{"url_path":"/sec/link/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/828146/0001104659-26-061139-index.html","accession_number":"0001104659-26-061139","cik":"0000828146","ticker":"LINK","issuer_name":"INTERLINK ELECTRONICS INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/828146/0001104659-26-061139-index.html","primary_entity_key":"0000828146","primary_entity_name":"INTERLINK ELECTRONICS INC"},"word_count":3591,"has_tables":true,"body_markdown":"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\n*This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to uncertainties, assumptions and business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth below in Part II, Item 1A, “Risk Factors,” and in our other reports filed with the Securities and Exchange Commission. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.*\n\n*The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.*\n\n**Executive Overview**\n\nInterlink 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.\n\nOur business is organized around two technology platforms:\n\n**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.\n\nThrough 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.\n\n**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.\n\nWe 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.\n\nWe 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\n\n21\n\n[Table of Contents](#TOC)\n\ninstruments 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.\n\nCritical Accounting Policies and Estimates\n\nWe 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.\n\nA description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2026. There have been no changes to our critical accounting policies and estimates described in the Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.\n\nResults of Operations\n\nThe following table sets forth certain unaudited condensed consolidated statements of operations data for the periods indicated. The percentages in the table are based on revenues.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n**$**\n\n**  ​ ​ ​**\n\n**%**\n\n**  ​ ​ ​**\n\n**$**\n\n**  ​ ​ ​**\n\n**%**\n\n**  ​ ​ ​**\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\nRevenue\n\n​\n\n$\n\n3,074\n\n​\n\n100.0\n\n%  \n\n$\n\n2,664\n\n​\n\n100.0\n\n%\n\nCost of revenue\n\n​\n\n​\n\n1,738\n\n​\n\n56.5\n\n%  \n\n​\n\n1,715\n\n​\n\n64.4\n\n%\n\nGross profit\n\n​\n\n​\n\n1,336\n\n​\n\n43.5\n\n%  \n\n​\n\n949\n\n​\n\n35.6\n\n%\n\nOperating expenses:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nEngineering, research and development\n\n​\n\n​\n\n303\n\n​\n\n9.9\n\n%  \n\n​\n\n434\n\n​\n\n16.3\n\n%\n\nSelling, general and administrative\n\n​\n\n​\n\n1,483\n\n​\n\n48.2\n\n%  \n\n​\n\n1,364\n\n​\n\n51.2\n\n%\n\nTotal operating expenses\n\n​\n\n​\n\n1,786\n\n​\n\n58.1\n\n%  \n\n​\n\n1,798\n\n​\n\n67.5\n\n%\n\n(Loss) from operations\n\n​\n\n​\n\n(450)\n\n​\n\n(14.6)\n\n%  \n\n​\n\n(849)\n\n​\n\n(31.9)\n\n%\n\nOther income (expense), net\n\n​\n\n​\n\n60\n\n​\n\n2.0\n\n%  \n\n​\n\n5\n\n​\n\n0.2\n\n%\n\n(Loss) before income taxes\n\n​\n\n​\n\n(390)\n\n​\n\n(12.7)\n\n%  \n\n​\n\n(844)\n\n​\n\n(31.7)\n\n%\n\nIncome tax expense (benefit)\n\n​\n\n​\n\n(52)\n\n​\n\n(1.7)\n\n%  \n\n​\n\n(39)\n\n​\n\n(1.5)\n\n%\n\nNet (loss)\n\n​\n\n$\n\n(338)\n\n​\n\n(11.0)\n\n%  \n\n$\n\n(805)\n\n​\n\n(30.2)\n\n%\n\n​\n\nComparison of Three Months Ended March 31, 2026 and 2025\n\nRevenue by the markets we serve is as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n**  ​ ​ ​**\n\n**% of **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n​\n\n​\n\n​\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**$ Change**\n\n​\n\n**% Change**\n\n​\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n​\n\nMedical\n\n​\n\n$\n\n1,003\n\n​\n\n32.6\n\n%  \n\n$\n\n727\n\n​\n\n27.3\n\n%\n\n$\n\n276\n\n​\n\n38.0\n\n%\n\nIndustrial\n\n​\n\n \n\n880\n\n​\n\n28.6\n\n%  \n\n​\n\n975\n\n​\n\n36.6\n\n%\n\n​\n\n(95)\n\n​\n\n(9.7)\n\n%\n\nAutomotive\n\n​\n\n \n\n89\n\n​\n\n2.9\n\n%\n\n​\n\n32\n\n​\n\n1.2\n\n%\n\n​\n\n57\n\n​\n\n178.1\n\n%\n\nStandard\n\n​\n\n \n\n1,102\n\n​\n\n35.8\n\n%  \n\n​\n\n930\n\n​\n\n34.9\n\n%\n\n​\n\n172\n\n​\n\n18.5\n\n%\n\nRevenue\n\n​\n\n$\n\n3,074\n\n​\n\n100.0\n\n%  \n\n$\n\n2,664\n\n​\n\n100.0\n\n%\n\n$\n\n410\n\n​\n\n15.4\n\n%\n\n​\n\n22\n\n[Table of Contents](#TOC)\n\nWe 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.\n\nRevenues were up in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 for customers in the medical and automotive markets and for customers of our standard products, and were down for customers in the industrial market. The increase in revenue from customers in the medical market was due to increased shipments of our force-sensing products and of our Calman subsidiary’s printed electronics due to higher customer demand, while the increase in revenue from customers in the automotive market was due to new innovation and automation products for that market. The decrease in revenue from customers in the industrial market was due to reduced shipments and lower demand for our gas-sensing products. In all markets, the timing of orders from our customers is not always predictable and can be less in some periods and higher in others depending on the level of their demand which is driven by their projects and operating plans.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n​\n\n  ​ ​ ​\n\n​\n\n​\n\n​\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**$ Change**\n\n​\n\n**% Change**\n\n​\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n​\n\nGross profit\n\n​\n\n$\n\n1,336\n\n​\n\n43.5\n\n% \n\n$\n\n949\n\n​\n\n35.6\n\n%\n\n$\n\n387\n\n​\n\n40.8\n\n%\n\n​\n\nOur gross profit and gross margin percentage are impacted by various factors including product mix, customer mix, sales volume, and fluctuations in our cost of revenues, which are comprised of material costs, direct and indirect production labor costs, warehousing and logistics costs, facilities costs, and other costs related to production activities. Gross profit and gross margin percentage were up during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due primarily to higher revenues and favorable changes in our product and customer mix.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n​\n\n  ​ ​ ​\n\n​\n\n​\n\n​\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**$ Change**\n\n​\n\n**% Change**\n\n​\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n​\n\nEngineering, research and development\n\n​\n\n$\n\n303\n\n​\n\n9.9\n\n%  \n\n$\n\n434\n\n​\n\n16.3\n\n%  \n\n$\n\n(131)\n\n​\n\n(30.2)\n\n%\n\n​\n\nEngineering and R&D expenses consist primarily of compensation expenses for employees engaged in research, design and development activities, plus the cost of those employees’ indirect supplies and allocation of facilities expenses. Our R&D team focuses both on internal design development in order to develop our products and solutions, and on custom design development aimed at addressing our customers’ unique design challenges. Engineering and R&D costs for the three months ended March 31, 2026 were down compared to the three months ended March 31, 2025 due to lower engineering employee and consultant compensation costs.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**% of**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n​\n\n​\n\n​\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**Amount**\n\n​\n\n**Revenue**\n\n​\n\n**$ Change**\n\n​\n\n**% Change**\n\n​\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n​\n\nSelling, general and administrative\n\n​\n\n$\n\n1,483\n\n​\n\n48.2\n\n%  \n\n$\n\n1,364\n\n​\n\n51.2\n\n%  \n\n$\n\n119\n\n​\n\n8.7\n\n%\n\n​\n\nSelling, general and administrative expenses consist primarily of compensation expenses for sales and administrative employees, legal and other professional fees, facilities expenses, communication expenses, and intangible asset amortization expense. Selling, general and administrative costs for the three months ended March 31, 2026 were up compared to the three months ended March 31, 2025 due to slightly higher costs for compensation, professional fees and consultants.\n\n23\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n​\n\n​\n\n​\n\n​\n\n​\n\n**% of**\n\n​\n\n​\n\n​\n\n​\n\n**% of**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n​\n\n  ​ ​ ​\n\n**Amount**\n\n  ​ ​ ​\n\n**Revenue**\n\n  ​ ​ ​\n\n**Amount**\n\n  ​ ​ ​\n\n**Revenue**\n\n  ​ ​ ​\n\n**$ Change**\n\n**  ​ ​ ​**\n\n**% Change**\n\n \n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n \n\nOther income (expense), net\n\n​\n\n$\n\n60\n\n​\n\n2.0\n\n%  \n\n$\n\n5\n\n​\n\n0.2\n\n%  \n\n$\n\n55\n\n​\n\n1,100.0\n\n%\n\n​\n\nOther income (expense) consists of non-operating income and expenses, such as gains and losses on marketable securities, foreign currency transaction gains and losses, interest income and expense, and other non-operating income and expenses. Other income (expense) for the three months ended March 31, 2026 was comprised of $2,000 of interest income, $52,000 of foreign currency transaction gains, and $6,000 of other income, while other income (expense) for the three months ended March 31, 2025 was comprised of $6,000 of interest income offset by $(1,000) of foreign currency transaction losses.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n**2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Change**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**% of**\n\n​\n\n​\n\n​\n\n​\n\n**% of**\n\n​\n\n​\n\n​\n\n​\n\n**in % of**\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**Pre-tax**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Pre-tax**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Pre-tax**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Income/**\n\n​\n\n​\n\n​\n\n​\n\n**Income/**\n\n​\n\n​\n\n​\n\n​\n\n**Income/**\n\n​\n\n​\n\n​\n\n**Amount**\n\n​\n\n**Loss**\n\n​\n\n**Amount**\n\n​\n\n**Loss**\n\n​\n\n**$ Change**\n\n​\n\n**Loss**\n\n​\n\n​\n\n​\n\n**(in thousands, except percentages)**\n\n​\n\nIncome tax expense (benefit)\n\n​\n\n$\n\n(52)\n\n \n\n13.3\n\n%  \n\n$\n\n(39)\n\n \n\n4.6\n\n%  \n\n$\n\n(13)\n\n \n\n8.7\n\n%\n\n​\n\nIncome taxes were 13.3% of pre-tax loss for the three months ended March 31, 2026, versus 4.6% of pre-tax loss for the three months ended March 31, 2025. Our income taxes are impacted by the mix of domestic and foreign pre-tax earnings and losses, permanent differences between book income/loss and taxable income/loss, and our ability to utilize net operating loss carryforwards (“NOLs”). Accordingly, our effective tax rate typically will vary from the U.S. statutory tax rate of 21% from quarter to quarter. The effective tax rates for the three-month periods ended March 31, 2026 and 2025 were impacted by the amount of our foreign pre-tax income/loss and the tax expense/benefit thereon while not realizing a benefit on our domestic pre-tax loss due to the valuation allowances thereon.\n\nDiscrete 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, positive and negative, on our effective tax rate and on our deferred tax assets and liabilities.\n\nLiquidity and Capital Resources\n\nCash requirements for working capital, capital expenditures, and acquisition activities have historically been funded from our cash balances, cash generated from operations, and issuances of equity securities. As of March 31, 2026, we had cash and cash equivalents of $2.1 million, working capital of $4.4 million and no indebtedness. Cash and cash equivalents consist of cash and money market funds. Of our $2.1 million of cash, $1.4 million was held by foreign subsidiaries. If these funds are needed for our operations in the U.S. or for acquisitions, we have several methods to repatriate without significant tax effects, including repayment of intercompany loans or distributions of previously taxed income. Certain methods of distribution may require us to incur U.S. or foreign taxes to repatriate these funds.\n\nWe believe that our existing cash and cash equivalents balances will be sufficient to maintain our current operations considering our current financial condition, obligations, and other expected cash flows. If our circumstances change, however, we may require additional cash. If we require additional cash, we may attempt to raise additional capital through equity, equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we could be subject to fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to raise additional needed funds, we may also take measures to reduce expenses to offset any shortfall.\n\n24\n\n[Table of Contents](#TOC)\n\nCash Flow Analysis\n\nOur cash flows from operating, investing and financing activities are summarized as follows:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**Three Months Ended March 31, **\n\n​\n\n​\n\n**2026**\n\n  ​ ​ ​\n\n**2025**\n\n​\n\n​\n\n**(in thousands)**\n\nNet cash (used in) operating activities\n\n​\n\n$\n\n(543)\n\n​\n\n$\n\n(271)\n\nNet cash (used in) investing activities\n\n​\n\n \n\n—\n\n​\n\n​\n\n(29)\n\nNet cash (used in) financing activities\n\n​\n\n \n\n—\n\n​\n\n​\n\n(100)\n\n​\n\n*Net Cash (Used In) Operating Activities*\n\nFor the three months ended March 31, 2026, the $543,000 of cash used in operating activities was attributable to net loss of $338,000, adjusted for non-cash charges of $145,000 and cash used in changes in operating assets and liabilities of $350,000. For the three months ended March 31, 2025, the $271,000 of cash used in operating activities was attributable to net loss of $805,000, adjusted for non-cash charges of $142,000 and cash provided by changes in operating assets and liabilities of $392,000.\n\nAccounts receivable increased from $1.5 million at December 31, 2025 to $1.7 million at March 31, 2026 due to higher sales in the three months ended March 31, 2026 compared to the three months ended December 31, 2025; days-sales outstanding at March 31, 2026 (46) was unchanged from December 31, 2025 (46). Many of our customers pay promptly and the accounts receivable balance is generally related to the most recent shipments. Inventories were up from $1.8 million at December 31, 2025 to $2.0 million at March 31, 2026; inventory balances fluctuate depending on the timing of materials purchases and product shipments. Prepaid expenses and other current assets were up slightly from $0.2 million at December 31, 2025 to $0.3 million at March 31, 2026; this balance fluctuates with the timing of making prepayments versus when the benefits of those prepayments are consumed. Accounts payable, accrued liabilities, and accrued income taxes increased from $1.3 million at December 31, 2025 to $1.4 million at March 31, 2026; the balances of these working capital liabilities fluctuate due to the timing of purchases and payments on inventories and other accruals of employee compensation and outside services.\n\n*Net Cash (Used In) Investing Activities*\n\nNo cash was provided by or used in investing activities for the three months ended March 31, 2026. Net cash used in investing activities of $29,000 for the three months ended March 31, 2025 consisted of purchases of property, plant, and equipment.\n\n*Net Cash (Used In) Financing Activities*\n\nNo cash was provided by or used in financing activities for the three months ended March 31, 2026. Net cash used in financing activities of $103,000 for the three months ended March 31, 2025 consisted of payment of dividends on our preferred stock. In October 2025, we converted all of our Series A Convertible Preferred Stock into common stock, which eliminated the payment of $400,000 per annum in dividends previously payable to holders of our preferred stock.\n\n**Off-Balance Sheet Arrangements**\n\nWe do not have any off-balance sheet arrangements.\n\n​"}