Interlink Electronics Reports 2009 First Quarter Financial Results

The company reported total 2009 first quarter revenues of $3.2 million, down 44 percent from $5.8 million in the first quarter of 2008. Gross profit decreased to $781,000, or 24 percent of revenues, from $1.9 million, or 34 percent of revenues, in the same quarter last year. Operating expenses decreased by $1.6 million to $3.0 million from $4.6 million for the 2008 first quarter. Interlink's operating loss was $2.3 million for the first quarter of 2009, down $400,000 from a $2.7 million operating loss in the same quarter last year. These operating results include charges for share-based compensation of $148,000 and $732,000 in the first quarters of 2009 and 2008, respectively.

The company incurred a net loss of $3.5 million for the first quarter of 2009, including $1.2 million of non operating charges, most notably an $858,000 non cash charge related to the total repayment in January 2009 of $5 million in convertible notes and unpaid interest. The company's net loss was $2.1 million for the first quarter of 2008, consisting primarily of a net non operating and non cash gain of $714,000 related to the valuation of the same convertible notes and warrants.

"Economic conditions prevented us from maintaining our improved 2008 performance into the first quarter of this year," said Kevin Wiley, Interlink Chief Executive Officer. "The impact was most pronounced on our eTransactions business unit, which targets the four markets most severely affected by the global economic downturn: banking, insurance, financial brokerage, and automotive. While there are some indications for improved performance later in the year, we are not expecting a significant recovery in these markets until the start of 2010.

"By moving all of our manufacturing operations to China and with reductions in headcount and other operating costs, we significantly reduced expenses to better align with our future growth," Wiley continued. "We also repaid our $5 million convertible notes as well as all related accrued and unpaid interest, eliminating $400,000 in annual interest payments. We will continue to manage our business with the goal of improved operational performance while also evaluating any strategic alternatives."

Wiley concluded, saying, "We are pleased to announce that effective June 1, 2009, the court approved our settlement agreements with the plaintiffs related to the class action lawsuit originated in November 2005 and the derivative action law suit originated in January 2006. The lawsuits were dismissed with prejudice and we will not face any further exposure. The settlement will be paid entirely from our directors and officers insurance that was in effect at the time of the claim."

Effective March 30, 2009, Interlink is no longer required to make filings in accordance with SEC regulations. The Company intends to continue to keep shareholders informed of financial results through press releases, postings on the Pink Sheets disclosure system (www.pinksheets.com) under the symbol LINK, and/or updates on our web site at www.interlinkelectronics.com.

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except par value)
                                                                        March 31,         December 31,
                                                                        2009              2008
                                                                        (Unaudited)       (Audited)
ASSETS
Current assets:
Cash and cash equivalents                                               $   4,297         $    9,248
Restricted cash                                                             --                 368
Accounts receivable, less allowance for doubtful accounts of $26 and        2,223              3,757
$51 at March 31, 2009 and December 31, 2008, respectively
Inventories, net of reserves of $491 and $472 at March 31, 2009 and         3,992              4,378
December 31, 2008, respectively
Prepaid expenses and other current assets                                   641                958
Total current assets                                                        11,153             18,709
Property and equipment, net                                                 737                804
Intangibles, net                                                            410                432
Other assets                                                                63                 93
Total assets                                                            $   12,363        $    20,038
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued payables                                   $   801           $    864
Accrued payroll and other accrued liabilities                               1,619              1,953
Deferred revenues - current                                                 482                591
Convertible note - current, net of discounts of $0 and $868 at March        --                 4,007
31, 2009 and December 31, 2008, respectively
Total current liabilities                                                   2,902              7,415
Deferred revenues - non current                                             394                407
Warrants and embedded derivatives                                           319                97
Total liabilities                                                           3,615              7,919
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          59,304             59,156
shares issued and outstanding at March 31, 2009 and December 31,
2008, respectively)
Accumulated other comprehensive loss                                        (494    )          (480    )
Accumulated deficit                                                         (50,062 )          (46,557 )
Total stockholders' equity                                                  8,748              12,119
Total liabilities and stockholders' equity                              $   12,363        $    20,038

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
data)
                                                                       Three Months Ended March 31,
                                                                       2009             2008
Revenues, net                                                          $   3,205        $   5,769
Cost of revenues (includes stock-based compensation of $23 and $61         2,424            3,830
for the three months ended March 31, 2009 and 2008, respectively)
Gross profit                                                               781              1,939
Operating expenses:
Product development and research (includes stock-based compensation        730              1,226
of $31 and $70 for the three months ended March 31, 2009 and 2008,
respectively)
Selling, general and administrative (includes stock-based                  2,318            3,420
compensation of $94 and $601 for the three months ended March 31,
2009 and 2008, respectively)
Total operating expenses                                                   3,048            4,646
Operating loss                                                             (2,267 )         (2,707 )
Other income (expense):
Interest income                                                            13               122
Interest expense                                                           (36    )         (237   )
Interest income (expense), net                                             (23    )         (115   )
Other income                                                               5                990
Other expense                                                              (359   )         (276   )
Loss on pay down on convertible notes                                      (858   )         --
Other income (expense), net                                                (1,212 )         714
Total other income (expense)                                               (1,235 )         599
Loss from operations before provision for income taxes                     (3,502 )         (2,108 )
Provision for income taxes                                                 3                --
Net loss                                                               $   (3,505 )     $   (2,108 )
Net loss per share:
Basic and diluted                                                      $   (0.25  )     $   (0.15  )
Weighted average shares used for net loss :
Basic and diluted                                                          13,778           13,749

About Interlink Electronics, Inc.

Interlink Electronics, Inc. (Pink Sheets: 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 
Charles Best, 805-484-8855 ext. 151 
cbest@interlinkelectronics.com