What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 143 added, 66 removed, 455 unchanged (31% of the section changed)

27 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, 2024 and December 31, 2023 ( $ 5.0 million liquidation preference)

1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding at both June 30, 2024 and December 31, 2023 ( $ 5.0 million liquidation preference)

Common stock, $ 0.001 par value:

30,000 shares authorized, 9,860 shares issued and outstanding at both March 31, 2024 and December 31, 2023

30,000 shares authorized, 9,860 shares issued and outstanding at both June 30, 2024 and December 31, 2023

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)

4 unchanged sentences

Total operating expenses

Loss from operations

Other income (expense):

Income (loss) from operations

Other income (expense), net

Loss before income taxes

Income (loss) before income taxes

Income tax expense

Net loss applicable to common stockholders

Net income (loss)

Net income (loss) applicable to common stockholders

Earnings (loss) per common share – basic and diluted

3 unchanged sentences

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:

Foreign currency translation adjustments

Comprehensive loss

Comprehensive income (loss)

See accompanying notes to these unaudited condensed consolidated financial statements.

4 unchanged sentences

Stockholders’

Three months ended March 31, 2024

Three months ended June 30, 2024

Income (Loss)

(in thousands)

Balance at March 31, 2024

Stock-based compensation expense

Preferred stock dividends

Foreign currency translation adjustment

Balance at June 30, 2024

Preferred Stock

Comprehensive

Stockholders’

Six months ended June 30, 2024

Income (Loss)

(in thousands)

Balance at December 31, 2023

Stock-based compensation expense

Preferred stock dividends

Foreign currency translation adjustment

Balance at June 30, 2024

Preferred Stock

Comprehensive

Stockholders’

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

1 unchanged sentence

Stockholders’

Three months ended March 31, 2023

Six months ended June 30, 2023

Income (Loss)

3 unchanged sentences

Foreign currency translation adjustment

Balance at March 31, 2023

Repurchases of common stock

Balance at June 30, 2023

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:

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

Net income (loss)

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

Depreciation and amortization

Stock-based compensation expense

Adjustment to reconcile operating lease expense to cash paid

6 unchanged sentences

Accrued income taxes

Net cash provided by (used in) operating activities

Net cash (used in) operating activities

Cash flows from investing activities:

4 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 increase (decrease) in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

3 unchanged sentences

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.

60 unchanged sentences

Shipping and Handling Fees and Costs

Amounts billed to customers for shipping and handling fees are presented in revenues.

Amounts billed to customers for shipping and handling fees are included in revenues.

Costs incurred for shipping and handling are included in cost of revenues.

7 unchanged sentences

All stock-based payments to employees, including grants of employee stock options and employee stock purchase rights, are recognized in the financial statements based on their respective grant date (measurement date) fair values.

We calculate the compensation cost of full-value awards, such as restricted stock, based on the market value of the underlying stock at the date of the grant.

We calculate the compensation cost of full-value awards, such as restricted stock units, based on the market value of the underlying stock at the date of the grant.

We estimate the expected life of a stock award as the period of time that the award is expected to be outstanding.

7 unchanged sentences

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

As of March 31, 2024, there were no stock-based compensation awards outstanding.

Other Income (Expense)

10 unchanged sentences

Foreign Currency Translation

The functional currency of our Chinese subsidiary is the Chinese Yuan Renminbi.

The functional currency of our Chinese subsidiary is the Chinese renminbi.

The functional currency of our United Kingdom subsidiaries is the British pound sterling.

46 unchanged sentences

Subsequent Events

We have evaluated subsequent events through May 9, 2024, being the date these condensed consolidated financial statements were issued.

We have evaluated subsequent events through August 8, 2024, 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 $ 40,000 and $ 37,000 for the three months ended March 31, 2024 and 2023, respectively.

Depreciation expense totaled $ 37,000 and $ 46,000 for the three months ended June 30, 2024 and 2023, respectively.

Depreciation expense totaled $ 77,000 and $ 83,000 for the six months ended June 30, 2024 and 2023, respectively.

Intangible assets, net, consisted of the following:

9 unchanged sentences

Total intangible assets, net

Amortization expense totaled $ 189,000 and $ 12,000 for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense totaled $ 189,000 and $ 94,000 for the three months ended June 30, 2024 and 2023, respectively.

Amortization expense totaled $ 378,000 and $ 106,000 for the six months ended June 30, 2024 and 2023, respectively.

Future amortization expense on existing intangible assets is as follows:

2 unchanged sentences

2024 (remainder of year)

The changes in the carrying amount of goodwill for the periods ended March 31, 2024 and 2023 are as follows:

The changes in the carrying amount of goodwill for the periods ended June 30, 2024 and 2023 are as follows:

(in thousands)

1 unchanged sentence

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of March 31, 2024

Balance as of June 30, 2024

(in thousands)

2 unchanged sentences

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of March 31, 2023

Balance as of June 30, 2023

Accrued liabilities consisted of the following:

25 unchanged sentences

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

The following represents the pro forma consolidated statement of operations as if Calman had been included in our consolidated results for the full quarters ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following represents the pro forma consolidated statement of operations as if Calman had been included in our consolidated results for the full periods ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

7 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per share data)

Net income (loss)

Preferred stock dividends

Net loss applicable to common stockholders

Net income (loss) applicable to common stockholders

Weighted average common shares outstanding – basic

Dilutive potential common shares from convertible preferred stock

Dilutive potential common shares from convertible preferred stock and restricted stock units

Weighted average common shares outstanding – diluted

1 unchanged sentence

Earnings (loss) per common share, diluted

Anti-dilutive shares issuable upon conversion of Series A Convertible Preferred Stock excluded from calculation

200,000 shares of Series A Convertible Preferred Stock convertible into 600,000 shares of common stock were outstanding but were not included in the computation of diluted earnings (loss) per share because their effect would be anti-dilutive due to the net losses and due to the $ 8.33 conversion price being higher than the average market price of the common stock.

Shares issuable upon conversion of Series A Convertible Preferred Stock excluded from calculation because their effect would be anti-dilutive

Shares subject to restricted stock units excluded from calculation because their effect would be anti-dilutive

200,000 shares of Series A Convertible Preferred Stock convertible into 600,000 shares of common stock were outstanding but were not included in the computation of diluted earnings (loss) per share because their effect would be anti-dilutive due to the net losses and/or due to the $ 8.33 conversion price being higher than the average market price of the common stock.

31,250 restricted stock units (relating to the same number of shares of common stock) were outstanding for the periods in 2024 but were not included in the computation of diluted earnings (loss) per share for those periods because their effect would be anti-dilutive due to the net losses.

Note 5 – Stockholders’ Equity

Restricted Stock Units

In May 2024, the Compensation Committee of the Company’s Board of Directors approved the Company’s grant of 31,250 restricted stock units to certain employees under the Interlink Electronics, Inc.

2016 Omnibus Incentive Plan.

A summary of the status of the Company’s nonvested restricted stock units as of and for the year-to-date period ended June 30, 2024, is as follows:

Nonvested Restricted Stock Units

Nonvested at January 1, 2024

Nonvested at June 30, 2024

As of June 30, 2024, there was approximately $ 131,000 of total unrecognized compensation cost related to nonvested restricted stock units.

That cost is expected to be recognized over a weighted-average period of 4.6 years.

Stock Repurchase Transaction

In May 2023, the Company’s Board of Directors approved the Company’s repurchase of 8,250 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 ($ 6.07 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 and six months ended June 30, 2024, the Company did no t repurchase any shares.

During the three months ended June 30, 2023, the Company repurchased 20,854 shares for an aggregate purchase price of approximately $ 127,000 .

The Stock Repurchase Program expired in May 2024.

Note 6 – 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

5 unchanged sentences

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

At March 31, 2024, two customers accounted for 24 % and 19 % of total accounts receivable.

At June 30, 2024, two customers accounted for 27 % and 15 % of total accounts receivable.

At December 31, 2023, two customers accounted for 35 % and 16 % of total accounts receivable.

Our allowance for doubtful accounts was $ 0 at both March 31, 2024 and December 31, 2023.

Our allowance for doubtful accounts was $ 0 at both June 30, 2024 and December 31, 2023.

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,

BKF Capital Group (OTCMKTS:BKFG)

Balance at June 30,

BKF Capital Group, Inc.

(OTCMKTS:BKFG)

BKF Capital Group, Inc.

(OTCMKTS:BKFG) (“BKF Capital”) is a related party.

5 unchanged sentences

We entered into a M&A advisory consulting services agreement with Bronson Financial LLC (“BF”), a wholly owned subsidiary of BKF Capital, pursuant to which BF provides M&A advisory consulting services to us.

This agreement was terminated in April 2024.

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

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 8 – Income Taxes

Income tax expense as a percentage of pre-tax loss was 3.1 % for the three months ended March 31, 2024 versus 75.2 % 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”).

Accordingly, our effective tax rate can vary from the U.S.

Income tax expense as a percentage of pre-tax income/loss was 3.4 % for the three months ended June 30, 2024 versus 18.9 % for the same quarter in the prior year, and was 3.1 % for the six months ended June 30, 2024 versus 47.4 % for the first half of the prior year.

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

Accordingly, our effective tax rate typically will vary from the U.S.

statutory tax rate of 21 % from quarter to quarter.

The effective tax rates for each of the three-month periods ended March 31, 2024 and 2023 were impacted by the amount of our foreign pre-tax income and the tax expense thereon while not realizing a benefit on our domestic pre-tax loss due to the valuation allowance on our domestic NOLs.

The effective tax rates for each of the three- and six-month periods ended June 30, 2024 and 2023 were impacted by the amount of our foreign pre-tax income and the tax expense thereon while not realizing a benefit on our domestic pre-tax loss due to the valuation allowance on our domestic NOLs.

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, 2024, all of the remaining federal and state NOLs are subject to annual limitations due to the 2010 ownership change.

As of June 30, 2024, 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, 2024 and December 31, 2023, while no valuation allowance on foreign deferred tax assets was necessary at both March 31, 2024 and December 31, 2023.

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, 2024 and December 31, 2023, while no valuation allowance on foreign deferred tax assets was necessary at both June 30, 2024 and December 31, 2023.

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.

The Internal Revenue Code includes a provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a 10.5 % tax on certain income of controlled foreign corporations.

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 our $ 4.4 million of cash at March 31, 2024, $ 2.7 million was held by our foreign subsidiaries.

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

Of our $ 4.0 million of cash at June 30, 2024, $ 2.3 million was held by our foreign subsidiaries.

If these funds are needed for our operations in the U.S.

2 unchanged sentences

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 9 – Commitments and Contingencies

1 unchanged sentence

We lease facilities under non-cancellable operating leases.

Our current leases expire at various dates through fiscal 2025 and frequently include renewal provisions for varying periods of time, provisions which require us to pay taxes, insurance and maintenance costs, and provisions for minimum rent increases.

Our current leases expire at various dates through fiscal 2029 and frequently include renewal provisions for varying periods of time, provisions for taxes, insurance and maintenance costs, and provisions for minimum rent increases.

Minimum leases payments, including scheduled rent increases are recognized as rent expenses on a straight-line basis over the term of the lease.

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, 2024 or 2023.

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, 2024 was 9.5 %.

No new ROU assets were capitalized during the six months ended June 30, 2023.

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, 2024, we have not recognized any impairment losses for our ROU assets.

As of June 30, 2024, 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.

4 unchanged sentences

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

We previously occupied a different 4,351 square-foot office space in Irvine, California from June 2020 to May 2023 under a sublease agreement for approximately $ 6,000 per month, plus common area maintenance costs.

We previously occupied a 4,351 square-foot office space in Irvine, California from June 2020 to May 2023 under a sublease agreement for approximately $ 6,000 per month, plus common area maintenance costs.

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

In May 2024, we renewed this lease for the period June 2024 through May 2026 for approximately $ 8,000 per month.

In May 2024, we also leased an additional

7,287 square-foot manufacturing facility in Shenzhen, China for the same June 2024 through May 2026 period for approximately $ 3,000 per month.

We lease a 10,635 square-foot manufacturing facility and administrative offices in Newark, California.

In February 2024, we renewed this lease for the period March 2024 through February 2025 for approximately $ 19,000 per month.

In March 2024, we entered into a new lease for a 5,183 square - foot facility in Fremont, California for a five - year and three - month period commencing May 1, 2024 (subject to completion of tenant improvements) for $ 10,625 per month, escalating 3.5 % annually, plus a share of common area operating expenses.

In March 2024, we entered into a new lease for a 5,183 square-foot facility in Fremont, California for a five - year and three - month period commencing May 1, 2024 for $ 10,625 per month, escalating 3.5 % annually, plus a share of common area operating expenses.

We lease an approximately 9,800 square-foot manufacturing facility and administrative offices in Irvine, Scotland for approximately $ 5,000 per month.

1 unchanged sentence

We lease a 275 square-foot engineering and administrative office in Singapore for approximately $ 1,000 per month.

This lease term ends May 2024.

This lease term ends June 2025.

We lease a 3,000 square-foot logistics and distribution facility in Hong Kong for approximately $ 2,000 per month.

2 unchanged sentences

This lease term ends November 2024.

As of March 31, 2024, we had current and long-term lease liabilities of $ 112,000 and $ 2,000 , respectively, and right-of-use assets of $ 99,000 .

As of June 30, 2024, we had current and long-term lease liabilities of $ 259,000 and $ 592,000 , respectively, and right-of-use assets of $ 814,000 .

As of December 31, 2023, we had current and long-term lease liabilities of $ 126,000 and $ 33,000 , respectively, and right of use assets of $ 143,000 .

Future imputed interest as of March 31, 2024 totaled $ 4,000 .

The weighted average remaining lease term of our leases as of March 31, 2024 is 0.5 years.

Future imputed interest as of June 30, 2024 totaled $ 177,000 .

The weighted average remaining lease term of our leases as of June 30, 2024 is 1.9 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, 2024, we incurred approximately $ 124,000 in operating lease costs.

Operating lease costs of $ 67,000 are included in cost of revenue, and $ 57,000 are included in operating expenses in our condensed consolidated statements of operations for the three months ended March 31, 2024.

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.

We are not party to any legal proceedings as of March 31, 2024.

During the three months ended June 30, 2024, we incurred approximately $ 156,000 in operating lease costs, of which $ 86,000 are included in cost of revenue and $ 71,000 are included in operating expenses in our condensed consolidated statements of operations.

During the six months ended June 30, 2024, we incurred approximately $ 280,000 in operating lease costs, of which $ 155,000 are included in cost of revenue and $ 125,000 are included in operating expenses in our condensed consolidated statements of operations.

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 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.

We are not party to any legal proceedings as of June 30, 2024.

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.

40 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