Interlink Electronics (LINK) 10-Q 11 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 09, 2017
Document and Entity Information
Entity Registrant Name	INTERLINK ELECTRONICS INC
Entity Central Index Key	828,146
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,334,805
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 6,373	$ 6,009
Restricted cash	5	5
Accounts receivable, net	1,636	1,726
Inventories	1,351	1,268
Prepaid expenses and other current assets	321	377
Total current assets	9,686	9,385
Property, plant and equipment, net	289	310
Deferred income taxes	630	675
Intangibles, net	60	44
Other assets	59	57
Total assets	10,724	10,471
Current liabilities:
Accounts payable	239	324
Accrued liabilities	313	334
Accrued income taxes	141	104
Deferred revenue, current	29	111
Total current liabilities	722	873
Total liabilities	722	873
Commitments and contingencies (see note 9)
Stockholders' equity:
Common stock, $0.001 par value: 30,000 shares authorized, 7,328 and 7,326 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively	7	7
Additional paid-in-capital	60,399	60,370
Accumulated other comprehensive (loss) income	(60)	(71)
Accumulated deficit	(50,344)	(50,708)
Total stockholders' equity	10,002	9,598
Total liabilities and stockholders' equity	$ 10,724	$ 10,471

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2017	Dec. 31, 2016
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	30,000	30,000
Common stock, shares issued	7,328	7,326
Common stock, shares outstanding	7,328	7,326

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Condensed Consolidated Statements of Income
Revenue, net	$ 2,884	$ 2,805
Cost of revenue	1,148	1,134
Gross profit	1,736	1,671
Operating expenses:
Engineering, research and development	178	141
Selling, general and administrative	1,027	912
Total operating expenses	1,205	1,053
Income from operations	531	618
Other income (expense)
Other income (expense), net	19	14
Income from continuing operations before income tax expense	550	632
Income tax expense	(186)	(26)
Net income	364	606
Other comprehensive income, net of tax:
Foreign currency translation adjustments	11	4
Comprehensive income	$ 375	$ 610
Earnings per share, basic and diluted	$ 0.05	$ 0.08
Weighted average common shares outstanding - basic	7,328	7,326
Weighted average common shares outstanding - diluted	7,412	7,391

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 364	$ 606
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	40	28
Stock based compensation	29	25
Changes in operating assets and liabilities:
Accounts receivable	90	(199)
Inventories	(83)	(168)
Prepaid expenses and other current assets	56	79
Other assets	(2)	(31)
Accounts payable	(85)	(83)
Accrued liabilities	(21)	(58)
Accrued income taxes	37
Deferred income taxes	45
Deferred revenue	(82)	(14)
Net cash provided by operating activities	388	185
Cash flows from investing activities:
Property, plant and equipment	(16)	(9)
Intangibles	(19)
Net cash used in investing activities	(35)	(9)
Effect of exchange rate changes on cash and cash equivalents	11	4
Net increase in cash and cash equivalents	364	180
Cash and cash equivalents, beginning of period	6,009	4,430
Cash and cash equivalents, end of period	6,373	4,610
Supplemental disclosure of cash flow information:
Income taxes paid	$ 105	$ (15)

THE COMPANY AND ITS SIGNIFICANT

THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2017
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES	NOTE 1-THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES Description of Business Interlink Electronics, Inc. (“we,” “us,” “our,” “Interlink” or the “Company”) designs, develops, manufactures and sells a range of force-sensing technologies that incorporate our proprietary materials technology, firmware and software into a portfolio of standard sensor based products and custom sensor system solutions. These include sensor components, subassemblies, modules and products that support effective, efficient cursor control and novel three-dimensional user inputs. Our human machine interface (“HMI”) technology platforms are deployed in a wide range of markets including consumer electronics, automotive, industrial, and medical. Interlink serves our world-wide customer base from our corporate headquarters in Westlake Village, California (greater Los Angeles area), our global research and development (“R&D”) and engineering center in Singapore, our printed-electronics manufacturing facility in Shenzhen, China and our global distribution and logistics center in Hong Kong. We also maintain engineering, assembly and prototyping capabilities in Simi Valley, California along with technical and sales offices in Japan and at multiple locations in the United States. Our principal executive office is located at 31248 Oak Crest Drive, Suite 110, Westlake Village, California 91361 and our telephone number is (805) 484-8855. Our website address is www.interlinkelectronics.com. Fiscal Year Our fiscal year is January 1 through December 31. Basis of Presentation The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. They do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2016 balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required for annual periods. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2016, included in our Annual Report on Form 10-K, filed with the SEC on March 2, 2017. The condensed consolidated financial statements included herein are unaudited. However, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly our consolidated financial position and our consolidated results of operations and consolidated cash flows. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for future quarters or the full year. Our condensed consolidated financial statements include the accounts of Interlink and our subsidiaries in Shenzhen, China, Hong Kong and Singapore. All intercompany accounts and transactions between our consolidated operations have been eliminated. Share and per share amounts and weighted-average grant date fair value reflect the 25% stock dividend paid on April 1, 2016. Foreign Currency Translation The functional currency of our Chinese subsidiary is the Chinese Yuan Renminbi. The functional currency for our Hong Kong and Singapore subsidiaries is the United States dollar. However, our Hong Kong and Singapore subsidiaries also transact business in their local currency. Therefore, assets and liabilities are translated into United States dollars at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate prevailing during the respective periods. Foreign currency transaction and translation gains and losses are included in results of operations. Segment Reporting We operate in one reportable segment: the manufacture and sale of force sensing technology solutions. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes to the consolidated financial statements. Management regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, warranty reserves, inventory valuation reserves, stock-based compensation, purchased intangible asset valuations and useful lives, asset retirement obligations, and deferred income tax asset valuation allowances. These estimates and assumptions are based on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The actual results we experience may differ materially and adversely from our original estimates. To the extent there are material differences between the estimates and the actual results, our future results of operations will be affected. Risk and Uncertainties Our future results of operations involve a number of risks and uncertainties. Factors that could affect our business or future results and cause actual results to vary materially from historical results include, but are not limited to, the rapid change in our industry; problems with the performance, reliability or quality of our products; loss of customers; impacts of doing business internationally, including foreign currency fluctuations; potential shortages of the supplies we use to manufacture our products; disruptions in our manufacturing facilities; changes in environmental directives impacting our manufacturing process or product lines; the development of new proprietary technology and the enforcement of intellectual property rights by or against us; our ability to attract and retain qualified employees; and our ability to raise additional capital. Recently Adopted Accounting Pronouncements In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-12, “ Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”, effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015. This update is intended to resolve the diverse accounting treatment of share-based payment awards whose performance target may be achieved after the requisite service period. An entity may apply the standards (1) prospectively to all share-based payment awards that are granted or modified on or after the effective date, or (2) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Earlier application is permitted. Effective January 1, 2016, the Company adopted ASU No. 2014-12 and it did not have a material effect on our consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, “ Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ”, which provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This update is effective for annual periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. Effective January 1, 2016, the Company adopted ASU No. 2014-15 and it did not have a material effect on our consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”, to change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The standard is effective for fiscal and interim periods within those fiscal years, beginning after December 15, 2015. Effective January 1, 2016, the Company adopted ASU No. 2015-02 and it had no impact on our consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”, which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU may be applied prospectively or retrospectively. The Company adopted ASU 2015-17 on January 1, 2016, and applied it retrospectively. In July 2015, the FASB issued ASU 2015-11, “ Inventory (Topic 330): Simplifying the Measurement of Inventory ”, which provides new guidance regarding the measurement of inventory. The new guidance requires most inventory to be measured at the lower of cost or net realizable value. The standard defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The standard applies to companies other than those that measure inventory using last-in, first-out ("LIFO") or the retail inventory method. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within those reporting periods. Early application is permitted. Effective January 1, 2017, the Company adopted ASU No. 2015-11 and it had no impact on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “ Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ”, which modifies and simplifies several aspects of accounting for share-based payment transactions. Changes to the current guidance primarily pertain to the income tax consequences of share-based payment transactions. Under the standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur, regardless of whether the benefit reduces taxes payable in the current period. The full amount of excess tax benefits should be classified along with other income tax cash flows as an operating activity. When awards are settled, cash paid to the taxing authorities by an employer when directly withholding shares for tax withholding purposes will be classified as a financing activity. Additionally, with respect to forfeitures of awards, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The amendments in this standard are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. Effective January 1, 2017, the Company adopted ASU No. 2016-09 and it had no impact on our consolidated financial statements. Recently Issued Accounting Pronouncements (Not Yet Adopted) In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) .” The amendments to this update supersede nearly all existing revenue recognition guidance under GAAP, including the revenue recognition requirements in ASC Topic 605, “ Revenue Recognition . ” . The standard was originally set to become effective in annual periods beginning after December 15, 2016 and for interim and annual reporting periods thereafter. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers; Deferral of the Effective Date,” which defers the effective date of ASU 2014-09 for all entities by one year, thereby delaying the effective date of the standard to January 1, 2018, with an option that would permit companies to adopt the standard as early as the original effective date. Early adoption prior to the original effective date is not permitted. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company is currently assessing the impact of ASU 2014-09 on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, that amends existing guidance around classification and measurement of certain financial assets and liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value through earnings. For equity investments without readily determinable fair values, the cost method is also eliminated. However, most entities will be able to elect to record equity investments without readily determinable fair values at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. The standard also requires that financial assets and liabilities be disclosed separately in the notes to the financial statements based on measurement principle and form of financial asset. The amendments in this guidance are effective for financial statements issued for interim and annual periods beginning after December 15, 2017. This standard is not expected to have a significant impact on our consolidated financial statements or disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842) ”, which replaces the existing guidance in ASC Topic 840, “Leases”. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application. The Company is currently evaluating the impact of ASU 2016-02 to our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ”, that significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables. The standard requires an entity to estimate its lifetime “expected credit loss” for such assets at inception, and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. This standard is not expected to have a significant impact on our consolidated financial statements or disclosures. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payment, ” which clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company has not yet evaluated the impact of the adoption of this accounting standard on our consolidated financial statements. In October 2016, the FASB issued ASU No. 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, ” which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, recognition of the income tax consequence was not recognized until the asset was sold to an outside party. This amendment should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. We are currently evaluating the impact of ASU 2016-16 on our consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash ”. The amendments in this update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. These amounts should be included within cash and cash equivalents when reconciling the beginning and ending balances for the periods shown on the statement of cash flows. The ASU requires retrospective application, and is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company does not expect the adoption of this accounting standard to have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, clarifying the definition of a business, reducing the number of transactions that need to be further evaluated and providing a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in the ASU specify that when the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not a business. The guidance also requires that an integrated set of assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output to be considered a business, and removes the evaluation of whether a market participant could replace the missing elements. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this accounting standard to have a material impact on our consolidated financial statements.

INVENTORIES

INVENTORIES	3 Months Ended
	Mar. 31, 2017
INVENTORIES
INVENTORIES	NOTE 2-INVENTORIES Inventories, stated at the lower of cost or market, consist of the following: March 31, December 31, 2017 2016 Inventories (in thousands) Raw materials $ 765 $ 738 Work-in-process 345 357 Finished goods 241 173 Total inventories $ 1,351 $ 1,268

STOCKHOLDERS EQUITY

STOCKHOLDERS EQUITY	3 Months Ended
	Mar. 31, 2017
STOCKHOLDERS EQUITY
STOCKHOLDERS' EQUITY	NOTE 3-STOCKHOLDERS’ EQUITY On April 1, 2016, we completed a stock dividend of one quarter (¼) of one share of common stock for every one (1) share of common stock outstanding. All share amounts, exercise prices, and weighted-average grant date fair value for our common stock, stock options and restricted stock reflect the stock split and stock dividend.

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION	3 Months Ended
	Mar. 31, 2017
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION	NOTE 4-STOCK BASED COMPENSATION Under the terms of our 2016 Omnibus Incentive Plan (the “2016 Plan”), officers and key employees could be granted restricted stock units, as well as non-qualified or incentive stock options, at the discretion of the Compensation Committee of the Board of Directors. The Plan replaces the 1996 Stock Incentive Plan (the “1996 Plan”) which was terminated in December 2015; however, all grants issued under the 1996 Plan prior to its termination will continue to vest, expire or terminate in accordance with the 1996 Plan document and the terms of each award. Restricted Stock Units Our outstanding restricted stock unit grants vest over five years in installments of 50% on the fourth anniversary of the grant date and the remaining 50% on the fifth anniversary of the grant date. Unvested restricted shares are forfeited if the recipient’s employment terminates for any reason other than death, disability or special circumstances as determined by the Compensation Committee of the Board of Directors. Activity for our restricted stock units is as follows: Weighted Average Restricted Stock Weighted-Average Grant Remaining Aggregate Intrinsic Units Date Fair Value Contractual Life Value (in thousands) (years) (in thousands) Restricted stock units, December 31, 2016 165 $ 3.54 2.33 $ 1,158 Awarded — $ — Released — — Forfeited — $ — Restricted stock units, March 31, 2017 165 $ 3.54 2.09 $ 1,485 The aggregate intrinsic values in the preceding table for the restricted stock units outstanding represent the total pretax intrinsic value, based on our closing stock price of $9.00 and $7.02 as of March 31, 2017 and December 31, 2016, respectively. No restricted stock units vested in the three months ended March 31, 2017. Stock Options The exercise price of our stock options is the closing price on the date the options are granted. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Options generally expire 10 years from the date of grant. The following table summarizes the activity for the remaining options outstanding under the Plan: Weighted Average Weighted Average Remaining Aggregate Intrinsic Shares Exercise Price Contractual Life Value (in thousands) (years) (in thousands) Options outstanding, December 31, 2016 11 $ 3.75 0.65 $ 37 Granted — — Exercised — — Cancelled or expired — $ — Options outstanding, March 31, 2017 11 $ 3.75 0.41 $ 59 Options exercisable, March 31, 2017 11 $ 3.75 0.41 $ 59 This intrinsic value represents the excess of the fair market value of our common stock on the date of exercise over the exercise price of such options. The aggregate intrinsic values in the preceding table for the options outstanding represent the total pretax intrinsic value, based on our closing stock price of $9.00 and $7.02 as of March 31, 2017 and December 31 2016, respectively, which would have been received by the option holders had those option holders exercised their in-the-money options as of those dates. The fair value of stock-based option awards is estimated at the date of grant using the Black-Scholes option pricing model; however, the value calculated using an option pricing model may not be indicative of the fair value observed in a willing buyer/willing seller market transaction, or actually realized by the employee upon exercise. Expected volatility used to estimate the fair value of options granted is based on the historical volatility of our common stock. The risk-free interest rate is based on the United States Treasury constant maturity rate for the expected life of the stock option. The expected life of a stock award is the period of time that the award is expected to be outstanding. We have not granted any stock options since 2008. The following table provides additional information in regards to options outstanding as of March 31, 2017: Options Outstanding Options Exercisable Weighted Range of Number Weighted Average Weighted Average Number Average Exercise Exercise Price Outstanding Remaining Contractual Life Exercise Price Exercisable Price (in thousands) (years) (in thousands) $ 1.56 4 1.02 $ 1.56 4 $ 1.56 $ - 5.20 7 0.07 $ 4.95 7 $ 4.95 11 0.41 $ 3.75 11 $ 3.75

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2017
EARNINGS PER SHARE
EARNINGS PER SHARE	NOTE 5-EARNINGS PER SHARE Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 364 $ 606 Comprehensive income $ 375 $ 610 Weighted average outstanding shares of common stock 7,328 7,326 Dilutive potential common shares from stock options and restricted stock units 84 65 Common stock and common stock equivalents 7,412 7,391 Earnings per share, basic and diluted $ 0.05 $ 0.08 Comprehensive income per share: basic and diluted $ 0.05 $ 0.08 Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation

SIGNIFICANT CUSTOMERS, CONCENTR

SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION	3 Months Ended
	Mar. 31, 2017
SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION
SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION	NOTE 6-SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION We manage and operate our business through one operating segment. Net revenues from customers equal to, or greater than, 10% of total net revenues are as follows: Three months ended March 31, 2017 2016 Customer A % % Customer B % * % Customer C % * % Customer D % Customer E * % % Customer F * % % * Net revenues by geographic area are as follows: Three months ended March 31, 2017 2016 (in thousands) United States $ 1,226 $ 1,579 Asia and Middle East 1,157 685 Europe and other 501 541 Revenue, net $ 2,884 $ 2,805 Revenues by geographic area are based on the country of shipment destination. The geographic location of distributors and third-party manufacturing service providers may be different from the geographic location of the purchasers and/or ultimate end users. We provide credit only to creditworthy third parties who are subject to our credit verification procedures. Accounts receivable balances are monitored on an ongoing basis, and accounts deemed to have credit risk are fully reserved. At March 31, 2017, three customers accounted for 31%, 27%, and 10% of total accounts receivable, respectively. At December 31, 2016, two customers accounted for 44% and 15% of total accounts receivable, respectively. Our allowance for doubtful accounts was $0 at both March 31, 2017 and December 31, 2016. Our long-lived assets (property, plant and equipment plus intangibles, net) were geographically located as follows: March 31, December 31, 2017 2016 (in thousands) United States $ 99 $ 87 Asia 250 267 Total long-lived assets $ 349 $ 354

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Mar. 31, 2017
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	NOTE 7-RELATED PARTY TRANSACTIONS BKF Capital Group (OTC:BKFG) We entered into an agreement, dated March 1, 2015 with BKF Capital Group, Inc. (“BKF”). Pursuant to the agreement, BKF occupies and uses one furnished office, telephone and other services, located at our corporate offices, for a fee of $1,000 per month. As of February 1, 2017 this agreement was modified as BKF relocated and no longer occupied the furnished office. Accordingly, the fee was reduced to $250 per month. In addition, we will occasionally pay administrative expenses on behalf of BKF, and BKF will reimburse the Company. For the three months ended March 31, 2017 and 2016, BKF paid $1,500 and $3,000, respectively to the Company. Steven N. Bronson, our Chairman of the Board, President and Chief Executive Officer, is also the Chairman of the Board, Chief Executive Officer and majority shareholder of BKF. At March 31, 2017 and December 31, 2016, there were no unpaid amounts owed by BKF to us. Qualstar Corporation (NASDAQ:QBAK) The Company agreed to reimburse, or be reimbursed by, Qualstar Corporation (“Qualstar”) for our occupation and use of a portion of their Simi Valley manufacturing location and other expenses paid by one company on behalf of the other. Steven N. Bronson, our Chairman of the Board, President and Chief Executive Officer, is also the President and Chief Executive Officer of Qualstar. Transactions with Qualstar are as follows: Three months ended March 31, 2017 2016 Due from Qualstar Due to Qualstar Due from Qualstar Due to Qualstar (in thousands) Balance at January 1, $ 2 $ 1 $ — $ 6 Billed to Qualstar by Interlink 6 — 2 — Paid by Qualstar to Interlink (8) — (2) — Billed to Interlink by Qualstar — 2 — 11 Paid by Interlink to Qualstar — (2) — (13) Balance at March 31, $ — $ 1 $ — $ 4

INCOME TAXES

INCOME TAXES	3 Months Ended
	Mar. 31, 2017
INCOME TAXES
INCOME TAXES	NOTE 8-INCOME TAXES Income tax expense as a percentage of income before income taxes was 33.8% for the three months ended March 31, 2017 compared to 4.1% for the comparable period in the prior year. Our income tax expense is primarily impacted by the mix of domestic and foreign pre-tax earnings, as well as our ability to utilize prior net operating loss carryovers (“NOLs”). The Company experienced an ownership change under IRC Section 382 in February 2010. In general, a Section 382 ownership change occurs if there is a cumulative change in our ownership by “5% shareholders” (as defined in the Internal Revenue Code of 1986, as amended) that exceeds 50 percentage points over a rolling three-year period. An ownership change generally affects the rate at which NOLs and potential other deferred tax assets are permitted to offset future taxable income. Certain state jurisdictions within which we operate contain similar provisions and limitations. All of the remaining federal and state NOLs as of March 31, 2017 are subject to annual limitations due to the February 2010 ownership change. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. We analyzed our need to maintain the valuation allowance against our otherwise recognizable deferred tax assets in the federal, state and foreign jurisdictions and had previously recorded a full valuation allowance. During the fourth quarter of 2016, we determined, given our current earnings and anticipated future earnings, that sufficient evidence existed to reach a conclusion that the valuation allowance was no longer warranted.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2017
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	NOTE 9-COMMITMENTS AND CONTINGENCIES Operating Leases We lease certain facilities under non-cancellable operating leases. The leases expire at various dates through fiscal 2021 and frequently include renewal provisions for varying periods of time, provisions which require us to pay taxes, insurance and maintenance costs, and provisions for minimum rent increases. Minimum lease payments, including scheduled rent increases are recognized as rent expenses on a straight-line basis over the term of the lease. Future minimum lease payments under non-cancellable operating leases that have remaining non-cancellable lease terms in excess of one year are as follows: Remaining 2017 2018 2019 2020 Thereafter Total (in thousands) Operating Leases $ $ $ $ $ $ Litigation We are not party to any legal proceedings at March 31, 2017. We are occasionally involved in legal proceedings in the ordinary course of business, including actions against us which assert or may assert claims or seek to impose fines and penalties in substantial amounts. Related legal defense costs are expensed as incurred. Warranties We establish reserves for future product warranty costs that are expected to be incurred pursuant to specific warranty provisions with our customers. We generally warrant our products against defects for one year from date of shipment, with certain exceptions in which the warranty period can extend to more than one year based on contractual agreements. Our warranty reserves are established at the time of sale and updated throughout the warranty period based upon numerous factors including historical warranty return rates and expenses over various warranty periods. Historically, our warranty returns have not been material. Intellectual Property Indemnities We indemnify certain customers and our contract manufacturers against liability arising from third-party claims of intellectual property rights infringement related to our products. These indemnities appear in development and supply agreements with our customers as well as manufacturing service agreements with our contract manufacturers, are not limited in amount or duration and generally survive the expiration of the contract. Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, we are unable to determine the maximum amount of losses that we could incur related to such indemnifications. Director and Officer Indemnities and Contractual Guarantees We have entered into indemnification agreements with our directors and executive officers, which require us to indemnify such individuals to the fullest extent permitted by Nevada law. Our indemnification obligations under such agreements are not limited in amount or duration. Certain costs incurred in connection with such indemnifications may be recovered under certain circumstances under various insurance policies. Given that the amount of any potential liabilities related to such indemnities cannot be determined until a lawsuit has been filed, we are unable to determine the maximum amount of losses that we could incur relating to such indemnities. We have also entered into an employment agreement with Steven N. Bronson, our Chairman of the Board, President and Chief Executive Officer. This agreement contains certain severance and change in control obligations. Under the agreement, if Mr. Bronson’s employment is terminated due to his death or disability (as such terms are defined in the agreement), Mr. Bronson or his beneficiaries will be entitled to receive: (i) his base compensation to the end of the monthly pay period immediately following the date of termination; (ii) accrued bonus payments; and (iii) all unvested equity and/or options issued by the Company shall immediately fully vest. If Mr. Bronson’s employment is terminated by him for good reason (as such term is defined in the agreement), or by us without cause, then Mr. Bronson will be entitled to receive: (i) his base compensation to the date of termination; (ii) a severance payment equal to twelve months of his base compensation; (iii) any earned bonus compensation; (iv) employee benefits for twelve months following the date of termination; (v) any vested company match 401k or other retirement contribution; and (vi) all unvested equity and/or options issued by the Company shall immediately fully vest. In the event of a change in control of the Company (as such term is defined in the agreement), Mr. Bronson is entitled to receive: (i) a change in control payment in an amount equal to twelve months of his base compensation, payable as of the date the change in control occurs; and (ii) all unvested equity and/or options issued by the Company shall immediately fully vest. Guarantees and Indemnities In the normal course of business, we are occasionally required to undertake indemnification for which we may be required to make future payments under specific circumstances. We review our exposure under such obligations no less than annually, or more frequently as required. The amount of any potential liabilities related to such obligations cannot be accurately determined until a formal claim is filed. Historically, any such amounts that become payable have not had a material negative effect our business, financial condition or results of operations. We maintain general and product liability insurance which may provide a source of recovery to us in the event of an indemnification claim.

SUBSEQUENT EVENT

SUBSEQUENT EVENT	3 Months Ended
	Mar. 31, 2017
SUBSEQUENT EVENT
SUBSEQUENT EVENT	NOTE 10-SUBSEQUENT EVENT On April 25, 2017, we announced additional details related to the expansion of our global R&D center in Singapore. As part of this strategic expansion, we intend to add 10 scientists and engineers to our existing team in Singapore and invest $3.5 million in the next 3 years to establish a state-of-the art facility in Singapore.

THE COMPANY AND ITS SIGNIFICA16

THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2017
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Description of Business	Description of Business Interlink Electronics, Inc. (“we,” “us,” “our,” “Interlink” or the “Company”) designs, develops, manufactures and sells a range of force-sensing technologies that incorporate our proprietary materials technology, firmware and software into a portfolio of standard sensor based products and custom sensor system solutions. These include sensor components, subassemblies, modules and products that support effective, efficient cursor control and novel three-dimensional user inputs. Our human machine interface (“HMI”) technology platforms are deployed in a wide range of markets including consumer electronics, automotive, industrial, and medical. Interlink serves our world-wide customer base from our corporate headquarters in Westlake Village, California (greater Los Angeles area), our global research and development (“R&D”) and engineering center in Singapore, our printed-electronics manufacturing facility in Shenzhen, China and our global distribution and logistics center in Hong Kong. We also maintain engineering, assembly and prototyping capabilities in Simi Valley, California along with technical and sales offices in Japan and at multiple locations in the United States. Our principal executive office is located at 31248 Oak Crest Drive, Suite 110, Westlake Village, California 91361 and our telephone number is (805) 484-8855. Our website address is www.interlinkelectronics.com.
Fiscal Year	Fiscal Year Our fiscal year is January 1 through December 31.
Basis of Presentation	Basis of Presentation The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. They do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2016 balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required for annual periods. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2016, included in our Annual Report on Form 10-K, filed with the SEC on March 2, 2017. The condensed consolidated financial statements included herein are unaudited. However, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly our consolidated financial position and our consolidated results of operations and consolidated cash flows. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for future quarters or the full year. Our condensed consolidated financial statements include the accounts of Interlink and our subsidiaries in Shenzhen, China, Hong Kong and Singapore. All intercompany accounts and transactions between our consolidated operations have been eliminated. Share and per share amounts and weighted-average grant date fair value reflect the 25% stock dividend paid on April 1, 2016.
Foreign Currency Translation	Foreign Currency Translation The functional currency of our Chinese subsidiary is the Chinese Yuan Renminbi. The functional currency for our Hong Kong and Singapore subsidiaries is the United States dollar. However, our Hong Kong and Singapore subsidiaries also transact business in their local currency. Therefore, assets and liabilities are translated into United States dollars at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate prevailing during the respective periods. Foreign currency transaction and translation gains and losses are included in results of operations.
Segment Reporting	Segment Reporting We operate in one reportable segment: the manufacture and sale of force sensing technology solutions.
Use of Estimates	Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes to the consolidated financial statements. Management regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, warranty reserves, inventory valuation reserves, stock-based compensation, purchased intangible asset valuations and useful lives, asset retirement obligations, and deferred income tax asset valuation allowances. These estimates and assumptions are based on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The actual results we experience may differ materially and adversely from our original estimates. To the extent there are material differences between the estimates and the actual results, our future results of operations will be affected.
Risk and Uncertainties	Risk and Uncertainties Our future results of operations involve a number of risks and uncertainties. Factors that could affect our business or future results and cause actual results to vary materially from historical results include, but are not limited to, the rapid change in our industry; problems with the performance, reliability or quality of our products; loss of customers; impacts of doing business internationally, including foreign currency fluctuations; potential shortages of the supplies we use to manufacture our products; disruptions in our manufacturing facilities; changes in environmental directives impacting our manufacturing process or product lines; the development of new proprietary technology and the enforcement of intellectual property rights by or against us; our ability to attract and retain qualified employees; and our ability to raise additional capital.
Recently Accounting Pronouncements	Recently Adopted Accounting Pronouncements In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-12, “ Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”, effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015. This update is intended to resolve the diverse accounting treatment of share-based payment awards whose performance target may be achieved after the requisite service period. An entity may apply the standards (1) prospectively to all share-based payment awards that are granted or modified on or after the effective date, or (2) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Earlier application is permitted. Effective January 1, 2016, the Company adopted ASU No. 2014-12 and it did not have a material effect on our consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, “ Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ”, which provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This update is effective for annual periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. Effective January 1, 2016, the Company adopted ASU No. 2014-15 and it did not have a material effect on our consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”, to change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The standard is effective for fiscal and interim periods within those fiscal years, beginning after December 15, 2015. Effective January 1, 2016, the Company adopted ASU No. 2015-02 and it had no impact on our consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”, which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU may be applied prospectively or retrospectively. The Company adopted ASU 2015-17 on January 1, 2016, and applied it retrospectively. In July 2015, the FASB issued ASU 2015-11, “ Inventory (Topic 330): Simplifying the Measurement of Inventory ”, which provides new guidance regarding the measurement of inventory. The new guidance requires most inventory to be measured at the lower of cost or net realizable value. The standard defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The standard applies to companies other than those that measure inventory using last-in, first-out ("LIFO") or the retail inventory method. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within those reporting periods. Early application is permitted. Effective January 1, 2017, the Company adopted ASU No. 2015-11 and it had no impact on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “ Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ”, which modifies and simplifies several aspects of accounting for share-based payment transactions. Changes to the current guidance primarily pertain to the income tax consequences of share-based payment transactions. Under the standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur, regardless of whether the benefit reduces taxes payable in the current period. The full amount of excess tax benefits should be classified along with other income tax cash flows as an operating activity. When awards are settled, cash paid to the taxing authorities by an employer when directly withholding shares for tax withholding purposes will be classified as a financing activity. Additionally, with respect to forfeitures of awards, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The amendments in this standard are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. Effective January 1, 2017, the Company adopted ASU No. 2016-09 and it had no impact on our consolidated financial statements. Recently Issued Accounting Pronouncements (Not Yet Adopted) In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) .” The amendments to this update supersede nearly all existing revenue recognition guidance under GAAP, including the revenue recognition requirements in ASC Topic 605, “ Revenue Recognition . ” . The standard was originally set to become effective in annual periods beginning after December 15, 2016 and for interim and annual reporting periods thereafter. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers; Deferral of the Effective Date,” which defers the effective date of ASU 2014-09 for all entities by one year, thereby delaying the effective date of the standard to January 1, 2018, with an option that would permit companies to adopt the standard as early as the original effective date. Early adoption prior to the original effective date is not permitted. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company is currently assessing the impact of ASU 2014-09 on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, that amends existing guidance around classification and measurement of certain financial assets and liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value through earnings. For equity investments without readily determinable fair values, the cost method is also eliminated. However, most entities will be able to elect to record equity investments without readily determinable fair values at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. The standard also requires that financial assets and liabilities be disclosed separately in the notes to the financial statements based on measurement principle and form of financial asset. The amendments in this guidance are effective for financial statements issued for interim and annual periods beginning after December 15, 2017. This standard is not expected to have a significant impact on our consolidated financial statements or disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842) ”, which replaces the existing guidance in ASC Topic 840, “Leases”. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application. The Company is currently evaluating the impact of ASU 2016-02 to our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ”, that significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables. The standard requires an entity to estimate its lifetime “expected credit loss” for such assets at inception, and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. This standard is not expected to have a significant impact on our consolidated financial statements or disclosures. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payment, ” which clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company has not yet evaluated the impact of the adoption of this accounting standard on our consolidated financial statements. In October 2016, the FASB issued ASU No. 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, ” which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, recognition of the income tax consequence was not recognized until the asset was sold to an outside party. This amendment should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. We are currently evaluating the impact of ASU 2016-16 on our consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash ”. The amendments in this update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. These amounts should be included within cash and cash equivalents when reconciling the beginning and ending balances for the periods shown on the statement of cash flows. The ASU requires retrospective application, and is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company does not expect the adoption of this accounting standard to have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, clarifying the definition of a business, reducing the number of transactions that need to be further evaluated and providing a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in the ASU specify that when the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not a business. The guidance also requires that an integrated set of assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output to be considered a business, and removes the evaluation of whether a market participant could replace the missing elements. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this accounting standard to have a material impact on our consolidated financial statements.

INVENTORIES (Tables)

INVENTORIES (Tables)	3 Months Ended
	Mar. 31, 2017
INVENTORIES
Schedule of inventories	March 31, December 31, 2017 2016 Inventories (in thousands) Raw materials $ 765 $ 738 Work-in-process 345 357 Finished goods 241 173 Total inventories $ 1,351 $ 1,268

STOCK BASED COMPENSATION (Table

STOCK BASED COMPENSATION (Tables)	3 Months Ended
	Mar. 31, 2017
STOCK BASED COMPENSATION
Schedule of activity for restricted stock units	Weighted Average Restricted Stock Weighted-Average Grant Remaining Aggregate Intrinsic Units Date Fair Value Contractual Life Value (in thousands) (years) (in thousands) Restricted stock units, December 31, 2016 165 $ 3.54 2.33 $ 1,158 Awarded — $ — Released — — Forfeited — $ — Restricted stock units, March 31, 2017 165 $ 3.54 2.09 $ 1,485
Schedule of activity for remaining options outstanding under the plan	Weighted Average Weighted Average Remaining Aggregate Intrinsic Shares Exercise Price Contractual Life Value (in thousands) (years) (in thousands) Options outstanding, December 31, 2016 11 $ 3.75 0.65 $ 37 Granted — — Exercised — — Cancelled or expired — $ — Options outstanding, March 31, 2017 11 $ 3.75 0.41 $ 59 Options exercisable, March 31, 2017 11 $ 3.75 0.41 $ 59
Schedule of additional information in regards to options outstanding	Options Outstanding Options Exercisable Weighted Range of Number Weighted Average Weighted Average Number Average Exercise Exercise Price Outstanding Remaining Contractual Life Exercise Price Exercisable Price (in thousands) (years) (in thousands) $ 1.56 4 1.02 $ 1.56 4 $ 1.56 $ - 5.20 7 0.07 $ 4.95 7 $ 4.95 11 0.41 $ 3.75 11 $ 3.75

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2017
EARNINGS PER SHARE
Schedule of computation of basic and diluted earnings per share	Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 364 $ 606 Comprehensive income $ 375 $ 610 Weighted average outstanding shares of common stock 7,328 7,326 Dilutive potential common shares from stock options and restricted stock units 84 65 Common stock and common stock equivalents 7,412 7,391 Earnings per share, basic and diluted $ 0.05 $ 0.08 Comprehensive income per share: basic and diluted $ 0.05 $ 0.08 Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation

SIGNIFICANT CUSTOMERS, CONCEN20

SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2017
SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION
Schedule of net revenues from customers	Three months ended March 31, 2017 2016 Customer A % % Customer B % * % Customer C % * % Customer D % Customer E * % % Customer F * % % *
Schedule of net revenues by geographical area	Three months ended March 31, 2017 2016 (in thousands) United States $ 1,226 $ 1,579 Asia and Middle East 1,157 685 Europe and other 501 541 Revenue, net $ 2,884 $ 2,805
Schedule of assets by geographical area	March 31, December 31, 2017 2016 (in thousands) United States $ 99 $ 87 Asia 250 267 Total long-lived assets $ 349 $ 354

RELATED PARTY TRANSACTIONS (Tab

RELATED PARTY TRANSACTIONS (Tables)	3 Months Ended
	Mar. 31, 2017
RELATED PARTY TRANSACTIONS
Schedule of related party transactions	Three months ended March 31, 2017 2016 Due from Qualstar Due to Qualstar Due from Qualstar Due to Qualstar (in thousands) Balance at January 1, $ 2 $ 1 $ — $ 6 Billed to Qualstar by Interlink 6 — 2 — Paid by Qualstar to Interlink (8) — (2) — Billed to Interlink by Qualstar — 2 — 11 Paid by Interlink to Qualstar — (2) — (13) Balance at March 31, $ — $ 1 $ — $ 4

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Tables)	3 Months Ended
	Mar. 31, 2017
COMMITMENTS AND CONTINGENCIES
Schedule of future minimum lease payments under non-cancellable operating leases	Remaining 2017 2018 2019 2020 Thereafter Total (in thousands) Operating Leases $ $ $ $ $ $

THE COMPANY AND ITS SIGNIFICA23

THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Details) - segment	Apr. 01, 2016	Mar. 31, 2017
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Stock spilt	0.25
Stock dividend (as a percent)	25.00%
Number of reportable segments		1

INVENTORIES (Details)

INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Inventories
Raw materials	$ 765	$ 738
Work-in-process	345	357
Finished goods	241	173
Total inventories	$ 1,351	$ 1,268

STOCKHOLDERS EQUITY (Details)

STOCKHOLDERS EQUITY (Details)	Apr. 01, 2016
STOCKHOLDERS EQUITY
Stock spilt	0.25

STOCK BASED COMPENSATION - Rest

STOCK BASED COMPENSATION - Restricted Stock Units (Details) - Restricted Stock Units - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Restricted Stock Units
Vesting period	5 years
Restricted Stock Units
Restricted stock units at the beginning of the period (in shares)	165
Awarded (in shares)
Released (in shares)
Restricted stock units at the end of the period (in shares)	165	165
Weighted-Average Grant Date Fair Value
Restricted stock units at the beginning of the period (in dollars per share)	$ 3.54
Awarded (in dollars per share)
Released (in dollars per share)
Restricted stock units at the end of the period (in dollars per share)	$ 3.54	$ 3.54
Weighted Average Remaining Contractual Life
Restricted stock units	2 years 1 month 2 days	2 years 3 months 29 days
Aggregate Intrinsic Value
Restricted stock units	$ 1,485	$ 1,158
Stock price	$ 9	$ 7.02
Vested (in shares)
First installment
Restricted Stock Units
Vesting (as a percent)	50.00%
Second installment
Restricted Stock Units
Vesting (as a percent)	50.00%

STOCK BASED COMPENSATION - Stoc

STOCK BASED COMPENSATION - Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Weighted Average Remaining Contractual Life
Options outstanding		7 months 24 days
Options exercisable	4 months 28 days
Stock Options
Stock Options
Expiration period	10 years
Shares
Options outstanding at the beginning of the period (in shares)	11
Options outstanding at the end of the period (in share)	11	11
Options exercisable at the end of the period (in shares)	11
Weighted Average Exercise Price
Options outstanding at the beginning of the period (in dollars per share)	$ 3.75
Options outstanding at the end of the period (in dollars per share)	3.75	$ 3.75
Options exercisable at the end of the period (in dollars per share)	$ 3.75
Weighted Average Remaining Contractual Life
Options outstanding	4 months 28 days
Aggregate Intrinsic value of options outstanding	$ 59	$ 37
Aggregate Intrinsic value of options exercisable	$ 59
Stock price	$ 9	$ 7.02

STOCK BASED COMPENSATION - Opti

STOCK BASED COMPENSATION - Option Pricing (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2017$ / sharesshares
Exercise price ranges
Number Outstanding (in shares) | shares	11
Weighted Average Remaining Contractual Life	4 months 28 days
Weighted Average Exercise Price (in dollars per share)	$ 3.75
Number Exercisable | shares	11
Weighted Average Exercise Price (in dollars per share)	$ 3.75
$0 - $1.56
Exercise price ranges
Exercise price range, upper limit (in dollars per share)	$ 1.56
Number Outstanding (in shares) | shares	4
Weighted Average Remaining Contractual Life	1 year 7 days
Weighted Average Exercise Price (in dollars per share)	$ 1.56
Number Exercisable | shares	4
Weighted Average Exercise Price (in dollars per share)	$ 1.56
$4.80 - $5.20
Exercise price ranges
Exercise price range, lower limit (in dollars per share)	4.80
Exercise price range, upper limit (in dollars per share)	$ 5.20
Number Outstanding (in shares) | shares	7
Weighted Average Remaining Contractual Life	26 days
Weighted Average Exercise Price (in dollars per share)	$ 4.95
Number Exercisable | shares	7
Weighted Average Exercise Price (in dollars per share)	$ 4.95

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Basic and diluted earnings
Net income	$ 364	$ 606
Comprehensive income	$ 375	$ 610
Weighted average outstanding shares of common stock	7,328	7,326
Dilutive potential common shares from stock options and restricted stock units	84	65
Common stock and common stock equivalents	7,412	7,391
Earnings per share:
Earnings per share, basic and diluted	$ 0.05	$ 0.08
Comprehensive income per share: basic and diluted	$ 0.05	$ 0.08
Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation	92	109

SIGNIFICANT CUSTOMERS, CONCEN30

SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND GEOGRAPHIC INFORMATION (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017USD ($)segmentcustomer	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)customer
Significant Customers, Concentration of Credit Risk and Geographic Information
Number of operating segments | segment	1
Revenue, net	$ 2,884	$ 2,805
Allowance for doubtful accounts	$ 0		$ 0
Net revenue | Customer Concentration Risk | Customer A
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	17.00%	19.00%
Net revenue | Customer Concentration Risk | Customer B
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	16.00%
Net revenue | Customer Concentration Risk | Customer C
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	12.00%
Net revenue | Customer Concentration Risk | Customer D
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	12.00%	11.00%
Net revenue | Customer Concentration Risk | Customer E
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)		11.00%
Net revenue | Customer Concentration Risk | Customer F
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)		10.00%
Net revenue | Geographic Concentration Risk
Significant Customers, Concentration of Credit Risk and Geographic Information
Revenue, net	$ 2,884	$ 2,805
Net revenue | Geographic Concentration Risk | United states
Significant Customers, Concentration of Credit Risk and Geographic Information
Revenue, net	1,226	1,579
Net revenue | Geographic Concentration Risk | Asia and Middle East
Significant Customers, Concentration of Credit Risk and Geographic Information
Revenue, net	1,157	685
Net revenue | Geographic Concentration Risk | Europe and other
Significant Customers, Concentration of Credit Risk and Geographic Information
Revenue, net	$ 501	$ 541
Accounts receivable | Credit Concentration Risk
Significant Customers, Concentration of Credit Risk and Geographic Information
Number of customers | customer	3		2
Accounts receivable | Credit Concentration Risk | Customer One
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	31.00%		44.00%
Accounts receivable | Credit Concentration Risk | Customer Two
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	27.00%		15.00%
Accounts receivable | Credit Concentration Risk | Customer Three
Significant Customers, Concentration of Credit Risk and Geographic Information
Concentration risk (as a percent)	10.00%
Assets | Geographic Concentration Risk
Significant Customers, Concentration of Credit Risk and Geographic Information
Total long-lived assets	$ 349		$ 354
Assets | Geographic Concentration Risk | United states
Significant Customers, Concentration of Credit Risk and Geographic Information
Total long-lived assets	99		87
Assets | Geographic Concentration Risk | Asia
Significant Customers, Concentration of Credit Risk and Geographic Information
Total long-lived assets	$ 250		$ 267

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details)	Feb. 01, 2017USD ($)	Mar. 01, 2015USD ($)Office	Mar. 31, 2017USD ($)	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)
BKF Capital
RELATED PARTY TRANSACTIONS
Number of offices leased out | Office		1
Revenue from related parties per month	$ 250	$ 1,000
Fees paid to related party for consulting services			$ 1,500	$ 3,000
Receivable from related party			0		$ 0
Qualstar
Due from Qualstar
Due from Qualstar, beginning balance			2,000
Billed to Qualstar by Interlink			6,000	2,000
Paid by Qualstar to Interlink			(8,000)	(2,000)
Due to Qualstar
Due to Qualstar, beginning balance			1,000	6,000
Billed to Interlink by Qualstar			2,000	11,000
Paid by Interlink to Qualstar			(2,000)	(13,000)
Due to Qualstar, end balance			$ 1,000	$ 4,000

INCOME TAXES (Details)

INCOME TAXES (Details)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
INCOME TAXES
Income tax expense (benefit) (as a percent)	33.80%	4.10%

COMMITMENTS AND CONTINGENCIES33

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Mar. 31, 2017USD ($)
Future minimum lease payments under non-cancellable operating leases
Remaining 2,017	$ 157
2,018	189
2,019	183
2,020	120
Thereafter	68
Total	$ 717

COMMITMENTS AND CONTINGENCIES -

COMMITMENTS AND CONTINGENCIES - Warranty (Details)	3 Months Ended
	Mar. 31, 2017
CONTINGENCIES
Period of warranty from date of shipment	1 year
Extended warranty period	1 year

SUBSEQUENT EVENT (Details)

SUBSEQUENT EVENT (Details) - Singapore - Subsequent Event $ in Millions	Apr. 25, 2017USD ($)employee
Subsequent Event
Number of scientists and engineers that will be added to the existing team | employee	10
Amount to be invested into the R&D center | $	$ 3.5
Period of time planned for investing into the R&D center	3 years