Interlink Electronics Reports 2008 Fourth Quarter and Fiscal Year Financial Results

Interlink reported total revenues for the fiscal year ended December 31, 2008 of $25.6 million, up 33 percent from $19.3 million in the same period in 2007. Gross profit increased to $10.2 million, or 40% of revenues for the 2008 fiscal year from $5.8 million, or 30% or revenues for the 2007 fiscal year. The company's operating loss was $4.5 million for the 2008 fiscal year compared to an operating loss of $8.5 million for the 2007 fiscal year. These results include charges for share-based compensation of $655,000 and $2,242,000 in the 2008 and 2007 fiscal years, respectively. Interlink's net loss for the year ended December 31, 2008 was $3.3 million, with a basic and diluted loss per share of ($0.24), compared to a net loss of $5.7 million, with a basic and diluted loss per share of ($0.41), for the year ended December 31, 2007. The 2007 fiscal year numbers include a $5.9 million gain, or earnings per share of $0.43, from the sale of assets.

Interlink reported total fourth quarter revenues of $5.9 million, down 11 percent from $6.7 million in the fourth quarter of 2007. However, gross profit increased to $2.0 million from $1.6 million in the same quarter last year. Interlink's operating loss for the fourth quarter of 2008 was $818,000, compared to a $2.2 million operating loss in the fourth quarter of 2007. These results include charges (reductions) for share-based compensation of ($336,000) and $471,000 in the fourth quarters of 2008 and 2007, respectively. Interlink's net loss in the fourth quarter of 2008 was $802,000, with a basic and diluted loss per share of ($0.06), compared to a net loss of $2.6 million with a basic and diluted loss per share of ($0.19) in the same quarter last year.

"In 2008 we saw revenue growth, improved gross margins and reduced operating losses when compared to 2007," stated Kevin Wiley, Interlink Chief Executive Officer. "We continue to look at ways to increase our value, be it by better aligning costs with revenues or through various strategic alternatives. We are still taking hard looks at the cost structures of our eTransactions and Specialty Components business segments and will make adjustments where necessary," said Mr. Wiley.

"Currently, while we are no longer required to make filings in accordance with SEC regulations, we intend to continue to keep our shareholders informed of our financial results through press releases, the Pink Sheets disclosure system and/or updates on our web site at www.interlinkelectronics.com," stated Mr. Wiley.

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                      Three Month Period Ended December 31,  Twelve Month Period Ended December 31,
                                                                            2008            2007                   2008            2007
                                                                      (Unaudited)     (Unaudited)            (Audited)       (Audited)
Revenues, net                                                         $     5,895     $     6,650            $     25,596    $     19,315
Cost of revenues (includes stock-based compensation of ($33) and $88        3,865           5,059                  15,393          13,556
for the three months ended December 31, 2008 and 2007, respectively,
and $64 and $532 for the twelve months ended December 31, 2008 and
2007, respectively)
Gross profit                                                                2,030           1,591                  10,203          5,759
Operating expenses:
Product development and research (includes stock-based compensation         782             734                    4,104           2,970
of ($57) and $124 for the three months ended December 31, 2008 and
2007, respectively, and $112 and $504 for the twelve months ended
December 31, 2008 and 2007, respectively)
Selling, general and administrative (includes stock-based                   2,066           3,013                  10,625          11,259
compensation of ($246) and $260 for the three months ended December
31, 2008 and 2007, respectively, and $479 and $1,206 for the twelve
months ended December 31, 2008 and 2007, respectively)
Total operating expenses                                                    2,848           3,747                  14,729          14,229
Operating loss                                                              (818   )        (2,156 )               (4,526 )        (8,470 )
Other income (expense):
Interest income                                                             50              174                    293             231
Interest expense                                                            (239   )        (274   )               (958   )        (573   )
Interest expense, net                                                       (189   )        (100   )               (665   )        (342   )
Other income                                                                355             522                    2,217           581
Other expense                                                               (147   )        (592   )               (334   )        (1,356 )
Other income (expense), net                                                 208             (70    )               1,883           (775   )
Total other income (expense)                                                19              (170   )               1,218           (1,117 )
Loss from continuing operations before provision for income taxes           (799   )        (2,326 )               (3,308 )        (9,587 )
Provision for income taxes                                                  3               (13    )               3               39
Loss from continuing operations, net of tax                                 (802   )        (2,313 )               (3,311 )        (9,626 )
Loss from discontinued operations, net of tax                               ---             ---                    ---             (1,957 )
Gain (loss) on sale of assets, net of tax                                   ---             (296   )               ---             5,914
Net loss                                                              $     (802   )  $     (2,609 )         $     (3,311 )  $     (5,669 )
Loss per share from continuing operations, net of tax:
Basic and diluted                                                     $     (0.06  )  $     (0.17  )         $     (0.24  )  $     (0.70  )
Loss per share on discontinued operations, net of tax:
Basic and diluted                                                     $     ---       $     ---              $     ---       $     (0.14  )
Gain (loss) per share on sale of assets, net of tax:
Basic                                                                 $     ---       $     (0.02  )         $     ---       $     0.43
Diluted                                                               $     ---       $     (0.02  )         $     ---       $     0.40
Net loss per share:
Basic and diluted                                                     $     (0.06  )  $     (0.19  )         $     (0.24  )  $     (0.41  )
Weighted average shares used for loss from continuing operations,
net of tax:
Basic and diluted                                                           13,778          13,749                 13,768          13,749
Weighted average shares used for loss on discontinued operations,
net of tax:
Basic and diluted                                                           ---             13,749                 ---             13,749
Weighted average shares used for gain (loss) on sale of assets, net
of tax:
Basic                                                                       ---             13,749                 ---             13,749
Diluted                                                                     ---             13,749                 ---             14,465
Weighted average shares used for net loss:
Basic and diluted                                                           13,778          13,749                 13,768          13,749

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
                                                                      December 31,
                                                                           2008               2007
                                                                      (Audited)          (Audited)
Assets
Current assets:
Cash and cash equivalents                                             $    9,248         $    12,659
Restricted cash                                                            368                2,937
Accounts receivable, less allowance for doubtful accounts of $51 and       3,757              3,918
$199 at December 31, 2008 and 2007, respectively
Inventories, net of reserves of $472 and $394 at December 31, 2008         4,378              5,151
and 2007, respectively
Prepaid expenses and other current assets                                  958                1,754
Assets held for sale                                                       --                 437
Total current assets                                                       18,709             26,856
Property and equipment, net                                                804                999
Intangibles, net                                                           432                113
Other assets                                                               93                 364
Total assets                                                          $    20,038        $    28,332
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable and accrued payables                                 $    864           $    1,600
Accrued payroll and other accrued liabilities                              1,953              5,836
Deferred revenues - current                                                591                187
Convertible note - current, net of discounts of $868 and $0 at             4,007              --
December 31, 2008 and 2007, respectively
Liabilities related to assets held for sale                                --                 86
Total current liabilities                                                  7,415              7,709
Deferred revenues - non-current                                            407                459
Convertible note - non-current, net of discounts of $0 and $1,415 at       --                 3,413
December 31, 2008 and 2007, respectively
Warrants and embedded derivatives                                          97                 1,974
Total liabilities                                                          7,919              13,555
Commitments and contingencies
Stockholders' equity:
Preferred stock, $5.00 par value (100 shares authorized, none issued       --                 --
and outstanding)
Common stock, $0.00001 par value (50,000 shares authorized, 13,778         59,156             58,463
and 13,749 shares issued and outstanding at December 31, 2008 and
2007, respectively)
Accumulated other comprehensive loss                                       (480    )          (440    )
Accumulated deficit                                                        (46,557 )          (43,246 )
Total stockholders' equity                                                 12,119             14,777
Total liabilities and stockholders' equity                            $    20,038        $    28,332

About Interlink Electronics, Inc.

Interlink Electronics, Inc. (OTC: LINK | Quote | Chart | News | PowerRating) is a worldwide provider of intuitive interface components and solutions. Setting tomorrow's standards for electronic signature, e-notarization products and interface components for consumer electronics, Interlink has established itself as one of the world's leading innovators of intuitive interface design. With more than 41 patents around the world protecting its technologies and products, Interlink Electronics serves a world-class customer-base from its corporate headquarters in Camarillo, California and offices in Japan, Hong Kong and China. For more information, see http://www.interlinkelectronics.com.

This release contains forward-looking statements that involve a number of risks and uncertainties. The following are among the factors that could cause actual results to differ materially from the forward-looking statements: historical losses and negative cash flow, the success of business divestitures and acquisitions, the ownership of the majority of our stock by a small group of investors, our success in predicting new markets and the acceptance of our new products, efficient management of our infrastructure, the pace of technological developments and industry standards evolution and their effect on our target product and market choices, the effect of outsourcing technology development, changes in the ordering patterns of our customers, a decrease in the quality and/or reliability of our products, protection of our proprietary intellectual property, competition by alternative sophisticated as well as generic products, pending litigation against Interlink, historical weaknesses in internal controls over financial accounting, the continued availability at competitive prices of raw materials for our products, disruptions in our manufacturing facilities, risks of international sales and operations including fluctuations in exchange rates, compliance with regulatory requirements applicable to our manufacturing operations, and customer concentrations. The forward-looking statements contained in this release should be considered in light of these risk factors.

SOURCE: Interlink Electronics, Inc.

Interlink Electronics, Inc. 
Investor Relations Contact: 
Charles Best, 805-484-8855 ext. 151 
cbest@interlinkelectronics.com