[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and important factors that may cause actual results to differ materially[6](index=6&type=chunk) - Key factors influencing future results include the impact of the COVID-19 pandemic, ability to fund operations, future financial results, business strategy, competitive advantages, intellectual property protection, market acceptance of technology, customer relationships, employee retention, increased competition, future acquisitions, and compliance with legal and export regulations[7](index=7&type=chunk) - Readers should not rely on forward-looking statements as predictions of future events, and the company undertakes no obligation to update them, except as required by law[9](index=9&type=chunk) [PART I](index=4&type=section&id=PART%20I) [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Interlink Electronics designs and sells force-sensing HMI solutions for diverse markets, focusing on global expansion and new technology development [Our Company](index=4&type=section&id=Our%20Company) Interlink Electronics is a leader in printed electronics, specializing in FSR® technology for HMI solutions globally - Interlink has been a leader in the printed electronics industry for over **35 years**, commercializing its patented Force-Sensing Resistor (FSR®) technology for rugged and reliable HMI solutions[13](index=13&type=chunk)[14](index=14&type=chunk) - The company's global presence includes corporate headquarters in Irvine, CA, a Global Product Development and Materials Science Center in Camarillo, CA, an embedded software and IoT application development center in Singapore, and a manufacturing facility in Shenzhen, China[17](index=17&type=chunk) - Interlink's solutions focus on handheld user input, menu navigation, and cursor control for top electronics manufacturers, differentiating itself through extensive FSR® knowledge and integrated firmware[13](index=13&type=chunk)[14](index=14&type=chunk) [Our Industry](index=6&type=section&id=Our%20Industry) The HMI technology market is rapidly expanding, driven by demand for advanced interfaces and IoT integration - HMI technologies transitioned from industrial products to ubiquitous consumer electronics, driven by demand for sleek, touch-sensitive, and gesture-driven interfaces[20](index=20&type=chunk) - The total market for printed, flexible, and organic electronics is projected to grow from **$41.2 billion in 2020 to $74 billion in 2030**, with printed force sensors accounting for approximately **30% of the printed sensor market share**[21](index=21&type=chunk) - Interlink's sensing technology platforms provide a critical backbone for data sensing, measurement, and analytics in emerging Internet-of-Things (IoT) wireless connectivity implementations[24](index=24&type=chunk) [Our Strategy](index=8&type=section&id=Our%20Strategy) The company's primary objective is to be a global leader in multi-sensing HMI technology solutions, pursuing market expansion and inorganic growth - The primary objective is to be the global leader and provider of multi-sensing based HMI technology solutions for the automotive, consumer electronics, medical, and industrial automation markets[25](index=25&type=chunk) - Strategic initiatives include expanding presence in existing and new markets, strengthening relationships with current major customers, and pursuing a multi-technology roadmap (resistive, piezo, capacitive, haptic technology)[28](index=28&type=chunk) - The company also intends to pursue inorganic growth opportunities through potential acquisitions that provide relevant new technologies[28](index=28&type=chunk) [Our Technology Platforms and Products](index=8&type=section&id=Our%20Technology%20Platforms%20and%20Products) Interlink's core FSR® sensor technology is evolving into comprehensive HMI solutions, with ongoing R&D in advanced sensing platforms - Interlink's core technology is its patented FSR® sensor, which uses printed electronics, is thin, durable, low-power, and provides continuous variable control, unlike capacitive sensors[26](index=26&type=chunk)[30](index=30&type=chunk) - The company is transitioning from an FSR® sensor supplier to an HMI solutions provider, investing in R&D for leading-edge force sensing and related technology platforms, including embedded software and materials science[26](index=26&type=chunk) - Product offerings include standard single zone FSR® sensors, Force Sensing Linear Potentiometers (FSLP) for navigation, integrated mouse modules, and new piezoelectric sensors for diverse applications[32](index=32&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) Interlink protects its crucial intellectual property through patents, copyrights, trade secrets, and agreements, with in-house manufacturing safeguarding proprietary techniques - Interlink relies on a combination of patents, copyrights, trade secrets, trademarks, and agreements to protect its intellectual property, which is considered crucial to its business[34](index=34&type=chunk) Intellectual Property Portfolio (as of December 31, 2021) | Category | Patents Held | Patents Pending | | :------- | :----------- | :-------------- | | Sensors | 8 | N/A | | Sensing Systems | 4 | N/A | | Human Interface Devices | 11 | N/A | | **Total** | **23** | **14** | - Proprietary screen-printing techniques for FSR® sensors are conducted in-house in the U.S. and China to maintain quality and protect trade secrets, which are considered difficult to replicate[36](index=36&type=chunk) [Competition](index=12&type=section&id=Competition) Interlink operates in a highly competitive market, differentiating itself through disruptive force-sensing technology and sophisticated HMI solutions - The markets for Interlink's products are highly competitive and subject to rapid advancements in design technology, requiring continuous development of value-added products[38](index=38&type=chunk) - The company competes by offering disruptive force-sensing technology that replaces older switch technology and provides functionality where commoditized capacitive sensing is unreliable or unsuitable[40](index=40&type=chunk) - Interlink's strategy to maintain a competitive edge involves developing and offering more sophisticated solutions, including smart surfaces for HMI applications, amidst significant price competition[41](index=41&type=chunk) [Sales and Marketing](index=14&type=section&id=Sales%20and%20Marketing) Interlink utilizes direct sales, representatives, and distributors to serve a diverse customer base, with a sales cycle focused on design wins and mass production - Sales channels include direct sales employees, outside sales representatives, and distributors like Digi-Key Electronics, serving large multinational companies, startups, and OEMs[42](index=42&type=chunk) - The sales cycle for custom solutions involves two main phases: 'Design Opportunity to Design Win' (customer engagement, sample provision, design commitment) and 'Mass Production' (product moves to production, varying lifespans)[43](index=43&type=chunk)[44](index=44&type=chunk)[48](index=48&type=chunk) - Sales personnel have extensive engineering backgrounds and receive substantial support from internal engineering resources, engaging early in the development phase with customers[25](index=25&type=chunk)[42](index=42&type=chunk) [Our Customers](index=14&type=section&id=Our%20Customers) Interlink serves a global customer base across various industries, with international sales contributing significantly to net revenues and a few key customers driving a substantial portion of revenue - Interlink serves a diverse global customer base, including leading electronics manufacturers, automotive, medical, and industrial equipment companies, and IoT market entrants[45](index=45&type=chunk) International Sales Contribution to Net Revenues | Year | International Sales % of Net Revenues | | :--- | :------------------------------------ | | 2021 | 71% | | 2020 | 59% | Top Customer Revenue Contribution (2021 vs. 2020) | Customer | 2021 Net Revenues % | 2020 Net Revenues % | | :------- | :------------------ | :------------------ | | Customer 1 | 17.0% | 17.4% | | Customer 2 | 14.7% | 15.8% | | Customer 3 | 14.7% | 11.6% | [Manufacturing Operations and Principal Suppliers](index=16&type=section&id=Manufacturing%20Operations%20and%20Principal%20Suppliers) Interlink operates an ISO-certified manufacturing facility in China, relying on external suppliers for materials, which introduces supply chain risks - Interlink operates an ISO 9001, ISO 14001, and ISO 13485 certified manufacturing facility in Shenzhen, China, with plans for IATF 16949 certification in 2022[52](index=52&type=chunk) - The company sources materials from outside suppliers, including multinational conglomerates, and relies on single-suppliers for certain components, which increases supply chain risk[53](index=53&type=chunk) - All products are RoHS and REACH compliant, and the company monitors suppliers to eliminate Conflict Minerals[52](index=52&type=chunk) [Engineering, Research and Development](index=16&type=section&id=Engineering,%20Research%20and%20Development) Future success hinges on continuous R&D and technology acquisition, with global R&D centers driving innovation in materials science and printed electronics - Future success depends largely on the company's ability to continuously improve products and process technologies, and to develop or acquire new technologies[54](index=54&type=chunk) - Key R&D locations include the Global Product Development and Materials Science Center in Camarillo, CA, an embedded software engineering team in Singapore, and a planned R&D center in the United Kingdom in 2022[55](index=55&type=chunk) - The global R&D team pursues scientific research, technology platform development, and advanced product development in materials science, printed electronics, and multi-disciplinary system engineering, supporting strategic partnerships[57](index=57&type=chunk) [Our Employees](index=16&type=section&id=Our%20Employees) Interlink's success relies on attracting and retaining qualified personnel, maintaining good employee relations without collective bargaining agreements Employee Distribution (as of December 31, 2021) | Department | Number of Employees | | :--------- | :------------------ | | Operations | N/A (largest) | | R&D | N/A | | Administration | N/A | | Sales | N/A (smallest) | | **Total** | **89** | - The company's ability to attract

PART I -- FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited Q3 2021 financial statements show total assets at $10.21 million, nine-month net revenue of $5.86 million, net income of $243 thousand, and $6.64 million in cash [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $6,642 | $6,120 | | Total current assets | $8,885 | $8,496 | | Total assets | $10,213 | $10,022 | | **Liabilities & Equity** | | | | Total current liabilities | $1,018 | $1,042 | | Total liabilities | $1,089 | $1,182 | | Total stockholders' equity | $9,124 | $8,840 | | Total liabilities and stockholders' equity | $10,213 | $10,022 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $2,223 | $1,548 | $5,855 | $4,941 | | Gross profit | $1,292 | $811 | $3,293 | $2,768 | | Income (loss) from operations | $259 | $(79) | $332 | $(110) | | Net income | $223 | $65 | $243 | $60 | | Earnings per share – basic and diluted | $0.03 | $0.01 | $0.04 | $0.01 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $223 | $65 | $243 | $60 | | Foreign currency translation adjustments | $(2) | $64 | $21 | $49 | | Comprehensive income | $221 | $129 | $264 | $109 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity increased from **$8.84 million** at December 31, 2020, to **$9.12 million** at September 30, 2021. The increase was primarily driven by net income of **$243 thousand** and positive foreign currency translation adjustments of **$21 thousand** for the nine-month period[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $639 | $42 | | Net cash used in investing activities | $(142) | $(66) | | Net cash provided by financing activities | $0 | $186 | | Net increase in cash and cash equivalents | $522 | $211 | | Cash, cash equivalents and restricted cash, end of period | $6,647 | $6,055 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's force-sensing technology business, significant customer concentrations, related party transactions, and a $3.0 million Series A Convertible Preferred Stock issuance in October 2021 - The company designs, develops, manufactures, and sells a range of force-sensing technologies for markets including consumer electronics, automotive, industrial, and medical. Manufacturing is conducted in Shenzhen, China, with a global presence including offices in the US, Singapore, Hong Kong, and Japan[20](index=20&type=chunk)[21](index=21&type=chunk) - As of September 30, 2021, the company had significant customer concentration, with two customers accounting for **34%** and **23%** of total accounts receivable, respectively[66](index=66&type=chunk) - The company engages in related party transactions with Qualstar Corporation and BKF Capital Group, Inc., entities controlled by Interlink's CEO, Steven N. Bronson. These transactions involve shared facilities, consulting services, and expense reimbursements[68](index=68&type=chunk)[69](index=69&type=chunk) - On October 21, 2021, the company entered into an agreement to sell **120,000 shares** of **8.0% Series A Convertible Preferred Stock** for gross proceeds of **$3.0 million**. The offering closed on October 22, 2021, with net proceeds of approximately **$2.82 million**[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2021 revenue growth of 43.6% driven by industrial and medical markets, improved gross margin, increased SG&A, and a strong liquidity position with $6.6 million cash [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q3 2021 revenue grew 43.6% to $2.2 million, primarily from industrial and medical markets, with gross margin expanding to 58.1% and a shift to operating income Revenue by Market - Q3 2021 vs Q3 2020 (in thousands) | Market | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Industrial | $557 | $319 | $238 | 74.6% | | Medical | $333 | $16 | $317 | 1,981.3% | | Consumer | $374 | $375 | $(1) | —% | | Standard | $959 | $839 | $120 | 14.3% | | **Total** | **$2,223** | **$1,548** | **$675** | **43.6%** | Revenue by Market - 9 Months 2021 vs 9 Months 2020 (in thousands) | Market | 9 Months 2021 | 9 Months 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Industrial | $1,529 | $1,204 | $325 | 27.0% | | Medical | $662 | $540 | $122 | 22.6% | | Consumer | $1,271 | $823 | $448 | 54.4% | | Standard | $2,393 | $2,374 | $19 | 0.8% | | **Total** | **$5,855** | **$4,941** | **$914** | **18.5%** | - Gross profit for Q3 2021 increased by **59.3%** to **$1.3 million**, with gross margin improving to **58.1%** from **52.4%** in Q3 2020, driven by favorable changes in product and customer mix[113](index=113&type=chunk) - Q3 2021 R&D expenses decreased by **49.5%** to **$105 thousand** due to cost reductions at the Singapore R&D center and a government grant. SG&A expenses increased by **36.1%** to **$928 thousand** due to higher personnel costs and expenses related to the Nasdaq relisting[114](index=114&type=chunk)[115](index=115&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $6.6 million in cash, $7.9 million working capital, and no debt, funding operations from existing cash - As of September 30, 2021, the company had cash and cash equivalents of **$6.647 million** and working capital of **$7.867 million** with no indebtedness[126](index=126&type=chunk) - Of the total cash balance, **$2.565 million** was held by foreign subsidiaries and is intended to be permanently reinvested outside the U.S.[126](index=126&type=chunk) - A **$186 thousand** Paycheck Protection Program (PPP) loan received in 2020 was fully forgiven in the first quarter of 2021[127](index=127&type=chunk) [Cash Flow Analysis](index=40&type=section&id=Cash%20Flow%20Analysis) Nine-month operating cash flow significantly increased to $639 thousand due to higher net income, with $142 thousand used in investing and no financing activities in 2021 Cash Flow Summary (in thousands) | Activity | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $639 | $42 | | Net cash used in investing activities | $(142) | $(66) | | Net cash provided by financing activities | $0 | $186 | - The **$639 thousand** in cash from operations in the first nine months of 2021 was driven by net income of **$243 thousand**, non-cash charges of **$235 thousand**, and positive changes in working capital of **$347 thousand**, offset by a **$186 thousand** non-cash gain on PPP loan forgiveness[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is reported as not applicable for the current reporting period - The company states that Quantitative and Qualitative Disclosures About Market Risk are 'Not Applicable'[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - Based on an evaluation as of September 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[138](index=138&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, internal controls[139](index=139&type=chunk) PART II -- OTHER INFORMATION [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors from the Annual Report on Form 10-K were reported - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020[142](index=142&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Exhibits filed include officer certifications, the Certificate of Designations for Series A Preferred Stock, and XBRL data files - The exhibits filed with this report include officer certifications (31.1, 31.2, 32.1), the Certificate of Designations for Series A Preferred Stock (3.2), and XBRL interactive data files[144](index=144&type=chunk) [Signatures](index=43&type=section&id=Signatures) The quarterly report was signed on November 4, 2021, by Chief Financial Officer Ryan J. Hoffman - The report was signed on November 4, 2021, by Ryan J. Hoffman, Chief Financial Officer[146](index=146&type=chunk)

[PART I – FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20--%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's financial analysis [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Interlink Electronics, Inc.'s unaudited consolidated financial statements and notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :------------------ | | Total assets | $9,903 | $10,022 | | Total current assets | $8,469 | $8,496 | | Cash and cash equivalents | $6,245 | $6,120 | | Total liabilities | $1,015 | $1,182 | | Total current liabilities | $928 | $1,042 | | PPP loan payable | $— | $186 | | Total stockholders' equity | $8,888 | $8,840 | - Total assets decreased slightly from **$10,022 thousand** at December 31, 2020, to **$9,903 thousand** at June 30, 2021[7](index=7&type=chunk) - Total liabilities decreased from **$1,182 thousand** to **$1,015 thousand**, primarily due to the forgiveness of the PPP loan[7](index=7&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including revenue, gross profit, and net income Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue, net | $2,064 | $1,702 | $3,632 | $3,393 | | Gross profit | $1,127 | $998 | $2,001 | $1,957 | | Income (loss) from operations | $133 | $41 | $73 | $(31) | | Net income (loss) | $63 | $13 | $20 | $(5) | | Earnings (loss) per share – basic and diluted | $0.01 | $0.00 | $0.00 | $(0.00) | - Net revenue increased by **21.3%** for the three months ended June 30, 2021, compared to the prior year, and by **7.0%** for the six months ended June 30, 2021[9](index=9&type=chunk)[102](index=102&type=chunk) - The company reported net income of **$63 thousand** for the three months ended June 30, 2021, a significant increase from **$13 thousand** in the prior year[9](index=9&type=chunk) - For the six months ended June 30, 2021, the company achieved a net income of **$20 thousand**, reversing a net loss of **$5 thousand** in the prior year[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the company's comprehensive income or loss, including net income and other items Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $63 | $13 | $20 | $(5) | | Foreign currency translation adjustments | $35 | $5 | $23 | $(15) | | Comprehensive income (loss) | $98 | $18 | $43 | $(20) | - Comprehensive income for the three months ended June 30, 2021, was **$98 thousand**, up from **$18 thousand** in the prior year, driven by increased net income and positive foreign currency translation adjustments[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's stockholders' equity, reflecting net income and adjustments Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :------------------ | | Total Stockholders' Equity | $8,888 | $8,840 | | Accumulated Deficit | $(49,150) | $(49,170) | | Accumulated Other Comprehensive Income | $60 | $37 | | Additional Paid-in-Capital | $57,971 | $57,966 | - Total stockholders' equity increased to **$8,888 thousand** as of June 30, 2021, from **$8,840 thousand** at December 31, 2020, primarily due to net income and foreign currency translation adjustments[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $234 | $130 | | Net cash (used in) investing activities | $(142) | $(48) | | Net cash provided by financing activities | $— | $186 | | Net increase in cash and cash equivalents | $125 | $253 | | Cash, cash equivalents and restricted cash, end of period | $6,250 | $6,097 | - Net cash provided by operating activities increased to **$234 thousand** for the six months ended June 30, 2021, from **$130 thousand** in the prior year[16](index=16&type=chunk) - Net cash used in investing activities increased to **$142 thousand**, primarily due to purchases of property, plant, and equipment related to the Global Product Development and Materials Science Center[16](index=16&type=chunk)[124](index=124&type=chunk) - No cash was provided by or used in financing activities in the current six-month period, compared to **$186 thousand** provided in the prior year from the PPP loan[16](index=16&type=chunk)[126](index=126&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the consolidated financial statements - Interlink Electronics, Inc. designs, develops, manufactures, and sells force-sensing technologies, including sensor components, subassemblies, modules, and products for HMI platforms in consumer electronics, automotive, industrial, and medical markets[18](index=18&type=chunk) - The company operates globally with headquarters in Irvine, California, a Global Product Development and Materials Science Center in Camarillo, California, an IoT application development center in Singapore, and a manufacturing facility in Shenzhen, China[19](index=19&type=chunk) - Revenue recognition follows ASC 606, recognizing revenue when a customer obtains control of promised goods or services, typically upon shipment[27](index=27&type=chunk)[29](index=29&type=chunk) - The company accounts for leases under ASC 842, recording ROU assets and lease liabilities for operating and financing leases, excluding short-term leases[49](index=49&type=chunk)[50](index=50&type=chunk) Inventories (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :--------------- | :------------ | :------------------ | | Raw materials | $500 | $520 | | Work-in-process | $251 | $246 | | Finished goods | $127 | $100 | | Total inventories | $878 | $866 | Intangible Assets, Net (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :------------------ | | Patents and trademarks | $658 | $658 | | Less: accumulated amortization | $(496) | $(463) | | Total intangible assets, net | $162 | $195 | - Amortization expense for intangible assets was **$34 thousand** for the six months ended June 30, 2021, compared to **$28 thousand** in the prior year[59](index=59&type=chunk) Accrued Liabilities (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :------------------ | | Accrued warranty | $7 | $7 | | Accrued wages and benefits | $165 | $180 | | Accrued vacation | $79 | $110 | | Accrued other | $49 | $46 | | Total accrued liabilities | $300 | $343 | Net Revenues from Significant Customers (as % of total net revenues) | Customer | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer A | 22% | 15% | 25% | 13% | | Customer B | 14% | * | * | 15% | | Customer C | 10% | 10% | * | * | | Customer D | * | 12% | 12% | 11% | Net Revenues by Geographic Area (in thousands) | Geographic Area | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $590 | $680 | $860 | $1,422 | | Asia and Middle East | $1,378 | $871 | $2,490 | $1,642 | | Europe and other | $96 | $151 | $282 | $329 | | Total Revenue, net | $2,064 | $1,702 | $3,632 | $3,393 | - Two customers accounted for **45%** and **12%** of total accounts receivable at June 30, 2021[64](index=64&type=chunk) - The company has related party transactions with Qualstar Corporation and BKF Capital Group, both controlled by Steven N. Bronson, involving shared facilities and consulting services[66](index=66&type=chunk)[67](index=67&type=chunk) - Income tax expense as a percentage of income before income taxes was **39.4%** for the three months ended June 30, 2021, and **63.0%** for the six months ended June 30, 2021[68](index=68&type=chunk) - The weighted average incremental borrowing rate used for lease liabilities was **5.50%** for the six months ended June 30, 2021[72](index=72&type=chunk) Future Minimum Lease Payments (in thousands) | Years ending December 31, | Amount | | :------------------------ | :----- | | 2021 (remainder of year) | $109 | | 2022 | $144 | | 2023 | $38 | | Total undiscounted future non-cancelable minimum lease payments | $291 | | Less: imputed interest | $(15) | | Present value of lease liabilities | $276 | - Operating lease costs for the six months ended June 30, 2021, totaled approximately **$166 thousand**, including **$59 thousand** in cost of revenue and **$107 thousand** in operating expenses[80](index=80&type=chunk) - The company is not party to any legal proceedings as of June 30, 2021, and historically, warranty returns have not been material[82](index=82&type=chunk)[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operating results, revenue trends, expenses, and liquidity - Interlink Electronics is a leader in the printed electronics industry for over **30 years**, commercializing Force-Sensing Resistor (FSR®) technology for Human Machine Interface (HMI) solutions[93](index=93&type=chunk)[94](index=94&type=chunk) - The company's HMI technology platforms are deployed in consumer electronics, automotive, industrial, and medical markets, with applications including vehicle entry, multi-media control, rugged touch controls, and biological monitoring[92](index=92&type=chunk) - Interlink is expanding its product portfolio to incorporate complementary sensing technologies for applications in the rapidly growing Internet-of-Things (IoT)[96](index=96&type=chunk) Revenue, Net by Market (Three Months Ended June 30, in thousands) | Market | 2021 Amount | 2021 % of Net Revenue | 2020 Amount | 2020 % of Net Revenue | $ Change | % Change | | :--------- | :---------- | :-------------------- | :---------- | :-------------------- | :------- | :------- | | Industrial | $434 | 21.0% | $493 | 29.0% | $(59) | (12.0)% | | Medical | $285 | 13.8% | $120 | 7.0% | $165 | 137.5% | | Consumer | $449 | 21.8% | $262 | 15.4% | $187 | 71.4% | | Standard | $896 | 43.4% | $827 | 48.6% | $69 | 8.3% | | Total | $2,064 | 100.0% | $1,702 | 100.0% | $362 | 21.3% | Revenue, Net by Market (Six Months Ended June 30, in thousands) | Market | 2021 Amount | 2021 % of Net Revenue | 2020 Amount | 2020 % of Net Revenue | $ Change | % Change | | :--------- | :---------- | :-------------------- | :---------- | :-------------------- | :------- | :------- | | Industrial | $973 | 26.8% | $885 | 26.1% | $88 | 9.9% | | Medical | $328 | 9.0% | $524 | 15.4% | $(196) | (37.4)% | | Consumer | $897 | 24.7% | $449 | 13.2% | $448 | 99.8% | | Standard | $1,434 | 39.5% | $1,535 | 45.3% | $(101) | (6.6)% | | Total | $3,632 | 100.0% | $3,393 | 100.0% | $239 | 7.0% | - Medical and consumer market revenues increased significantly for the three months ended June 30, 2021, due to increased purchasing levels, while industrial market revenue decreased due to timing of purchasing volume[104](index=104&type=chunk) - Gross profit increased by **12.9%** for the three months ended June 30, 2021, and by **2.2%** for the six months ended June 30, 2021, driven by increased revenues, though gross margin percentage was impacted by product/customer mix and production costs[105](index=105&type=chunk)[113](index=113&type=chunk) - Engineering, research and development expenses decreased by **20.8%** and **22.3%** for the three and six months ended June 30, 2021, respectively, due to cost reductions and headcount transfer at the Singapore R&D center[106](index=106&type=chunk)[114](index=114&type=chunk) - Selling, general and administrative expenses increased due to increases in personnel and costs associated with relisting with Nasdaq, partially offset by a **$186 thousand** gain from PPP loan forgiveness for the six-month period[107](index=107&type=chunk)[115](index=115&type=chunk) - As of June 30, 2021, the company had **$6.250 million** in cash and cash equivalents and **$7.541 million** in working capital, with no indebtedness[117](index=117&type=chunk) - The full amount of the **$186 thousand** PPP loan principal and interest was forgiven in February 2021[118](index=118&type=chunk) - Management believes existing cash and cash equivalents will be sufficient for current operations, but may seek additional capital if circumstances change[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section confirms no applicable market risk disclosures for the company - The company has no applicable quantitative and qualitative disclosures about market risk[128](index=128&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms effective disclosure controls and no material changes in internal controls - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021[130](index=130&type=chunk) - There were no material changes in internal control over financial reporting during the period ended June 30, 2021[131](index=131&type=chunk) - Controls and procedures, regardless of design, can only provide reasonable assurance due to inherent limitations and resource constraints[132](index=132&type=chunk) [PART II – OTHER INFORMATION](index=28&type=section&id=PART%20II%20--%20OTHER%20INFORMATION) This section contains other required information, including risk factors and exhibits [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Annual Report on Form 10-K risk factors, noting no material changes - No material changes to the risk factors outlined in the Annual Report on Form 10-K occurred during the six months ended June 30, 2021[134](index=134&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents - Exhibits include Articles of Incorporation, Bylaws, Certifications of Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1), and XBRL Instance and Taxonomy Extension Documents[136](index=136&type=chunk) [Signatures](index=30&type=section&id=Signatures) This section contains the signature of Interlink Electronics, Inc. by its Chief Financial Officer - The report is signed by Ryan J. Hoffman, Chief Financial Officer of Interlink Electronics, Inc., on August 10, 2021[138](index=138&type=chunk)

[PART I -- FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20--%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion and analysis, and disclosures on market risk and internal controls [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), and cash flows, along with detailed notes explaining the company's business, significant accounting policies, and specific financial components [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets | ASSETS (in thousands) | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $6,098 | $6,120 | | Accounts receivable, net | $970 | $1,113 | | Inventories | $881 | $866 | | Total current assets | $8,291 | $8,496 | | Total assets | $9,718 | $10,022 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $286 | $235 | | Accrued liabilities | $295 | $343 | | PPP loan payable | $— | $186 | | Total current liabilities | $829 | $1,042 | | Total liabilities | $928 | $1,182 | | Total stockholders' equity| $8,790 | $8,840 | | Total liabilities and stockholders' equity | $9,718 | $10,022 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations | (in thousands, except per share data) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue, net | $1,568 | $1,691 | | Cost of revenue | $694 | $732 | | Gross profit | $874 | $959 | | Total operating expenses | $934 | $1,031 | | (Loss) from operations | $(60) | $(72) | | (Loss) before income taxes | $(50) | $(66) | | Net (loss) | $(43) | $(18) | | Earnings (loss) per share – basic and diluted | $(0.01) | $(0.00) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the net loss and other comprehensive income (loss) components for the reporting periods Condensed Consolidated Statements of Comprehensive Income (Loss) | (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss) | $(43) | $(18) | | Foreign currency translation adjustments | $(12) | $(20) | | Comprehensive (loss) | $(55) | $(38) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $(1) | $263 | | Net cash used in investing activities | $(12) | $(34) | | Net cash provided by financing activities | $— | $— | | Net increase (decrease) in cash and cash equivalents | $(22) | $209 | | Cash, cash equivalents and restricted cash, end of period | $6,103 | $6,053 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES](index=6&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20ITS%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business, its core technologies, global operations, and significant accounting policies - Interlink Electronics, Inc. designs, develops, manufactures, and sells **force-sensing technologies**, including sensor components, subassemblies, modules, and products for cursor control and 3D user inputs. Its **Human Machine Interface (HMI) technology** platforms are used in consumer electronics, automotive, industrial, and medical markets[18](index=18&type=chunk) - The company operates globally with headquarters in Irvine, California, a Global Product Development and Materials Science Center in Camarillo, California (expected May **2021**), an **IoT application development center** in Singapore, a manufacturing facility in Shenzhen, China, and a distribution center in Hong Kong[19](index=19&type=chunk) - Key accounting policies include revenue recognition (ASC **606**), warranty reserves, expensing R&D and marketing costs, stock-based compensation using Black-Scholes, asset and liability method for income taxes, and accounting for leases under ASC **842**[26](index=26&type=chunk)[32](index=32&type=chunk)[36](index=36&type=chunk)[39](index=39&type=chunk)[46](index=46&type=chunk) - The company faces risks including rapid industry change, product performance/quality issues, customer loss, international business impacts (e.g., foreign currency), supply shortages, manufacturing disruptions, environmental directives, intellectual property, ability to attract/retain employees, and ability to raise capital. Public health threats like COVID-19 could also adversely affect operations[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 2 – DETAILS OF CERTAIN FINANCIAL STATEMENT COMPONENTS](index=11&type=section&id=NOTE%202%20%E2%80%93%20DETAILS%20OF%20CERTAIN%20FINANCIAL%20STATEMENT%20COMPONENTS) This note provides a breakdown of specific balance sheet items such as inventories, property, plant and equipment, and intangible assets Inventories (in thousands) | Inventories (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------- | :------------- | :---------------- | | Raw materials | $555 | $520 | | Work-in-process | $229 | $246 | | Finished goods | $97 | $100 | | Total inventories | $881 | $866 | Property, plant and equipment, net (in thousands) | Property, plant and equipment, net (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------------------ | :------------- | :---------------- | | Furniture, machinery and equipment | $1,661 | $1,662 | | Leasehold improvements | $544 | $538 | | Less: accumulated depreciation | $(1,841) | $(1,793) | | Total property, plant and equipment, net | $364 | $407 | Intangible assets, net (in thousands) | Intangible assets, net (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------ | :------------- | :---------------- | | Patents and trademarks | $658 | $658 | | Less: accumulated amortization | $(479) | $(463) | | Total intangible assets, net | $179 | $195 | - Depreciation expense was **$54 thousand** for Q1 **2021**, down from **$59 thousand** in Q1 **2020**. Amortization expense was **$17 thousand** for Q1 **2021**, up from **$13 thousand** in Q1 **2020**[54](index=54&type=chunk)[55](index=55&type=chunk) [NOTE 3 – STOCK-BASED COMPENSATION](index=12&type=section&id=NOTE%203%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation plans and outstanding awards - As of March **31**, **2021**, there were **no stock-based compensation awards outstanding** under the **2016** Omnibus Incentive Plan[59](index=59&type=chunk) [NOTE 4 – EARNINGS PER SHARE](index=12&type=section&id=NOTE%204%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share | (in thousands, except per share data) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(43) | $(18) | | Weighted average outstanding shares of common stock | 6,601 | 6,563 | | Dilutive potential common shares from stock options and restricted stock units | — | 35 |\ | Common stock and common stock equivalents | 6,601 | 6,598 | | Earnings (loss) per share, basic and diluted | $(0.01) | $(0.00) | [NOTE 5 – SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION](index=13&type=section&id=NOTE%205%20%E2%80%93%20SIGNIFICANT%20CUSTOMERS,%20CONCENTRATION%20OF%20CREDIT%20RISK%20AND%20GEOGRAPHIC%20INFORMATION) This note identifies major customers, assesses credit risk concentration, and provides geographic revenue and asset breakdowns Net revenues from customers >= 10% of total net revenues | Net revenues from customers >= 10% of total net revenues | | :------------------------------------------------------- | | **Three months ended March 31, 2021:** | | Customer A: 29% | | Customer B: 17% | | **Three months ended March 31, 2020:** | | Customer A: 11% | | Customer B: 10% | | Customer C: 24% | Net revenues by geographic area (in thousands) | Net revenues by geographic area (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $270 | $742 | | Asia and Middle East | $1,112 | $771 | | Europe and other | $186 | $178 | | Revenue, net | $1,568 | $1,691 | Long-lived assets geographically located (in thousands) | Long-lived assets geographically located (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------------------------ | :------------- | :---------------- | | United States | $1,154 | $1,194 | | Asia | $273 | $332 | | Total long-lived assets | $1,427 | $1,526 | - At March **31**, **2021**, two customers accounted for **46%** and **12%** of total accounts receivable, respectively. The allowance for doubtful accounts was **$0** at both March **31**, **2021** and December **31**, **2020**[64](index=64&type=chunk) [NOTE 6 - RELATED PARTY TRANSACTIONS](index=14&type=section&id=NOTE%206%20-%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions and balances with entities controlled by the company's Chairman, President, and CEO - **Interlink Electronics**, **Qualstar Corporation**, and **BKF Capital Group** are **related parties**, all controlled by **Steven N. Bronson** (Chairman, President, and CEO of Interlink). They share facilities and provide consulting services to each other[66](index=66&type=chunk)[67](index=67&type=chunk) Transactions with Qualstar (in thousands) | Transactions with Qualstar (in thousands) | Due from Qualstar (2021) | Due to Qualstar (2021) | Due from Qualstar (2020) | Due to Qualstar (2020) | | :---------------------------------------- | :----------------------- | :--------------------- | :----------------------- | :--------------------- | | Balance at January 1, | $52 | $34 | $24 | $12 | | Billed (or accrued) to Qualstar by Interlink | $208 | $— | $128 | $— | | Paid by Qualstar to Interlink | $(145) | $— | $(151) | $— | | Billed (or accrued) to Interlink by Qualstar | $— | $31 | $— | $33 | | Paid by Interlink to Qualstar | $— | $(58) | $— | $(38) | | Balance at March 31, | $115 | $7 | $1 | $7 | - For the three months ended March **31**, **2021**, BKF Capital paid Interlink **$2 thousand**, while Interlink paid BKF Capital **$0**[67](index=67&type=chunk) [NOTE 7 – INCOME TAXES](index=14&type=section&id=NOTE%207%20%E2%80%93%20INCOME%20TAXES) This note explains the company's income tax benefit, effective tax rates, and the impact of net operating loss limitations - Income tax benefit as a percentage of income before income taxes was **14.0%** for Q1 **2021**, compared to **72.7%** for Q1 **2020**. The **income tax benefit** in both periods resulted from **operating losses**[68](index=68&type=chunk)[113](index=113&type=chunk) - All remaining federal and state Net Operating Losses (NOLs) as of March **31**, **2021**, are **subject to annual limitations due to an ownership change under IRC Section 382** in February **2010**[69](index=69&type=chunk) [NOTE 8 – PAYCHECK PROTECTION PROGRAM LOAN](index=16&type=section&id=NOTE%208%20%E2%80%93%20PAYCHECK%20PROTECTION%20PROGRAM%20LOAN) This note describes the company's PPP loan, its forgiveness, and the accounting treatment - The company received a **$186 thousand** Paycheck Protection Program (PPP) loan in Q2 **2020**, which was **fully forgiven** in February **2021**. The forgiveness was recorded as a contra-expense within selling, general and administrative expense[71](index=71&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=16&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's lease liabilities, operating lease costs, legal proceedings, warranty obligations, and executive employment agreements Lease Liabilities (in thousands) | Lease Liabilities (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------- | :------------- | :---------------- | | Current lease liabilities | $195 | $219 | | Long-term lease liabilities | $99 | $140 | | Right-of-use assets | $272 | $334 | Operating Lease Costs (in thousands) | Operating Lease Costs (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- |\ | Included in cost of revenue | $30 | $24 |\ | Included in operating expenses | $52 | $35 |\ | Total operating lease costs | $82 | $59 | - The company is **not party to any legal proceedings** as of March **31**, **2021**. **Warranty returns have historically not been material**[84](index=84&type=chunk)[85](index=85&type=chunk) - The employment agreement with CEO Steven N. Bronson includes severance and change in control obligations, such as a **severance payment equal to twelve months of base compensation and immediate full vesting of unvested equity/options** under certain termination or change in control events[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, critical accounting policies, detailed analysis of revenue and expenses, and discussion of liquidity and capital resources [Overview](index=20&type=section&id=Overview) This section provides a general description of the company's business, technology, and market strategy - Interlink Electronics designs, develops, manufactures, and sells **force-sensing technologies**, including sensor components, subassemblies, modules, and products for cursor control and 3D user inputs. Its **HMI technology** platforms are deployed in consumer electronics, automotive, industrial, and medical markets[94](index=94&type=chunk) - The company is a leader in printed electronics, having invented and commercialized **Force-Sensing Resistor (FSR®) technology**, which differentiates its HMI solutions through extensive knowledge and firmware integration[95](index=95&type=chunk)[96](index=96&type=chunk) - Interlink is expanding its standard product portfolio and developing new technology platforms, including hybrid solutions combining force sensing with capacitive technologies, to address market demand for smaller, thinner devices, lower power consumption, and multi-modal HMI in various sectors, including IoT[97](index=97&type=chunk)[99](index=99&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses the accounting policies and estimates that require significant management judgment - There have been **no material changes** to the company's critical accounting policies and estimates as described in its Annual Report on Form **10-K** filed on March **17**, **2021**[102](index=102&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=21&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) This section addresses the impact of new accounting standards on the company's financial statements - Recently issued accounting pronouncements are **not applicable or not expected to be material** to the company's financial statements[52](index=52&type=chunk)[103](index=103&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues, gross profit, and operating expenses for the reporting periods [Comparison of Three Months Ended March 31, 2021 and 2020](index=22&type=section&id=Comparison%20of%20Three%20Months%20Ended%20March%2031,%202021%20and%202020) This section provides a detailed comparative analysis of financial performance for the specified three-month periods Comparison of Three Months Ended March 31, 2021 and 2020 | (in thousands, except percentages) | 2021 Amount | 2021 % of Net Revenue | 2020 Amount | 2020 % of Net Revenue | $ Change | % Change | | :--------------------------------- | :---------- | :-------------------- | :---------- | :-------------------- | :------- | :------- | | Revenue, net | $1,568 | 100.0% | $1,691 | 100.0% | $(123) | (7.3)% | | Cost of revenue | $694 | 44.3% | $732 | 43.3% | | | | Gross profit | $874 | 55.7% | $959 | 56.7% | $(85) | (8.9)% | | Engineering, research and development | $217 | 13.8% | $285 | 16.9% | $(68) | (23.9)% | | Selling, general and administrative | $717 | 45.7% | $746 | 44.1% | $(29) | (3.9)% | | Income (loss) from operations | $(60) | (3.8)% | $(72) | (4.3)% | | | | Net income (loss) | $(43) | (2.7)% | $(18) | (1.1)% | | | Revenue, net by market (in thousands, except percentages) | Revenue, net by market (in thousands, except percentages) | 2021 Amount | 2021 % of Net Revenue | 2020 Amount | 2020 % of Net Revenue | $ Change | % Change | | :-------------------------------------------------------- | :---------- | :-------------------- | :---------- | :-------------------- | :------- | :------- | | Industrial | $538 | 34.3% | $392 | 23.2% | $146 | 37.2% | | Medical | $43 | 2.7% | $404 | 23.9% | $(361) | (89.4)% | | Consumer | $449 | 28.6% | $187 | 11.1% | $262 | 140.1% | | Standard | $538 | 34.3% | $708 | 41.8% | $(170) | (24.0)% | | Revenue, net | $1,568 | 100.0% | $1,691 | 100.0% | $(123) | (7.3)% | - **Industrial revenue increased** due to higher purchasing volume from existing product lines. **Consumer revenue increased** due to higher purchase levels on corresponding products and programs. **Medical revenue decreased significantly** due to reduced shipments to a major customer, impacted by COVID-19 restrictions on hospital device installations. **Standard product revenue decreased** due to cyclical purchasing patterns of larger customers who took bulk deliveries in **2020**[108](index=108&type=chunk) - **Engineering and R&D costs decreased by 23.9%** due to reduced costs and headcount at the Singapore R&D center as part of a transfer to Camarillo, California. **Selling, general and administrative expenses decreased by 3.9%** due to the **$186 thousand** PPP loan forgiveness, partially offset by increases in personnel, legal costs, and filing fees for Nasdaq relisting[111](index=111&type=chunk)[112](index=112&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and funding sources Financial Position (in millions) | Financial Position (in millions) | March 31, 2021 | | :------------------------------- | :------------- | | Cash and cash equivalents | $6.1 | | Working capital | $7.5 | | Indebtedness | $0 | - The company's **$186 thousand** PPP loan was **fully forgiven** in February **2021**, eliminating this debt[116](index=116&type=chunk) - Management believes existing cash and cash equivalents are **sufficient for current operations**. However, if additional cash is needed, the company may seek equity, equity-linked, or debt financing, which could **dilute existing stockholders or impose restrictive covenants**[117](index=117&type=chunk) [Cash Flow Analysis](index=25&type=section&id=Cash%20Flow%20Analysis) This section examines the sources and uses of cash from operating, investing, and financing activities [Net Cash Provided by Operating Activities](index=25&type=section&id=Net%20Cash%20Provided%20by%20Operating%20Activities) This section analyzes cash generated or used by the company's core business operations Cash Flow from Operating Activities (in thousands) | Cash Flow from Operating Activities (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $(1) | $263 | - Operating activities used **$1 thousand** cash in Q1 **2021**, primarily due to a **net loss of $43 thousand** and a **non-cash gain on PPP loan forgiveness of $186 thousand**, partially offset by non-cash charges of **$136 thousand** and cash provided by changes in operating assets and liabilities of **$92 thousand**[120](index=120&type=chunk) - Accounts receivable **decreased from $1,113 thousand to $970 thousand**, while inventories **increased from $866 thousand to $881 thousand**. Prepaid expenses and other current assets decreased, and accounts payable and accrued liabilities slightly increased[122](index=122&type=chunk) [Net Cash Used in Investing Activities](index=25&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets Cash Flow from Investing Activities (in thousands) | Cash Flow from Investing Activities (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in investing activities | $(12) | $(34) | - Investing activities used **$12 thousand** in Q1 **2021** for purchases of property, plant, and equipment, compared to **$34 thousand** in Q1 **2020** for legal costs related to patenting new products and processes[123](index=123&type=chunk) [Net Cash Provided by Financing Activities](index=25&type=section&id=Net%20Cash%20Provided%20by%20Financing%20Activities) This section describes cash flows from debt, equity, and dividend transactions - There was **no cash provided by or used in financing activities** during the three months ended March **31**, **2021**, or March **31**, **2020**[124](index=124&type=chunk) [Off-Balance Sheet Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any financial arrangements not recorded on the balance sheet that could impact the company's financial condition - The company does not have any **off-balance sheet arrangements**[125](index=125&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable to the company - This item is **not applicable**[126](index=126&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting [Evaluation of Disclosure Controls and Procedures](index=25&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's disclosure controls and procedures - As of March **31**, **2021**, management, with the participation of the CEO and CFO, concluded that the company's **disclosure controls and procedures were designed at a reasonable assurance level and were effective**[128](index=128&type=chunk) [Changes in Internal Controls over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) This section reports on any material changes in the company's internal controls over financial reporting - There was **no change in internal control over financial reporting** during the period ended March **31**, **2021**, that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[129](index=129&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=26&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This section acknowledges the inherent limitations of any control system in achieving absolute assurance - Management acknowledges that any controls and procedures, no matter how well designed and operated, can provide only **reasonable assurance** of achieving desired control objectives due to inherent resource constraints and the need for judgment[130](index=130&type=chunk) [PART II -- OTHER INFORMATION](index=27&type=section&id=PART%20II%20--%20OTHER%20INFORMATION) This section includes additional information not covered in Part I, such as risk factors, exhibits, and signatures [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the company's Annual Report on Form 10-K for a comprehensive list of risk factors and confirms no material changes during the current reporting period - There have been **no material changes to the risk factors** previously disclosed in the Annual Report on Form **10-K** filed on March **17**, **2021**[132](index=132&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes various exhibits, such as Articles of Incorporation, Bylaws, certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL Instance Document and Taxonomy Extensions[134](index=134&type=chunk) [Signatures](index=28&type=section&id=Signatures) This section formally certifies the accuracy and completeness of the report by authorized officers - The report was signed on **May 6, 2021**, by **Ryan J. Hoffman**, Chief Financial Officer (Principal Financial and Accounting Officer) of Interlink Electronics, Inc[137](index=137&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ . Commission file number 000-21858 INTERLINK ELECTRONICS, INC. (Exact name of registrant as specified in its charter) Nevada (State or other j ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q For the quarterly period ended September 30, 2020 or ¨ Transition Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________________ to ______________________. Commission file number 000-21858 INTERLINK ELECTRONICS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification N ...