INTERLINK ELECTRONICS INC

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

Revenues were up in the three months ended June 30, 2026 compared to the three months ended June 30, 2025 for customers in the medical market and for customers of our standard products and were down for customers in the industrial and automotive markets. 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. 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.

Previous wording

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 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.

Current wording

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 June 30, 2026 compared to the three months ended June 30, 2025 due primarily to higher revenues, while gross margin percentage was down slightly due to changes in our product and customer mix.

Previous wording

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

Current wording

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 June 30, 2026 were up compared to the three months ended June 30, 2025 due to higher costs for compensation, professional fees and consultants.

Previous wording

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, 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.

Current wording

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 June 30, 2026 was comprised of $3,000 of interest income offset by $18,000 of foreign currency transaction losses, while 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.

Previous wording

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 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.

Current wording

Income taxes were 7.4% of pre-tax income/loss for the three months ended June 30, 2026, versus 9.9% of pre-tax income/loss for the three months ended June 30, 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 June 30, 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.

Previous wording

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. Of our $2.1 million of cash, $1.4 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.

Current wording

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 June 30, 2026, we had cash and cash equivalents of $1.8 million, working capital of $4.7 million and no indebtedness. Cash and cash equivalents consist of cash and money market funds. Of our $1.8 million of cash, $1.3 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.

Previous wording

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.

Current wording

For the six months ended June 30, 2026, the $829,000 of cash used in operating activities was attributable to net loss of $90,000, adjusted for non-cash charges of $320,000 and cash used in changes in operating assets and liabilities of $1,059,000. 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.

Previous wording

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 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 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 $1.3 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.

Current wording

Accounts receivable increased from $1.5 million at December 31, 2025 to $2.1 million at June 30, 2026 due to higher sales in the three months ended June 30, 2026 compared to the three months ended December 31, 2025; days-sales outstanding at June 30, 2026 (47) was unchanged from December 31, 2025 (47). Many of our customers pay promptly and the accounts receivable balance is generally related to the most recent shipments. Inventories were unchanged at $1.8 million at both December 31, 2025 and June 30, 2026; inventory balances fluctuate depending on the timing of materials purchases and product shipments. Prepaid expenses and other current assets were up slightly from $0.2 million at December 31, 2025 to $0.3 million at June 30, 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 decreased from $1.3 million at December 31, 2025 to $0.9 million at June 30, 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.

Previous wording

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.

Current wording

Net cash used in investing activities of $1,000 and $34,000 for the six months ended June 30, 2026 and 2025, respectively, consisted of purchases of property, plant, and equipment.

Previous wording

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.

Current wording

No cash was provided by or used in financing activities for the six months ended June 30, 2026. Net cash used in financing activities of $200,000 for the six months ended June 30, 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.