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Thursday, 02/14/2002 11:13:50 PM

Thursday, February 14, 2002 11:13:50 PM

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4th Quarter 2001 Financials

Interlink Electronics Reports Fourth Quarter 2001 Financial Results
CAMARILLO, Calif.--(BUSINESS WIRE)--Feb. 14, 2002--Interlink Electronics, Inc. (Nasdaq:LINK - news), a world leader in the development of intuitive interface technologies and solutions for business and home applications, today announced financial results for the quarter and the year ended December 31, 2001.

Worldwide revenues for the fourth quarter totaled $5.3 million, compared to the $6 million posted in third quarter of 2001. For the year, revenues totaled $25.3 million compared to the $33.9 million recorded in 2000. Operations delivered a $491,000 loss for the quarter, as compared to the $593,000 operating loss in third quarter of 2001. For the year, the operating loss was $635,000 (excluding $2.4 million in one-time operating charges). This compares with an operating income of $3.6 million in 2000. The net loss reached $467,000 for the quarter and $2 million for the year. The loss per diluted share was $0.05 for the fourth quarter and $0.21 for the 2001 year.

``As anticipated, the performance of our Business Communications segment remained sluggish in the fourth quarter of 2001,'' said E. Michael Thoben, chairman, CEO and president of Interlink Electronics. ``During the current worldwide economic slowdown, we retained all of our major OEM customers. Their orders, however, have been more conservative reflecting current market conditions. We have used this opportunity to deepen and broaden our relationships with key customers. Our recently announced enhanced partnership with InFocus Corporation, the world's largest maker of presentation projectors, is a result of the implementation of this strategy.

``In general, we are encouraged by some of the positive indices we are seeing in the OEM sector. Specifically, we are now achieving design wins indicating to us a much stronger second half of the year,'' Mr. Thoben continued.

``The Home Entertainment market in the fourth quarter, while slow for companies focused on broadband opportunities, continued to be a bright spot for Interlink Electronics. We currently supply Microsoft with an integral patented component in the Xbox game controller. The Xbox has been hailed by the home entertainment industry as today's most advanced gaming platform. We are pleased to be contributing to its success and anticipate sales to remain strong as this product continues to roll out worldwide.

``While revenues from ePad product sales fell short of expectations in 2001, the fourth quarter ePad revenues were strong and there is clear evidence of momentum building in the market. Industry leaders such as Charles Schwab, Prudential, and Nuremberg Insurance have adopted ePad e-signature solutions to automate their customer forms processing. And recently, one of the world's largest automobile manufacturers similarly chose an ePad solution to automate its dealership leasing operations. As a slowing economy mandates cost-reduction measures in larger companies, the operational savings realized by a transition from paper to electronic documents will be a huge incentive, driving a worldwide transition to electronic documents and ePad e-signature solutions in 2002 and 2003.

``Operations finished the last quarter of the year using less than $500,000 in cash. Our balance sheet remains strong with $9.3 million in the bank and several unused lines of credit. We continued to invest in our key strategic business segments while at the same time streamlining our operations in the US and Japan to reduce costs. We also established a manufacturing logistics facility in Hong Kong, Interlink Electronics Asia Pacific (IEAP), to guarantee cost competitive `just in time' delivery to our customers. It is our belief these steps will begin to produce a positive bottom-line trend by the second half of 2002,'' concluded Mr. Thoben.

Summarized Consolidated Statements of Operations
(000s except per share data)

Three Months Twelve Months
Ended December 31, Ended December 31,
2001 2000 2001 2000

Revenue $ 5,301 $ 9,303 $25,265 $33,870

Gross profit(1) 2,221 4,115 8,811 14,417
Operating expenses(2) 2,712 3,027 11,796 10,834

Operating income (loss) (491) 1,088 (2,985) 3,583

Cost of cancelled equity
offering - - - (638)
Other income (loss) 24 (81) 207 20
Provision for income tax
benefit - 524 764 143

Net income (loss) $ (467) $ 1,531 $(2,014) $ 3,108

Earnings (loss) per
share -- basic $ (0.05) $ 0.17 $ (0.21) $ 0.35
Earnings (loss) per
share -- diluted $ (0.05) $ 0.14 $ (0.21) $ 0.28

Weighted average
shares -- basic 9,759 9,179 9,645 8,892
Weighted average
shares -- diluted 9,759 10,986 9,645 11,130

(1) Includes $2 million excess inventory reserve adjustment in second
quarter, 2001.

(2) Includes $50,000 restructuring charge in 2nd quarter 2001 and
$300,000 adjustment to bad debt reserves in third quarter 2001.

Selected Consolidated Balance Sheet Data (000s)

December 31, December 31,
2001 2000

Cash and short term investments $ 9,325 $ 10,506
Working capital 20,634 23,128
Total assets 27,479 31,774
Long-term debt and
capital lease obligations 1,855 2,598
Stockholders' equity 21,143 22,433

About Interlink Electronics

Interlink Electronics, Inc., (Nasdaq:LINK - news), is the world's leading developer of intuitive interface technologies and solutions for business and home applications. Innovative products include interactive remote controls for business communications and broadband home entertainment markets, electronic signature solutions for network and Internet applications, and integrated computer pointing devices.

Interlink's Home Entertainment Business Unit develops and markets IntuiTouch broadband interface solutions to enable interactive TV services and a host of additional home electronics applications. Industry partners include Concero, PowerTV, Mediatti, Ncube, SNAP2, Tivella, Allwell, Vesta Broadband, and Integra5.

The company's E-Transactions business group provides ePad electronic signature solutions for commercial, Internet and retail electronic signature applications. Industry partners include Bluepoint Solutions, Cardiff, Communications Intelligence Corporation (CIC), RichSolutions Inc., Silanis Technologies, and Valyd Inc.

Finally, Interlink's Business Communications group designs interface solutions for a wide variety of business and home products, including those produced by Microsoft, Compaq, Sony, SANYO, NEC, Sharp, Toshiba, Pioneer, Mitsubishi and InFocus. Interlink Electronics, Inc. maintains offices in Camarillo, California; Tokyo, Japan; and Hong Kong and is available online at, or in Japan at

From time to time the Company may issue 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: business conditions and growth in the electronics industry and general economies, both domestic and international; lower than expected customer orders, delays in receipt of orders or cancellation of orders; competitive factors, including increased competition, new product offerings by competitors and price pressures; the availability of third party parts and supplies at reasonable prices; changes in product mix; significant quarterly performance fluctuations due to the receipt of a significant portion of customer orders and product shipments in the last month of each quarter; and product shipment interruptions due to manufacturing problems. The forward looking statements contained in this document regarding revenue and customer order trends, market trends, new product introductions, future successes of new products, success of cost improvement programs and future business activities should be considered in light of these factors.

Live Conference Call Information
Thursday, February 14, 2002, 1:30 p.m. PT
Live Call Domestic Call In #: 888-566-5777
Live Call International Call In #: 312-470-0008
Live Call Verbal Pass Code: Interlink

Live Audio Web Cast:

Telephonic Replay available until February 21, 2002
Domestic Replay Call In #: 800-879-9147
International Replay #: 402-220-5352
Replay Web cast:

Interlink Electronics, Inc., Camarillo
Keith M. Roberts
Michelle Lockard (Investors)
Fax: 805/484-8989



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