What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-05-13 · 60 added, 34 removed, 119 unchanged (44% of the section changed)

11 unchanged sentences

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 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.

17 unchanged sentences

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 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.

15 unchanged sentences

The percentages in the table are based on revenues.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except percentages)

4 unchanged sentences

Total operating expenses

(Loss) from operations

Income (loss) from operations

Other income (expense), net

(Loss) before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Comparison of Three Months Ended March 31, 2025 and 2024

Net income (loss)

Comparison of Three Months Ended June 30, 2025 and 2024

Revenue by the markets we serve is as follows:

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands, except percentages)

We sell our custom products into the medical, industrial, and consumer markets.

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.

4 unchanged sentences

We currently have products with life cycles that have exceeded 20 years and are ongoing.

Revenues were down in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 from customers in all of the custom markets into which we sell, and were up from customers of our standard products.

The decrease in revenue from customers in all custom markets was due to decreased shipments of our force-sensing and gas-sensing products and solutions resulting from lower customer demand.

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 their projects and building plans.

Three Months Ended March 31,

Revenues were up in the three months ended June 30, 2025, compared to the three months ended June 30, 2024, from customers in the industrial and automotive markets, and were up from customers of our standard products, while revenues from customers in the medical market were down.

The increase in revenue from customers in the industrial and automotive markets was due to increased shipments due to higher customer demand, while the decrease in revenue from customers in the medical market was primarily due to lower shipments to one of our larger medical customers in alignment with its level of 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.

Three Months Ended June 30,

(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 and gross margin percentage were down during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due primarily to lower revenues and also in part to changes in product and customer mix.

Three Months Ended March 31,

Gross profit was up during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due primarily to higher revenues, while gross margin percentage was flat, as higher margins on certain of our products was offset by lower margins on others.

Three Months Ended June 30,

(in thousands, except percentages)

2 unchanged sentences

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 March 31, 2025 were down compared to the three months ended March 31, 2024 due to decreased engineering employee and consultant compensation costs.

Three Months Ended March 31,

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

Three Months Ended June 30,

(in thousands, except percentages)

1 unchanged sentence

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 March 31, 2025 were down slightly compared to the three months ended March 31, 2024 due to lower sales and administrative compensation expense on lower headcount and lower professional services expenses, offset in part by higher facilities costs.

Three Months Ended March 31,

Selling, general and administrative costs for the three months ended June 30, 2025 were flat compared to the three months ended June 30, 2024.

Three Months Ended June 30,

(in thousands, except percentages)

1 unchanged sentence

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 March 31, 2025 was comprised of $6,000 of interest income, offset by $1,000 of foreign currency transaction losses, while other income (expense) for the three months ended March 31, 2024 was comprised of $14,000 of interest income, and $18,000 of foreign currency transaction gains.

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 three months ended March 31, 2024.

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 carryforwards (“NOLs”).

Other income (expense) for the three months ended June 30, 2025 was comprised of $7,000 of interest income and $18,000 of foreign currency transaction gains, while other income (expense) for the three months ended June 30, 2024 was comprised of $14,000 of interest income and $2,000 of foreign currency transaction gains.

Income taxes were 9.9% of pre-tax income for the three months ended June 30, 2025, versus 3.4% of pre-tax loss for the three months ended June 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 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.

The effective tax rates for the three-month periods ended June 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.

5 unchanged sentences

could have significant effects, positive and negative, on our effective tax rate and on our deferred tax assets and liabilities.

Comparison of Six Months Ended June 30, 2025 and 2024

Revenue by the markets we serve is as follows:

Six Months Ended June 30,

(in thousands, except percentages)

Revenues were up in the six months ended June 30, 2025, compared to the six months ended June 30, 2024, from customers in the industrial and automotive markets into which we sell, while they were down from our medical market customers and from customers of our standard products.

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 one of our larger medical customers in alignment with its level of demand and production plans.

Six Months Ended June 30,

(in thousands, except percentages)

Gross profit and gross margin percentage were down slightly during the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due primarily to changes in product and customer mix.

Six Months Ended June 30,

(in thousands, except percentages)

Engineering, research and development

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

Six Months Ended June 30,

(in thousands, except percentages)

Selling, general and administrative

Selling, general and administrative costs for the six months ended June 30, 2025 were down slightly compared to the six months ended June 30, 2024 due primarily to lower sales and administrative compensation expense on lower headcount, offset in part by higher costs incurred for consultants and professional services.

Six Months Ended June 30,

(in thousands, except percentages)

Other income (expense), net

Other income (expense) for the six months ended June 30, 2025 was comprised of $13,000 of interest income and $17,000 of foreign currency transaction gains, while other income (expense) for the six months ended June 30, 2024 was comprised of $32,000 of interest income and $16,000 of foreign currency transaction gains.

Income taxes were 6.4% of pre-tax loss for the six months ended June 30, 2025, versus 3.1% for the six months ended June 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 March 31, 2025, we had cash and cash equivalents of $2.6 million, working capital of $4.8 million and no indebtedness.

As of June 30, 2025, we had cash and cash equivalents of $2.3 million, working capital of $5.0 million and no indebtedness.

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

17 unchanged sentences

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

Three Months Ended

Six Months Ended

(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 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.

For the three months ended March 31, 2024, the $222,000 of cash provided by operating activities was attributable to net loss of $741,000, adjusted for non-cash charges of $188,000 and cash provided by changes in operating assets and liabilities of $775,000.

Accounts receivable was unchanged at $1.6 million at both December 31, 2024 and March 31, 2025, resulting from lower shipments during the first quarter of 2025 compared to the fourth quarter of 2024, and slightly higher days-sales outstanding at March 31, 2025 (55) compared to December 31, 2024 (42).

Net Cash (Used In) Operating Activities

For the six months ended June 30, 2025, the $409,000 of cash used in operating activities was attributable to net loss of $705,000, adjusted for non-cash charges of $303,000 and cash used in changes in operating assets and liabilities of $7,000.

For the six months ended June 30, 2024, the $76,000 of cash used in operating activities was attributable to net loss of $1,048,000, adjusted for non-cash charges of $395,000 and cash provided by changes in operating assets and liabilities of $577,000.

Accounts receivable increased from $1.6 million at December 31, 2024 to $2.1 million at June 30, 2025 resulting from higher shipments during the second quarter of 2025 compared to the fourth quarter of 2024, and also from slightly higher days-sales outstanding at June 30, 2025 (56) 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 slightly from $2.0 million at December 31, 2024 to $1.8 million at March 31, 2025.

Inventories were down from $2.0 million at December 31, 2024 to $1.7 million at June 30, 2025.

Inventory balances fluctuate depending on the timing of materials purchases and product shipments.

Prepaid expenses and other current assets were substantially unchanged at $328,000 at December 31, 2024 and $329,000 at March 31, 2025;

Prepaid expenses and other current assets were unchanged at $0.3 million at both December 31, 2024 and June 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 March 31, 2025;

Accounts payable, accrued liabilities, and accrued income taxes increased slightly from $1.0 million at December 31, 2024 to $1.1 million at June 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 $29,000 for the three months ended March 31, 2025, and $18,000 for the three months ended March 31, 2024, consisted of purchases of property, plant, and equipment.

Net cash used in investing activities of $34,000 for the six months ended June 30, 2025, and $20,000 for the six months ended June 30, 2024, consisted of purchases of property, plant, and equipment.

Net Cash (Used In) Financing Activities

Net cash used in financing activities of $100,000 for each of the three months ended March 31, 2025 and 2024 consisted of payment of dividends on our Preferred Stock.

Net cash used in financing activities of $200,000 for each of the six months ended June 30, 2025 and 2024 consisted of payment of dividends on our Preferred Stock.

Off-Balance Sheet Arrangements

3 unchanged sentences

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