What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 156 added, 72 removed, 441 unchanged (34% of the section changed)

26 unchanged sentences

Preferred stock, $ 0.01 par value:

1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding at both March 31, 2023 and December 31, 2022 ($ 5.0 million liquidation preference)

1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding at both June 30, 2023 and December 31, 2022 ($ 5.0 million liquidation preference)

Common stock, $ 0.001 par value:

30,000 shares authorized, 6,610 shares issued and outstanding at both March 31, 2023 and December 31, 2022

30,000 shares authorized, 6,591 shares issued and outstanding at June 30, 2023;

6,610 shares issued and outstanding at December 31, 2022

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share data)

7 unchanged sentences

Other income (expense), net

Income (loss) before income taxes

Income before income taxes

Income tax expense

Net income (loss)

Net income (loss) applicable to common stockholders

1 unchanged sentence

Weighted average common shares outstanding – basic and diluted

See accompanying notes to these unaudited condensed consolidated financial statements.

INTERLINK ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Net income (loss)

Other comprehensive income (loss), net of tax:

7 unchanged sentences

Stockholders’

Three months ended March 31, 2023

Three Months Ended June 30, 2023

Income (Loss)

(in thousands)

Balance at March 31, 2023

Preferred stock dividends

Foreign currency translation adjustment

Repurchases of common stock

Balance at June 30, 2023

Preferred Stock

Comprehensive

Stockholders’

Six Months Ended June 30, 2023

Income (Loss)

(in thousands)

Balance at December 31, 2022

1 unchanged sentence

Foreign currency translation adjustment

Repurchases of common stock

Balance at June 30, 2023

Preferred Stock

Comprehensive

Stockholders’

Three Months Ended June 30, 2022

Income (Loss)

(in thousands)

Balance at March 31, 2022

Preferred stock dividends

Foreign currency translation adjustment

Balance at June 30, 2022

Preferred Stock

1 unchanged sentence

Stockholders’

Three months ended March 31, 2022

Six Months Ended June 30, 2022

Income (Loss)

3 unchanged sentences

Foreign currency translation adjustment

Balance at March 31, 2022

Balance at June 30, 2022

See accompanying notes to these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

Six Months Ended June 30,

(in thousands)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) operating activities:

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

Depreciation and amortization

Unrealized (gains) on marketable securities

Unrealized and realized (gains) on marketable securities

Adjustment to reconcile operating lease expense to cash paid

5 unchanged sentences

Accrued income taxes

Net cash (used in) operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

5 unchanged sentences

Payment of dividends on preferred stock

Repurchases of common stock

Net cash used in financing activities

Effect of exchange rate changes on cash

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Reconciliation of cash, cash equivalents and restricted cash, end of period:

Cash and cash equivalents, end of period

Restricted cash, end of period

Cash, cash equivalents and restricted cash, end of period

Supplemental disclosure of cash flow information:

Income taxes paid, net

Income taxes paid

Interest paid

Supplemental disclosure of non-cash investing and financing activities:

Lease liabilities arising from obtaining right-of-use assets

See accompanying notes to these unaudited condensed consolidated financial statements.

19 unchanged sentences

We also maintain a technical and sales office in Japan.

Our principal executive office is located at 1 Jenner, Suite 200, Irvine, California 92618 and our telephone number is (805) 484-8855.

Our principal executive office is located at 15707 Rockfield Boulevard, Suite 105, Irvine, California 92618 and our telephone number is (805) 484-8855.

Our website address is www.interlinkelectronics.com.

54 unchanged sentences

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

As of March 31, 2023, there were no stock-based compensation awards outstanding.

As of June 30, 2023, there were no stock-based compensation awards outstanding.

Other Income (Expense)

Other income (expense) consists of interest income, foreign currency exchange gains and losses, gains and losses on marketable securities, and other non-operating gains and losses.

Other income (expense), net, consists of interest income, foreign currency exchange gains and losses, gains and losses on marketable securities, and other non-operating income and expenses.

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.

29 unchanged sentences

In calculating the right of use and lease liability, we have elected to combine lease and non-lease components.

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

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

Risk and Uncertainties

10 unchanged sentences

and our ability to raise additional capital.

Our operations may be adversely affected by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the COVID-19 coronavirus and its potential impact on our financial results) in countries in which our products are manufactured and sold.

Our operations and financial results may be adversely affected by outbreaks of viruses, widespread illness, infectious diseases, contagions and unforeseen epidemics (such as the COVID-19 coronavirus) in countries in which our products are manufactured and sold.

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, and to a lesser extent in fiscal 2022 and so far in fiscal 2023.

11 unchanged sentences

Subsequent Events

We have evaluated subsequent events through May 11, 2023, being the date these condensed consolidated financial statements were issued.

We have evaluated subsequent events through August 10, 2023, being the date these condensed consolidated financial statements were issued.

Note 2 – Details of Certain Financial Statement Components

12 unchanged sentences

Total property, plant and equipment, net

Depreciation expense totaled $ 37,000 and $ 52,000 for the three months ended March 31, 2023 and 2022, respectively.

Depreciation expense totaled $ 46,000 and $ 50,000 for the three months ended June 30, 2023 and 2022, respectively.

Depreciation expense totaled $ 83,000 and $ 102,000 for the six months ended June 30, 2023 and 2022, respectively.

Intangible assets, net consisted of the following:

1 unchanged sentence

(in thousands)

Patents and trademarks

Patents, tradenames, and trademarks

Developed technology

Customer relationships

Non-compete agreements

Order backlog

In-process research and development

accumulated amortization

Total intangible assets, net

Amortization expense totaled $ 12,000 and $ 15,000 for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense totaled $ 94,000 and $ 13,000 for the three months ended June 30, 2023 and 2022, respectively.

Amortization expense totaled $ 106,000 and $ 28,000 for the six months ended June 30, 2023 and 2022, respectively.

Future amortization expense on existing intangible assets is as follows:

5 unchanged sentences

(in thousands)

Accrued wages and benefits

Accrued compensation and benefits

Accrued vacation

6 unchanged sentences

The Asset Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants.

Under the terms of the Asset Purchase Agreement, the purchase price for both companies’ assets was $ 2,000,000 plus the amount by which the combined companies’ net working capital at closing was more than $ 1,350,000 ;

at closing, the purchase price was calculated as $ 2,269,000 , of which $ 1,519,000 was paid to SPEC/KWJ, and $ 750,000 was paid into escrow against purchase price adjustments and potential claims for breaches of representations and warranties by SPEC/KWJ or the equity holders.

Subsequent to the closing, the parties reached an agreement pursuant to which (i) the purchase price was reduced to $ 2,102,313 resulting from a $ 166,687 reduction in closing date net working capital, with such funds having being distributed to the Company from the escrow account in May 2023, and (ii) the remaining funds in the escrow account were released to SPEC/KWJ in May 2023 without prejudice to the Company’s rights in respect of breaches of representations, warranties or covenants.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands), giving effect to the post-closing purchase price adjustment.

We are in the process of identifying and measuring the fair value of certain property and equipment assets, intangible assets, and working capital balances, and accordingly the following measurements of these assets and goodwill are provisional and subject to change.

Under the terms of the Asset Purchase Agreement, the purchase price for both companies’ assets is $ 2,000,000 plus the amount by which the combined companies’ net working capital at closing is more than $ 1,350,000 .

At closing, the purchase price was preliminarily calculated as $ 2,269,000 , of which $ 1,519,000 was paid to SPEC/KWJ, and $ 750,000 was paid into escrow against purchase price adjustments and potential claims for breaches of representations and warranties by SPEC/KWJ or the equity holders.

Subsequent to the closing, the parties reached an agreement pursuant to which (i) the purchase price was reduced to $ 2,102,313 resulting from the determination that the closing date net working capital was $ 166,687 lower than was preliminarily calculated, with such funds having been distributed back to the Company from the escrow account in May 2023, and (ii) the remaining funds in the escrow account were released to SPEC/KWJ in May 2023 without prejudice to the Company’s rights in respect of breaches of representations, warranties or covenants.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, giving effect to the post-closing purchase price adjustment (in thousands).

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Accounts payable and accrued liabilities

Net identifiable assets acquired

Developed technology

Customer relationships

Tradenames and trademarks

In-process research and development

Non-compete agreements

Order backlog

Net assets acquired

After our December 31, 2022 and March 31, 2023 financial statements were issued, the valuation report for the acquired intangible assets was completed.

Based on the results of that valuation report, we have revised the preliminarily allocated $ 650,000 of goodwill to be allocated as follows:

$ 50,000 property and equipment, $ 134,000 developed technology, $ 96,000 customer relationships, $ 47,000 trademarks and tradenames, $ 29,000 in-process research and development, $ 26,000 non-compete agreements, $ 22,000 order backlog, and $ 246,000 goodwill.

In addition, the changes in these provisional amounts resulted in an increase in amortization expense and accumulated amortization of $ 82,000 recorded in the three months ended June 30, 2023, of which $ 12,000 relates to the three months ended December 31, 2022, and $ 37,000 relates to the three months ended March 31, 2023.

The fair value of accounts receivable is equal to the $ 306,000 gross contractual amount, as we expect the entire balance to be collectible.

The goodwill recognized is attributable primarily to expected synergies and the assembled workforces of SPEC/KWJ.

The goodwill is expected to be deductible for income tax purposes.

The fair value of accounts receivable is equal to the $ 306,000 gross contractual amount, as we expect the entire balance to be collectible.

Acquisition of Calman Technology Limited

1 unchanged sentence

The Share Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants on the part of the sellers, who continue to be employed by Calman.

Under the terms of the Share Purchase Agreement, the purchase price is GB£ 4,127,000 (approximately $ 4,912,000 ), of which GB£ 3,627,000 (approximately $ 4,317,000 ) was paid at closing and the balance is being held back for up to nine months against potential claims for breaches of representations and warranties (subject to certain deductibles and caps).

The purchase price is subject to adjustment based on the extent if any to which Calman’s net working capital is more or less than GB£ 600,000 (approximately $ 714,000 ), which is expected to result in additional consideration of approximately GB£ 1,297,000 (approximately $ 1,544,000 ).

Under the terms of the Share Purchase Agreement, the purchase price is GB£ 4,127,000 (approximately $ 4,912,000 ), of which GB£ 3,627,000 (approximately $ 4,317,000 ) was paid at closing and the remaining GB£ 500,000 (approximately $ 595,000 ) is being held back for up to nine months against potential claims for breaches of representations and warranties (subject to certain deductibles and caps).

The purchase price was subject to adjustment based on the extent, if any, to which Calman’s net working capital at closing was more or less than GB£ 600,000 (approximately $ 714,000 ), which resulted in additional purchase consideration of approximately GB£ 1,292,000 (approximately $ 1,538,000 ).

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands).

8 unchanged sentences

Net assets acquired

The fair value of accounts receivable is equal to the $ 656,000 gross contractual amount, as we expect the entire balance to be collectible.

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Calman.

The goodwill is not expected to be deductible for income tax purposes.

The fair value of accounts receivable is equal to the $ 663,000 gross contractual amount, as we expect the entire balance to be collectible.

The following represents the pro forma consolidated statement of operations as if both SPEC/KWJ and Calman had been included in our consolidated results for the periods ended March 31, 2023 and 2022 (unaudited):

Three Months Ended March 31,

The following represents the pro forma consolidated statement of operations as if both SPEC/KWJ and Calman had been included in our consolidated results for the periods ended June 30, 2023 and 2022 (unaudited):

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Net income (loss)

Note 4 – Marketable Securities

Our marketable securities consist of equity securities classified as available-for-sale (“AFS”).

AFS securities are carried at fair value on the condensed consolidated balance sheets.

Realized and unrealized gains and losses are reported in earnings within “other income (expense), net”.

The specific identification method is used to determine realized gains and losses on AFS securities.

During the three months ended June 30, 2023 and 2022, we purchased $ 0 and $ 3.8 million of marketable securities, respectively, and we sold $ 0 of marketable equity securities in each period.

During the six months ended June 30, 2023 and 2022, we purchased $ 0 and $ 6.0 million of marketable securities, respectively, and we sold $ 0 of marketable equity securities in each period.

During the three months ended June 30, 2023 and 2022, gross realized and unrealized gains were $ 0 and $ 318,000 , respectively, and gross realized and unrealized losses were $ 0 in each period.

During the six months ended June 30, 2023 and 2022, gross realized and unrealized gains were $ 0 and $ 225,000 , respectively, and gross realized and unrealized losses were $ 0 in each period.

As of June 30, 2023, we had no marketable equity securities.

Note 5 – Earnings Per Share

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per share data)

Net income (loss)

Preferred stock dividends

6 unchanged sentences

Shares subject to anti-dilutive Series A Convertible Preferred Stock excluded from calculation

Note 6 – Stockholders’ Equity

Stock Repurchase Transaction

In May 2023, the Company’s board of directors approved the Company’s repurchase of 5,500 shares of common stock that were previously issued and sold in a private transaction to an individual in December 2022.

The Company repurchased the shares for $ 50,050 ($ 9.10 per share), which is the same price at which the Company issued and sold the shares in December 2022.

Stock Repurchase Program

In May 2023, the Company’s board of directors approved a Stock Repurchase Program to repurchase up to 100,000 shares of the Company’s common stock.

During the three months ended June 30, 2023, the Company repurchased 13,903 shares for an aggregate purchase price of approximately $ 127,000 .

Note 7 – Significant Customers, Concentrations of Credit Risk, and Geographic Information

1 unchanged sentence

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

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

* Less than 10% of total net revenues

Net revenues by geographic area are as follows:

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

United States

3 unchanged sentences

The geographic location of distributors and third-party manufacturing service providers may be different from the geographic location of the purchasers and/or ultimate end users.

We provide credit only to creditworthy third parties who are subject to our credit verification procedures.

We provide credit only to creditworthy customers who are subject to our credit verification procedures.

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

At March 31, 2023, two customers accounted for 45 % and 17 % of total accounts receivable.

At June 30, 2023, two customers accounted for 29 % and 18 % of total accounts receivable.

At December 31, 2022, two customers accounted for 20 % and 13 % of total accounts receivable.

Our allowance for doubtful accounts was $ 0 at both March 31, 2023 and December 31, 2022.

Our allowance for doubtful accounts was $ 0 at both June 30, 2023 and December 31, 2022.

Our long-lived assets were geographically located as follows:

14 unchanged sentences

Transactions with Qualstar and its subsidiaries are as follows:

Three months ended March 31,

Three Months Ended June 30,

(in thousands)

Balance at April 1,

Billed (or accrued) to Qualstar by Interlink

Paid by Qualstar to Interlink

Billed (or accrued) to Interlink by Qualstar

Paid by Interlink to Qualstar

Balance at June 30,

Six Months Ended June 30,

(in thousands)

Balance at January 1,

3 unchanged sentences

Paid by Interlink to Qualstar

Balance at March 31,

Balance at June 30,

BKF Capital Group (OTCMKTS:BKFG)

9 unchanged sentences

Transactions with BKF Capital and its subsidiaries are as follows:

Three months ended March 31,

Three Months Ended June 30,

(in thousands)

Balance at April 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 June 30,

Six Months Ended June 30,

(in thousands)

Balance at January 1,

3 unchanged sentences

Paid by Interlink to BKF Capital

Balance at March 31,

Balance at June 30,

Note 9 – Income Taxes

Income taxes as a percentage of pre-tax income was an expense of 75.2 % for the three months ended March 31, 2023 versus expense of 17.9 % for the comparable period in the prior year.

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

The effective tax rate for the three months ended March 31, 2023 was impacted by having incurred tax expense on our foreign pre-tax income while not realizing a benefit on our domestic pre-tax loss due to the valuation allowance on our domestic NOLs.

Our income tax expense is impacted by the mix of our domestic and foreign pre-tax earnings and losses.

Our effective income tax rates are generally higher than the blended statutory tax rates of the jurisdictions in which we operate due to having incurred income tax expense on taxable income in certain jurisdictions, while not being able to benefit from losses in other jurisdictions for which our net operating loss carryovers (“NOLs”) are subject to valuation allowance.

Income tax expense as a percentage of income/loss before income taxes was 18.9 % for the three months ended June 30, 2023 versus 41.4 % for the comparable quarter in the prior year.

Income tax expense as a percentage of income before income taxes was 47.4 % for the six months ended June 30, 2023 versus 30.2 % for the first half of the prior year.

We experienced an ownership change under IRC Section 382 in 2010.

2 unchanged sentences

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

As of March 31, 2023, all of the remaining federal and state NOLs are subject to annual limitations due to the 2010 ownership change.

As of June 30, 2023, all of the remaining federal and state NOLs are subject to annual limitations due to the 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.

We analyzed our need to record a valuation allowance against our otherwise recognizable net deferred tax assets in the federal, state and foreign jurisdictions, and we determined that a valuation allowance on federal and state deferred tax assets was necessary at both March 31, 2023 and December 31, 2022, while no valuation allowance on foreign deferred tax assets was necessary at both March 31, 2023 and December 31, 2022.

We analyzed our need to record a valuation allowance against our otherwise recognizable net deferred tax assets in the federal, state and foreign jurisdictions, and we determined that a valuation allowance on federal and state deferred tax assets was necessary at both June 30, 2023 and December 31, 2022, while no valuation allowance on foreign deferred tax assets was necessary at both June 30, 2023 and December 31, 2022.

The amount of deferred tax assets considered realizable could be adjusted in future periods if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future profitability.

1 unchanged sentence

We have elected to account for GILTI as a period cost if and when occurred, rather than recognizing deferred taxes for basis differences expected to reverse.

Of the $ 6.7 million of cash balances on hand at March 31, 2023, $ 2.7 million was held by our foreign subsidiaries.

Of the $ 5.1 million of our cash balance at June 30, 2023, $ 1.3 million was held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S., we have several methods to repatriate the funds without significant tax effects, including repayment of intercompany loans or distributions of previously taxed income.

1 unchanged sentence

or foreign taxes to repatriate these funds.

However, our intent is to permanently reinvest these funds outside the U.S.

and our current plans do not demonstrate a need to repatriate cash to fund our U.S.

Note 10 – Commitments and Contingencies

4 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.

No new right-of-use (“ROU”) assets were capitalized during the three months ended March 31, 2023 or 2022.

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, 2023 was 5.5 %, and during the six months ended June 30, 2022 was 7.0 %.

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 March 31, 2023, we have not recognized any impairment losses for our ROU assets.

As of June 30, 2023, 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, we entered into a sublease agreement to lease 4,351 square feet of office space located in Irvine, California for approximately $ 6,000 per month with 3 percent annual increases, plus common area maintenance costs.

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

The space is used for executive offices, sales, finance and administration.

In June 2020, we entered into a sublease agreement to lease 4,351 square feet of office space in Irvine, California for approximately $ 6,000 per month with 3 percent annual increases, plus common area maintenance costs.

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

In June 2023, we entered into a lease agreement to lease 1,560 square feet of office space in Irvine, California for approximately $ 4,000 per month for a term commencing June 1, 2023 and ending May 31, 2024.

Our Irvine, California office is used for executive offices, sales, finance and administration.

We lease a 14,476 square-foot manufacturing facility and administrative office in Shenzhen, China.

11 unchanged sentences

We sublease on a month-to-month basis approximately 1,000 square-feet of office space in Los Angeles, California for approximately $ 1,000 per month.

As of March 31, 2023, we had current and long-term lease liabilities of $ 144,000 and $ 83,000 , respectively, and right-of-use assets of $ 224,000 .

As of June 30, 2023, we had current and long-term lease liabilities of $ 157,000 and $ 77,000 , respectively, and right-of-use assets of $ 225,000 .

As of December 31, 2022, we had current and long-term lease liabilities of $ 131,000 and $ 46,000 , respectively, and right of use assets of $ 172,000 .

Future imputed interest as of March 31, 2023 totaled $ 15,000 .

The weighted average remaining lease term of our leases as of March 31, 2023 is 1.2 years.

Future imputed interest as of June 30, 2023 totaled $ 14,000 .

The weighted average remaining lease term of our leases as of June 30, 2023 is 1.1 years.

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 March 31, 2023, we incurred approximately $ 119,000 in operating lease costs.

Operating lease costs of $ 41,000 are included in cost of revenue, and $ 78,000 are included in operating expenses in our condensed consolidated statements of operations for the three months ended March 31, 2023.

During the three months ended March 31, 2022, we incurred approximately $ 61,000 in operating lease costs.

Operating lease costs of $ 32,000 are included in cost of revenue, and $ 29,000 are included in operating expenses in our condensed consolidated statements of operations for the three months ended March 31, 2022.

We are not party to any legal proceedings as of March 31, 2023.

During the three months ended June 30, 2023, we incurred approximately $ 129,000 in operating lease costs, of which $ 52,000 is included in cost of revenue and $ 77,000 is included in operating expenses in our condensed consolidated statements of operations.

During the three months ended June 30, 2022, we incurred approximately $ 61,000 in operating lease costs, of which $ 30,000 is included in cost of revenue and $ 31,000 is included in operating expenses in our condensed consolidated statements of operations.

During the six months ended June 30, 2023, we incurred approximately $ 250,000 in operating lease costs, of which $ 96,000 is included in cost of revenue and $ 154,000 is included in operating expenses in our condensed consolidated statements of operations.

During the six months ended June 30, 2022, we incurred approximately $ 122,000 in operating lease costs, of which $ 62,000 is included in cost of revenue and $ 60,000 is included in operating expenses in our condensed consolidated statements of operations.

We are not party to any legal proceedings as of June 30, 2023.

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.

2 unchanged sentences

We generally warrant our products against defects for one year from date of shipment, with certain exceptions in which the warranty period can extend to more than one year based on contractual agreements.

Our warranty reserves are established at the time of sale and updated throughout the warranty period based upon numerous factors including historical warranty return rates and expenses over various warranty periods.

Our warranty reserves are established at the time of sale and are updated throughout the warranty period based upon numerous factors including historical warranty return rates and claim costs over various warranty periods.

Historically, our warranty returns have not been material.

35 unchanged sentences

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