What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-10 · 143 added, 101 removed, 437 unchanged (36% of the section changed)

1 unchanged sentence

INTERLINK ELECTRONICS, INC.

CONDENSED CONSOLIDAED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value)

26 unchanged sentences

Common stock, $ 0.001 par value:

30,000 shares authorized, 6,601 shares issued and outstanding at both June 30, 2021 and December 31, 2020

30,000 shares authorized, 6,602 shares issued and outstanding at September 30, 2021;

6,601 shares issued and outstanding at December 31, 2020

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands, except per share data)

9 unchanged sentences

Income tax expense (benefit)

Net income (loss)

Earnings (loss) per share – basic and diluted

Weighted average common shares outstanding – basic and diluted

Earnings per share – basic and diluted

Weighted average common shares outstanding – basic

Weighted average common shares outstanding - diluted

INTERLINK ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended June 30,

Six months ended June 30,

(in thousands)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Net income (loss)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

Comprehensive income (loss)

Comprehensive income

See accompanying notes to these unaudited condensed consolidated financial statements.

3 unchanged sentences

Stockholders’

Three months ended June 30, 2021

Three months ended September 30, 2021

Income (Loss)

(in thousands)

Balance at March 31, 2021

Net income (loss)

Balance at June 30, 2021

Foreign currency translation adjustment

Stock-based compensation

Balance at June 30, 2021

Balance at September 30, 2021

Comprehensive

Stockholders’

Six months ended June 30, 2021

Nine months ended September 30, 2021

Income (Loss)

1 unchanged sentence

Balance at December 31, 2020

Net income (loss)

Foreign currency translation adjustment

Stock-based compensation

Balance at June 30, 2021

Balance at September 30, 2021

Comprehensive

Stockholders’

Three months ended June 30, 2020

Three months ended September 30, 2020

Income (Loss)

(in thousands)

Balance at March 31, 2020

Net income (loss)

Balance at June 30, 2020

Foreign currency translation adjustment

Stock-based compensation

Balance at June 30, 2020

Balance at September 30, 2020

Comprehensive

Stockholders’

Six months ended June 30, 2020

Nine months ended September 30, 2020

Income (Loss)

1 unchanged sentence

Balance at December 31, 2019

Net income (loss)

Foreign currency translation adjustment

Stock-based compensation

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes to these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED SATEMENTS OF CASH FLOWS

Six months ended June 30,

Nine months ended September 30,

(in thousands)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Stock-based compensation

Amortization of right-of-use assets

Operating leases - other

Gain on forgiveness of PPP loan

7 unchanged sentences

Deferred taxes

Lease liabilities

Deferred revenue

29 unchanged sentences

Our Human Machine Interface (“HMI”) technology platforms are deployed in a wide range of markets including consumer electronics, automotive, industrial, and medical.

Interlink serves our world-wide customer base from our corporate headquarters in Irvine, California (Orange County area) and from our facility in Camarillo, California (Ventura County).

Interlink serves our world-wide customer base from our corporate headquarters in Irvine, California (Orange County) and from our facility in Camarillo, California (Ventura County).

We have established a Global Product Development and Materials Science Center in our Camarillo footprint.

3 unchanged sentences

We also maintain a small embedded software and Internet-of-Things (“IoT”) application development center in Singapore.

We manufacture all our products in our printed electronics manufacturing facility in Shenzhen, China, which has been in operation since 2006.

We manufacture all our products in our printed electronics manufacturing facility in Shenzhen, China.

In addition, we maintain a global distribution and logistics center in Hong Kong, a technical sales office in Japan, and several manufacturer representatives and distributors in strategic locations in our key markets, all of which allows us to support our global customer base.

15 unchanged sentences

The results of the Company’s operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K, which was filed the Securities and Exchange Commission, or SEC, on March 17, 2021.

INTERLINK ELECTRONICS, INC.

7 unchanged sentences

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, we perform the following five steps:

29 unchanged sentences

R&D expenses also include depreciation and amortization, and overhead, including facilities expenses.

Marketing Costs

All of the costs related to marketing and advertising our products are expensed as incurred or at the time the marketing takes place.

Marketing and Advertising Costs

All of the costs related to marketing and advertising our products are expensed as incurred or at the time the marketing or advertising takes place.

Stock-Based Compensation

10 unchanged sentences

The benefits of tax deductions in excess of recognized compensation cost are reported as a financing cash flow.

As of June 30, 2021, there were no stock-based compensation awards outstanding.

As of September 30, 2021, there were no stock-based compensation awards outstanding.

INTERLINK ELECTRONICS, INC.

1 unchanged sentence

Other Income, Net

Other income, net, consists of interest income, foreign exchange gains and losses and other non-operating gains and losses.

Other income, net, consists of interest income /expense, foreign exchange gains and losses and other non-operating gains and losses.

We account for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.

2 unchanged sentences

We also utilize a “more likely than not” recognition threshold and measurement analysis for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

We recognize potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.

We recognize potential accrued interest and penalties related to unrecognized tax benefits within the statement of operations as income tax expense.

We operate within multiple tax jurisdictions and are subject to audit in these jurisdictions.

Our foreign subsidiaries are subject to foreign income taxes on earnings in their respective jurisdictions.

Earnings of our foreign subsidiaries are not included in our U.S.

federal income tax return until earnings are repatriated.

We are generally eligible to receive tax credits on repatriated earnings on our U.S.

federal income tax return for foreign taxes paid by our subsidiaries.

Earnings of our foreign subsidiaries that constitute Global Intangible Low Taxed Income (“GILTI”) are included in U.S.

taxable income with related taxes recorded as a current period income tax expense.

Foreign Currency Translation

1 unchanged sentence

The functional currency for our Hong Kong and Singapore subsidiaries is the United States dollar.

However, our Hong Kong and Singapore subsidiaries also transact business in their local currency.

Therefore, assets and liabilities are translated into United States dollars at the exchange rate in effect on the balance sheet date.

Assets and liabilities are translated into United States dollars at the exchange rate in effect on the balance sheet date.

Revenues and expenses are translated at the average exchange rate prevailing during the respective periods.

Foreign currency transaction and translation gains and losses are included in results of operations.

Foreign currency transaction and remeasurement gains and losses are included in results of operations.

Segment Reporting

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements - continued

The Company accounts for its leases under ASC 842.

The Company accounts for its leases under ASC Topic 842, Leases .

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheets as both a right-of-use (“ROU”) asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

3 unchanged sentences

In calculating the ROU asset and lease liability, the Company has elected to combine lease and non-lease components.

The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

The Company excludes short-term leases having initial term of 12 months or less from this guidance as an accounting policy election, and recognizes rent expense for such short-term leases on a straight-line basis over the lease term.

Risk and Uncertainties

12 unchanged sentences

Public health threats could adversely affect our ongoing or planned business operations.

The COVID-19 pandemic resulted in quarantines, restrictions on travel and other business and economic disruptions.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions from such public health threats, but if we or any of the third parties with whom we engage, including the suppliers, distributers, resellers and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely impacted.

For example, the COVID-19 pandemic resulted in quarantines, restrictions on travel and other business and economic disruptions.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions from such public health threats, but if we or any of the third parties with whom we engage, including the suppliers, distributers, resellers and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines we plan could be materially and adversely impacted.

Fair Value Measurements

10 unchanged sentences

Subsequent Events

The Company has evaluated subsequent events through August 10, 2021, being the date these condensed consolidated financial statements were issued.

The Company has evaluated subsequent events through November 4, 2021, being the date these condensed consolidated financial statements were issued.

Note 2 – Details of Certain Financial Statement Components

Inventories, stated at the lower of cost or net realizable value, consisted of the following:

September 30,

(in thousands)

4 unchanged sentences

Property, plant and equipment, net, consisted of the following:

September 30,

Property, plant and equipment, net

4 unchanged sentences

Total property, plant and equipment, net

Depreciation expense totaled $ 57 thousand and $ 59 thousand for the three months ended June 30, 2021 and 2020, respectively, and $ 111 thousand and $ 118 thousand for the six months ended June 30, 2021 and 2020, respectively.

Depreciation expense totaled $ 51 thousand and $ 55 thousand for the three months ended September 30, 2021 and 2020, respectively, and $ 163 thousand and $ 173 thousand for the nine months ended September 30, 2021 and 2020, respectively.

Intangible assets, net consisted of the following:

September 30,

Intangible assets, net

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements - continued

Amortization expense totaled $ 17 thousand and $ 15 thousand for the three months ended June 30, 2021 and 2020, respectively, and $ 34 thousand and $ 28 thousand for the six months ended June 30, 2021 and 2020, respectively.

Amortization expense totaled $ 16 thousand and $ 16 thousand for the three months ended September 30, 2021 and 2020, respectively, and $ 50 thousand and $ 44 thousand for the nine months ended September 30, 2021 and 2020, respectively.

Future amortization expense on existing intangible assets over the next five years is as follows:

3 unchanged sentences

Accrued liabilities consisted of the following:

September 30,

Accrued liabilities

6 unchanged sentences

Note 3 – Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings (loss) per share:

Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

Net income (loss)

Weighted average outstanding shares of common stock

1 unchanged sentence

Common stock and common stock equivalents

Earnings (loss) per share, basic and diluted

Earnings per share, basic and diluted

Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation

4 unchanged sentences

Net revenues from customers equal to or greater than 10% of total net revenues are as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

* Less than 10% of total net revenues

Net revenues by geographic area are as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands)

6 unchanged sentences

Accounts receivable balances are monitored on an ongoing basis, and accounts deemed to have credit risk are fully reserved.

At June 30, 2021, two customers accounted for 45 % and 12 % of total accounts receivable, respectively.

At September 30, 2021, two customers accounted for 34 % and 23 % of total accounts receivable, respectively.

At December 31, 2020, two customers accounted for 47 % and 22 % of total accounts receivable, respectively.

Our allowance for doubtful accounts was $ 0 at both June 30, 2021 and December 31, 2020.

Our allowance for doubtful accounts was $ 0 at both September 30, 2021 and December 31, 2020.

Our long-lived assets were geographically located as follows:

September 30,

(in thousands)

12 unchanged sentences

Qualstar also has a facilities agreement with us to allow us to use of a portion of its Camarillo, California office and warehouse facility, for which we have agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

In addition, we have various consulting agreements with Qualstar for certain of our respective employees and/or independent contractors that provide operational, sales, marketing, general and administrative services to the other entity.

In addition, we have consulting agreements with Qualstar for certain of our respective employees and/or independent contractors that provide operational, sales, marketing, general and administrative services to the other entity.

Interlink and Qualstar also agree to reimburse, or be reimbursed by, one another for expenses paid by one company on behalf of the other.

Transactions with Qualstar are as follows:

Three months ended June 30,

Three months ended September 30,

Due from Qualstar

3 unchanged sentences

(in thousands)

Balance at April 1,

Balance at June 30,

Billed (or accrued) to Qualstar by Interlink

2 unchanged sentences

Paid by Interlink to Qualstar

Balance at June 30,

Six months ended June 30,

Balance at September 30,

Nine months ended September 30,

Due from Qualstar

8 unchanged sentences

Paid by Interlink to Qualstar

Balance at June 30,

Balance at September 30,

INTERLINK ELECTRONICS, INC.

7 unchanged sentences

Bronson, has a controlling interest in Interlink.

We have a facilities agreement with BKF Capital to allow BKF Capital to use of a portion of our Irvine, California office facility, for which we have agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

We previously had a facilities agreement with BKF Capital under which BKF Capital was allowed to use a portion of our Irvine, California office facility, for which we had agreed to split substantially all rent and lease-related costs on an apportioned basis according to the approximate relative usage levels by each entity.

In addition, we have consulting agreements with BKF Capital for certain of our respective employees and/or independent contractors that provide operational and general and administrative services to the other entity.

Interlink and BKF Capital also agree to reimburse, or be reimbursed by, one another for expenses paid by one company on behalf of the other.

For the three months ended June 30, 2021 and 2020, BKF Capital paid Interlink $ 6 thousand and $ 0 thousand, respectively, pursuant to these arrangements.

For the six months ended June 30, 2021 and 2020, BKF Capital paid Interlink $ 7 thousand and $ 0 thousand, respectively, pursuant to these arrangements.

Transactions with BKF Capital are as follows:

Three months ended September 30,

Due from BKF Capital

Due to BKF Capital

Due from BKF Capital

Due to BKF Capital

(in thousands)

Balance at June 30,

Billed (or accrued) to BKF Capital by Interlink

Paid by BKF Capital to Interlink

Billed (or accrued) to Interlink by BKF Capital

Paid by Interlink to BKF Capital

Balance at September 30,

Nine months ended September 30,

Due from BKF Capital

Due to BKF Capital

Due from BKF Capital

Due to BKF Capital

(in thousands)

Balance at January 1,

Billed (or accrued) to BKF Capital by Interlink

Paid by BKF Capital to Interlink

Billed (or accrued) to Interlink by BKF Capital

Paid by Interlink to BKF Capital

Balance at September 30,

Note 6 – Income Taxes

Income tax expense as a percentage of income before income taxes was 39.4 % for the three months ended June 30, 2021 versus tax expense of 60.6 % for the comparable period in the prior year.

Income tax expense as a percentage of income before income taxes was 63.0 % for the six months ended June 30, 2021 versus tax benefit of 84.8 % for the comparable period in the prior year .

Our income tax expense/benefit is primarily impacted by the mix of domestic and foreign pre-tax earnings, as well as our ability to utilize prior net operating loss carryforwards (“NOLs”).

Income tax expense as a percentage of pre-tax income was 11.9 % for the three months ended September 30, 2021, versus tax benefit of 154.2 % for the comparable period in the prior year.

Income tax expense as a percentage of pre-tax income was 20.8 % for the nine months ended September 30, 2021 versus tax benefit of 139.2 % for the comparable period in the prior year .

Our income tax expense/benefit is primarily impacted by permanent taxable differences, the mix of domestic and foreign pre-tax earnings, as well as our ability to utilize prior net operating loss carryforwards (“NOLs”).

The Company experienced an ownership change under IRC Section 382 in February 2010.

1 unchanged sentence

An ownership change generally affects the rate at which NOLs and potential other deferred tax assets are permitted to offset future taxable income.

Certain state jurisdictions within which we operate contain similar provisions and limitations.

All of the remaining federal and state NOLs as of June 30, 2021 are subject to annual limitations due to the February 2010 ownership change.

Certain state jurisdictions within

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

which we operate contain similar provisions and limitations.

All of the remaining federal and state NOLs as of September 30, 2021 are subject to annual limitations due to the February 2010 ownership change.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.

6 unchanged sentences

The rate implicit in each lease is not readily determinable, and we therefore use our incremental borrowing rate to determine the present value of the lease payments.

The weighted average incremental borrowing rate used to determine the initial value of right-of-use (ROU) assets and lease liabilities capitalized during the six months ended June 30, 2021 was 5.50 %.

No new ROU assets were capitalized during the six months ended June 30, 2020.

The weighted average incremental borrowing rate used to determine the initial value of ROU assets and lease liabilities capitalized during the nine months ended September 30, 2021 and 2020 was 5.50 % and 6.75 %, respectively.

ROU assets for operating leases are periodically reduced by impairment losses.

We use the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant and Equipment – Overall , to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

As of June 30, 2021, we have not recognized any impairment losses for our ROU assets.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

As of September 30, 2021, we have not recognized any impairment losses for our ROU assets.

We monitor for events or changes in circumstances that require a reassessment of our leases.

1 unchanged sentence

In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

In June 2020, the Company entered into a sublease agreement to lease 4,351 square feet of space located in Irvine, California for approximately $ 5 thousand per month with 3 percent annual increases.

In June 2020, the Company entered into a sublease agreement to lease 4,351 square feet of space located in Irvine, California for approximately $ 6 thousand per month with 3 percent annual increases, plus common area maintenance costs.

The lease term began July 1, 2020 and ends May 31, 2023.

3 unchanged sentences

The Company leases a 275 square-foot engineering and administrative office in Singapore for approximately $ 1 thousand per month.

This lease term ends July 2021.

This lease term ends May 2022.

The Company leases a 3,000 square-foot distribution facility in Hong Kong for approximately $ 2 thousand per month.

2 unchanged sentences

This lease term ends November 2022.

As of June 30, 2021, the Company had current and long-term lease liabilities of $ 189 thousand and $ 87 thousand, respectively, and right-of-use assets of $ 258 thousand.

As of December 31, 2020, the Company had current and long-term lease liabilities of $ 219 thousand and $ 140 thousand, respectively, and right of use assets of $ 334 thousand.

Future imputed interest as of June 30, 2021 totaled $ 15 thousand.

The weighted average remaining lease term of the Company’s leases as of June 30, 2021 is 1.1 years.

As of September 30, 2021, the Company had current and long-term lease liabilities of $ 150 thousand and $ 71 thousand, respectively, and ROU assets of $ 207 thousand.

As of December 31, 2020, the Company had current and long-term lease liabilities of $ 219 thousand and $ 140 thousand, respectively, and ROU assets of $ 334 thousand.

Future imputed interest as of September 30, 2021 totaled $ 10 thousand.

The weighted average remaining lease term of the Company’s leases as of September 30, 2021 is 0.8 years.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

Future minimum lease payments under non-cancellable operating leases that have remaining non-cancellable lease terms in excess of one year are as follows:

5 unchanged sentences

Present value of lease liabilities

During the three months ended June 30, 2021, we recognized approximately $ 84 thousand in operating lease costs,including approximately $ 30 thousand in cost of revenue and approximately $ 54 thousand in operating expenses.

During the three months ended June 30, 2020, we recognized approximately $ 51 thousand in operating lease costs, including approximately $ 19 thousand in cost of revenue and approximately $ 32 thousand in operating expenses.

During the six months ended June 30, 2021, we recognized approximately $ 166 thousand in operating lease costs, including approximately $ 59 thousand in cost of revenue and approximately $ 107 thousand in operating expenses.

During the six months ended June 30, 2020, we recognized approximately $ 110 thousand in operating lease costs, including approximately $ 43 thousand in cost of revenue and approximately $ 67 thousand in operating expenses.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

We are not party to any legal proceedings as of June 30, 2021.

During the three months ended September 30, 2021, we recognized approximately $ 68 thousand in operating lease costs,including approximately $ 29 thousand in cost of revenue and approximately $ 39 thousand in operating expenses.

During the three months ended September 30, 2020, we recognized approximately $ 77 thousand in operating lease costs, including approximately $ 29 thousand in cost of revenue and approximately $ 48 thousand in operating expenses.

During the nine months ended September 30, 2021, we recognized approximately $ 234 thousand in operating lease costs, including approximately $ 88 thousand in cost of revenue and approximately $ 146 thousand in operating expenses.

During the nine months ended September 30, 2020, we recognized approximately $ 187 thousand in operating lease costs, including approximately $ 73 thousand in cost of revenue and approximately $ 114 thousand in operating expenses.

We are not party to any legal proceedings as of September 30, 2021.

We are occasionally involved in legal proceedings in the ordinary course of business, including actions against us which assert or may assert claims or seek to impose fines and penalties in substantial amounts.

8 unchanged sentences

Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, we are unable to determine the maximum amount of losses that we could incur related to such indemnifications.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

Director and Officer Indemnities and Contractual Guarantees

24 unchanged sentences

and (ii) all unvested equity and/or options issued by the Company shall immediately fully vest.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

Guarantees and Indemnities

4 unchanged sentences

We maintain general and product liability insurance which may provide a source of recovery to us in the event of an indemnification claim.

Note 8 – Subsequent Events

Series A Convertible Preferred Stock

On October 21, 2021, the Company entered into a securities purchase agreement with twenty one ( 21 ) investors, pursuant to which the Company sold to the investors an aggregate of one hundred twenty thousand ( 120,000 ) shares of its 8.0 % Series A Convertible Preferred Stock, par value $ 0.01 per share, at an offering price of $ 25.00 per share, for gross proceeds of $ 3.0 million.

Each share of Series A Convertible Preferred Stock is convertible into shares of the Company’s common stock at a conversion price of $ 12.50 per common share, or 2.0 shares of common stock, at any time at the option of the holder, subject to certain customary adjustments.

The Company may elect to automatically convert some or all of the Series A Convertible Preferred Stock into shares of common stock at any time on or after April 22, 2022 if the closing price of the common stock equals or exceeds $ 15.00 ( 120 % of the initial conversion price) for at least 20 out of 30 consecutive trading days ending within five trading days prior to the notice of automatic conversion.

The offering closed on October 22, 2021.

After payment of placement agent cash fees and expenses of the offering, the Company received net proceeds of approximately $ 2.82 million.

The securities purchase agreement allows for the sale by the Company of up to an additional 480,000 shares of Series A Convertible Preferred Stock at one or more subsequent closings within ninety ( 90 ) days of the initial closing date.

Holders of the Series A Convertible Preferred Stock generally have no voting rights.

INTERLINK ELECTRONICS, INC.

Notes to Condensed Consolidated Financial Statements - continued

On October 21, 2021, the Company filed the Certificate of Designations with the Secretary of State of the State of Nevada to establish the voting rights, powers, preferences and privileges, and the relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of the Series A Convertible Preferred Stock (“Certificate of Designations”).

The Series A Convertible Preferred Stock will not be redeemable before April 22, 2022 except as described below upon the occurrence of a Fundamental Change (as defined in the Certificate of Designations).

The Company may redeem, at the Company’s option, the Series A Convertible Preferred Stock, in whole or in part, at a cash redemption price of $ 27.50 plus accrued and unpaid dividends beginning April 22, 2022 through October 21, 2023, at a cash redemption price of $ 28.125 plus accrued and unpaid dividends beginning October 22, 2023 through October 21, 2024, and, at a cash redemption price of $ 28.75 plus accrued and unpaid dividends beginning October 22, 2024.

If the Company exercises the foregoing redemption right, holders of the Series A Convertible Preferred Stock will have the right to convert such shares into shares of common stock at the conversion price until the redemption date specified in the redemption notice delivered by the Company.

However, at any time within sixty ( 60 ) days after the occurrence of a Fundamental Change, the Company may redeem, at the Company’s option, the Series A Convertible Preferred Stock, in whole or in part, at a cash redemption price of $ 27.50 plus accrued and unpaid dividends if the redemption date occurs from October 22, 2022 through October 21, 2023, at a cash redemption price of $ 28.125 plus accrued and unpaid dividends if the redemption date occurs from October 22, 2023 through October 21, 2024, and at a cash redemption price of $ 28.75 plus accrued and unpaid dividends, if the redemption date occurs on and after October 22, 2024.

If the Company exercises the foregoing redemption right, holders of the Series A Convertible Preferred Stock will have the right to convert such shares into shares of common stock at the conversion price after the Fundamental Change but prior to the redemption date specified in the redemption notice delivered by the Company.

The Company entered into a registration rights agreement with the investors, dated October 22, 2021, pursuant to which the Company agreed to register for resale by the investors the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock.

The Company has committed to file the registration statement no later than January 19, 2022 and to cause the registration statement to become effective no later than April 19, 2022.

The registration rights agreement provides for liquidated damages upon the occurrence of certain events, including the Company’s failure to file the registration statement or cause it to become effective by the deadlines set forth above.

The amount of liquidated damages payable to an investor would be 0.5 % of the aggregate amount invested by such investor for each 30-day period, or pro rata portion thereof, during which the default continues.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements