What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 92 added, 79 removed, 519 unchanged (25% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value)

23 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 June 30, 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 September 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 June 30, 2024 and December 31, 2023

30,000 shares authorized, 9,864 shares issued and outstanding at September 30, 2024;

9,860 shares issued and outstanding at December 31, 2023

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

9 unchanged sentences

Net income (loss)

Net income (loss) applicable to common stockholders

Net (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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

9 unchanged sentences

Stockholders’

Three months ended June 30, 2024

Three Months Ended September 30, 2024

Income (Loss)

(in thousands)

Balance at March 31, 2024

Balance at June 30, 2024

Stock-based compensation expense

1 unchanged sentence

Foreign currency translation adjustment

Balance at June 30, 2024

Balance at September 30, 2024

Preferred Stock

1 unchanged sentence

Stockholders’

Six months ended June 30, 2024

Nine Months Ended September 30, 2024

Income (Loss)

4 unchanged sentences

Foreign currency translation adjustment

Balance at June 30, 2024

Balance at September 30, 2024

Preferred Stock

1 unchanged sentence

Stockholders’

Three months ended June 30, 2023

Three Months Ended September 30, 2023

Income (Loss)

(in thousands)

Balance at March 31, 2023

Balance at June 30, 2023

Preferred stock dividends

Foreign currency translation adjustment

Stock-based compensation expense

Repurchases of common stock

Balance at June 30, 2023

Balance at September 30, 2023

Preferred Stock

1 unchanged sentence

Stockholders’

Six months ended June 30, 2023

Nine Months Ended September 30, 2023

Income (Loss)

3 unchanged sentences

Foreign currency translation adjustment

Stock-based compensation expense

Repurchases of common stock

Balance at June 30, 2023

Balance at September 30, 2023

See accompanying notes to these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30,

Nine Months Ended September 30,

(in thousands)

1 unchanged sentence

Net income (loss)

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

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

Depreciation and amortization

8 unchanged sentences

Accrued income taxes

Net cash (used in) operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

54 unchanged sentences

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes to the consolidated financial statements.

Management regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, warranty reserves, inventory valuation reserves, stock-based compensation, purchased intangible asset valuations and useful lives, asset retirement obligations, and deferred income tax asset valuation allowances.

Management regularly evaluates estimates and assumptions related to revenue recognition, allowances for credit losses, warranty reserves, inventory valuation reserves, stock-based compensation, purchased intangible asset valuations and useful lives, asset retirement obligations, and deferred income tax asset valuation allowances.

These estimates and assumptions are based on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

18 unchanged sentences

A portion of our product sales is made through distributors under agreements allowing for right of return.

Our past history with these sell-through right of return provisions allow us to reasonably estimate the amount of inventory that could be returned pursuant to these agreements, and revenue is recognized accordingly.

Our past history with these sell-through right of return provisions allows us to reasonably estimate the amount of inventory that could be returned pursuant to these agreements, and revenue is recognized accordingly.

Shipping and Handling Fees and Costs

80 unchanged sentences

Subsequent Events

We have evaluated subsequent events through August 8, 2024, being the date these condensed consolidated financial statements were issued.

We have evaluated subsequent events through November 7, 2024, being the date these condensed consolidated financial statements were issued.

Note 2 – Details of Certain Financial Statement Components

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

September 30,

(in thousands)

4 unchanged sentences

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

September 30,

Property, plant and equipment, net

4 unchanged sentences

Total property, plant and equipment, net

Depreciation expense totaled $ 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.

Depreciation expense totaled $ 36,000 and $ 42,000 for the three months ended September 30, 2024 and 2023, respectively.

Depreciation expense totaled $ 112,000 and $ 125,000 for the nine months ended September 30, 2024 and 2023, respectively.

Intangible assets, net, consisted of the following:

September 30,

Intangible assets, net

8 unchanged sentences

Total intangible assets, net

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.

Amortization expense totaled $ 189,000 and $ 36,000 for the three months ended September 30, 2024 and 2023, respectively.

Amortization expense totaled $ 571,000 and $ 142,000 for the nine months ended September 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 June 30, 2024 and 2023 are as follows:

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

(in thousands)

1 unchanged sentence

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of June 30, 2024

Balance as of September 30, 2024

(in thousands)

1 unchanged sentence

Goodwill acquired in acquisition of Calman (before December 2023 adjustment to allocation)

Adjustment to goodwill, acquisition price allocation of SPEC/KWJ

Adjustment to goodwill, foreign currency exchange rate changes

Balance as of June 30, 2023

Balance as of September 30, 2023

Accrued liabilities consisted of the following:

September 30,

Accrued liabilities

24 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 periods ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Net income (loss)

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

1 unchanged sentence

Preferred stock dividends

Net income (loss) applicable to common stockholders

Net (loss) applicable to common stockholders

Weighted average common shares outstanding – basic

3 unchanged sentences

Earnings (loss) per common share, diluted

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

Shares issuable upon conversion of Series A Convertible Preferred Stock excluded from calculation because their conversion 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.

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 the effect of their conversion 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.

3 unchanged sentences

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:

A summary of the status of the Company’s nonvested restricted stock units as of and for the year-to-date period ended September 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.

Nonvested at September 30, 2024

As of September 30, 2024, there was approximately $ 124,000 of total unrecognized compensation cost related to nonvested restricted stock units.

That cost is expected to be recognized over a weighted-average period of 4.3 years.

4 unchanged sentences

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 .

During the three and nine months ended September 30, 2024, the Company did no t repurchase any shares.

During the three and nine months ended September 30, 2023, the Company repurchased 27,326 shares and 48,180 shares, respectively, for an aggregate purchase prices of approximately $ 173,000 and $ 300,000 , respectively.

The Stock Repurchase Program expired in May 2024.

2 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

* Less than 10% of total net revenues

Net revenues by geographic area are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

7 unchanged sentences

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

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

At September 30, 2024, two customers accounted for 17 % and 13 % 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 June 30, 2024 and December 31, 2023.

Our allowance for credit losses was $ 0 at both September 30, 2024 and December 31, 2023.

Our long-lived assets were geographically located as follows:

September 30,

(in thousands)

8 unchanged sentences

(OTCMKTS:BKFG) which he controls, has a controlling interest in both Interlink and Qualstar.

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

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

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

2 unchanged sentences

Transactions with Qualstar and its subsidiaries are as follows:

Three months ended June 30,

Three months ended September 30,

(in thousands)

Balance at April 1,

Balance at July 1,

Billed (or accrued) to Qualstar by Interlink

2 unchanged sentences

Paid by Interlink to Qualstar

Balance at June 30,

Six months ended June 30,

Balance at September 30,

Nine months ended September 30,

(in thousands)

4 unchanged sentences

Paid by Interlink to Qualstar

Balance at June 30,

Balance at September 30,

BKF Capital Group, Inc.

7 unchanged sentences

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

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.

In 2021, 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 provided M&A advisory consulting services to us.

This agreement was terminated in April 2024.

1 unchanged sentence

Transactions with BKF Capital and its subsidiaries are as follows:

Three months ended June 30,

Three months ended September 30,

(in thousands)

Balance at April 1,

Balance at July 1,

Billed (or accrued) to BKF Capital by Interlink

2 unchanged sentences

Paid by Interlink to BKF Capital

Balance at June 30,

Six months ended June 30,

Balance at September 30,

Nine months ended September 30,

(in thousands)

4 unchanged sentences

Paid by Interlink to BKF Capital

Balance at June 30,

Balance at September 30,

Note 8 – Income Taxes

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.

Income tax expense as a percentage of pre-tax income/loss was 5.7 % for the three months ended September 30, 2024 versus 89.4 % for the same quarter in the prior year, and was 4.0 % for the nine months ended September 30, 2024 versus 78.0 % for the nine months ended September 30, 2023.

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”).

1 unchanged sentence

statutory tax rate of 21 % from quarter to quarter.

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.

The effective tax rates for each of the three- and nine-month periods ended September 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 June 30, 2024, all of the remaining federal and state NOLs are subject to annual limitations due to the 2010 ownership change.

As of September 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 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.

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

1 unchanged sentence

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.

Of our $ 3.8 million of cash at September 30, 2024, $ 2.5 million was held by our foreign subsidiaries.

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

8 unchanged sentences

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

The weighted average incremental borrowing rate used to determine the initial value of right-of-use (“ROU”) assets and lease liabilities capitalized during the six months ended June 30, 2024 was 9.5 %.

No new ROU assets were capitalized during the six months ended June 30, 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 nine months ended September 30, 2024 was 9.5 %, and during the nine months ended September 30, 2023 was 5.5 %.

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

As of June 30, 2024, we have not recognized any impairment losses for our ROU assets.

As of September 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.

5 unchanged sentences

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.

In April 2024, we entered into a lease agreement to lease 2,480 square feet of office space in Bellevue, Washington for approximately $ 9,000 per month for a term commencing July 2024 and ending October 2027.

Our Bellevue, Washington office is used for executive offices, sales and administration.

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.

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.

2 unchanged sentences

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

This lease term ends February 2028, with an option for us to terminate the lease in February 2025.

This lease term ends February 2028.

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

4 unchanged sentences

This lease term ends November 2024.

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 September 30, 2024, we had current and long-term lease liabilities of $ 351,000 and $ 870,000 , respectively, and right-of-use assets of $ 1,155,000 .

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 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 imputed interest as of September 30, 2024 totaled $ 227,000 .

The weighted average remaining lease term of our leases as of September 30, 2024 is 2.4 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 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.

During the three months ended September 30, 2024, we incurred approximately $ 186,000 in operating lease costs, of which $ 91,000 are included in cost of revenue and $ 95,000 are included in operating expenses in our condensed consolidated statements of operations.

During the nine months ended September 30, 2024, we incurred approximately $ 466,000 in operating lease costs, of which $ 241,000 are included in cost of revenue and $ 225,000 are included in operating expenses in our condensed consolidated statements of operations.

During the three months ended September 30, 2023, we incurred approximately $ 129,000 in operating lease costs, of which $ 54,000 is included in cost of revenue and $ 75,000 is included in operating expenses in our condensed consolidated statements of operations.

During the nine months ended September 30, 2023, we incurred approximately $ 379,000 in operating lease costs, of which $ 149,000 is included in cost of revenue and $ 230,000 is included in operating expenses in our condensed consolidated statements of operations.

We are not party to any legal proceedings as of September 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