026 compared to the three months ended December 31, 2025;

days-sales outstanding at March 31, 2026 (46) was unchanged from December 31, 2025 (46).

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;

Inventories were up from $1.8 million at December 31, 2025 to $2.0 million at March 31, 2026;

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;

Prepaid expenses and other current assets were up slightly from $0.2 million at December 31, 2025 to $0.3 million at March 31, 2026;

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;

Accounts payable, accrued liabilities, and accrued income taxes increased from $1.3 million at December 31, 2025 to $1.4 million at March 31, 2026;

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.

No cash was provided by or used in investing activities for the three months ended March 31, 2026.

Net cash used in investing activities of $29,000 for the three months ended March 31, 2025 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.

No cash was provided by or used in financing activities for the three months ended March 31, 2026.

Net cash used in financing activities of $103,000 for the three months ended March 31, 2025 consisted of payment of dividends on our preferred stock.

In October 2025, we converted all of our Series A Convertible Preferred Stock into common stock, which eliminated the payment of $400,000 per annum in dividends previously payable to holders of our preferred stock.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis