What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-07 · 106 added, 199 removed, 412 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value)

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Preferred stock, $ 0.01 par value:

1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding at both September 30, 2024 and December 31, 2023 ( $ 5.0 million liquidation preference)

1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding at both March 31, 2025 and December 31, 2024 ( $ 5.0 million liquidation preference)

Common stock, $ 0.001 par value:

30,000 shares authorized, 9,864 shares issued and outstanding at September 30, 2024;

9,860 shares issued and outstanding at December 31, 2023

30,000 shares authorized, 9,864 shares issued and outstanding at both March 31, 2025 and December 31, 2024

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data)

4 unchanged sentences

Total operating expenses

Income (loss) from operations

(Loss) from operations

Other income (expense), net

Income (loss) before income taxes

Income tax expense

Net income (loss)

(Loss) before income taxes

Income tax expense (benefit)

Net (loss) applicable to common stockholders

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net income (loss)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

Comprehensive income (loss)

Comprehensive (loss)

See accompanying notes to these unaudited condensed consolidated financial statements.

4 unchanged sentences

Stockholders’

Three Months Ended September 30, 2024

Income (Loss)

(in thousands)

Balance at June 30, 2024

Stock-based compensation expense

Preferred stock dividends

Foreign currency translation adjustment

Balance at September 30, 2024

Preferred Stock

Comprehensive

Stockholders’

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Income (Loss)

4 unchanged sentences

Foreign currency translation adjustment

Balance at September 30, 2024

Preferred Stock

Comprehensive

Stockholders’

Three Months Ended September 30, 2023

Income (Loss)

(in thousands)

Balance at June 30, 2023

Preferred stock dividends

Foreign currency translation adjustment

Stock-based compensation expense

Repurchases of common stock

Balance at September 30, 2023

Balance at March 31, 2025

Preferred Stock

1 unchanged sentence

Stockholders’

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Income (Loss)

3 unchanged sentences

Foreign currency translation adjustment

Stock-based compensation expense

Repurchases of common stock

Balance at September 30, 2023

Balance at March 31, 2024

See accompanying notes to these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

10 unchanged sentences

Cash flows from investing activities:

Acquisition of Calman Technology Limited, net of cash acquired

Purchases of property, plant and equipment

2 unchanged sentences

Payment of dividends on preferred stock

Repurchases of common stock

Net cash (used in) financing activities

Effect of exchange rate changes on cash

Net (decrease) in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

1 unchanged sentence

Supplemental disclosure of cash flow information:

Income taxes paid, net

Income taxes paid (refunded), net

Interest paid

Supplemental disclosure of non-cash investing and financing activities:

Lease liabilities arising from obtaining right-of-use assets

See accompanying notes to these unaudited condensed consolidated financial statements.

4 unchanged sentences

Interlink Electronics, Inc.

(“we,” “us,” “our,” “Interlink” or the “Company”) is a global sensor and printed electronics company operating in two principal sensor technology divisions:

force/touch sensors, and gas and environmental sensors.

We design, develop, manufacture and sell a range of force-sensing and gas-sensing technologies that incorporate our proprietary materials technology, firmware and software into a portfolio of standard sensor-based products and custom sensor system solutions.

Our force-sensing products and solutions include sensor components, subassemblies, modules and products that support effective, efficient cursor control and novel three-dimensional user inputs.

Our Human Machine Interface (“HMI”) technology platforms are deployed in a wide range of markets including consumer electronics, automotive, industrial, and medical.

Our membrane keypads, graphic overlays, printed electronics and industrial label products are applicable for use in a wide range of fields, from industrial automation, process control and monitoring to medical and diagnostic devices and defense systems.

Our electrochemical gas-sensing technology instruments, products and solutions are deployed in industry, community, health and home settings, with uses in fields such as carbon monoxide and ozone detection and air quality monitoring.

We serve our world-wide customer base from our corporate headquarters in Irvine, California;

our Global Product Development and Materials Science Center and distribution and logistics center in Camarillo, California;

our printed-electronics manufacturing facilities in Shenzhen, China, and Irvine, Scotland;

our advanced and proprietary production and product development facility in Silicon Valley, California;

our engineering, research and development center in Singapore;

(“we”, “us”, “our”, “Interlink” or the “Company”) is a leading provider of sensors and printed electronics used extensively in Human-Machine Interface (“HMI”) devices and Internet-of-Things (“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 blue-chip customers trust our products and solutions which span various markets, including industrial, medical, automotive, consumer, wearables, and IoT.

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.

We serve our world-wide customer base from a number of locations.

Our corporate headquarters are located in Fremont, California, which is also where we have our advanced and proprietary gas sensor production and product development facility.

Our Global Product Development and Materials Science Center and distribution and logistics center is located in Camarillo, California.

We have printed-electronics manufacturing facilities in Shenzhen, China;

Irvine, Scotland;

and Barnsley, England.

Our engineering, research and development center is located in Singapore;

our technical sales office in Japan;

and our distribution and logistics center in Hong Kong.

Our principal executive office is located at 15707 Rockfield Boulevard, Suite 105, Irvine, California 92618 and our telephone number is (805) 484-8855.

Our administrative and executive office is located in Irvine, California.

Our principal executive office is located at 48389 Fremont Boulevard, Suite 110, Fremont, California 94538 and our telephone number is (510) 244-0424.

Our website address is www.interlinkelectronics.com.

March 2024 Common Stock Dividend

On March 1, 2024, the Board of Directors declared a 50 % common stock dividend with a record date of March 11, 2024, that was paid on March 22, 2024.

Settlement of fractional share interests was made by issuing one full share of common stock in lieu of a fractional share.

The stock dividend increased the number of issued and outstanding shares of common stock from 6,573,570 to 9,860,368 .

Except as otherwise noted, all references to common stock, common stock issuable upon conversion of preferred stock, and corresponding per share information throughout this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the stock dividend, which is accounted for as a stock split effected in the form of a stock dividend.

Our fiscal year is the calendar year reporting cycle beginning January 1 and ending December 31.

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The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K, which was filed the Securities and Exchange Commission on March 25, 2024.

These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 27, 2025.

Use of Estimates

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Our past history with these sell-through right of return provisions allows us to reasonably estimate the amount of inventory that could be returned pursuant to these agreements, and revenue is recognized accordingly.

Revenue for engineering services contracts and grants is recognized ratably over the contract term as the related performance obligations are satisfied.

Progress toward completion is measured based on the ratio of costs incurred to total estimated costs at completion.

This method reflects the pattern of transfer of control, as it aligns revenue recognition with the extent of work performed.

For the three months ended March 31, 2025, the amount of revenue recognized at a point in time was approximately $ 2,502,000 , and the amount of revenue recognized over time was approximately $ 162,000 .

For the three months ended March 31, 2024, the amount of revenue recognized at a point in time was approximately $ 2,956,000 , and the amount of revenue recognized over time was approximately $ 168,000 .

Revenue recognized at a point in time primarily relates to product sales.

Revenue recognized over time primarily relates to engineering service contracts and other services agreements.

Shipping and Handling Fees and Costs

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R&D expenses also include depreciation and amortization, and overhead, including facilities expenses.

Marketing and Advertising Costs

All of the costs related to marketing and advertising our products are expensed as incurred or at the time the marketing or advertising takes place.

Advertising and Marketing Costs

All of the costs related to advertising and marketing our products are expensed as incurred or at the time the marketing takes place.

Advertising and marketing costs incurred in the three months ended March 31, 2025 and 2024 were $ 43,000 and $ 40,000 , respectively.

Stock-Based Compensation

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Segment Reporting

We operate in one reportable segment:

the manufacture and sale of force/touch sensors and gas sensors.

We operate as a single operating and reportable segment:

the design, development, and manufacture of sensor technologies.

Our chief operating decision maker is the Company’s Chief Executive Officer, who reviews its performance as a whole and allocates resources based on overall performance.

Earnings Per Share

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loss of customers;

impacts of doing business internationally, including foreign currency fluctuations, changes in the trade policies of countries in which we or our customers do business, and political instability;

impacts of doing business internationally, including foreign currency fluctuations, changes in the trade policies of countries in which we or our customers do business (including fluctuating tariff rates), and political instability;

potential shortages of the supplies we use to manufacture our products;

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Our operations and financial results may be adversely affected by outbreaks of viruses, widespread illness, infectious diseases, contagions and unforeseen epidemics (such as the COVID-19 coronavirus) in countries in which our products are manufactured and sold.

We experienced delays in the receipt of certain goods and the supply of our products from international and domestic shipping origins as a result of the COVID-19 pandemic and more general global supply chain constraints in fiscal 2021, and to a lesser extent in fiscal 2022 and 2023, and so far in fiscal 2024.

Depending on the continued extent and duration of these and similar constraints and disruptions, our supply chain, results of operations (including sales) or future business may be materially and adversely impacted.

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Subsequent Events

We have evaluated subsequent events through November 7, 2024, being the date these condensed consolidated financial statements were issued.

We have evaluated subsequent events through May 13, 2025, being the date these condensed consolidated financial statements were issued.

Note 2 – Details of Certain Financial Statement Components

Inventories, stated at the lower of cost or net realizable value, consisted of the following:

September 30,

(in thousands)

4 unchanged sentences

Property, plant and equipment, net, consisted of the following:

September 30,

Property, plant and equipment, net

4 unchanged sentences

Total property, plant and equipment, net

Depreciation expense totaled $ 36,000 and $ 42,000 for the three months ended September 30, 2024 and 2023, respectively.

Depreciation expense totaled $ 112,000 and $ 125,000 for the nine months ended September 30, 2024 and 2023, respectively.

Depreciation expense totaled $ 47,000 and $ 40,000 for the three months ended March 31, 2025 and 2024, respectively.

Intangible assets, net, consisted of the following:

September 30,

Intangible assets, net

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Total intangible assets, net

Amortization expense totaled $ 189,000 and $ 36,000 for the three months ended September 30, 2024 and 2023, respectively.

Amortization expense totaled $ 571,000 and $ 142,000 for the nine months ended September 30, 2024 and 2023, respectively.

Future amortization expense on existing intangible assets is as follows:

Amortization expense totaled $ 172,000 and $ 189,000 for the three months ended March 31, 2025 and 2024, respectively.

Years ending December 31,

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2025 (remainder of year)

The changes in the carrying amount of goodwill for the periods ended September 30, 2024 and 2023 are as follows:

The changes in the carrying amount of goodwill for the periods ended March 31, 2025 and 2024 are as follows:

(in thousands)

Balance as of January 1, 2025

Adjustment to goodwill, acquisition price allocation of Conductive Transfers

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of September 30, 2024

Balance as of March 31, 2025

(in thousands)

Balance as of January 1, 2024

Goodwill acquired in acquisition of Calman (before December 2023 adjustment to allocation)

Adjustment to goodwill, acquisition price allocation of SPEC/KWJ

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of September 30, 2023

Balance as of March 31, 2024

Accrued liabilities consisted of the following:

September 30,

Accrued liabilities

4 unchanged sentences

Total accrued liabilities

Note 3 – Acquisition of Calman Technology Limited

On March 17, 2023, we acquired all of the outstanding shares in Calman Technology Limited (“Calman”), a Scotland-based designer and manufacturer of membrane keypads, graphic overlays and printed electronics, pursuant to a Share Purchase Agreement (the “Share Purchase Agreement”) by and among the Company’s wholly owned United Kingdom subsidiary, Interlink Electronics Limited, and the shareholders of Calman.

The Share Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants on the part of the sellers, who continue to be employed by Calman.

Under the terms of the Share Purchase Agreement, the purchase price was GB£ 4,127,000 (approximately $ 4,912,000 ), of which GB£ 3,627,000 (approximately $ 4,317,000 ) was paid at closing and the remaining GB£ 500,000 (approximately $ 595,000 ) was held back against potential claims for breaches of representations and warranties (subject to certain deductibles and caps) and was paid to the sellers in December 2023.The purchase price was subject to adjustment based on the extent, if any, to which Calman’s net working capital at closing was more or less than GB£ 600,000 (approximately $ 714,000 ), which resulted in additional purchase consideration of approximately GB£ 1,292,000 (approximately $ 1,538,000 ).

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, giving effect to the post-closing purchase price adjustment and the revised allocation based on the results of the valuation report (in thousands).

Accounts receivable

Prepaid expenses and other current assets

Property, plant, and equipment

Right-of-use assets

Accounts payable and accrued liabilities

Lease liabilities

Note 3 – Acquisition of Conductive Transfers

On December 20, 2024, we acquired substantially all of the operating assets of Conductive Transfers Limited and its affiliate Global Print Solutions Limited (collectively, “Conductive Transfers”), England-based designers and manufacturers of wearables and smart textiles, conductive ink, and other printed electronics, pursuant to an Asset Sale Agreement (the “Asset Purchase Agreement”) by and among the Company’s wholly owned United Kingdom subsidiary, Conductive Transfers International Limited, and Conductive Transfers.

Under the terms of the Asset Purchase Agreement, the purchase price was GB£ 250,000 (approximately $ 314,000 ) which was paid to the sellers in cash on the acquisition date.

The following table summarizes the fair values of the assets acquired at the acquisition date (in thousands).

Property and equipment

Net identifiable tangible assets acquired

Developed technology

Tradenames and trademarks

Customer relationships

Non-compete agreements

Deferred tax liabilities

Net assets acquired

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Calman.

The goodwill is not expected to be deductible for income tax purposes.

The following represents pro forma consolidated statement of operations information as if Calman had been included in our consolidated results for the full periods ended September 30, 2024 and 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

The following represents pro forma consolidated statement of operations information as if Conductive Transfers had been included in our consolidated results for the three-month periods ended March 31, 2025 and 2024 (unaudited):

Three Months Ended March 31,

(in thousands)

Net income (loss)

Note 4 – Earnings Per Share

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Diluted earnings per share is computed by dividing net income/loss by the weighted average number of common shares outstanding during the period, plus the dilutive effect of any dilutive securities.

On March 1, 2024, the Board of Directors declared a 50 % common stock dividend with a record date of March 11, 2024, that was paid on March 22, 2024.

The effect of this stock dividend (which is accounted for as a stock split effected in the form of a stock dividend) has been applied retroactively to weighted average common shares outstanding, earnings per share, and the conversion rate and conversion price applicable for our Series A Convertible Preferred Stock, as if the 50 % common stock dividend had occurred at the beginning of the earliest period presented.

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

Net income (loss)

Preferred stock dividends

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200,000 shares of Series A Convertible Preferred Stock convertible into 600,000 shares of common stock were outstanding but were not included in the computation of diluted earnings (loss) per share because the effect of their conversion would be anti-dilutive due to the net losses and/or due to the $ 8.33 conversion price being higher than the average market price of the common stock.

31,250 restricted stock units (relating to the same number of shares of common stock) were outstanding for the periods in 2024 but were not included in the computation of diluted earnings (loss) per share for those periods because their effect would be anti-dilutive due to the net losses.

Note 5 – Stockholders’ Equity

Restricted Stock Units

31,250 restricted stock units (relating to the same number of shares of common stock) were outstanding for 2025 but were not included in the computation of diluted earnings (loss) per share for those periods because their effect would be anti-dilutive due to the net loss.

Note 5 – Restricted Stock Units

The $ 7,000 of stock - based compensation expense recorded in the three months ended March 31, 2025 is for restricted stock units.

In May 2024, the Compensation Committee of the Company’s Board of Directors approved the Company’s grant of 31,250 restricted stock units to certain employees under the Interlink Electronics, Inc.

2016 Omnibus Incentive Plan.

A summary of the status of the Company’s nonvested restricted stock units as of and for the year-to-date period ended September 30, 2024, is as follows:

A summary of the status of the Company’s nonvested restricted stock units as of and for the three – month period ended March 31, 2025, is as follows:

Nonvested Restricted Stock Units

Nonvested at January 1, 2025

Nonvested at September 30, 2024

As of September 30, 2024, there was approximately $ 124,000 of total unrecognized compensation cost related to nonvested restricted stock units.

Nonvested at March 31, 2025

As of March 31, 2025, there was approximately $ 114,000 of total unrecognized compensation cost related to nonvested restricted stock units.

That cost is expected to be recognized over a weighted-average period of 3.7 years.

Stock Repurchase Transaction

In May 2023, the Company’s Board of Directors approved the Company’s repurchase of 8,250 shares of common stock that were previously issued and sold in a private transaction to an individual in December 2022.

The Company repurchased the shares for $ 50,050 ($ 6.07 per share), which is the same price at which the Company issued and sold the shares in December 2022.

Stock Repurchase Program

In May 2023, the Company’s Board of Directors approved a Stock Repurchase Program to repurchase up to 100,000 shares of the Company’s common stock.

During the three and nine months ended September 30, 2024, the Company did no t repurchase any shares.

During the three and nine months ended September 30, 2023, the Company repurchased 27,326 shares and 48,180 shares, respectively, for an aggregate purchase prices of approximately $ 173,000 and $ 300,000 , respectively.

The Stock Repurchase Program expired in May 2024.

Note 6 – Significant Customers, Concentrations of Credit Risk, and Geographic Information

We manage and operate our business through one operating segment.

Net revenues from customers equal to or greater than 10% of total net revenues are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

* Less than 10% of total net revenues

Net revenues by geographic area are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Revenues from customers equal to or greater than 10% of total revenues are as follows:

Three Months Ended March 31,

* Less than 10% of total revenues

Revenues by geographic area are as follows:

Three Months Ended March 31,

(in thousands)

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Accounts receivable balances are monitored on an ongoing basis, and accounts deemed to have credit risk are fully reserved.

At September 30, 2024, two customers accounted for 17 % and 13 % of total accounts receivable.

At December 31, 2023, two customers accounted for 35 % and 16 % of total accounts receivable.

Our allowance for credit losses was $ 0 at both September 30, 2024 and December 31, 2023.

At March 31, 2025, two customers accounted for 36 % and 11 % of total accounts receivable.

At December 31, 2024, one customer accounted for 41 % of total accounts receivable.

Our allowance for credit losses was approximately $ 40,000 and $ 34,000 at March 31, 2025 and December 31, 2024, respectively.

Our long-lived assets were geographically located as follows:

September 30,

(in thousands)

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(OTCMKTS:BKFG) which he controls, has a controlling interest in both Interlink and Qualstar.

We have a facilities agreement with Qualstar to allow Qualstar to use a portion of our Irvine, California and Bellevue Washington office facilities, for which we have agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

Qualstar also has a facilities agreement with us to allow us to use of a portion of its Camarillo, California office and warehouse facility, for which we have agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

In addition, we have various consulting agreements with Qualstar for certain of our respective employees and/or independent contractors that provide certain operational, sales, marketing, general and administrative services to the other entity.

We have a mutual facilities sharing agreement with Qualstar under which we allow Qualstar to use a portion of our Irvine, California and Bellevue, Washington office facilities and Qualstar allows us to use of a portion of its Camarillo, California office and warehouse facility, in each case splitting substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

In addition, we have a mutual consulting agreement with Qualstar under which certain of our respective employees and/or independent contractors provide certain operational, sales, marketing, general and administrative services to the other entity.

Interlink and Qualstar also agree to reimburse, or be reimbursed by, one another for expenses paid by one company on behalf of the other.

Transactions with Qualstar and its subsidiaries are as follows:

Three months ended September 30,

(in thousands)

Balance at July 1,

Billed (or accrued) to Qualstar by Interlink

Paid by Qualstar to Interlink

Billed (or accrued) to Interlink by Qualstar

Paid by Interlink to Qualstar

Balance at September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Paid by Qualstar to Interlink

Billed (or accrued) to Interlink by Qualstar

Paid by Interlink to Qualstar

Balance at September 30,

Billed (or accrued) to Interlink by BKF Capital

Paid by Interlink to BKF Capital

Balance at March 31,

BKF Capital Group, Inc.

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We have a facilities agreement with BKF Capital to allow BKF Capital to use a portion of our Irvine, California office facility, for which we have agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

In addition, we have consulting agreements with BKF Capital for certain of our respective employees and/or independent contractors that provide certain operational and general and administrative services to the other entity.

In 2021, we entered into a M&A advisory consulting services agreement with Bronson Financial LLC (“BF”), a wholly owned subsidiary of BKF Capital, pursuant to which BF provided M&A advisory consulting services to us.

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Transactions with BKF Capital and its subsidiaries are as follows:

Three months ended September 30,

(in thousands)

Balance at July 1,

Billed (or accrued) to BKF Capital by Interlink

Paid by BKF Capital to Interlink

Billed (or accrued) to Interlink by BKF Capital

Paid by Interlink to BKF Capital

Balance at September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Paid by Interlink to BKF Capital

Balance at September 30,

Balance at March 31,

Note 8 – Income Taxes

Income tax expense as a percentage of pre-tax income/loss was 5.7 % for the three months ended September 30, 2024 versus 89.4 % for the same quarter in the prior year, and was 4.0 % for the nine months ended September 30, 2024 versus 78.0 % for the nine months ended September 30, 2023.

Our income tax expense is 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 carryovers (“NOLs”).

Income taxes as a percentage of pre-tax loss was 4.6 % for the three months ended March 31, 2025 versus 3.1 % for the same quarter in the prior year.

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 each of the three- and nine-month periods ended September 30, 2024 and 2023 were impacted by the amount of our foreign pre-tax income and the tax expense thereon while not realizing a benefit on our domestic pre-tax loss due to the valuation allowance on our domestic NOLs.

We experienced an ownership change under IRC Section 382 in 2010.

In general, a Section 382 ownership change occurs if there is a cumulative change in our ownership by “5% shareholders” (as defined in the Internal Revenue Code of 1986, as amended) that exceeds 50 percentage points over a rolling three-year period.

An ownership change generally affects the rate at which NOLs and potential other deferred tax assets are permitted to offset future taxable income.

Certain state jurisdictions within which we operate contain similar provisions and limitations.

As of September 30, 2024, all of the remaining federal and state NOLs are subject to annual limitations due to the 2010 ownership change.

The effective tax rates for the three-month periods ended March 31, 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.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.

We analyzed our need to record a valuation allowance against our otherwise recognizable net deferred tax assets in the federal, state and foreign jurisdictions, and we determined that a valuation allowance on federal and state deferred tax assets was necessary at both September 30, 2024 and December 31, 2023, while no valuation allowance on foreign deferred tax assets was necessary at both September 30, 2024 and December 31, 2023.

We analyzed our need to record a valuation allowance against our otherwise recognizable net deferred tax assets in the federal, state and foreign jurisdictions, and we determined that a valuation allowance on federal, state, and certain foreign deferred tax assets was necessary at both March 31, 2025 and December 31, 2024.

The amount of deferred tax assets considered realizable could be adjusted in future periods if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future profitability.

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We have elected to account for GILTI as a period cost if and when incurred, rather than recognizing deferred taxes for basis differences expected to reverse.

Of our $ 3.8 million of cash at September 30, 2024, $ 2.5 million was held by our foreign subsidiaries.

Of our $ 2.6 million of cash at March 31, 2025, $ 1.9 million was held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S.

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The rate implicit in each lease is not readily determinable, and we therefore use our incremental borrowing rate to determine the present value of the lease payments.

The weighted average incremental borrowing rate used to determine the initial value of right-of-use (“ROU”) assets and lease liabilities capitalized during the nine months ended September 30, 2024 was 9.5 %, and during the nine months ended September 30, 2023 was 5.5 %.

No new right-of-use (“ROU”) assets were capitalized during the three months ended March 31, 2025 or 2024.

ROU assets for operating leases are periodically reduced by impairment losses.

As of September 30, 2024, we have not recognized any impairment losses for our ROU assets.

As of March 31, 2025, we have not recognized any impairment losses for our ROU assets.

We monitor for events or changes in circumstances that require a reassessment of our leases.

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In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

We lease a 10,635 square - foot manufacturing facility and administrative offices in Newark, California.

In February 2024, we renewed this lease for the period March 2024 through February 2025 for approximately $ 19,000 per month.

In March 2024, we entered into a new lease for a 5,183 square - foot facility in Fremont, California for a five - year and three - month period commencing May 1, 2024 for $ 10,625 per month, escalating 3.5 % annually, plus a share of common area operating expenses.

In June 2023, we entered into a lease agreement to lease 1,560 square feet of office space in Irvine, California for approximately $ 4,000 per month for a term commencing June 2023 and ending May 2024.

In March 2024 we extended the term of this lease through May 2025 for the same approximately $ 4,000 per-month rental fee.

The term of this lease has been extended through December 31, 2025 for the same rental amount.

Our Irvine, California office is used for executive offices, sales, finance and administration.

We previously occupied a 4,351 square-foot office space in Irvine, California from June 2020 to May 2023 under a sublease agreement for approximately $ 6,000 per month, plus common area maintenance costs.

In April 2024, we entered into a lease agreement to lease 2,480 square feet of office space in Bellevue, Washington for approximately $ 9,000 per month for a term commencing July 2024 and ending October 2027.

Our Bellevue, Washington office is used for executive offices, sales and administration.

In April 2024, we entered into a lease agreement for approximately 2,480 square feet of office space in Bellevue, Washington, at a monthly rent of approximately $ 9,000 .

This lease term begins in July 2024 and ends in October 2027.

Subsequently, in March 2025, we entered into a sublease agreement with a third party for the same space at a monthly rate of approximately $ 10,000 .

The sublease term begins in March 2025 and also ends in October 2027.

We lease a 14,476 square-foot manufacturing facility and administrative office in Shenzhen, China.

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In May 2024, we also leased an additional 7,287 square-foot manufacturing facility in Shenzhen, China for the same June 2024 through May 2026 period for approximately $ 3,000 per month.

We lease a 10,635 square-foot manufacturing facility and administrative offices in Newark, California.

In February 2024, we renewed this lease for the period March 2024 through February 2025 for approximately $ 19,000 per month.

In March 2024, we entered into a new lease for a 5,183 square-foot facility in Fremont, California for a five - year and three - month period commencing May 1, 2024 for $ 10,625 per month, escalating 3.5 % annually, plus a share of common area operating expenses.

We lease an approximately 9,800 square-foot manufacturing facility and administrative offices in Irvine, Scotland for approximately $ 5,000 per month.

This lease term ends February 2028.

We use a 10,786 square - foot manufacturing facility and administrative offices in Barnsley, England subject to a temporary premise license agreement for the period from January 2025 to June 2025 for approximately $ 8,000 per month.

We lease a 275 square-foot engineering and administrative office in Singapore for approximately $ 1,000 per month.

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This lease term ends November 2024.

As of September 30, 2024, we had current and long-term lease liabilities of $ 351,000 and $ 870,000 , respectively, and right-of-use assets of $ 1,155,000 .

As of March 31, 2025, we had current and long-term lease liabilities of $ 357,000 and $ 688,000 , respectively, and right-of-use assets of $ 981,000 .

As of December 31, 2024, we had current and long-term lease liabilities of $ 352,000 and $ 777,000 , respectively, and right of use assets of $ 1,064,000 .

Future imputed interest as of September 30, 2024 totaled $ 227,000 .

The weighted average remaining lease term of our leases as of September 30, 2024 is 2.4 years.

Future imputed interest as of March 31, 2025 totaled $ 174,000 (weighted average discount rate of 8.9 )%;

and future imputed interest as of December 31, 2024 totaled $ 199,000 (weighted average discount rate of 8.9 )%.

The weighted average remaining lease term of the Company’s leases as of March 31, 2025 is 2.0 years;

and as of December 31, 2024 was 2.2 years.

Future minimum lease payments under non-cancellable operating leases that have remaining non-cancellable lease terms in excess of one year are as follows:

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Present value of lease liabilities

During the three months ended September 30, 2024, we incurred approximately $ 186,000 in operating lease costs, of which $ 91,000 are included in cost of revenue and $ 95,000 are included in operating expenses in our condensed consolidated statements of operations.

During the nine months ended September 30, 2024, we incurred approximately $ 466,000 in operating lease costs, of which $ 241,000 are included in cost of revenue and $ 225,000 are included in operating expenses in our condensed consolidated statements of operations.

During the three months ended September 30, 2023, we incurred approximately $ 129,000 in operating lease costs, of which $ 54,000 is included in cost of revenue and $ 75,000 is included in operating expenses in our condensed consolidated statements of operations.

During the nine months ended September 30, 2023, we incurred approximately $ 379,000 in operating lease costs, of which $ 149,000 is included in cost of revenue and $ 230,000 is included in operating expenses in our condensed consolidated statements of operations.

We are not party to any legal proceedings as of September 30, 2024.

During the three months ended March 31, 2025, we incurred approximately $ 133,000 in operating lease costs, of which 73,000 are included in cost of revenue and $ 60,000 are included in operating expenses in our condensed consolidated statements of operations.

During the three months ended March 31, 2024, we incurred approximately $ 124,000 in operating lease costs.

Operating lease costs of $ 67,000 are included in cost of revenue, and $ 57,000 are included in operating expenses in our condensed consolidated statements of operations for the three months ended March 31, 2024.

We are not party to any legal proceedings as of March 31, 2025.

We are occasionally involved in legal proceedings in the ordinary course of business, including actions against us which assert or may assert claims or seek to impose fines and penalties in substantial amounts.

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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 1. Financial Statements