INTERLINK ELECTRONICS INC

Previous wording

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 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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

Current wording

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

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 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.

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, 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.

Previous wording

Engineering and R&D expenses consist primarily of compensation expenses for employees engaged in research, design and development activities, plus the cost of those employees’ indirect supplies and allocation of facilities expenses. Our R&D team focuses both on internal design development in order to develop our products and solutions, and on custom design development aimed at addressing our customers’ unique design challenges. Engineering and R&D costs for the three months ended March 31, 2025 were down compared to the three months ended March 31, 2024 due to decreased engineering employee and consultant compensation costs.

Current wording

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

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, 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.

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, 2025 were flat compared to the three months ended June 30, 2024.

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, 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.

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, 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.

Previous wording

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”). 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.

Current wording

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 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.

Previous wording

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.

Current wording

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. 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

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. Cash and cash equivalents consist of cash and money market funds. Of our $2.6 million of cash, $1.9 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. Other distributions may require us to incur U.S. or foreign taxes to repatriate these funds.

Current wording

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 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. Of our $2.3 million of cash, $1.5 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. Other distributions may require us to incur U.S. or foreign taxes to repatriate these funds.

Previous wording

Net Cash Provided By (Used In) Operating Activities

Current wording

Net Cash (Used In) Operating Activities

Previous wording

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.

Current wording

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.

Previous wording

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). 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. 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; 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; 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 $1.6 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 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 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 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.