Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decision regarding required disclosure.
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of December 31, 2022, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2022, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding our internal control over financial reporting due to an exemption established for smaller reporting companies.
Changes in Internal Controls over Financial Reporting
There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2022 that materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only
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reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DICLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors
Our business affairs are managed under the direction of our board of directors, which is currently composed of four members. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our executive officers are appointed by our board of directors and serve until their successors have been duly elected and qualified. There are no family relationships among any of our directors or executive officers.
The following table provides information regarding our directors and executive officers as of December 31, 2022:
Name
Age
Company Position
Steven N. Bronson
57
Chairman of the Board, President, and Chief Executive Officer
Ryan J. Hoffman
44
Chief Financial Officer and Secretary
Gene Chen, PhD
51
Vice President of Engineering & Advanced Materials
Joy C. Hou
47
Director
David J. Wolenski
61
Director
Maria N. Fregosi
57
Director
Executive Officers
Steven N. Bronson . Mr. Bronson has over 35 years of business and entrepreneurial experience. His successful background in investment banking, operations, and management has led him to acquire meaningful stakes in several promising technology companies and assuming CEO roles. Mr. Bronson became the Chairman and CEO of Interlink Electronics in 2010. Less than a year later, in 2011, he also took on the role of President, bringing both his operational and financial expertise to the company. Since successfully returning Interlink’s business to profitability, Mr. Bronson has focused on strategic matters, mission-critical decisions, and the identification of potential acquisitions and business partnership opportunities.
In July 2013, Mr. Bronson assumed the positions of President and CEO of Qualstar Corporation (OTCMKTS: QBAK)—a high-quality tape library manufacturer—and its subsidiary N2Power, a manufacturer of high efficiency power supplies for diverse electronics industries. He immediately initiated a turnaround strategy, implementing cost-cutting measures and aggressive sales efforts. Since 2008, Mr. Bronson has held the position of Chairman, President, and CEO of BKF Capital Group, Inc. (OTCMKTS: BKFG) a publicly traded company operating through its wholly-owned subsidiaries, BKF Asset Holdings, Inc., which invests in publicly and privately owned businesses, and Bronson Financial LLC, a FINRA member investment banking firm (providing M&A advisory and capital raising services to lower and middle-market companies). In addition, Mr. Bronson served on the board of Mikron Infrared Instruments, Inc. from September 1996 to July 2000. During a restructuring period spanning August 1998 to May 1999, he was appointed Mikron’s Chairman and CEO. Mr. Bronson led the effort of recruiting a top-notch management team, eventually increasing the company’s revenue by 500 percent; it was sold in April 2007. Mr. Bronson is also the Chairman, President, and Chief
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Executive Officer of Ridgefield Acquisition Corp. (OTCMKTS: RDGA) since 1996. Ridgefield Acquisition Corp. is a public shell that is seeking a merger, acquisition, or business combination with a viable operating entity.
Mr. Bronson currently holds the Series 4, 7, 24, 27, 53, 55, and 79 licenses.
Ryan J. Hoffman . Mr. Hoffman has served as our Chief Financial Officer since November 2020, joining Interlink with more than two decades of auditing and professional services experience accrued at two top global public accounting firms. He previously spent 16 years at the accounting firm RSM US LLP and was a partner there for his last five years. At RSM, he successfully led audits of global companies in industries that include technology, consumer products, and manufacturing, and cultivated a specialization in software and multiple-element revenue recognition accounting and auditing. Prior to that, he worked for the Big Four accounting firm Ernst & Young. Mr. Hoffman graduated with a degree in accounting from Chapman University and is a licensed CPA. He is also the Chief Financial Officer of Qualstar Corporation (OTCMKTS: QBAK) and BKF Capital Group, Inc. (OTCMKTS: BKFG).
Gene Chen, PhD . Dr. Chen joined Interlink in May 2021 as our Vice President of Engineering & Advanced Materials. Dr. Chen has more than two decades of experience in advanced materials and electronic devices and has taken leadership roles in a wide variety of technical fields, including force sensing and human machine interface (HMI) technology. Prior to joining Interlink, from 2016 to 2021 he was CTO at force sensor company New Degree Technology, where he led its R&D and product development teams. Prior to that, he is the founding member of Pixelligent Technologies, LLC and served as VP of Engineering from 2009 to 2016. His diverse, interdisciplinary background has also included roles managing projects working on nanomaterials and advanced materials for applications ranging from LEDs and OLEDs to semiconductors to dielectric coatings for spaceships. Dr. Chen has also served on numerous grant review panels for the National Science Foundation and Department of Energy. Dr. Chen earned a doctorate of philosophy in electrical engineering – focusing on electro-physics and microelectronics – from the University of Maryland, College Park. An active member of the scientific community, he holds 14 patents, has published 17 scientific papers, and has sat on multiple peer review panels. Dr. Chen leads Interlink’s R&D and materials science laboratory in Camarillo, California, and directs Interlink’s global engineering team.
Non-Employee Directors
Maria N. Fregosi. Ms. Fregosi joined our board of directors in February 2021. Ms. Fregosi previously served as Chief Investment Officer of Home Point Capital Inc. (NASDAQ:HMPT) from 2020 to 2022, a leading residential mortgage originator and servicer, where she was responsible for managing and monitoring the company’s investments. Ms. Fregosi is a founding member of Home Point Capital, and previously served as its Chief Financial Officer from 2018 to 2020 as well as its Chief Strategy Officer and Chief Capital Markets Officer from 2015 to 2018. Ms. Fregosi has served as a member of the Board of Home Point Mortgage Acceptance Corp. since 2020. Prior to joining Home Point Capital, Ms. Fregosi served as Chief Capital Markets Officer for Hamilton Group Funding, a retail mortgage loan originator. In addition, Ms. Fregosi previously served as the Chief Operating Officer and Chief Compliance Officer of Catalyst Financial, a full-service value-based investment banking firm, and simultaneously the Chief Operating Officer for BKF Capital Group, Inc., a publicly traded investment company. Ms. Fregosi also served as Chief Operating Officer and Chief Financial Officer of Client First Settlement Funding, a boutique specialty finance company, and as an Executive Vice President at ABN AMRO Bank. Ms. Fregosi holds a Master of Business Administration in Finance from the University of Rochester’s Simon School and is a Summa Cum Laude graduate with a Bachelor of Arts in Economics from SUNY Buffalo State College.
Ms. Fregosi was selected to serve on our board of directors because of her extensive business experience in working with publicly held companies in the investment banking and financial services industries.
Joy C. Hou . Ms. Hou joined our board of directors in June 2020. Ms. Hou presently is the CEO and Co-Founder of MREN, Inc., an enterprise technology platform serving the commercial real estate industry since 2013. Ms. Hou has over 30 years of business and entrepreneurial experience in finance, technology, and management. Prior to MREN, Ms. Hou was the CEO and Co- Founder of RAISC, Inc., a tech-enabled bank distressed asset platform that centralized data for over $3B of commercial real estate assets and supported the disposition of over $1.5B of assets. In addition, Ms. Hou spent over 10 years on Wall Street where she held various debt and equity investment positions at Donaldson, Lufkin & Jenrette, Lehman Brothers and served as the Head of Hospitality Practice at Barclays Capital. Ms. Hou is currently on the Board of Cornell Asian Alumni Association as the Vice President of University Relations and had previously served on the Board of Country Montessori School. Ms. Hou holds a Bachelor of Science degree from Cornell University’s School of Hotel Administration with Distinction.
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Ms. Hou was selected to serve on our board of directors because of her extensive business experience in working with technology companies, as both a Wall Street banker and entrepreneur.
David J. Wolenski . Mr. Wolenski joined our board of directors in June 2020. He currently serves as President and on the Board of Directors of Electro-Mechanical Products, Inc., a privately held company engaged in the manufacture of precision-machined components and thermal management systems for the semiconductor, laser, and medical device industries. From 1996 to 2000, Mr. Wolenski was Chief Executive Officer of OZO Automation, Inc. (OTCBB: OZOA), a publicly-traded company that produced robotic workstations for the electronics industry. As Chief Executive Officer, he also managed the sale of OZO’s assets to JOT Automation of Olunsalo, Finland, and served as President of their Depaneling subsidiary from 2000 to 2001. From 1983 to 1996, Mr. Wolenski held various positions with Johns Manville Corporation, a worldwide leader in fiberglass insulations and engineered products, which included managerial assignments in manufacturing, business development, and quality assurance. Mr. Wolenski currently serves on the board of directors of Qualstar Corporation (OTCMKTS: QBAK), a position he has held since 2013. His past board affiliations have included OZO Automation, Inc., where he was a director from 1996 to 1999, and Bio-Medical Automation, Inc., where he was a director from 1999 to 2000. Mr. Wolenski holds a BS degree in Mechanical Engineering from the University of Colorado at Boulder (1983), and an MBA from the University of Colorado at Denver (1990).
Mr. Wolenski was selected to serve on our board of directors because of his senior executive management experience at privately-held and publicly-held manufacturing companies and his prior experience as a director of other companies.
Code of Ethics
Interlink has adopted a written Code of Business Conduct and Ethics, which complies with the requirements for a code of ethics pursuant to Item 406(b) of Regulation S-K under the Exchange Act, which applies to our chief executive officer, chief financial officer and persons performing similar functions. A copy of the Code of Business Conduct and Ethics is posted on the “Investors” section of our website at www.interlinkelectronics.com. We will post amendments to our Code of Business Conduct and Ethics or waivers of our Code of Business Conduct and Ethics for directors and executive officers on the same website. A copy of the Code of Business Conduct and Ethics will be provided, without charge, to any shareholder who sends a written request to our Chief Financial Officer at Interlink Electronics, Inc., 1 Jenner, Suite 200, Irvine, CA 92618.
Stockholder Recommendations and Nominations of Candidates for Election to the Board of Directors
Our board of directors has established a nominating and governance committee, which is responsible for, among other things: evaluating and making recommendations regarding the composition, organization and governance of our board of directors and its committees; identifying, recruiting and nominating director candidates to the board if and when necessary; evaluating and making recommendations regarding the creation of additional committees or the change in mandate or dissolution of committees; reviewing and making recommendations with regard to our corporate governance guidelines and compliance with laws and regulations; and reviewing and approving conflicts of interest of our directors and corporate officers, other than related person transactions reviewed by the audit committee.
The nominating and governance committee employs a variety of methods for identifying and evaluating director nominees. In its evaluation of director candidates, the nominating and governance committee will consider the current size and composition of the board of directors and the needs of the board of directors and the respective committees of the board of directors. Some of the qualifications that the committee considers include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments. The nominating and governance committee requires the following minimum qualifications to be satisfied by any nominee for a position on our board of directors: (i) the highest personal and professional ethics and integrity, (ii) proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment, (iii) skills and expertise that are complementary to those of the existing members of our board of directors, (iv) the ability to assist and support management and make significant contributions to the company’s success, and (v) an understanding of the fiduciary responsibilities that are required of a member of our board of directors, and the commitment of time and energy necessary to diligently carry out those responsibilities. Other than the foregoing, there are no stated minimum criteria for director nominees, although the nominating and governance committee may also consider other factors that it may deem, from time to time, in our and our stockholders’ best interests. The nominating and governance committee may also take measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination,
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engagement of an outside search firm to gather additional information, or reliance on the knowledge of the members of the nominating and governance committee, the board of directors, or management.
Although the board of directors does not maintain a specific policy with respect to board diversity, the board of directors believes that the board should be a diverse body, and the nominating and governance committee considers a broad range of backgrounds and experiences. In making determinations regarding nominations of directors, the nominating and governance committee may take into account the benefits of diverse viewpoints. After completing its review and evaluation of director candidates, the nominating and governance committee recommends to the full board of directors the director nominees for election. The nominating and governance committee also considers these and other factors as it oversees the annual board of director and committee evaluations.
The nominating and governance committee will consider candidates for nomination to the board of directors recommended by any stockholder holding at least one percent (1%) of the fully diluted capitalization of Interlink for at least twelve months prior to the date that the recommendation is submitted. The committee will evaluate recommendations in accordance with its charter, our bylaws, our policies and procedures for director candidates, as well as the nominee criteria described above. This process is designed to ensure that the board of directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. A stockholder wishing to recommend a candidate for nomination should contact our Secretary in writing, at the address indicated in the next paragraph. The recommendation must include the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, a signed letter from the candidate confirming willingness to serve on our board of directors, information regarding any relationships between the candidate and Interlink and evidence of the recommending stockholder’s ownership of our common stock. The recommendation must also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for board of directors membership. Our nominating and governance committee has sole discretion to decide which individuals to recommend for nomination as directors.
A stockholder of record can nominate a candidate directly for election to the board by complying with the rules and regulations of the Securities and Exchange Commission. An eligible stockholder who wishes to submit a nomination should review the statutory requirements for nominations by stockholders. Any nomination should be sent in writing to the company, addressed to the attention of the Secretary at Interlink Electronics, Inc., 1 Jenner, Suite 200, Irvine, California 92618. The notice must comply with applicable federal and state law.
Audit Committee
Our board of directors has established an audit committee, which is responsible for, among other things: appointing, overseeing, and if need be, terminating any independent auditor; assessing the qualification, performance and independence of our independent auditor; reviewing the audit plan and pre-approving all audit and non-audit services to be performed by our independent auditor; reviewing our financial statements and related disclosures; reviewing the adequacy and effectiveness of our accounting and financial reporting processes, systems of internal control and disclosure controls and procedures; reviewing our overall risk management framework; overseeing procedures for the treatment of complaints on accounting, internal accounting controls, or audit matters; reviewing and discussing with management and the independent auditor the results of our annual audit, reviews of our quarterly financial statements and our publicly filed reports; reviewing and approving related person transactions; and preparing the audit committee report that the SEC requires in our annual proxy statement.
Ms. Fregosi, Mr. Wolenski and Ms. Hou, each of whom is a non-employee member of our board of directors, serve on our audit committee. Our board of directors has determined that each of the members of the audit committee satisfies the requirements for independence and financial literacy under the rules and regulations of the SEC as well as those applicable to companies listed on The Nasdaq Stock Market. Our board of directors also has determined that Ms. Fregosi qualifies as an “audit committee financial expert,” as defined in the SEC rules, and satisfies the financial sophistication requirements of Nasdaq.
ITEM 11. EXECUTIVE COMPENSATION
Processes and Procedures for Compensation Decisions
The compensation committee of our board of directors is responsible for the executive compensation programs for our executive officers and reports to the board on its discussions, decisions and other actions. Typically, our chief executive officer makes recommendations to our compensation committee, often attends committee meetings and is involved in the determination of
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compensation for the executive officers that report to him, except that he does not make recommendations as to his own compensation. Our chief executive officer makes recommendations to our compensation committee regarding short-term and long-term compensation for all executive officers, excluding himself, based on our results, an individual executive officer’s contribution toward these results and performance toward individual goal achievement. Our compensation committee then reviews the recommendations and other data and makes decisions as to total compensation for each executive officer other than the chief executive officer, as well as each individual compensation component. The compensation committee makes recommendations to the board regarding compensation for the chief executive officer. The independent members of the board make the final decisions regarding executive compensation for our chief executive officer.
The compensation committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with the establishment of our compensation programs and related policies. The compensation committee has not retained the services of a compensation consultant since 2016.
Summary Compensation Table
The following table provides information regarding the compensation of our named executive officers during 2022 and 2021. As a “smaller reporting company,” as such term is defined in the rules promulgated under the Exchange Act, we are required to provide compensation disclosure for our principal executive officer and the two most highly compensated executive officers other than our principal executive officer. Throughout this proxy statement, these three officers are referred to as our “named executive officers.”
All Other
Salary
Bonus (1)
Compensation (2)
Total
Name and Principal Position
Year
($)
($)
($)
($)
Steven N. Bronson
2022
300,000
50,000
1,677
351,677
Chief Executive Officer, President, and Chairman of the Board
2021
300,000
100,000
1,677
401,677
Ryan J. Hoffman (3)
2022
95,128
20,000
2,684
117,813
Chief Financial Officer
2021
94,379
50,000
697
145,076
Gene Chen, PhD (4)
2022
165,169
—
—
165,169
Vice President of Engineering & Advanced Materials
2021
103,713
10,000
250
113,963
(1) Consists of discretionary cash bonuses awarded by our compensation committee.
(2) Consists of the taxable cost of group term life insurance coverage, 401(k) employer matching contributions, and other miscellaneous compensation.
(3) Mr. Hoffman also serves as Chief Financial Officer for Qualstar Corporation and BKF Capital Group, Inc. Accordingly, a portion his compensation is charged to Qualstar Corporation and BKF Capital Group, Inc. based on the approximate amount of time Mr. Hoffman devotes to Interlink, Qualstar Corporation, and BKF Capital Group, Inc. The amounts presented in this table represent the net portion of his compensation charged to and incurred by Interlink.
(4) Dr. Chen joined Interlink in May 2021.
Outstanding Equity Awards at Fiscal Year End
None
Executive Officer Employment Letters
We have entered into employment agreements with each of the named executive officers. With the exception of his own arrangement, each of these employment agreements was negotiated on our behalf by our Chief Executive Officer with the oversight and approval of the compensation committee of the board.
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Steven N. Bronson
We entered into an employment agreement with Steven N. Bronson, our Chairman, President and Chief Executive Officer, on July 7, 2016. The employment agreement was for an original term of one year and automatically renews for additional one-year periods unless either party elects not to renew or it is otherwise terminated, in either case pursuant to its terms.
Pursuant to his employment agreement, Mr. Bronson receives an annual base salary, currently $300,000, and is entitled to earn and receive bonus compensation based upon the achievement of performance goals, as determined by our compensation committee, in accordance with a bonus plan adopted by us for the applicable year. Mr. Bronson also is entitled to participate in our benefit plans, including health insurance, life insurance, disability insurance, and retirement plans.
If Mr. Bronson’s employment terminates due to his death or disability, Mr. Bronson or his beneficiaries will be entitled to receive his base compensation to the end of the monthly pay period immediately following the date of termination and any accrued bonus payments, and all of Mr. Bronson’s unvested and outstanding equity awards shall immediately vest and become exercisable.
If Mr. Bronson’s employment is terminated by him for “good reason”, or by us without “cause”, Mr. Bronson will be entitled to receive his base compensation to the date of termination, severance pay equal to twelve months of his base compensation, any earned bonus compensation, employee benefits for twelve months following the date of termination, and any vested company match 401(k) or other retirement contribution, and all of Mr. Bronson’s unvested and outstanding equity awards shall immediately vest and become exercisable.
Mr. Bronson’s employment agreement also provides that upon a “change of control” of Interlink, Mr. Bronson is entitled to receive an amount in cash equal to twelve months of his base salary then in effect, and all of Mr. Bronson’s unvested and outstanding equity awards shall immediately vest and become exercisable.
Ryan J. Hoffman
We entered into an employment arrangement with Ryan J. Hoffman, our Chief Financial Officer, in November 2020. The employment arrangement provides for an annual base salary, which currently is $245,000, and a discretionary annual bonus. Because Mr. Hoffman also serves as Chief Financial Officer for Qualstar Corporation and BKF Capital Group, Inc., a portion his compensation is charged to Qualstar Corporation and BKF Capital Group, Inc. based on the approximate amount of time Mr. Hoffman devotes to Interlink, Qualstar Corporation, and BKF Capital Group, Inc. Mr. Hoffman’s employment arrangement provides for “at will” employment and may be terminated at any time by either party. Mr. Hoffman is not entitled to any termination or “change of control” payments or benefits under his employment agreement.
Gene Chen, PhD
We entered into an employment arrangement with Dr. Chen, our Vice President of Engineering & Advanced Materials, in May 2021. The employment arrangement provides for an annual base salary, which currently is $165,000 and a discretionary annual bonus. Dr. Chen’s employment arrangement provides for “at will” employment and may be terminated at any time by either party. Dr. Chen is not entitled to any termination or “change of control” payments or benefits under his employment agreement.
Pension Benefits and Nonqualified Deferred Compensation
We do not provide a pension plan for our employees, and none of our named executive officers participated in a nonqualified deferred compensation plan in 2022.
401(k) Plan
We maintain a tax-qualified retirement plan, or the 401(k) plan, that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to participate in the 401(k) plan as of the first day of the month following the date they meet the 401(k) plan’s eligibility requirements, and participants are able to defer up to 60% of their eligible compensation subject to applicable annual Code limits. All participants’ interests in their deferrals are 100% vested when contributed. The 401(k) plan permits us to make matching contributions and profit-sharing contributions to eligible participants. The match is limited to 50% of base salary up to $5,000.
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Non-Employee Director Compensation
Director Compensation Table
The following table details the total compensation earned by our non-employee directors in fiscal year 2022:
Fees Earned or
Paid in Cash
Stock Awards (1)(2)
Total
Director
($)
($)
($)
Joy C. Hou
10,000
5,000
15,000
David J. Wolenski
10,000
5,000
15,000
Maria N. Fregosi
10,000
5,000
15,000
(1) Represents awards of our common stock. These amounts represent the grant date fair value of the stock awards granted in fiscal year 2022 determined in accordance with ASC Topic 718. These amounts may not correspond to the actual value eventually realized by the director, which depends in part on the market value of our common stock in future periods. Assumptions used in calculating these amounts are set forth in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
(2) On July 15, 2022, each of Ms. Hou, Mr. Wolenski and Ms. Fregosi received 600 shares of our common stock as partial payment of their annual compensation for service on our board of directors.
No director held stock options or restricted stock awards as of December 31, 2022.
Outside Director Compensation Policy
Our board of directors has adopted a policy for the compensation for our non-employee directors, or the Outside Directors. Outside Directors will receive compensation in the form of equity and cash, as described below:
● Initial Equity Award. Each person who first becomes an Outside Director will be granted common stock with a grant date fair value equal to $5,000. These awards will be granted on the date of the first meeting of our board of directors or compensation committee occurring on or after the date on which the individual first became an Outside Director.
● Annual Equity Award . Annually, on July 15, each Outside Director who has served on our board of directors for at least the preceding six months will be granted common stock with a grant date fair value equal to $5,000.
● Cash Compensation . Each Outside Director receives an annual retainer of $10,000 in cash for serving on our board of directors, or the Annual Fee. The Annual Fee is paid in quarterly installments to each Outside Director who has served in the relevant capacity for the immediately preceding fiscal quarter no later than 30 days following the end of such preceding fiscal quarter. An Outside Director who has served in the relevant capacity for only a portion of the immediately preceding fiscal quarter will receive a prorated payment of the quarterly payment of the Annual Fee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of December 31, 2022, for:
● each of our named executive officers;
● each of our directors;
● all of our executive officers and directors as a group; and
● each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock.
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We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
We have based percentage ownership of our common stock on 6,609,798 shares of our common stock outstanding as of December 31, 2022. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares of common stock subject to options held by the person that are currently exercisable or exercisable within 60 days of December 31, 2022, as well as all shares of common stock issuable pursuant to restricted stock units held by the person that are subject to vesting conditions expected to occur within 60 days of December 31, 2022. However, we did not deem such shares outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Interlink Electronics, Inc., 1 Jenner, Suite 200, Irvine, California 92618.
Common Stock
Beneficially Owned
Name of Beneficial Owner
Number
Percentage
Named Executive Officers and Directors:
Steven N. Bronson (1)
5,448,698
82.4
%
Ryan J. Hoffman
—
—
Gene Chen, PhD
—
—
Joy C. Hou (2)
12,135
0.2
%
David J. Wolenski
2,885
0.0
%
Maria N. Fregosi
1,978
0.0
%
All executive officers and directors as a group (6 persons)
5,465,696
82.7
%
Other 5% Stockholders:
BKF Asset Holdings, Inc. (3)
993,658
15.0
%
(1) Consists of (i) 4,249,040 shares of common stock held by Mr. Bronson individually and jointly with his spouse, (ii) 993,658 shares of common stock held by BKF Asset Holdings, Inc. and (iii) 206,000 shares of common stock held separately by Mr. Bronson’s spouse.
(2) Consists of (i) 7,385 shares of common stock held Ms. Hou jointly with her spouse and (ii) 4,750 shares of common stock held Ms. Hou’s minor child.
(3) BKF Asset Holdings, Inc. is a wholly-owned subsidiary of BKF Capital Group, Inc. Steven N. Bronson, Chairman, Chief Executive Officer and majority stockholder of BKF Capital Group, Inc., has voting and dispositive power with respect to these securities.
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Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes certain information about our equity compensation plans as of December 31, 2022.
Number of
Securities
Remaining
Number of
Available for
Securities to
Weighted
Future Issuance
be Issued Upon
Average
Under Equity
Exercise
Exercise Price
Compensation
of Outstanding
of Outstanding
Plans (Excluding
Options,
Options,
Securities
Warrants and
Warrants and
Reflected in
Rights
Rights
Column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders (1)
—
—
1,538,543
Equity compensation plans not approved by security holders
—
—
—
Total
—
—
1,538,543
(1) Consists of our 2016 Omnibus Incentive Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
We describe below transactions, and series of related transactions, since January 1, 2021 to which we were or will be a party, in which:
● the amounts involved exceeded or will exceed $120,000 or 1% of our average total assets at December 31, 2022 and 2021; and
● any of our directors, executive officers, or beneficial holders of more than 5% of any class of our capital stock, or their immediate family members, had or will have a direct or indirect material interest.
Other than as described below, there has not been, nor is there any currently proposed, transaction or series of related transactions to which we have been or will be a party other than compensation arrangements for our directors and executive officers, which are described in this Form 10-K under Part III, Item 11, “Executive Compensation.”
Cost Sharing Arrangements
Steven N. Bronson, our Chairman of the Board, President, and Chief Executive Officer, and Ryan J. Hoffman, our Chief Financial Officer, simultaneously serve as officers and, in the case of Mr. Bronson, as a director, of Qualstar Corporation and BKF Capital Group, Inc. Mr. Bronson serves as President and Chief Executive Officer and as a Director of Qualstar and as the Chairman of the Board and Chief Executive Officer of BKF Capital. Mr. Hoffman serves as Chief Financial Officer of each of Qualstar and BKF Capital.
We have entered into the following cost sharing arrangements with Qualstar and BKF Capital:
Irvine, California Facility: We have facilities agreements with both Qualstar and BKF Capital to allow each the use of a portion of the office leased by us in Irvine, California, and 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. For the years ended December 31, 2022 and 2021, we billed Qualstar $54 thousand and $54 thousand, respectively, for Qualstar’s use of our Irvine office facility. For the years ended December 31, 2022 and 2021, we billed BKF Capital $6 thousand and $3 thousand, respectively, for BKF Capital’s use of our Irvine office facility.
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Camarillo, California Facility: We have a facilities agreement with Qualstar to allow us to use a portion of the office and warehouse facility leased by Qualstar in Camarillo, California, and 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. For the years ended December 31, 2022 and 2021, we incurred $73 thousand and $72 thousand, respectively, for our use of Qualstar’s Camarillo facility.
Los Angeles, California Facility: Commencing in March 2022, we have a facilities agreement with Qualstar to allow it the use of a portion of the office leased by us in Los Angeles, California, and 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. For the year ended December 31, 2022, we billed Qualstar $8 thousand for Qualstar’s use of our Los Angeles office facility.
Consulting Agreements: We have entered into various consulting agreements with Qualstar and BKF Capital. Pursuant to the consulting agreements, certain of the parties’ respective employees and independent contractors provide operational, sales, marketing, general and administrative services to the other entity. Interlink provided such consulting services to Qualstar in the amounts of $646 thousand and $756 thousand for the years ended December 31, 2022 and 2021, respectively. Interlink provided such consulting services to BKF Capital in the amounts of $73 thousand and $65 thousand for the years ended December 31, 2022 and 2021, respectively. Qualstar provided such consulting services to Interlink in the amounts of $12 thousand and $14 thousand for the years ended December 31, 2022 and 2021, respectively. BKF Capital provided such consulting services to Interlink in the amounts of $26 thousand and $0 thousand for the years ended December 31, 2022 and 2021, respectively.
M&A Advisory Consulting Agreement: Effective July 2021, we entered into a M&A advisory consulting services agreement with Bronson Financial LLC, a wholly owned subsidiary of BKF Capital, in which Bronson Financial LLC provides mergers and acquisitions advisory consulting services to Interlink for $10 thousand per month. For the years ended December 31, 2022 and 2021, we incurred $120 thousand and $60 thousand for services rendered under this agreement.
Expense Reimbursements: Additionally, the parties occasionally pay expenses on behalf of one another, for which each party reimburses the other party correspondingly. We incurred reimbursable expenses on behalf of Qualstar in the amounts of $90 thousand and $82 thousand for the years ended December 31, 2022 and 2021, respectively. We incurred reimbursable expenses on behalf of BKF Capital in the amounts of $23 thousand and $13 thousand for the years ended December 31, 2022 and 2021, respectively. Qualstar incurred reimbursable expenses on behalf of us in the amounts of $11 thousand and $16 thousand for the years ended December 31, 2022 and 2021, respectively.
Indemnification Agreements
Pursuant to our bylaws, we will indemnify our directors and executive officers to the fullest extent permitted by Nevada law, without limitation as to amount or duration, in the event of any actual or threatened lawsuit or proceeding.
Policies and Procedures for Related Party Transactions
Our audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 or 1% of our average total assets at December 31, 2022 and 2021 and in which a related person has or will have a direct or indirect material interest. Our policy regarding transactions between us and related persons provides that a related person is defined as a director, executive officer, nominee for director or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and any of their immediate family members. Our audit committee charter provides that our audit committee shall review and approve or disapprove any related party transactions.
Director Independence
Our common stock is listed on the Nasdaq Capital Market. Under the rules of The Nasdaq Stock Market, LLC, or Nasdaq, independent directors must comprise a majority of a listed company’s board of directors. In addition, the Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
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Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise or interfere with such director’s ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors has determined that Ms. Fregosi, Ms. Hou, and Mr. Wolenski are “independent directors” as defined under applicable Nasdaq rules and regulations. Because Mr. Bronson is employed by Interlink, he does not qualify as independent.
In addition, our board of directors has established an audit committee, a compensation committee and a nominating and governance committee. Ms. Fregosi, Ms. Hou, and Mr. Wolenski, each of whom is a non-employee member of our board of directors, serve on these board committees. Our board of directors has determined that each of Ms. Fregosi, Ms. Hou, and Mr. Wolenski satisfies the requirements for independence and, in the case of the audit committee, financial literacy for service on the audit committee, compensation committee and nominating and governance committee under applicable Nasdaq rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services
Consistent with requirements of the SEC and the Public Company Accounting Oversight Board, or PCAOB, regarding auditor independence, our audit committee is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our audit committee has a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.
Before the establishment of our audit committee in July 2020, the duties and responsibilities of the audit committee were performed by our full board of directors.
Before engagement of the independent registered public accounting firm for the next fiscal year’s audit, the independent registered public accounting firm submits a detailed description of services expected to be rendered during that year for each of the following categories of services to the audit committee for approval:
● Audit services. Audit services include the annual financial statement audit (including required quarterly reviews) and other procedures required to be performed by the independent auditor to form an opinion on our consolidated financial statements. Audit services also include, as necessary, the attestation engagement for the independent auditor’s report on management’s report on internal controls for financial reporting. Other audit services may include services associated with SEC registration statements, periodic reports and other documents filed with the SEC.
● Audit-related services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the independent auditor.
● Tax Services. Tax services include services related to tax compliance, tax planning and tax advice.
● All Other Services. All other services are those services not described in the other categories that are not prohibited by SEC rules.
The audit committee pre-approves particular services or categories of services on a case-by-case basis. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the services must be pre-approved by the audit committee, or as permitted, the audit committee chair, before the independent registered public accounting firm is engaged. Pre-approval fee levels or budgeted amounts for all services to be provided by the independent registered public accounting firm are established annually by the audit committee. Any proposed services exceeding these levels or amounts require specific pre-approval by the audit committee, or the audit committee chair. All fees paid to LMHS, P.C. (the Company’s current independent registered public accounting firm) and Macias Gini & O’Connell LLP (the Company’s former independent registered public accounting firm) for the fiscal years ended December 31, 2022 and 2021 were pre-approved by the audit committee.
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Fees Paid to Independent Registered Public Accounting Firm
On January 10, 2023, we engaged LMHS, P.C. as our independent registered public accounting firm for our fiscal year ended December 31, 2022, and we dismissed Macias Gini & O’Connell LLP as our independent registered public accounting firm. Macias Gini & O’Connell LLP conducted the audit of our financial statements for the fiscal year ended December 31, 2021.
The following table presents fees billed to us by LMHS, P.C. for professional services rendered during the fiscal year ended December 31, 2022. LMHS, P.C. did not provide professional services to us during 2021.
2022
Audit Fees (1)
$
140,000
Audit-Related Fees (2)
—
Tax Fees (3)
—
All Other Fees (4)
—
Total Fees
$
140,000
The following table presents fees billed to us by Macias Gini & O’Connell LLP for professional services for the fiscal years ended December 31, 2022 and 2021.
2022
2021
Audit Fees (1)
$
111,000
$
130,000
Audit-Related Fees (2)
—
—
Tax Fees (3)
—
—
All Other Fees (4)
—
—
Total Fees
$
111,000
$
130,000
(1) “Audit Fees” consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, review of our quarterly financial statements presented in our quarterly reports on Form 10-Q, and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the fiscal year.
(2) “Audit-Related Fees” consist of fees incurred for professional services that are reasonably related to the performance of the audit or review of the company’s financial statements.
(3) “Tax Fees” consist of fees incurred for professional services rendered in connection with tax audits, tax compliance, and tax consulting and planning.
(4) “All Other Fees” relate to professional services not included in the categories above, including services related to other regulatory reporting requirements.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
Our consolidated financial statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included in our consolidated financial statements and related notes.
3. Exhibits
The following exhibits are filed as part of this Annual Report on Form 10-K.
Exhibit
Incorporated by Reference
Filed
Number
Exhibit Description
Form
File Number
Exhibit
Filing Date
Herewith
3.1
Articles of Incorporation of the Registrant
10
000-21858
3.1
February 17, 2016
3.2
Certificate of Designations of Series A Preferred Stock
8-K
001-37659
3.1
October 25, 2021
3.3
Bylaws of the Registrant
10
000-21858
3.2
February 17, 2016
3.4
Amendment to Bylaws of the Registrant
10
000-21858
3.3
February 17, 2016
4.1
Form of the Registrant’s common stock certificate
10
000-21858
4.1
February 17, 2016
10.1*
Form of Indemnification Agreement between the Registrant and each of its directors and officers
10
000-21858
10.1
February 17, 2016
10.2*
Employment Agreement, dated July 7, 2016, between the Registrant and Steven N. Bronson
8-K
001-37659
10.1
July 11, 2016
10.3*
Interlink Electronics, Inc. 2016 Omnibus Incentive Plan
8-K
001-37659
10.1
June 22, 2016
10.4
Sublease, dated June 8, 2020, by and between Overland, Pacific & Cutler, LLC and Interlink Electronics, Inc.
10-12G
000-21858
10.6
August 4, 2020
10.5*
Employment Offer Letter, dated November 4, 2020, between the Registrant and Ryan J. Hoffman
8-K
000-21858
10.1
November 17, 2020
21.1
List of Subsidiaries
X
23.1
Consent of Macias Gini & O’Connell LLP
X
23.2
Consent of RBSM LLP
X
24.1
Power of Attorney (included on signature page)
X
31.1
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
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31.2
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1#
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.INS
XBRL Instance Document
X
101.SCH
XBRL Taxonomy Extension Schema Document
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
X
*
Each a management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on Form 10-K.
#
The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Interlink Electronics, Inc. under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2023
Interlink Electronics, Inc.
By:
/s/ RYAN J. HOFFMAN
RYAN J. HOFFMAN
Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven N. Bronson and Ryan J. Hoffman, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution for him, and in his name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Steven N. Bronson
Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer)
March 29, 2023
Steven N. Bronson
/s/ Ryan J. Hoffman
Chief Financial Officer and Secretary
( Principal Financial and Accounting Officer )
March 29, 2023
Ryan J. Hoffman
/s/ Maria N. Fregosi
Director
March 29, 2023
Maria N. Fregosi
/s/ Joy C. Hou
Director
March 29, 2023
Joy C. Hou
/s/ David J. Wolenski
Director
March 29, 2023
David J. Wolenski
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