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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.02pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.05pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.08pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
against+1
threats+1
defects+1
disrupt+1
crisis+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
8,712 words
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K, including our consolidated financial statements and related notes, before investing in our common stock. If any of the following risks materialize, our business, financial condition, results of operations and prospects could be materially and affected. In that event, the price of our common stock could , and you could part or all of your investment.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
We have derived, and expect to continue to derive, a significant share of our revenue from a small number of customers.
Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a relatively small number of customers. In 2025, our top two customers accounted for 18% and 9% of our revenue, respectively. If we were to either lose one of our major customers or have a major customer significantly reduce its volume of business with us, our business, results of operations and financial condition would be harmed unless we were able to replace such demand with other orders promptly. We expect to continue to be dependent on our major customers, the number and identity of which may change from period to period. Because they generally do not provide us with firm, long-term volume purchase commitments, our customers, including our largest customers upon whom we are or may become dependent, can reduce or terminate altogether their business with us at any time, whether because they choose an alternate supplier, see reduced demand for their products, or otherwise.
We rely on third parties for the materials that we use to manufacture our products, and supply shortages and price increases could adversely affect our revenue, operating results and customer relationships.
We rely on third-party suppliers for the raw material components of our products. There are no assurances that our suppliers will be able to maintain an adequate supply of these raw materials to enable us to fulfill all of our customers’ orders on a timely basis. A failure to obtain an adequate supply of the materials for our products could increase our costs (because purchases on the spot market would likely be more expensive), cause us to fail to meet delivery commitments and/or cause our customers to purchase from our competitors, which could adversely affect our operating results and customer relationships.
Additionally, our sourcing operations may also be hurt by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including a recurrence of the COVID-19 coronavirus and its potential impact on our financial results) in countries in which our products are manufactured. Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from our products. Furthermore, changes in U.S. trade policies, such as those being implemented by the current U.S. administration. including new restrictions, tariffs or other changes, especially as regards China, and reciprocal tariffs imposed by other countries, could lead to additional costs, delays in shipments, embargos and other uncertainties that could negatively impact our relationships with our international suppliers and materially adversely affect our business. Depending on the continued extent and duration of these constraints and disruptions, our supply chain, results of operations (including sales) or future business could be materially and adversely impacted. These and other issues affecting our international suppliers or internationally manufactured merchandise could have a material adverse effect on our business, results of operations and financial condition.
We do not have long-term fixed price contracts for the supply of our raw materials and components. Accordingly, increases in prevailing market prices (including due to increases in transportation, shipping and freight costs) would have an adverse effect on our operations to the extent we were unable to pass on increases to our customers.
In some situations, we rely on a single supplier for raw material components of our products. Any disruption in these supplier relationships could prevent us from maintaining an adequate supply of materials and could adversely affect our results of operation and financial position.
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Disruptions in our manufacturing facilities or arrangements could cause our revenue and operating results to decline.
We manufacture our products in Shenzhen, China; Fremont, California; and Irvine, Scotland. These facilities are vulnerable to damage from earthquakes, floods, fires, power loss and similar events. They could also be subject to break-ins, sabotage and intentional acts of vandalism. Our insurance may not cover such events and, if the event is covered, our insurance may not be sufficient to compensate us in full for any losses that may occur. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipatedproblem at any of our manufacturing facilities could result in delayed shipment of products, missed delivery deadlines and harm to our reputation, which could cause our revenue and operating results to decline. Performance, reliability or quality problems with our products could cause our customers to reduce or cancel orders, which would harm our operating results.
We regularly introduce new products with new technologies or manufacturing processes. Our products have in the past contained, and may in the future contain, errors or defects that may be detected at any point in the life of the product. Detection of such errors could result in delays in sales during the period required to correct them.
Defects may also result in product returns, loss of sales and cancelled orders, delays in market acceptance, injury to our reputation, injury to customer relationships and increased warranty costs, which could have an adverse effect on our business, operating results and financial condition. Our insurance may not be sufficient to fully cover us against any liability arising out of such defects.
In addition, events beyond our control, such as disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, power outages, political instability, physical or cyber break-ins, server failure, work stoppages, slowdowns or strikes by employees, acts of terrorism, the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics and other unforeseen or catastrophic events, could damage our manufacturing facilities or our vendors’ fulfillment centers or render them inoperable, making it difficult or impossible for us or our vendors to process customer orders for an extended period of time. For example, in March 2022, China imposed a multi-day lockdown in the city of Shenzhen due to a rise in the number of coronavirus cases, which required factories to close and disrupted our manufacturing operations in that city. Armed conflicts in the Middle East and between Russia and Ukraine, tensions between the U.S. and countries such as Iran and North Korea and between other countries such as China and Taiwan, and disruptions to traffic through key shipping routes such as the Panama Canal and the Suez Canal, also could adversely impact our sales, shipping costs, and results of operations. Such events may also result in delays in our or our vendors’ receipt of inventory and the delivery of merchandise between our customers, our stores and/or our partners and our distribution center and our vendors’ fulfillment centers. We or our vendors could also incur significantly higher costs and longer lead times associated with distributing inventory during the time it takes for us or our vendors to reopen or replace any of our distribution centers or any of their fulfillment centers.
We cannot guarantee that our solutions for new markets will be successful or that we will be able to generate significant revenue from these markets.
Our products and solutions may not be successful in new markets. Various of our target markets may develop more slowly than anticipated or participants in those markets could choose to utilize competing technologies. The markets for certain of our HMI products depend in part upon the continued development and deployment of wireless and other technologies, which may or may not address the needs of the users of these products. The markets for our gas and environmental sensors rely heavily on our customers’ investment in the required infrastructure for new devices or instruments and also on their competency and execution in development. The performance of any sensor depends on the quality of its implementation and may vary depending on design decisions, tradeoffs, or lack of experience. While we perform extensive engineering services for our customers and support them with reference materials and open-source designs, we cannot guarantee our customers’ success, and this remains a risk for our portfolio.
Our ability to generate significant revenue from new markets will depend on various factors, including the following:
the development and growth of these markets;
the ability of our technologies and product solutions to address the needs of these markets;
the price and performance requirements of our customers and the preferences of their end-users;
our ability to provide our customers with solutions that provide advantages in terms of size, power consumption, reliability, durability, performance and value-added features compared with alternative solutions; and
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the effectiveness of our sales and marketing efforts in communicating all of these capabilities to the marketplace.
The failure of any of these target markets to develop as we expect, or any significant failure on our part to serve these markets, will impede our sales growth and could result in substantially reduced earnings. We cannot predict the size or growth rate of these markets or the market share we will achieve or maintain in these markets in the future.
If we fail to build and maintain relationships with new and existing customers, or if our customers’ products that utilize our solutions do not gain widespread market acceptance, our revenue may stagnate or decline.
We generally do not sell products to end-users. Instead, we sell component products that our customers incorporate into their products, and we depend on our customers to successfully manufacture and distribute products incorporating our component products and to generate consumer demand through their marketing and promotional activities. We do not control or influence the manufacture, promotion, distribution, or pricing of the products that incorporate our solutions. As a result of this, our success depends almost entirely upon the widespread market acceptance of our customers’ products that incorporate our solutions. Even if our technologies successfully meet our customers’ price and performance goals, our sales would decline or fail to develop if our customers do not achieve commercial success in selling such products.
Our customers generally do not provide us with firm, long-term volume purchase commitments, opting instead to issue purchase orders that they can cancel, reduce, or delay at any time. In order to meet the expectations of our customers, we must provide innovative solutions on a timely and cost-effective basis. This requires us to match our design and production capacity with customer demand, maintain satisfactory delivery schedules, and meet performance goals. If we are unable to achieve these goals for any reason, our sales may decline or fail to develop, which would result in decreasing revenue.
If we are not able to protect our intellectual property or if we infringe on the intellectual property of others, our business and operating results could be adversely affected.
We consider our intellectual property to be a key element of our ability to compete in our chosen markets. We rely on a combination of patents, trade secrets and proprietary software to establish and protect our intellectual property rights. There is no assurance that patents will be issued from any of our pending applications or that any claims allowed from existing or pending patents will be sufficiently broad to protect our technology. We also cannot assure that any patents issued to us will not be challenged, invalidated or circumvented, or that the rights granted will provide proprietary protection. Litigation may be necessary to enforce our patents, trade secrets and other intellectual property rights, to determine the validity and scope of the proprietary rights of others or to defendagainstclaims of infringement. Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, regardless of the final outcome of the litigation.
Despite our efforts to maintain and safeguard our proprietary rights, there are no assurances that we will be successful in doing so or that our competitors will not independently develop or patent technologies that are substantially equivalent or superior to our technologies. If any of the holders of these patents assert claims that we are infringing them, we could be forced to incur substantial litigation expenses, and if we were found to be infringing on someone else’s patent, we could be required to pay substantial damages, and pay royalties in the future, which would adversely impact our profitability, or be enjoined from infringing in the future, which could materially impede our ability to operate.
Our global operations require us to maintain intellectual property in a number of foreign jurisdictions, in particular in connection with our manufacturing facility in Shenzhen, China. This may expose us to material risks of theft or compromise of proprietary technology and other intellectual property, including technical data, business processes, data sets or other sensitive information. There is no assurance that we would be successful in enforcing our legal rights against the offending party in such circumstances.
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Our success depends in part on our CEO and CFO, who simultaneously lead other public corporations.
Steven N. Bronson, our Chairman of the Board, President and Chief Executive Officer, and Ryan J. Hoffman, our Chief Financial Officer, simultaneously serve as officers and, in the case of Mr. Bronson, as a director, of other affiliated companies. Mr. Bronson serves as President and Chief Executive Officer and as a director of Qualstar Corporation (OTCMKTS: QBAK) and as Chairman of the Board and Chief Executive Officer of BKF Capital Group, Inc. (OTCMKTS: BKFG), and Mr. Hoffman serves as Acting Chief Financial Officer of Qualstar Corporation and as Chief Financial Officer of BKF Capital Group, Inc.
As a result, each of Messrs. Bronson and Hoffman divides his time among these companies and does not devote his full business time and attention to Interlink’s business. Each of Messrs. Bronson and Hoffman currently works an equivalent full-time schedule; however, there can be no assurance that the amount of time these officers devote to our company will not diminish from time to time for limited or extended periods as their other business obligations require a greater portion of their attention. Neither Mr. Bronson nor Mr. Hoffman is required to spend a minimum amount of time on Interlink business. Our continued success depends in part upon the availability and performance of these officers, particularly Mr. Bronson, who possesses unique and extensive industry knowledge and experience as well as a deep understanding of our business and strategy. A reduction in their services to Interlink from current levels due to obligations to Qualstar Corporation, BKF Capital Group, Inc. or other organizations with which these officers are affiliated could have a disruptive effect, adversely impacting our ability to manage our business effectively and execute our business strategy.
We face risks associated with security breaches or cyber-attacks.
We face risks associated with security breaches or cyber-attacks of our computer systems or those of our third-party representatives, vendors, and service providers. Heightened geopolitical tensions, armed conflicts, and broader global uncertainties may increase the likelihood of cyber threats, which could directly or indirectly disrupt our operations. Although we have implemented security procedures and controls to address these threats, such as firewalls, encryption, access controls, and employee training, cybersecurity threats are dynamic and evolving and our systems may still be vulnerable to theft, loss or misuse of data, including proprietary or confidential information, relating to our business, products, employees, suppliers and customers; disruption due to computer viruses and programming errors; attacks by third parties including destruction of data or demanding ransom to return control of our systems and services; or similar disruptiveproblems.
If our systems, or systems owned by third parties affiliated with our company, were breached or attacked, the proprietary and confidential information of our company and our customers could be disclosed and we could incur substantial costs and liabilities, including the following:
expenses to rectify the consequences of the security breach or cyber-attack;
liability for misused or stolen assets or information;
costs of repairing damage to our systems;
lost revenue and income resulting from any system downtime caused by such breach or attack;
loss of competitive advantage if our proprietary information is obtained by competitors as a result of such breach or attack;
increased costs of insurance and cybersecurity protection;
costs of incentives we may be required to offer to our customers or business partners to retain their business; and
damage to our reputation.
In addition, any compromise of security from a security breach or cyber-attack could deter customers or business partners from entering into transactions that involve providing confidential information to us. As a result, any compromise to the security of our systems could have a material adverse effect on our business, reputation, financial condition, and operating results.
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Ransomware attacks, in particular, have become more frequent and severe, potentially resulting in the encryption or theft of critical data, operational disruptions, and financial losses. A successful ransomware attack on our systems or those of our vendors could lead to prolonged business interruptions, regulatory fines, reputational damage, and substantial remediation costs. While we employ security measures designed to detect, prevent, and respond to such threats, no system is entirely immune from cyberattacks.
Risks Related to Our Industry
If we are unable to keep pace with rapid technological change and gain market acceptance of new products, we may not be able to compete effectively.
Technology, both in our markets and in our customers’ markets, is undergoing and will continue to undergo rapid change. In order to maintain our leadership position in our existing markets and to emerge as a leader in new markets, we will have to maintain a leadership position in the technologies supporting those markets. Doing so will require, among other things, that we accomplish the following:
accurately predict the evolving needs of our customers and develop, in a timely manner, the technology required to support those needs;
provide products that are not only technologically sophisticated and well supported but are also available at a price within market tolerances and competitive with comparable products;
establish and effectively defend our ownership of the intellectual property supporting our products; and
enter into relationships with other companies that have developed complementary technology on which our products also depend.
There is no assurance that we will be able to achieve any of these objectives in whole or in part.
Our markets are intensely competitive and many of our potential competitors have resources that we lack.
Our markets are highly competitive, and we expect competition in our newer markets to increase. Our competitors include companies with similar products or technologies, companies that sell complementary products to our target markets, and our customers themselves, who could choose to manufacture in-house products that they currently buy from us. Many of our competitors have substantially greater financial resources than we do. Our competitors and potential competitors may have established business relationships that afford them a competitive advantage or may create technologies that are superior to ours or that set a new industry standard that will define the successful product for that market. If any of our competitors establish a close working relationship with our customers, they may obtain advance knowledge of our customers’ technology choices or may be afforded an opportunity to work in partnership to develop compatible technologies and may therefore achieve a competitive advantage. We may be unable to compete successfullyagainst our current and future competitors.
Risks Relating to Ownership of Our Stock
There is a limited or no public market for our securities.
While our common stock, $0.001 par value per share (“Common Stock”), is quoted on The Nasdaq Capital Market, the daily trading volume is typically very low. This is due in part to the significant percentage (approximately 77% as of December 31, 2025) of our shares that are held by officers and directors and their affiliates, primarily Mr. Bronson.
We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market or how liquid that market might become. The lack of an active market may reduce the value of our Common Stock and impair the ability of our stockholders to sell their shares at the time or price at which they wish to sell them. An inactive market may also impair our ability to raise capital by issuing Common Stock (or other securities convertible into Common Stock) and may impair our ability to acquire or invest in other companies, products, or technologies by using our stock as consideration.
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The price of our Common Stock may be volatile, and the value of a stockholder’s investment could decline.
Technology stocks, including our Common Stock, have historically experienced high levels of volatility. The trading price of our shares may continue to fluctuate substantially, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause investors to lose all or part of their investment. Factors that could cause fluctuations in the trading price of our shares include, without limitation, the following:
announcements of new offerings, products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;
price and volume fluctuations in the overall stock market from time to time;
significant volatility in the market price and trading volume of technology companies in general;
fluctuations in the trading volume of our shares or the size of our public float;
actual or anticipated changes or fluctuations in our results of operations;
failure of our results of operations to meet the expectations of securities analysts or investors;
actual or anticipated changes in the expectations of investors or securities analysts;
litigation involving us, our industry, or both;
regulatory developments in the United States, foreign countries, or both;
general economic conditions and trends;
economic disruptions caused by political disputes and governmental gridlock in the United States;
major catastrophic events;
lockup releases, and sales of large blocks of our Common Stock;
the impact of outbreaks, and threat or perceived threat of outbreaks, of epidemics and pandemics, including, without limitation, a resurgence of the COVID-19 coronavirus, on our sourcing and manufacturing operations as well as on consumer spending;
departures of key employees; or
an adverse impact on the company from any of the other risks cited herein.
In addition, if the market for technology stocks, or the stock market in general, experiences a loss of investor confidence, the trading price of our shares could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our Common Stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation, which could result in substantial costs and divert our management’s attention and resources from our business. This could have a material adverse effect on our business, results of operations and financial condition.
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The issuance of shares of our Preferred Stock in the future would reduce the amount available to our holders of Common Stock in the event of our liquidation or winding up, utilize cash resources in the payment of dividends, and potentially limit our ability to obtain additional financing thereafter.
We currently have no shares of Preferred Stock outstanding but may issue shares in the future. While we cannot predict the amount of any such issuance or the liquidation preference or dividend rights of any such shares, the holders would be entitled to receive the applicable liquidation preference plus any accrued and unpaid dividends in the event of our liquidation or winding up before any payment or other distribution of assets to holders of our Common Stock, and the amount of any such payment or other distribution to such holders would be correspondingly reduced. In addition, the payment of dividends on such shares could reduce the amount of cash available to us to invest in our business. If such shares are convertible into shares of our Common Stock, the issuance of such shares upon such conversion would likely result in dilution to the interests of other common stockholders.
The terms of any Preferred Stock we may issue may restrict our ability to raise additional capital on acceptable terms, or at all.
If securities or industry analysts do not publish research or reports about our business, or if they publish inaccurate or unfavorable research reports, our share price and trading volume could decline.
The trading market for our Common Stock, to some extent, depends on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If analysts downgrade our shares or change their opinion of our business prospects, our share price would likely decline. If analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect stockholder rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds from third parties, we may have to relinquishvaluable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for our product candidates, or we may need to grant to others the rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our CEO has control over key decision making as a result of his control of a majority of our voting stock.
Steven N. Bronson, our Chairman of the Board, President and Chief Executive Officer, beneficially owned approximately 77% of the outstanding shares of our Common Stock as of December 31, 2025. As a result, Mr. Bronson has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, Mr. Bronson has the ability to control the management and affairs of our company as a result of his position as our CEO and his ability to control the election of our directors. As a board member and officer, Mr. Bronson owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, Mr. Bronson may have interests that differ from yours and he may vote in a manner that is adverse to your interests. This concentration of ownership may have the effect of deterring, delaying or preventing a change of control of our company, could deprive our other common stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and might ultimately affect the market price of our shares.
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We do not intend to pay dividends on our Common Stock for the foreseeable future and, consequently, our common stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our shares.
We have never declared or paid cash dividends on our Common Stock, and we do not anticipate paying any such dividends in the foreseeable future. The declaration, amount and payment of any future dividends on our shares, if any, may be subject to the designations, rights and preferences of any Preferred Stock that we may issue in the future and will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and any other factors that the Board may deem relevant. As a result, stockholders may only receive a return on their investment in our shares if the market price increases.
Our charter documents and Nevada law could discourage takeover attempts and lead to management entrenchment.
Our articles of incorporation and bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to take other corporate actions, including effecting changes in our management. These provisions include:
the ability of the Board to cause the company to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the exclusive right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board;
the requirement that a special meeting of stockholders may be called only by the Board, by majority vote, or by any shareholder or group of shareholders who own and have the right to vote more than 25% of our issued and outstanding securities, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
the ability of the Board, by majority vote, to amend our bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt.
We also are subject to provisions of Nevada law found in Nevada Revised Statutes, Sections 78.411 to 78.444, inclusive, that prohibit us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns 10 percent (10%) or more of our stock cannot acquire us for a period of time after the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by the Board and stockholders.
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Risks Related to Government Regulation
Our failure to comply with U.S. laws and regulations relating to the export and import of goods, technology, and software could subject us to penalties and other sanctions and restrict our ability to license and develop our circuit designs.
We are obligated by law to comply with all U.S. laws and regulations governing the export and import of goods, technology, and services, including without limitation the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), regulations administered by the Department of Treasury’s Office of Foreign Assets Control, and regulations administered by the Bureau of Alcohol Tobacco Firearms and Explosives governing the importation of items on the U.S. Munitions Import List. Pursuant to these regulations, we are responsible for determining the proper licensing jurisdiction and export classification of our products, and obtaining all necessary licenses or other approvals, if required, for exports and imports of technical data, and software, or for the provision of technical assistance or other defense services to or on behalf of foreign persons. We are also required to obtain export licenses, if required, before employing or otherwise utilizing foreign persons in the performance of our contracts if the foreign person will have access to export-controlled technical data or software. The violation of any of the applicable laws and regulations could subject us to administrative, civil, and criminalpenalties.
These regulations could restrict our ability to sell products and develop new products. Changes in our products or changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our customers with international operations from deploying products incorporating our products throughout their global systems or, in some cases, prevent the export or import of products that include our products to certain countries altogether. Any change in export or import regulations or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons, or technologies targeted by such regulations, could result in decreased use of our products by, or our ability to export or license our products to, existing or potential customers with international operations and decreased revenue. Additionally, failure to comply with these laws could result in sanctions by the U.S. government, including substantial monetary penalties, denial of export privileges, and debarment from government contracts.
Increasing global tariffs create risks to our global business and that of our customers.
Recent changes in U.S. trade policies, including the imposition of new tariffs on imported goods, present significant risks to our operations and potentially those of our customers. These tariffs may lead to increased costs for raw materials and components, supply chain disruptions, and heightened market volatility. Additionally, retaliatory tariffs from trade partners may hinder our ability and that of our customers to access key markets, further impacting our financial performance. We continue to monitor these developments closely and are evaluating strategies to mitigate potential adverse effects on our business.
If we fail to comply with anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”), we could be subject to civil and/or criminalpenalties.
As a result of our international operations, we may be subject to anti-bribery laws, including the FCPA, which prohibits companies from making improper payments to foreign officials for the purpose of obtaining or keeping business. If we fail to comply with these laws, the U.S. Department of Justice, the SEC, or other U.S. or foreign governmental authorities could seek civil and/or criminal sanctions, including monetary fines and penalties, against us or our employees, as well as additional changes to our business practices and compliance programs, which could have a material adverse effect on our business, results of operations, or financial condition. Competitors in foreign countries that are not subject to the FCPA or similar laws may have competitive advantages.
We cannot provide any assurance that current environmental laws and product quality specification standards, or any laws or standards enacted in the future, will not have a material adverse effect on our business.
Our operations are subject to environmental and various other regulations in each of the jurisdictions in which we conduct business. Regulations have been enacted in certain jurisdictions which impose restrictions on waste disposal of electronic products and electronics recycling obligations. If we fail to comply with applicable rules and regulations in connection with the use and disposal of such substances or other environmental or recycling legislation, we could be subject to significant liability or loss of future sales.
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General Risks
Our business, financial position, results of operations, and cash flows may be adversely affected by a resurgence of the global COVID-19 pandemic or any broad outbreak of any other epidemic in the human population.
The persistentchallenges stemming from the COVID-19 pandemic and the possibility of a resurgence in infections or the outbreak of another global pandemic continue to pose significant risks to our business operations, financial performance, and outlook. While there have been advancements in managing the spread of the COVID-19 virus and increasing vaccination rates, uncertainties remain regarding its long-term effects and potential resurgence. The COVID-19 pandemic demonstrated the potential of a global health crisis to to disrupt global supply chains, affect consumer behavior, cause significant volatility and disruption of financial markets and prompt regulatory responses, any and all of which can adversely impact our operations and financial position.
Because the severity, magnitude and duration of a pandemic such as COVID-19 and its economic consequences are uncertain, vary by region, and are rapidly changing and difficult to predict, its full impact on our operations and financial performance, as well as its impact on our near-term ability to successfully execute our strategic objectives, remains similarly uncertain and difficult to predict. As the situation evolves, we face the risk of additional disruptions due to new variants of the virus, changes in public health guidelines, or unforeseen events that could further exacerbate operational challenges. Moreover, economic recovery remains uneven across regions, which may continue to influence consumer spending patterns and market dynamics.
Further, the pandemic’s ultimate impact depends in part on many factors not within our control and which may vary by region (heightening the uncertainty as to the ultimate impact COVID-19 or a subsequent pandemic may have on our operations and financial performance), including, without limitation: restrictive governmental and business actions that have been and continue to be taken in response (including travel restrictions, work from home requirements, and other workforce limitations); economic stimulus, funding and relief programs and other governmental economic responses; the effectiveness of governmental actions; economic uncertainty in key global markets and financial market volatility; levels of economic contraction or growth; the impact of the pandemic on health and safety; the pace of recovery if and when the pandemic subsides; and how significantly the number of cases increases as economies begin to open and restrictive governmental and business actions are relaxed.
In addition, a pandemic outbreak such as COVID-19 subjects our operations and financial performance to several risks, including the following:
Operations-related risks : Our business is facing increased operational challenges including a heightened need to protect employee health and safety, office shutdowns, workplace disruptions, and restrictions on the movement of people, both at our own offices and at those of our clients and suppliers. During the early years of the COVID-19 pandemic, we experienced lower demand and volume for products and services, client requests for engagement deferrals or other contract modifications, and other circumstances related directly and indirectly to the pandemic that adversely impacted our business. While these factors have begun to decline and projected demand for our products has stabilized, there can be no assurance that we will not again experience significant declines in product sales due to COVID-19 or another pandemic.
Client-related risks : Our clients were and could again be disrupted by quarantines and restrictions on employees’ ability to work and office closures. Such disruptions restricted and could again restrict our ability to provide products and services to our clients and reduce demand for our products and services. In addition, the COVID-19 pandemic adversely affected the global economy and the economies and financial markets of many countries, and a recurrence of a global pandemic could result in further economic downturns affecting demand for our products and services and impact our operations.
Employee-related risks : We experienced and may in the future experience disruptions to our operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to deliver our products and services in a timely manner or meet milestones or customer commitments.
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The full extent of the effect of the COVID-19 pandemic and any future global pandemic on us, our customers, our supply chain and our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak or subsequent outbreaks. We may continue to experience the effects of a pandemic even after its initial severity has waned, and our business, results of operations and financial condition could continue to be affected. In particular, if COVID-19 re-emerges or another virus emerges with serious and widespread impact on public health, particularly in the United States, China,or the United Kingdom where our operations are most concentrated, and results in a prolonged period of travel, commercial, social and other similar restrictions, we could experience, among other things:
Adverse impacts on our operations and financial results caused by government and regulatory measures to contain or mitigate the spread of the virus, temporary closures of our facilities or the facilities of our customers or suppliers, which could impact our ability to timely meet our customers’ orders or negatively impact our supply chain;
The failure of third parties on which we rely, including our suppliers, customers and external business partners, to meet their respective obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties including bankruptcy or default;
Disruptions or restrictions on our employees’ ability to work effectively, due to illness, quarantines, travel bans, shelter-in-place orders or other limitations;
Interruptions to the operations of our business if the health of our executives, management personnel and other employees are affected, particularly if a significant number of individuals are impacted;
Litigation, manufacturing delays and harm to our reputation resulting from any accident, illness, or injury to our employees related to the pandemic that could negatively affect our business, results of operations and financial condition;
Changes in prices of products and services impacted by worldwide demand and by the pandemic, which price increases could materially increase our operating costs and adversely affect our profit margin;
Increased cybersecurity and privacy risks and risks related to the reliability of technology to support remote operations;
Sudden and/or severedeclines in the market price of our Common Stock; and
Costs incurred and revenues lost during and from the effects of the COVID-19 pandemic that likely will not be recoverable.
The COVID-19 pandemic or another global pandemic may also affect our operations and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results. The degree to which a pandemic impacts our results will depend on future developments, and there is no certainty that measures we have taken or will take will be sufficient to mitigate the risks posed by the virus. Additional impacts and risks may arise that we or our customers, suppliers, and other partners are not aware of or able to respond to effectively, and which may adversely affect us. The impact of a pandemic can also exacerbate other risks discussed in this Risk Factors section and throughout this report.
Investors should carefully evaluate the potential implications of ongoing COVID-19 challenges and other potential pandemics on our financial performance, operational resilience, and competitive position when making investment decisions. The extent and duration of these challenges remain uncertain, and our ability to effectively manage them will be critical to our long-term success.
If we fail to manage change successfully, our operations could be adversely impacted and our business could be impaired.
The ability to operate our business in rapidly evolving markets requires an effective planning and management process. We expect that responding to changes in our business will place a significant strain on our personnel, management systems, infrastructure and other resources. Our ability to manage change effectively will require us to attract, train, motivate and manage new employees, to reallocate human and other resources to support new undertakings and to restructure our operations to manage a restructured business
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effectively. If we are unable to respond effectively to change, our operations could be adversely affected and our business could be impaired.
International sales and manufacturing risks could adversely affect our operating results.
Our revenue from international sales represents a substantial portion of our overall sales, and this trend will continue for the foreseeable future. The majority of our international manufacturing is currently performed in China and the United Kingdom. Our international operations involve a number of risks, including with respect to:
import-export license agreements, tariffs (which have been increasing globally), taxes and other trade barriers;
staffing and managing foreign operations;
securing credit and funding;
maintaining an effective system of internal controls at our foreign facilities;
collecting foreign receivables;
transfer pricing and other tax uncertainties;
currency exchange fluctuations;
reduced protection of intellectual property rights;
the impact of outbreaks, and threat or perceived threat of outbreaks, of epidemics and pandemics, including, without limitation, the COVID – 19 virus, on our sourcing and manufacturing operations as well as consumer spending;
political and economic instability, and terrorism; and
transportation risks.
Any of the above factors could adversely affect our operating results.
Political instability and uncertainty could adversely affect our operating results.
The political landscape in the United States is characterized by increasing polarization, uncertainty, and volatility. Political developments, including changes in leadership, shifts in policy priorities, and legislative gridlock, with increased risks of federal government shutdowns or debt defaults, could have significant implications for our business operations, regulatory environment, and financial performance. The unpredictability of the political environment poseschallenges in anticipating and mitigating risks effectively.
The current U.S. political climate, marked by rapid policy changes and regulatory shifts under the current administration, presents significant uncertainties for our global operations. In particular, escalating geopolitical tensions involving key global markets could impact our supply chain stability and market access. These factors collectively may adversely affect our business operations, financial condition, and future prospects.
Uncertainty surrounding government policies and regulations, including those related to taxation, trade, healthcare, environmental protection, and labor practices, may impact our costs, operations, and market competitiveness. Changes in government spending priorities or fiscal policies could also affect demand for our products/services, particularly in sectors dependent on government contracts or funding.
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Furthermore, political instability and social unrest may disrupt supply chains, distribution networks, and consumer confidence, leading to operational disruptions, decreased consumer spending, and market volatility. Heightened geopolitical tensions or domestic conflicts may also contribute to economic uncertainty and market fluctuations.
Acquisitions involve multiple risks and uncertainties.
Within the last three years, we completed the acquisitions of SPEC, KWJ, Calman, and Conductive Transfers, and we expect to make further acquisitions in the future. Acquisitions involve numerous inherent challenges, such as properly evaluating acquisition opportunities, properly evaluating risks and other diligence matters, ensuring adequate capital availability and balancing other resource constraints. There are risks and uncertainties related to acquisitions, including: difficulties integrating acquired technology, operations, personnel and financial and other systems; unrealized sales expectations from the acquired business; unrealized synergies and cost savings; unknown or underestimated liabilities; diversion of management attention from running our existing businesses and potential loss of key management employees of the acquired business. In addition, internal controls over financial reporting of acquired companies may not comply with required standards. Our integration activities may place substantial demands on our management, operational resources and financial and internal control systems. Customer dissatisfaction or performance problems with an acquired business, technology, service or product could also have a material adverse effect on our reputation and business.
Our ability to operate effectively could be impaired if we were to lose the services of key personnel, or if we are unable to recruit qualified managers and key personnel in the future.
Our success is substantially dependent on the continued availability of our key management and technical personnel. Several of our key management personnel have been with us throughout most of our history and have substantial experience with our business and technology. If one or more of our key management personnel leaves Interlink and we are unable to find a replacement with the combination of skills and attributes necessary to execute our business plan, it could have an adverse impact on our business. Our success will also depend, in part, on our ability to attract and retain additional qualified professional, technical, production, managerial and marketing personnel, both domestically and internationally.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting. Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.
Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting; however, our independent registered public accounting firm may communicate to us if they are not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future.
The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the securities exchange on which our Common Stock is traded and other applicable securities rules and regulations. Compliance with these rules and regulations imposes legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and improve our disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight is required. As a
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result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations. We may need to hire additional employees to comply with these requirements, which will increase our costs and expenses.
In addition, being a public company subject to these rules and regulations make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our Board, particularly to serve on our audit committee and compensation committee.
MD&A (Item 7)
4,988 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to the consolidated financial statements included later in this Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-K, particularly in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Executive Overview
Interlink Electronics, Inc. is a leading global provider of advanced sensing technologies and printed electronics solutions that enable Human-Machine Interface (“HMI”) devices and Internet-of-Things (“IoT”) applications. Our broad product and technology portfolio spans force and touch sensors, piezoelectric sensors, rugged HMI devices, wearable and textile-based sensors, electrochemical gas and environmental sensors, instruments, and fully integrated systems.
Our business is organized around two technology platforms:
Force/Touch Sensing and HMI Solutions . Our force-sensing resistor (“FSR®”) technology, together with piezoelectric sensing, printed electronics, rugged interface devices, and emerging smart textile platforms, enables intuitive, durable, and low-power user input solutions. These technologies are deployed in applications such as vehicle entry and control systems, industrial and medical interfaces, presence and pressure detection, wearable monitoring, and other three-dimensional input environments.
Through our acquisitions of Calman in 2023 and Conductive Transfers Limited in 2024, we expanded our capabilities in customized membrane keypads, graphic overlays, industrial labeling, conductive textiles, and integrated printed electronic systems. These additions enhance our vertical integration, broaden our intellectual property portfolio, and strengthen our presence in European markets. We are increasingly positioning our HMI offerings as integrated subsystems that combine sensing hardware with proprietary firmware, signal processing, and system-level design.
Gas and Environmental Sensing Solutions . We entered the gas and environmental sensing market in 2022 through the acquisition of the assets of SPEC Sensors and KWJ Engineering. We now design and manufacture miniaturized electrochemical gas sensors, instruments, and monitoring systems for safety, health, air quality, and industrial applications. Our products are designed to address growing demand for compact, low-power, and cost-effective sensing solutions suitable for wireless, wearable, and IoT deployments.
We prioritize revenue growth in targeted strategic markets, gross margin expansion driven by favorable product mix and operational efficiencies, disciplined capital allocation, and the ongoing advancement of differentiated sensing platforms. Our strategy emphasizes higher-margin, application-specific solutions built on scalable technology foundations. A substantial portion of our revenue is generated from custom solutions developed in close collaboration with OEM customers. Although these engineering and product development engagements often involve extended design cycles, they frequently lead to multi-year production programs that provide long-term revenue visibility and strengthen customer relationships.
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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.
Results of Operations
The following table sets forth certain consolidated statements of operations data for the periods indicated. The percentages in the tables are based on revenue.
Year Ended December 31,
(in thousands, except percentages)
Revenue
Cost of revenue
Gross profit
Operating expenses:
Engineering, research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Other income (expense), net
Loss before income taxes
Income tax expense (benefit)
Net loss
Comparison of the Years Ended December 31, 2025 and 2024
Revenue by the markets we serve is as follows:
Year Ended December 31,
Amount
Revenue
Amount
Revenue
$ Change
% Change
(in thousands, except percentages)
Medical
Industrial
Automotive
Standard
Revenue
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 other specialty markets such as environmental monitoring products generally have long design and life cycles. We currently have products with life cycles that have exceeded 20 years and are ongoing.
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Revenues were up in 2025 compared to 2024 to customers in the industrial and automotive markets, and were down to customers in the medical market and to customers of our standard products. The increase in revenue from customers in the industrial market was due to increased shipments on higher customer demand due to increases in their production levels, while the increase in revenue from customers in the automotive market was due to new products and to programs intended to support innovation and automation in that market group. The decrease in revenue from customers in the medical market was due to lower shipments of our traditional force-sensing products offset in part by higher shipments of our Calman printed electronics, all of which is driven by customer demand. In all markets, the timing of orders from our customers is not always predictable and can vary significantly from period to period depending on customers’ projects and building plans.
Year Ended December 31,
Amount
Revenue
Amount
Revenue
$ Change
% Change
(in thousands, except percentages)
Gross profit
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 for 2025 were down compared to 2024 due primarily to changes in the mix of products sold, and also in part due to strengthened Chinese yuan relative to the U.S. dollar which increased the cost of our production activities in China.
Year Ended December 31,
Amount
Revenue
Amount
Revenue
$ Change
% Change
(in thousands, except percentages)
Engineering, research and development
Engineering and R&D expenses consist primarily of compensation expenses for employees engaged in research, design and product development activities and the cost of those employees’ indirect supplies and allocation of facilities expenses. Our R&D team focuses both on internal design development of our force-sensing and gas-sensing technologies and other printed electronics solutions, as well as custom design development aimed at addressing our customers’ unique design challenges. Engineering and R&D costs for 2025 were down compared to the prior year due primarily to lower engineering employee headcount and lower consultant and outside services costs, offset in part by higher costs on prototyping and product-development activities.
Year Ended December 31,
Amount
Revenue
Amount
Revenue
$ Change
% Change
(in thousands, except percentages)
Selling, general and administrative
Selling, general and administrative expenses consist primarily of compensation expenses, legal and other professional fees, facilities expenses and communication expenses. Selling, general and administrative expenses for the current year were up slightly compared to last year due primarily to the inclusion of Conductive Transfers in 2025 (which was acquired in December 2024), offset in part by lower sales and administrative compensation expense on lower headcount elsewhere.
Year Ended December 31,
Amount
Revenue
Amount
Revenue
$ Change
% Change
(in thousands, except percentages)
Other income (expense), net
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Other income (expense), net 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), net for 2025 was comprised of $20,000 of interest income and $3,000 of foreign currency transaction gains, while other income (expense), net for 2024 was comprised of $54,000 of interest income and $39,000 of foreign currency transaction gains.
Year Ended December 31,
Change
Pre-tax
Pre-tax
Pre-tax
Income/
Income/
Income/
Amount
Loss
Amount
Loss
$ Change
Loss
(in thousands, except percentages)
Income tax expense (benefit)
Income tax expense reflects statutory tax rates in the jurisdictions in which we operate on the taxable income (loss) we generate in each jurisdiction. For both 2025 and 2024, the Company’s income tax expense reflects tax expense (or benefit) on its foreign earnings (or losses) with no tax benefit on its domestic losses due to the valuation allowance recorded on domestic net operating losses and other deferred tax assets.
Our effective tax rate is directly affected by the relative proportions of our taxable income/loss in the jurisdictions in which we operate and the applicable tax rates in such jurisdictions. Based on the expected mix of domestic and foreign earnings, we anticipate our effective tax rate to remain higher than the U.S. statutory rate of 21% primarily due to a portion of our earnings originating in higher rate jurisdictions of China (25%) and the United Kingdom (25%), offset in part by earnings in the lower-rate jurisdiction of Hong Kong (16.5%), while our domestic losses are expected to provide no tax benefit due to the valuation allowance recorded on domestic net operating losses and other deferred tax assets. State income taxes also have an impact in the U.S.
Discrete tax events may cause our effective rate to fluctuate on a quarterly basis. Certain events, including, for example, acquisitions and other business changes, which are difficult to predict, may also cause our effective tax rate to fluctuate. We are subject to changing tax laws, regulations, and interpretations in multiple jurisdictions. Corporate tax reform continues to be a priority in the U.S. and other jurisdictions. Additional changes to the tax system in the U.S. could have significant effects (which we cannot predict to be net positive or net negative) on our effective tax rate and on our deferred tax assets and liabilities.
Liquidity and Capital Resources
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 December 31, 2025, we had cash and cash equivalents of $2.7 million, working capital of $4.6 million and no indebtedness. Cash and cash equivalents consist of cash and money market funds. We did not have any short-term or long-term investments as of December 31, 2025. Of our $2.7 million of cash, $2.1 million was held by foreign subsidiaries. If these funds are needed for U.S. operations or for acquisitions, we have several methods to repatriate the funds 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. However, our intent is to permanently reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate cash.
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In October 2025, we converted our Series A Convertible Preferred Stock into Common Stock, which eliminated the 8.0% per annum cumulative cash dividend payable on the Preferred Stock, for a cash savings of $400,000 per year. We believe that our existing cash and cash equivalents balance will be sufficient to maintain our current operations considering our current financial condition, obligations, and other expected cash flows. If our circumstances change, however, we may require additional cash. If we require additional cash, we may attempt to raise additional capital through equity, equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we could be subject to fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to raise additional needed funds, we may also take measures to reduce expenses to offset any shortfall.
Cash Flow Analysis
Our cash flows from operating, investing and financing activities are summarized as follows:
Year Ended December 31,
(in thousands)
Net cash (used in) operating activities
Net cash (used in) investing activities
Net cash (used in) financing activities
Net Cash (Used In) Operating Activities
For the year ended December 31, 2025, the $112,000 in net cash used in operating activities was attributable to net loss of $1,615,000, adjusted for non-cash charges of $519,000 and cash provided by changes in operating assets and liabilities of $984,000. For the year ended December 31, 2024, the $367,000 in net cash used in operating activities was attributable to net loss of $1,984,000, adjusted for non-cash charges of $809,000 and cash provided by changes in operating assets and liabilities of $808,000.
Accounts receivable decreased from $1,612,000 at December 31, 2024 to $1,542,000 at December 31, 2025 due to the timing of shipments and cash collections during the fourth quarter of 2025 compared to the fourth quarter of 2024. Many of our customers pay promptly and accounts receivable is generally related to the most recent shipments. Inventories decreased from $2,009,000 at December 31, 2024 to $1,801,000 at December 31, 2025 due primarily to variability in the timing of materials purchases and customer demand on product shipments. Prepaid expenses and other current assets decreased from $328,000 at December 31, 2024 to $236,000 at December 31, 2025. The balance of these current assets fluctuates with the timing of payments of insurance premiums, advances, and estimated income taxes. Accounts payable, accrued liabilities, and accrued income taxes increased from $1,038,000 at December 31, 2024 to $1,339,000 at December 31, 2025. The balance of these current liabilities fluctuates based on the timing of payment for purchases of materials, compensation accruals, outside services, and income taxes.
Net Cash (Used In) Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 consisted of $56,000 used for purchases of property and equipment. Net cash used in investing activities of $491,000 for the year ended December 31, 2024 consisted of $314,000 used to acquire the assets of Conductive Transfers in December 2024, and $177,000 used for purchases of property and equipment.
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Net Cash (Used In) Financing Activities
Net cash used in financing activities of $91,000 for the year ended December 31, 2025 consisted of proceeds of $242,000 from issuance of Common Stock (net of $86,000 of offering costs), offset by payment of $333,000 of dividends on our Preferred Stock. Net cash used in financing activities for the year ended December 31, 2024 consisted of payment of $400,000 of dividends on our Preferred Stock.
Transactions with Related Parties
For a discussion of transactions with related parties, see Note 10, Related Party Transactions , of the notes to the consolidated financial statements, and Item 13, Certain Relationships and Related Transactions, and Director Independence , appearing elsewhere in this Form 10-K.
Off-Balance Sheet Arrangements
As of December 31, 2025 and 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected.
We believe that the assumptions and estimates associated with revenue recognition, inventory valuation, accounts receivable, stock-based compensation expense and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our consolidated financial statements.
Revenue Recognition
In accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five-step process to achieve this core principle and, in doing so, judgment and estimates may be required within the revenue recognition process including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Generally, we recognize revenue when there is persuasive evidence that an arrangement exists, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment. In limited circumstances where either title or risk of loss pass upon destination or acceptance or when collection is not reasonably assured, we defer revenue recognition until such events occur.
We input orders based upon receipt of a customer purchase order, confirm pricing through the customer purchase order, validate credit worthiness through past payment history or other financial data and record revenue upon shipment of goods and when risk of loss and title transfer. All customers have warranty rights, and some customers have explicit or implicit rights of return. We record reserves for potential customer returns and warranty rights.
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Inventory Valuation
Inventories are stated at lower of cost or net realizable value (“NRV”). Inventory costs are determined using standard costs which approximate actual costs under the first-in, first-out method. We evaluate inventories for excess quantities and obsolescence. Our evaluation considers market and economic conditions, technology changes, new product introductions, and changes in strategic business direction, and requires estimates that may include elements that are uncertain. In order to state the inventory at lower of cost or NRV, we maintain reserves against individual stocking units. Inventory write-downs, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoice amount and presented net of the allowance for credit losses. They do not bear interest. We evaluate the collectability of accounts receivable at each balance sheet date using a combination of factors, such as historical experience, credit quality, age of the accounts receivable balances, and economic conditions that may affect a customer’s ability to pay. We include any accounts receivable balances that are determined to be uncollectible in the overall allowance for credit losses using the specific identification method. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
Assessments of Impairment of Goodwill and Long-Lived Assets
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed. Goodwill is determined to have an indefinite useful life and is not amortized but is tested for impairment at least annually or more frequently in events and circumstances exist that indicate that a goodwill impairment test should be performed. Intangible assets and property, plant and equipment are carried at cost less accumulated depreciation and amortization and are tested for impairment whenever events or changes in circumstances indicate their carrying value may not be recoverable. The impairment tests and assessments involve estimates and require management judgment of qualitative and quantitative considerations. If factors change in the future and we use different assumptions, our impairment tests and assessments could change significantly.
Stock-Based Compensation
We account for stock-based compensation under ASC Topic 718, Compensation-Stock Compensation , which requires us to record related compensation costs in the statement of operations. Calculating the fair value of stock-based compensation awards requires the input of highly subjective assumptions, including the expected life of the awards and expected volatility of our stock price. Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. Our estimates of expected volatilities are based on weighted historical implied volatility. The expected forfeiture rate applied in calculating stock-based compensation cost is estimated using historical data and is updated annually.
The assumptions used in calculating the fair value of stock-based awards involve estimates that require management judgment. If factors change and we use different assumptions, our stock-based compensation expense could change significantly in the future. In addition, if our actual forfeiture rate is different from our estimate, our stock-based compensation expense could change significantly in the future.
Income Taxes
We account for income taxes using the asset and liability method in accordance with ASC Topic 740, Income Taxes , which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, we must make estimates and judgments in determining the provision for taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. In addition, the Company operates within multiple tax jurisdictions and is subject to audit in these jurisdictions. Significant changes in these estimates may result in an increase or decrease to our tax provision in a subsequent period. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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Our foreign subsidiaries are subject to foreign income taxes on earnings in their respective jurisdictions. Earnings of our foreign subsidiaries are generally included in our U.S. federal income tax return as they are earned.
We assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not determinable beyond a “more likely than not” standard, we establish a valuation allowance. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, we include an expense or benefit within the tax provision in the statement of operations.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If we determine that a tax position will more likely than not fail to be sustained on audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various hypothetical outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period in which a change in judgment occurs.
Recently Issued and Adopted Accounting Pronouncements
For a discussion of recently adopted accounting pronouncements, see Recently Issued Accounting Pronouncements in Note 1, The Company and its Significant Accounting Policies , of the notes to the consolidated financial statements appearing elsewhere in this Form 10-K.
