10-Q: Interlink Electronics Narrows Losses, Boosts Revenue

Interlink Electronics reported improved financial results for Q3 and the first nine months of 2025, narrowing net losses and achieving positive cash flow from operations.

Summary

• Revenue for the three months ended September 30, 2025, increased by 10.8% to $2.959 million, up from $2.671 million in the prior year period.
• Net loss for the three months ended September 30, 2025, improved to $(336) thousand, compared to $(523) thousand for the same period in 2024.
• Revenue for the nine months ended September 30, 2025, increased by 4.0% to $9.037 million, up from $8.693 million in the prior year period.
• Net loss for the nine months ended September 30, 2025, significantly improved to $(1.041) million, compared to $(1.571) million for the same period in 2024.
• Cash provided by operating activities for the nine months ended September 30, 2025, was $244 thousand, a substantial improvement from $144 thousand cash used in operating activities in the prior year period.
• The company converted all 200,000 shares of Series A Convertible Preferred Stock into 900,000 shares of common stock on October 15, 2025, eliminating $400 thousand per annum in preferred stock dividends.
• A 50% common stock dividend was declared on September 24, 2025, and paid on October 28, 2025, increasing outstanding common shares from 9,896,366 to 14,844,573.
• As of September 30, 2025, cash and cash equivalents stood at $2.987 million, with working capital of $4.9 million and no indebtedness.
• The company utilized its At-The-Market (ATM) Issuance Sales Agreement, selling 29,547 shares of common stock for net proceeds of $107 thousand through September 30, 2025, with approximately $5.8 million remaining available.

Sentiment

Score: 7

Explanation: The company demonstrated significant improvements in reducing net losses and generating positive cash flow from operations. Revenue growth, while modest year-to-date, showed strong quarterly acceleration in key segments. The conversion of preferred stock is a notable positive for common shareholders by eliminating future dividend obligations. However, the company still operates at a net loss, and some market segments experienced revenue declines, indicating ongoing challenges.

Positives

• Net loss significantly narrowed for both the three-month (from $(523)k to $(336)k) and nine-month (from $(1.571)M to $(1.041)M) periods ended September 30, 2025.
• Revenue increased by 10.8% for the three months and 4.0% for the nine months ended September 30, 2025, driven by strong performance in medical and standard product markets.
• Cash flow from operating activities turned positive, providing $244 thousand for the nine months ended September 30, 2025, compared to $144 thousand cash used in the prior year.
• The conversion of Series A Convertible Preferred Stock eliminates $400 thousand in annual preferred stock dividends, improving future cash flow for common shareholders.
• Engineering, research and development expenses decreased by 27.2% for the three months and 26.8% for the nine months, indicating cost management.
• Improved accounts receivable collections, with days-sales outstanding decreasing from 49 at December 31, 2024, to 41 at September 30, 2025.

Negatives

• Despite improvements, the company continues to report net losses for both the quarter and year-to-date periods.
• Revenue from the industrial market decreased by 27.9% for the three months ended September 30, 2025, due to reduced shipments and lower demand for gas-sensing products.
• Automotive market revenue declined by 78.8% for the three months ended September 30, 2025.
• Gross margin percentage slightly decreased for the nine months ended September 30, 2025 (41.2% vs. 42.1%), due to changes in product and customer mix.
• Selling, general and administrative expenses increased by 9.3% for the three months ended September 30, 2025, due to higher professional fees and consultant compensation costs.
• Total stockholders' equity decreased from $10.493 million at December 31, 2024, to $9.632 million at September 30, 2025.

Risks

• Rapid change in the industry.
• Problems with the performance, reliability, or quality of products.
• Loss of customers.
• Impacts of doing business internationally, including foreign currency fluctuations, changes in trade policies, and political instability.
• Potential shortages of supplies used to manufacture products.
• Disruptions in manufacturing facilities.
• Changes in environmental directives impacting manufacturing processes or product lines.
• Challenges in the development of new proprietary technology and the enforcement of intellectual property rights.
• Ability to attract and retain qualified employees.
• Ability to raise additional capital.
• Adverse effects from outbreaks of viruses, widespread illness, infectious diseases, contagions, and unforeseen epidemics (e.g., COVID-19) and general global supply chain constraints.

Future Outlook

The company believes its existing cash and cash equivalents will be sufficient to maintain current operations. However, if circumstances change, additional capital may be required, potentially through equity, equity-linked, or debt financing arrangements, which could lead to dilution for existing stockholders or restrictive covenants. The company also plans to explore potential strategic relationships to support growth initiatives.

Management Comments

• Our technical and engineering expertise in materials science, manufacturing, embedded electronics, firmware, and software enables us to create and deliver high-quality, cost-effective custom solutions tailored to our customers' unique requirements.
• We control 100% of the manufacturing and shipping process, which enables us to respond quickly to customer product demand and design requirements.
• We believe that our existing cash and cash equivalents balances will be sufficient to maintain our current operations considering our current financial condition, obligations, and other expected cash flows.
• We also plan to explore potential strategic relationships with companies and technology institutes that will support our growth initiatives.

Industry Context

Interlink Electronics operates in the dynamic Human-Machine Interface (HMI) and Internet-of-Things (IoT) solutions markets, which are characterized by rapid technological change and evolving customer demands across medical, industrial, automotive, and consumer sectors. The company's focus on custom solutions and expansion of its technology platforms through acquisitions (like Conductive Transfers for wearables/smart textiles) and internal R&D (Global Product Development and Materials Science Center) aligns with broader industry trends towards specialized, integrated sensor technologies and smart surfaces. The reported fluctuations in market segment revenues reflect the project-driven nature and varying design cycles within these diverse end-markets.

Legal Proceedings

• The company is not party to any legal proceedings as of September 30, 2025, but is occasionally involved in legal proceedings in the ordinary course of business.

Related Party Transactions

• Ongoing mutual facilities sharing agreement with Qualstar Corporation for office and warehouse facilities, splitting rent and lease-related costs.
• Mutual consulting agreement with Qualstar Corporation for operational, sales, marketing, general, and administrative services.
• Interlink and Qualstar reimburse each other for expenses paid on behalf of the other.
• Transactions with Qualstar for the nine months ended September 30, 2025: $363,000 billed to Qualstar by Interlink, $354,000 paid by Qualstar to Interlink, $144,000 billed to Interlink by Qualstar, $121,000 paid by Interlink to Qualstar.
• Facilities agreement with BKF Capital Group, Inc. for use of Irvine, California office facility, splitting rent and lease-related costs.
• M&A advisory consulting services agreement with Bronson Financial LLC (a BKF Capital subsidiary) was terminated in April 2024.
• Interlink and BKF Capital reimburse each other for expenses paid on behalf of the other.
• Transactions with BKF Capital for the nine months ended September 30, 2025: $5,000 billed to BKF Capital by Interlink, $4,000 paid by BKF Capital to Interlink.

Stakeholder Impact

• **Shareholders:** The narrowing net loss, positive cash flow from operations, and elimination of preferred stock dividends are positive. However, potential future equity raises could lead to dilution. The 50% stock dividend increases the number of shares outstanding.
• **Employees:** Continued R&D and SG&A expenses indicate ongoing investment in personnel, though R&D compensation costs were lower. Stock-based compensation plans are in place.
• **Customers:** Increased shipments in medical and standard markets indicate continued demand. Decreased shipments in industrial and automotive markets suggest fluctuating demand or project cycles.
• **Creditors:** No indebtedness reported, which is favorable. Improved cash flow from operations strengthens the company's ability to meet obligations.
• **Suppliers:** Potential shortages of supplies and global supply chain constraints remain a risk, which could impact supplier relationships and operational efficiency.

Next Steps

• Continue to manage cash and cash equivalents to maintain current operations.
• Potentially raise additional capital through equity, equity-linked, or debt financing if circumstances change.
• Explore potential strategic relationships with companies and technology institutes to support growth initiatives.
• Relocate the manufacturing facility and administrative offices in Barnsley, England.

Key Dates

Recommendation

While Interlink Electronics demonstrated significant improvements in reducing net losses and achieving positive cash flow from operations, the company still operates at a net loss. The conversion of preferred stock is a positive catalyst, eliminating a substantial annual dividend. However, revenue growth remains modest overall, and certain market segments experienced declines. The ATM offering provides capital flexibility but also introduces potential dilution. Given the mixed financial performance, ongoing risks, and the recent positive structural change (preferred stock conversion), a 'hold' recommendation is appropriate for investors to observe sustained profitability and market traction before considering further investment.

Keywords

sensors, printed electronics, HMI, IoT, force sensors, piezo-electric, wearable sensors, gas sensors, medical devices, industrial automation, automotive, semiconductors, technology, manufacturing, SEC filing, 10-Q