Interlink Electronics Reports 2009 Second Quarter and First Half Financial Results

The company reported second quarter revenues of $3.6 million, down 46 percent from $6.7 million in the second quarter of 2008, but up 13 percent from the first quarter of 2009. Gross profit decreased to $1.6 million, or 43 percent of revenues, from $3.1 million, or 46 percent of revenues, in the same quarter last year. Operating expenses were $2.8 million, down from $4.1 million in the 2008 second quarter. Interlink's operating loss was $1.2 million for the second quarter of 2009, compared to a $1.0 million operating loss in the same quarter last year. These operating results include charges for share-based compensation of $144,000 and $115,000 in the second quarters of 2009 and 2008, respectively.

The company incurred a net loss of $1.3 million for the second quarter of 2009, compared to a net loss of $522,000 in the second quarter of 2008. Results in 2008 included a $622,000 benefit to Other Income related to the valuation of convertible notes and warrants outstanding at that time. Interlink reported a net loss of $3.5 million in the first quarter of 2009.

For the six month period ended June 30, 2009, the company reported revenues of $6.8 million, down 46 percent from $12.5 million in the first six months of 2008. Gross profit decreased to $2.3 million, or 34 percent of revenues, from $5.0 million, or 40 percent of revenues, in the same period last year. Operating expenses were $5.8 million for the first six months of 2009, down from $8.7 million for the first six months of 2008. Interlink's operating loss was $3.5 million for the first six months of 2009, compared to a $3.7 million operating loss in the same period last year. These operating results include charges for share-based compensation of $291,000 and $847,000 in the six months ended June 30, 2009 and 2008, respectively.

The company incurred a net loss of $4.8 million for the first six months of 2009, compared to a net loss of $2.6 million in the first six months of 2008. Results in 2008 included a $1.6 million benefit to Other Income related to the valuation of convertible notes and warrants outstanding at that time.

"We continued to see the effects of the economy on eTransactions revenues," said Kevin Wiley, Interlink Chief Executive Officer. "Yet our overall revenues increased sequentially from the first quarter of the year because of significant growth in our Specialty Components business segment, which should continue over the next few quarters. We also made considerable strides in reducing fixed costs throughout the organization. And with the transition of our manufacturing operations to China now complete, we expect to realize even more cost savings going forward. These changes have reduced the company's cash requirements and better position us for growth while we continue to look at strategic alternatives."

Effective March 30, 2009, Interlink was 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 updates on our web site at www.interlinkelectronics.com.

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except par value)
                                                                       June 30,            December 31,
                                                                            2009                2008
                                                                       (Unaudited)         (Audited)
ASSETS
Current assets:
Cash and cash equivalents                                              $    3,224          $    9,248
Restricted cash                                                             --                  368
Accounts receivable, less allowance for doubtful accounts of $43 and        2,021               3,757
$51 at June 30, 2009 and December 31, 2008, respectively
Inventories, net of reserves of $280 and $472 at June 30, 2009 and          3,911               4,378
December 31, 2008, respectively
Prepaid expenses and other current assets                                   640                 958
Total current assets                                                        9,796               18,709
Property and equipment, net                                                 605                 804
Intangibles, net                                                            407                 432
Other assets                                                                63                  93
Total assets                                                           $    10,871         $    20,038
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued payables                                  $    1,111          $    864
Accrued payroll and other accrued liabilities                               1,031               1,953
Deferred revenues - current                                                 360                 591
Convertible note - current, net of discounts of $0 and $868 at June         --                  4,007
30, 2009 and December 31, 2008, respectively
Total current liabilities                                                   2,502               7,415
Deferred revenues - non-current                                             381                 407
Warrants and embedded derivatives                                           348                 97
Total liabilities                                                           3,231               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          59,448              59,156
shares issued and outstanding at June 30, 2009 and December 31,
2008, respectively)
Accumulated other comprehensive loss                                        (491    )           (480    )
Accumulated deficit                                                         (51,317 )           (46,557 )
Total stockholders' equity                                                  7,640               12,119
Total liabilities and stockholders' equity                             $    10,871         $    20,038

INTERLINK ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
data)
                                                                       Three months ended          Six months ended
                                                                       June 30,                    June 30,
                                                                          2009          2008          2009          2008
Revenues, net                                                          $  3,606      $  6,713      $  6,811      $  12,482
Cost of revenues (includes stock-based compensation of $22 and $16        2,055         3,616         4,479         7,446
for the three months ended June 30, 2009 and 2008, respectively and
$44 and $77 for the six months ended June 30, 2009 and 2008,
respectively)
Gross profit                                                              1,551         3,097         2,332         5,036
Operating expenses:
Product development and research (includes stock-based compensation       748           1,112         1,478         2,338
of $30 and $55 for the three months ended June 30, 2009 and 2008,
respectively and $60 and $125 for the six months ended June 30, 2009
and 2008, respectively.)
Selling, general and administrative (includes stock-based                 2,015         2,957         4,333         6,377
compensation of $92 and $44 for the three months ended June 30, 2009
and 2008, respectively and $187 and $645 for the six months ended
June 30, 2009 and 2008, respectively)
Total operating expenses                                                  2,763         4,069         5,811         8,715
Operating loss                                                            (1,212 )      (972   )      (3,479 )      (3,679 )
Other income (expense):
Interest income                                                           3             72            16            194
Interest expense                                                          --            (238   )      (36    )      (475   )
Interest income (expense), net                                            3             (166   )      (20    )      (281   )
Other income                                                              4             655           9             1,645
Other expense                                                             (50    )      (39    )      (409   )      (316   )
Loss on pay down on convertible notes                                     --            --            (858   )      --
Other income (expense), net                                               (46    )      616           (1,258 )      1,329
Total other income (expense)                                              (43    )      450           (1,278 )      1,048
Loss from operations before provision for income taxes                    (1,255 )      (522   )      (4,757 )      (2,631 )
Provision for income taxes                                                --            --            3             --
Net loss                                                               $  (1,255 )   $  (522   )   $  (4,760 )   $  (2,631 )
Net loss per share:
Basic and diluted                                                      $  (0.09  )   $  (0.04  )   $  (0.35  )   $  (0.19  )
Weighted average shares used for net loss :
Basic and diluted                                                         13,778        13,764        13,778        13,757

About Interlink Electronics, Inc.

Interlink Electronics, Inc. (OTC: LINK.PK) 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