Interlink Electronics(LINK) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's financial analysis Item 1. Financial Statements (unaudited) This section presents Interlink Electronics, Inc.'s unaudited consolidated financial statements and notes Condensed Consolidated Balance Sheets 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] - Total liabilities decreased from $1,182 thousand to $1,015 thousand, primarily due to the forgiveness of the PPP loan[7] Condensed Consolidated Statements of Operations 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][102] - 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] - 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] Condensed Consolidated Statements of Comprehensive Income (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] Condensed Consolidated Statements of Stockholders' Equity 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] Condensed Consolidated Statements of Cash Flows 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] - 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][124] - 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][126] Notes to Condensed Consolidated Financial Statements 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] - 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] - Revenue recognition follows ASC 606, recognizing revenue when a customer obtains control of promised goods or services, typically upon shipment[27][29] - The company accounts for leases under ASC 842, recording ROU assets and lease liabilities for operating and financing leases, excluding short-term leases[49][50] 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] 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] - 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][67] - 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] - The weighted average incremental borrowing rate used for lease liabilities was 5.50% for the six months ended June 30, 2021[72] 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] - The company is not party to any legal proceedings as of June 30, 2021, and historically, warranty returns have not been material[82][83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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][94] - 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] - Interlink is expanding its product portfolio to incorporate complementary sensing technologies for applications in the rapidly growing Internet-of-Things (IoT)[96] 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] - 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][113] - 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][114] - 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][115] - 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] - The full amount of the $186 thousand PPP loan principal and interest was forgiven in February 2021[118] - Management believes existing cash and cash equivalents will be sufficient for current operations, but may seek additional capital if circumstances change[119] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms no applicable market risk disclosures for the company - The company has no applicable quantitative and qualitative disclosures about market risk[128] Item 4. Controls and Procedures 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] - There were no material changes in internal control over financial reporting during the period ended June 30, 2021[131] - Controls and procedures, regardless of design, can only provide reasonable assurance due to inherent limitations and resource constraints[132] PART II – OTHER INFORMATION This section contains other required information, including risk factors and exhibits Item 1A. Risk Factors 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] Item 6. Exhibits 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] 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]