What changed in this filing

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Item 1A. Risk Factors

2023-03-29 compared with 2022-03-29 · 57 added, 45 removed, 275 unchanged (27% of the section changed)

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trade policies, including new restrictions, tariffs or other changes 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.

We experienced delays in the receipt of certain goods and the supply of our products from international and domestic shipping origins as a result of the COVID-19 pandemic and more general global supply chain constraints in fiscal 2021.

Depending on the continued extent and duration of these constraints and disruptions, our supply chain, results of operations (including sales) or future business may be materially and adversely impacted.

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Disruptions in our manufacturing facilities or arrangements could cause our revenues and operating results to decline.

We currently manufacture the majority of our products in Shenzhen, China.

This facility is vulnerable to damage from earthquakes, floods, fires, power loss and similar events.

It could also be subject to break-ins, sabotage and intentional acts of vandalism.

We manufacture of our products in Shenzhen, China and Newark, California.

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 for any losses that may occur.

Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problem at our manufacturing facility could result in delayed shipment of products, missed delivery deadlines and harm to our reputation, which may

cause our revenues and operating results to decline.

Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problem at either manufacturing facility could result in delayed shipment of products, missed delivery deadlines and harm to our reputation, which may cause our revenues and operating results to decline.

Performance, reliability or quality problems with our products may cause our customers to reduce or cancel orders which would harm our operating results.

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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.

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 (for example, the current conflict between Russia and Ukraine), 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 (including the outbreak of the coronavirus and its potential impact on our financial results) 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.

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 (for example, the conflict between Russia and Ukraine), 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 (including the outbreak of the coronavirus and its potential impact on our financial results) 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;

The war between Russia and Ukraine and the resulting political uncertainty also could result in an increase in cyberattacks that could either directly or indirectly impact our operations.

while China has now officially ended its “zero-COVID” policy, there can be no assurance that such a policy will not be reimposed at some time in the future if deemed necessary or desirable by the Chinese government, which could result in further lockdowns.

International conflicts such as between Russia and Ukraine, and tensions with countries such as Iran and North Korea, and resulting political uncertainties also could result in an increase in cyberattacks that could either directly or indirectly impact our 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 our distribution center or any of their fulfillment centers.

We cannot guarantee that our HMI solutions for new markets will be successful or that we will be able to continue to generate significant revenue from these markets.

Our HMI solutions may not be successful in new markets despite the fact that these product solutions are capable of enabling people to interact more easily and intuitively with a wide variety of electronic devices.

Various target markets for our interface solutions may develop slower than anticipated or could utilize competing technologies.

The markets for certain of these 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.

We cannot guarantee that our solutions for new markets will be successful or that we will be able to continue to generate significant revenue from these markets.

Our HMI and gas-sensing solutions may not be successful in new markets.

Various target markets for our products and solutions may develop slower than anticipated or could 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 successful integration of gas sensors relies heavily on our customers’ investment in the required infrastructure to bring up a device or instrument and also on their competency and execution in development.

The performance of any gas 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:

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● the price and performance requirements of our customers and the preferences of end users; and

● our ability to provide our customers with HMI solutions that provide advantages in terms of size, power consumption, reliability, durability, performance, and value-added features compared with alternative solutions.

● 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.

The failure of any of these target markets to develop as we expect, or our failure to serve these markets to a significant extent, 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 maintain and build relationships with our customers, or if our customers’ products which utilize our HMI solutions do not gain widespread market acceptance, our revenue may stagnate or decline.

If we fail to maintain and build relationships with our customers, or if our customers’ products which 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 HMI solutions.

As a result of this, our success depends almost entirely upon the widespread market acceptance of our customers’ products that incorporate our HMI 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 their products that incorporate our HMI solutions.

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.

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 HMI solutions on a timely and cost-effective basis.

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.

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Each of Messrs.

Bronson and Hoffman currently works an equivalent full-time schedule for Interlink;

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.

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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.

The war between Russia and Ukraine and the resulting political uncertainty could result in an increase in cyberattacks that could either directly or indirectly impact our operations.

Although we have implemented security procedures and controls to address these threats, our systems may still be vulnerable to data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems.

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 may be required to incur substantial costs and liabilities, including the following:

Although we have implemented security procedures and controls to address these threats, 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 demanding ransom to return control of our systems and services;

or similar disruptive problems.

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 may incur substantial costs and liabilities, including the following:

● expenses to rectify the consequences of the security breach or cyber-attack;

● liability for stolen assets or information;

● liability for misused or stolen assets or information;

● costs of repairing damage to our systems;

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There is a limited or no public market for our securities.

Our common stock is quoted on The Nasdaq Capital Market, where the daily trading volume has been limited.

Our common stock is quoted on The Nasdaq Capital Market, where the daily trading volume has been low.

This is due in part to the significant percentage (approximately 83% as of December 31, 2022) of our shares that are held by officers and directors and their affiliates.

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These fluctuations could cause investors to lose all or part of their investment in our common stock.

Factors that could cause fluctuations in the trading price of our common stock include the following:

Factors that could cause fluctuations in the trading price of our common stock include, without limitation, the following:

● announcements of new offerings, products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

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● general economic conditions and trends;

● economic disruptions caused by political disputes and governmental gridlock in the United States;

● major catastrophic events;

● lockup releases, 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, the coronavirus outbreak, on our sourcing and manufacturing operations as well as consumer spending;

● lockup releases, and sales of large blocks of our common stock;

● departures of key employees;

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This means that those holders are entitled to receive the liquidation preference before any payment or other distribution of assets to our common stockholders, and the amount of any such payment or other distribution will be reduced by that amount.

The aggregate liquidation preference of the Series A Convertible Preferred Stock as of December 31, 2022 was $5 million.

The issuance of shares of common stock upon conversion of the Series A Convertible Preferred Stock may cause immediate and substantial dilution to our existing stockholders.

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If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.

If one or more of these analysts ceases coverage of our company or fails 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.

If one or more of these

analysts ceases coverage of our company or fails 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.

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Our CEO has control over key decision making as a result of his control of a majority of our voting stock.

Bronson, our Chairman of the Board, President and Chief Executive Officer, beneficially owns approximately 82.5% of the outstanding shares of our common stock as of December 31, 2021.

Bronson, our Chairman of the Board, President and Chief Executive Officer, beneficially owned approximately 82% of the outstanding shares of our common stock as of December 31, 2022.

As a result, Mr.

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● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

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;

● the requirement that a special meeting of stockholders may be called only by our board of directors, 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;

● the ability of our board of directors, by majority vote, to amend our bylaws, which may allow our board of directors 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.

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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 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.

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.

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The ongoing, global coronavirus pandemic has significantly and adversely affected, and may continue to adversely affect, our business, financial position, results of operations, and cash flows.

The outbreak of the novel coronavirus (which causes the disease now known as COVID-19) was first identified in December 2019 in Wuhan, China, and has since spread rapidly across the world, including in all or most of the countries in which we, our clients, and our suppliers operate.

The COVID-19 pandemic has caused, and is expected to continue to cause, a global slowdown in economic activity, a decrease in demand for a broad variety of goods and services, disruptions in global supply chains, and significant volatility and disruption of financial markets.

Because the severity, magnitude and duration of the pandemic and its economic consequences are uncertain, vary by region, 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.

The outbreak of the novel coronavirus (which causes the disease now known as COVID-19) was first identified in December 2019 in Wuhan, China, and together with its numerous variants has since spread rapidly across the world, including in all or most of the countries in which we, our clients, and our suppliers operate.

The COVID-19 pandemic has caused, and is expected to continue to cause, directly and indirectly, a global slowdown in economic activity, a decrease in consumer and industrial demand for a broad variety of goods and services, disruptions in global supply chains, and significant volatility and disruption of financial markets.

Because the severity, magnitude and duration of the pandemic 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.

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 may have on our operations and financial performance), including, without limitation:

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and how significantly the number of cases increases as economies begin to open and restrictive governmental and business actions are relaxed.

Further, the COVID-19 pandemic has recently subjected our operations and financial performance to several risks, including those discussed below:

In addition, the COVID-19 pandemic has recently subjected our operations and financial performance to several risks, including the following:

● Operations-related risks :

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We may continue to experience the effects of the pandemic even after it has waned, and our business, results of operations and financial condition could continue to be affected.

In particular, if COVID-19 continues to spread or re-emerges, particularly in the United States, Singapore and China where our operations are most concentrated, resulting in a prolonged period of travel, commercial, social and other similar restrictions, we could experience, among other things:

In particular, if COVID-19 continues to spread or re-emerges,

particularly in the United States, Singapore and China where our operations are most concentrated, resulting 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;

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● 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;

● Any accident, COVID-19 illness, or injury to our employees could result in litigation, manufacturing delays and harm to our reputation, which could negatively affect our business, results of operations and financial condition;

● Changes in prices of products and services may be impacted by worldwide demand and by the ongoing COVID-19 pandemic, and such price increases could materially increase our operating costs and adversely affect our profit margin;

● Litigation, manufacturing delays and harm to our reputation resulting from any accident, illness, or injury to our employees related to COVID-19 that could negatively affect our business, results of operations and financial condition;

● Changes in prices of products and services may be impacted by worldwide demand and by the ongoing COVID-19 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 severe declines in the market price of our common stock;

● Costs incurred and revenues lost during and from the effects of the COVID-19 pandemic likely will not be recoverable.

● 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 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 COVID-19 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 COVID-19 can also exacerbate other risks discussed in this Risk Factors section and throughout this report.

If we fail to manage change successfully, our operations could be adversely impacted and our business could be impaired.

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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.

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.

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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.

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 will be subject to the reporting requirements of the Exchange Act, and will be 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 will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.

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.

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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-K

Item 1A. Risk Factors