UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549

                                    FORM 10-Q

 [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

         For the quarterly period ended December 31, 1996

                                       OR

 [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF 
         FROM__________________TO________________

Commission file number 0-21077

                        INTERLINK COMPUTER SCIENCES, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                       94-2990567
(State of incorporation)                    (IRS Employer Identification Number)

                             47370 Fremont Boulevard
                            Fremont, California 94538
                                 (510) 657-9800

          (Address and telephone number of principal executive offices)

                                -----------------

 Indicate by check mark whether registrant (1) has filed all reports required to
  be filed by Section 13 or 15(d) of the Securities  Exchange Act of 1934 during
  the preceding 12 months, and (2) has been subject to such filing  requirements
  for the past 90 days.

                                   YES  X  NO
                                       ---    ---


   7,011,481 shares of the registrant's Common stock, $0.001 par value, were
                       outstanding as of January 1, 1997.


                                       1
<PAGE>

<TABLE>

                        INTERLINK COMPUTER SCIENCES, INC.
                                AND SUBSIDIARIES

                                    CONTENTS
<CAPTION>

                                                                                                                       Page
<S>                                                                                                                      <C>
                          PART I: FINANCIAL INFORMATION

Item 1.       Financial Statements
                  Condensed Consolidated Balance Sheets:
                      December 31, 1996 and June 30, 1996.................................................................4
                  Condensed Consolidated Statements of Operations:
                      Three and six months ended December 31, 1996 and 1995...............................................5
                  Condensed Consolidated Statements of Cash Flows:
                      Six months ended December 31, 1996 and 1995.........................................................6
                  Notes to Condensed Consolidated Financial Statements....................................................7

Item 2.       Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.....................................................................9


                           PART II: OTHER INFORMATION


Item 2        Changes in Securities......................................................................................26
Item 6        Exhibits and Reports on Form 8-K...........................................................................26

Signatures    ...........................................................................................................27

</TABLE>
                                                     2

<PAGE>





                          PART I: FINANCIAL INFORMATION



                                       3

<PAGE>
<TABLE>

                                         INTERLINK COMPUTER SCIENCES, INC. AND SUBSIDIARIES
                                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                           (in thousands)
<CAPTION>

                                                                                                   December 31,            June 30,
                                                                                                       1996                  1996
                                                                                                     --------              --------
                                                                                                    (unaudited)
<S>                                                                                                  <C>                   <C>     
ASSETS
Current assets:
     Cash and cash equivalents .........................................................             $ 27,061              $  6,121
     Accounts receivable, net ..........................................................                9,640                 9,445
     Inventories .......................................................................                1,327                   700
     Other current assets ..............................................................                2,615                 2,876
                                                                                                     --------              --------
         Total current assets ..........................................................               40,643                19,142
Property and equipment, net ............................................................                1,562                 1,281
Purchased software products ............................................................                2,467                 2,893
Other non-current assets ...............................................................                1,942                 2,609
                                                                                                     --------              --------
         Total assets ..................................................................             $ 46,614              $ 25,925
                                                                                                     ========              ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Bank line of credit ...............................................................                                   $  5,000
     Current portion of long-term debt .................................................             $  1,867                 3,100
     Accounts payable ..................................................................                2,517                 2,662
     Accrued liabilities ...............................................................                6,024                 6,630
     Deferred maintenance and product revenue ..........................................                7,611                 8,121
                                                                                                     --------              --------
         Total current liabilities .....................................................               18,019                25,513
Long-term debt, less current portion ...................................................                  984                 2,892
Deferred maintenance revenue ...........................................................                  914                 1,056
Other liabilities ......................................................................                  887                 1,049
                                                                                                     --------              --------
     Total liabilities .................................................................               20,804                30,510
                                                                                                     --------              --------
Commitments and contingencies (Note 5)
Preferred stock ........................................................................                                      6,310
Common stock ...........................................................................               49,924                14,602
Cumulative translation adjustment ......................................................                 (542)                 (581)
Accumulated deficit ....................................................................              (23,572)              (24,916)
                                                                                                     --------              --------
     Total stockholders' equity (deficit) ..............................................               25,810                (4,585)
                                                                                                     --------              --------
         Total liabilities and stockholders' equity (deficit) ..........................             $ 46,614              $ 25,925
                                                                                                     ========              ========

<FN>
                               See accompanying notes to condensed  consolidated financial statements.
</FN>
</TABLE>
                                                                 4
<PAGE>


<TABLE>

                                         INTERLINK COMPUTER SCIENCES, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               ( in thousands, except per share data)
<CAPTION>

                                                                            Three months ended                  Six months ended
                                                                                December 31,                       December 31,
                                                                                (unaudited)                        (unaudited)
                                                                          ------------------------         ------------------------
                                                                            1996            1995             1996            1995
                                                                          --------        --------         --------        --------
<S>                                                                       <C>             <C>              <C>             <C>     
Revenues:
      Product ....................................................        $  5,960        $  4,880         $ 10,792        $  7,914
      Maintenance and consulting .................................           3,673           3,284            7,566           6,815
                                                                          --------        --------         --------        --------
            Total revenues .......................................           9,633           8,164           18,358          14,729
                                                                          --------        --------         --------        --------

Cost of revenues:
      Product ....................................................             678           1,002            1,363           1,642
      Maintenance and consulting .................................           1,209           1,081            2,446           2,148
                                                                          --------        --------         --------        --------
            Total cost of revenues ...............................           1,887           2,083            3,809           3,790
                                                                          --------        --------         --------        --------

Gross profit .....................................................           7,746           6,081           14,549          10,939

Operating expenses:
      Product development ........................................           1,969           1,170            3,870           2,294
      Sales and marketing ........................................           3,194           3,033            6,258
                                                                                                                              5,538
      General and administrative .................................           1,107             955            2,019           1,788
      Purchased research and development and
         product amortization ....................................             139          10,158              301          10,158
                                                                          --------        --------         --------        --------
            Total operating expenses .............................           6,409          15,316           12,448          19,778
                                                                          --------        --------         --------        --------

Operating income (loss) ..........................................           1,337          (9,235)           2,101          (8,839)

Interest income, net .............................................             144              20               88              41
                                                                          --------        --------         --------        --------

Income (loss) before provision for income taxes ..................           1,481          (9,215)           2,189          (8,798)

Provision for (benefit from) income taxes ........................             578            (554)             847            (391)
                                                                          --------        --------         --------        --------

Net income (loss) ................................................        $    903        ($ 8,661)        $  1,342        ($ 8,407)
                                                                          ========        ========         ========        ========

Net income (loss) per share ......................................        $   0.12        $  (2.77)        $   0.19        $  (2.69)

                                                                          ========        ========         ========        ========

Shares used in per share calculation .............................           7,671           3,125            6,886           3,125
                                                                          ========        ========         ========        ========


<FN>
                               See accompanying notes to condensed  consolidated financial statements.
</FN>
</TABLE>
                                                                 5
<PAGE>

<TABLE>

                                         INTERLINK COMPUTER SCIENCES, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (in thousands)
<CAPTION>

                                                                                                       Six months ended December 31,
                                                                                                           1996              1995
                                                                                                         --------          --------
                                                                                                                 (unaudited)
<S>                                                                                                      <C>     
Cash flows from operating activities:
     Net income (loss) .........................................................................            1,342            (8,407)
     Adjustments to reconcile net income (loss) to net cash
         provided by (used in) operating activities:
              Purchased research and development ...............................................             --              10,158
              Depreciation and amortization ....................................................              848               474
              Provision for doubtful accounts ..................................................              100                93
              Exchange gain ....................................................................              (32)              (76)
              Changes in operating assets and liabilities:
                  Accounts receivable ..........................................................             (195)           (2,209)
                  Inventories ..................................................................             (623)              195
                  Other assets .................................................................            1,027              (337)
                  Accounts payable .............................................................             (133)             (670)
                  Accrued liabilities ..........................................................             (618)           (1,031)
                  Deferred maintenance and product revenue .....................................             (713)            1,796
                  Other liabilities ............................................................             (156)               (2)
                                                                                                         --------          --------
                      Net cash provided by (used in) operating activities ......................              847               (16)
                                                                                                         --------          --------
Cash flows from investing activities:
     Acquisition of New Era, net of cash acquired ..............................................             --             (10,168)
     Proceeds from sale of available-for-sale securities .......................................             --               5,685
     Acquisition of property and equipment .....................................................             (714)             (199)
     Capitalization of software development costs ..............................................              (56)             --
     Purchase of available-for-sale securities .................................................             --              (3,160)
                                                                                                         --------          --------
                  Net cash used in investing activities ........................................             (770)           (7,842)
                                                                                                         --------          --------
Cash flows from financing activities:
     Proceeds from term loan ...................................................................             --               3,000
     Proceeds from bank line of credit .........................................................             --               5,000
     Payments on notes payable and other .......................................................           (3,045)             (251)
     Payments on bank line of credit ...........................................................           (5,000)           (1,300)
     Proceeds from issuance of common stock, net ...............................................           29,012                27
                                                                                                         --------          --------
                      Net cash provided by financing activities ................................           20,967             6,476
                                                                                                         --------          --------

                           Net increase (decrease) in cash and cash equivalents ................           21,044            (1,382)

Effect of exchange rate changes on cash ........................................................             (104)               58
Cash and cash equivalents, beginning of period .................................................            6,121             4,148
                                                                                                         --------          --------
Cash and cash equivalents, end of period .......................................................         $ 27,061          $  2,824
                                                                                                         ========          ========

SUPPLEMENTAL CASH FLOW DISCLOSURES
     Interest paid .............................................................................         $    177          $    148
     Income taxes paid .........................................................................         $  1,412          $    132
     Non cash transactions from financing activities:
         Conversion of preferred stock to common
              stock in connection with initial public offering .................................         $  6,310              --

<FN>

                               See accompanying notes to condensed  consolidated financial statements.
</FN>
</TABLE>

                                                                 6
<PAGE>

               INTERLINK COMPUTER SCIENCES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.   Basis of Presentation:

     The unaudited condensed  consolidated  financial statements included herein
     have  been  prepared  by  Interlink   Computer   Sciences,   Inc.  and  its
     subsidiaries  (collectively,  the  "Company") in accordance  with generally
     accepted accounting principles and reflect all adjustments, consisting only
     of normal  recurring  adjustments,  which in the opinion of management  are
     necessary to fairly present the Company's  consolidated financial position,
     results  of  operations,  and cash  flows for the  periods  presented.  The
     financial  statements  include  the  accounts of the Company and its wholly
     owned subsidiaries  after intercompany  balances and transactions have been
     eliminated.  These financial  statements should be read in conjunction with
     the Company's  June 30, 1996 audited  consolidated  financial  statement as
     included in the  Company's  Registration  Statement on Form S-1 as declared
     effective  by the  Securities  and Exchange  Commission  on August 15, 1996
     (Reg. No. 333-05243).  The consolidated results of operations for the three
     and six months ended  December 31, 1996 are not  necessarily  indicative of
     the  results to be  expected  for any  subsequent  period or for the entire
     fiscal year  ending June 30,  1997.  The June 30,  1996  balance  sheet was
     derived  from  audited  financial  statements,  but  does not  include  all
     disclosures required by generally accepted accounting principles.

2.   Inventories:

     Inventories  are  stated at the lower of cost  (determined  on a  first-in,
     first-out  basis) or  market.  Inventories  are  principally  comprised  of
     finished goods at December 31, 1996 and June 30, 1996.

3.   Initial Public Offering:

     On August 15, 1996, the Company sold  2,200,000  shares of its Common Stock
     in an initial  public  offering and on September  16, 1996,  an  additional
     330,000  shares of Common Stock were sold when the  Company's  underwriters
     exercised their over-allotment option, which sales of Common Stock together
     were made at $10.00  per share  and  which  generated  approximately  $22.1
     million of cash,  net of  underwriting  discounts,  commissions,  and other
     offering  costs.  On August 16, 1996, the Common Stock began trading on the
     NASDAQ  National  Market under the symbol INLK.  Upon the completion of the
     offering, all of the Company's 1,230,000 shares of Series 1 Preferred Stock
     were converted into shares of Common Stock on a one-for-one basis.

4.   Computation of Net Income (Loss) Per Share:

     Net income (loss) per share is computed  using the weighted  average number
     of common and  common  equivalent  shares  outstanding  during the  period.
     Common equivalent shares are included in the per share  calculations  where
     the effect of their inclusion would be dilutive. Dilutive equivalent shares
     consist of the  incremental  common  shares  issuable  upon  conversion  of
     convertible  preferred  stock (using the "if  converted"  method) and stock
     options and  warrants,  using the  modified  treasury  stock  method in all
     periods.  Pursuant to Securities and Exchange  Commission  Staff Accounting
     Bulletin No. 83, common and common  equivalent shares issued by the Company
     during the twelve  months  preceding  the filing of the  Company's

                                       7
<PAGE>

     initial  public  offering,  using the treasury  stock method and the public
     offering  price per share,  have been  included in the  calculation  of net
     income (loss) per share for all periods presented.

5.   Contingencies

     The  Company  and the  Company's  subsidiary  in France are  involved  in a
     commercial  dispute  with a former  Italian  distributor  of the  Company's
     TCPaccess products.  The former distributor alleged in a letter sent to the
     Company  that the  Company  had  breached  and  unlawfully  terminated  the
     agreement  pursuant  to  which  the  former  distributor  was  appointed  a
     distributor  of the Company's  products in Italy and asserted other related
     claims against the Company.  The letter  demanded the former  distributor's
     reinstatement  as a  distributor,  the execution of a written  distribution
     agreement setting forth the distribution  arrangements between the parties,
     and  compensation  in an  unspecified  amount  to be  paid  to  the  former
     distributor  for the harm  that it has  suffered.  The  Company's  Canadian
     subsidiary,  New Era, has also previously used the former  distributor as a
     distributor  of  the  HARBOR  products  in  Italy  pursuant  to a  separate
     agreement.  No legal claim has been filed nor has arbitration  been invoked
     by the former  distributor  regarding  this matter.  No  provision  for any
     liability  that may result upon  resolution of this matter has been made in
     the  accompanying  financial  statements.  Should  the  former  distributor
     initiate  legal  proceedings  and  prevail on such  claims,  the  Company's
     business, financial condition and results of operations could be materially
     adversely affected.

     During the quarter the Company  settled a  commercial  dispute  with MSB, a
     former  Belgian  distributor  of  the  Company's  TCPaccess  products.  The
     settlement included a payment to MSB in the amount of $100,000.  All claims
     and counterclaims  relating to this dispute have been dismissed as a result
     of the settlement.

6.   Subsequent Event

     On January 27, 1997, the Company  signed a definitive  agreement with Cisco
     Systems,  Inc. ("Cisco")  regarding a strategic alliance to jointly develop
     and market  IOS/390,  a software  suite that extends  Cisco's  Internetwork
     Operating  System (IOS)  networking  technologies to IBM and compatible MVS
     mainframes and mainframe applications. As part of the alliance, on December
     12, 1996,  Cisco  purchased  622,000  newly-issued  shares of the Company's
     Common Stock (approximately nine percent (9%) of the Company's  outstanding
     shares) for approximately $6.8 million.


                                       8
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

The following  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties.  The Company's actual results could differ  materially from those
discussed  herein.  Factors that could cause or contribute  to such  differences
include,  but are not limited to, those  discussed in the section below entitled
"Risk Factors That May Affect Future  Results," as well as those risks discussed
in this section and elsewhere in this Report.

The following  discussion  should be read in conjunction  with the  management's
discussion  included  in the  Company's  Registration  Statement  on Form S-1 as
declared effective by the Securities and Exchange  Commission on August 15, 1996
(Reg. No. 333-05243).

Overview

The Company offers a suite of  high-performance,  network transport products and
systems management  applications which efficiently transport,  store and protect
the  integrity  of  mission-critical  data and  applications.  The  Company  was
incorporated in December 1985 and initially focused its products and development
on  providing   interoperability  between  IBM  mainframes  and  DECnet  network
environments. In 1990, the Company acquired the core technology of its TCPaccess
suite of  products.  In  December  1995 the  Company  acquired  New Era  Systems
Services,  Ltd. ("New Era"),  the developer of the HARBOR  products,  a software
product  line  providing   enterprise   systems   management   applications  for
client/server networks. This transaction was accounted for as a purchase.  Prior
to the  acquisition,  the  Company  distributed  the HARBOR  products in certain
countries in Europe for more than one year. New Era is a wholly-owned subsidiary
headquartered in Calgary, Alberta.

<TABLE>

Results of Operations

The  following  table sets forth,  as a percentage  of total  revenues,  certain
condensed consolidated statement of operations data for the periods indicated:
<CAPTION>

                                                                                  Three months                     Six months
                                                                                ended December 31,              ended December 31,
                                                                               --------------------           ---------------------
                                                                               1996            1995            1996           1995
                                                                               -----          -----           -----          -----
<S>                                                                            <C>            <C>             <C>            <C>  
Revenues:
     Product .........................................................          61.9%          59.8%           58.8%          53.7%
     Maintenance and consulting ......................................          38.1           40.2            41.2           46.3
                                                                               -----          -----           -----          -----
         Total revenues ..............................................         100.0          100.0           100.0          100.0
                                                                               -----          -----           -----          -----

Cost of revenues:
     Product .........................................................           7.0           12.3             7.4           11.1
     Maintenance and consulting ......................................          12.6           13.2            13.3           14.6
                                                                               -----          -----           -----          -----
         Total cost of revenues ......................................          19.6           25.5            20.7           25.7
                                                                               -----          -----           -----          -----

Gross profit .........................................................          80.4           74.5            79.3           74.3
Operating expenses:
     Product development .............................................          20.4           14.3            21.1           15.6


                                       9
<PAGE>


     Sales and marketing .............................................          33.2          (37.2)           34.1           37.6
     General and administrative ......................................          11.5          (11.7)           11.0           12.1
     Purchased research and development
         and product amortization ....................................           1.4         (124.4)            1.7           69.0
                                                                               -----          -----           -----          -----
         Total operating expenses ....................................          66.5         (187.6)           67.9          134.3
                                                                               -----          -----           -----          -----

Operating income (loss) ..............................................          13.9         (113.1)           11.4          (60.0)
Interest income, net .................................................           1.5           (0.2)            0.5            0.3
                                                                               -----         -----            -----          -----
     Income (loss) before income taxes ...............................          15.4         (112.9)           11.9          (59.7)
Provision for (benefit from) income taxes ............................           6.0           (6.8)            4.6           (2.6)
                                                                               -----          -----           -----          -----
Net income (loss) ....................................................           9.4%        (106.1)%           7.3%         (57.1)%
                                                                               =====         ======           =====          =====  

Cost of sales as a percentage of the related revenues:
     Product .........................................................          11.4%          20.5%           12.6%          20.7%
     Maintenance and consulting ......................................          32.9%          32.9%           32.3%          31.5%

</TABLE>

As a result  of the  acquisition  of New Era in  December  1995,  the  Company's
operating  results for the three and six months ended December 31, 1996 and 1995
are not directly comparable.

Revenues:

The Company's  revenues are derived from product  sales and related  maintenance
and consulting  contracts.  Product  revenues are derived from software  license
fees and sales of related hardware to end users, resellers and distributors. The
Company's  sales  cycle,  from  the  date  the  sales  agent  first  contacts  a
prospective  customer to the date a customer ultimately  purchases the Company's
product,  is typically three to six months for the TCPaccess products and six to
nine months for the HARBOR products.  Because licenses are noncancellable and do
not impose  significant  obligations  on the  Company,  the  Company  recognizes
software  license  revenues  upon  completion of a trial period and receipt of a
signed  contract.  Fees for service  revenues  are charged  separately  from the
Company's  product sales. The Company  recognizes  maintenance  revenues ratably
over  the term of  agreement.  Maintenance  agreements  are  typically  one-year
renewable contracts,  pursuant to which, historically, a substantial majority of
the Company's  maintenance  agreements have been renewed upon expiration.  There
can be no assurance that  customers will continue to renew expiring  maintenance
agreements at the historical rate. The Company recognizes consulting revenues as
services are accepted. The Company no longer actively markets its DECnet product
line. As a consequence, maintenance revenues from this product line may continue
to decline in the future.

Total  revenues  were $9.6  million and $8.2  million for the three months ended
December 31, 1996 and 1995, respectively, representing an increase of 17%. Total
revenues were $18.4 million and $14.7 million for the six months ended  December
31, 1996 and 1995, respectively,  representing an increase of 25%. Product sales
were $6.0 million and $4.9 million for the three months ended  December 31, 1996
and 1995,  respectively,  representing  an increase of 22%.  Product  sales were
$10.8  million and $7.9 million for the six months  ended  December 31, 1996 and
1995,  respectively,  representing  an increase  of 37%.  These  increases  were
primarily due to an increase in TCPaccess  license fees and associated  hardware
sales as well as the addition of revenues from Harbor products.  Maintenance and
consulting  revenues  were $3.7  million and $3.3  million for the three  months
ended December 31, 1996 and 1995, respectively, 

                                       10
<PAGE>

representing an increase of 12%.  Maintenance and consulting  revenues were $7.6
million and $6.8  million for the six months  ended  December 31, 1996 and 1995,
respectively,   representing  an  increase  of  12%.  These  increases  resulted
principally from an increase in the number of customers  purchasing  maintenance
agreements.

Cost of Revenues:

         Product.  Cost of revenues  from product  sales  consists  primarily of
hardware, product media, documentation and packaging costs. Cost of revenues for
product  sales was $678,000 and  $1,002,000,  representing  11% and 21% of total
product  revenues  for the  three  months  ended  December  31,  1996 and  1995,
respectively.  Cost of revenues for product sales was $1,363,000 and $1,642,000,
representing  13% and 21% of total  product  revenues  for the six months  ended
December 31, 1996 and 1995, respectively. These percentage decreases were due to
a reduction  in  third-party  revenue and a decline in hardware  revenue,  which
carry higher  product costs as a percentage of their  respective  revenues.  The
decrease in the  percentage  of cost of revenues  from  product  sales is due to
product mix and is not  necessarily  indicative of cost of revenues from product
sales in future quarters.

         Maintenance  and  Consulting.  Cost of revenues  from  maintenance  and
consulting  consists  primarily of personnel related costs incurred in providing
telephone  support and software  updates.  Cost of revenues from maintenance and
consulting  was  $1.2  million  and  $1.1  million,  representing  33% of  total
maintenance and consulting revenues for the three months ended December 31, 1996
and 1995, respectively. Cost of revenues for maintenance and consulting was $2.4
million and $2.1 million,  representing 32% of total  maintenance and consulting
revenues for the six months ended December 31, 1996 and 1995, respectively . The
absolute  dollar  increases  were due to  staff  additions  as a  result  of the
acquisition of New Era.

Operating Expenses:

Total operating  expenses were $6.4 million and $15.3 million,  representing 67%
and 188% of total  revenues  for the three  months  ended  December 31, 1996 and
1995,  respectively.  Total  operating  expenses  were $12.4  million  and $19.8
million,  representing  68% and 134% of total  revenues for the six months ended
December 31, 1996 and 1995, respectively .

         Product Development.  Product development expenses consist primarily of
personnel related costs. Product development expenses were $2.0 million and $1.2
million,  representing  20% and 14% of total revenues for the three months ended
December 31, 1996 and 1995, respectively. Product development expenses were $3.9
million and $2.3 million, representing 21% and 16% of total revenues for the six
months  ended  December  31, 1996 and 1995,  respectively.  These  increases  in
product  development  expenses  resulted  from the  expansion  of the  Company's
product  line as a result  of the  acquisition  of New Era and  ongoing  product
development efforts.

         Sales and Marketing.  Sales and marketing expenses consist primarily of
salaries and commissions for sales and marketing  personnel,  the fixed costs of
worldwide sales offices,  and promotional  costs.  The Company sells through its
direct sales force, resellers and distributors.  The direct channel produced 89%
and 85% of product  revenues for the three  months  ended  December 31, 1996 and
1995, respectively, and 85% and 90% of product revenues for the six months ended
December 31, 1996 and 1995, respectively. Sales and marketing expenses were $3.2
million and $3.0  million,  representing  33% and 37% of total  revenues for the
three  months  ending  December  31,  1996 and  1995,  respectively.  Sales  and
marketing expenses were $6.3 million and $5.5 million,  representing 34% and 38%
of total  revenues  for the six  months  ending  December  31,  1996  and  1995,

                                       11
<PAGE>

respectively.   The  increase  in  absolute  dollars  was  a  result  of  higher
commissions, marketing program costs and the New Era acquisition

         General and Administrative. General and administrative expenses include
personnel and other costs of the finance,  human  resources  and  administrative
departments of the Company,  and includes  gains and losses on foreign  currency
exchange.  General  and  administrative  expenses  were  $1.1  million  and $1.0
million,  representing 12% of total revenues for the three months ended December
31, 1996 and 1995,  respectively  General and administrative  expenses were $2.0
million and $1.8 million, representing 11% and 12% of total revenues for the six
months ended December 31, 1996 and 1995, respectively. These increases in dollar
amounts  for  general  and  administrative  are  attributable  to the  increased
headcount required to support the Company's expansion.

         Purchased Research and Development and Product Amortization.  Purchased
research  and  development  and  product  amortization  was  $139,000  and $10.2
million,  representing  1% and 124% of total revenues for the three months ended
December 31, 1996 and 1995, respectively. Purchased research and development and
product amortization was $301,000 and $10.2 million,  representing 2% and 69% of
total   revenues  for  the  six  months  ended   December  31,  1996  and  1995,
respectively.  These decreases were due to a one-time write-off of $10.2 million
of purchased  research and  development  related to the New Era  acquisition  in
December 1995.

         Interest  Income  (Expense)  Net. Net interest  income was $144,000 and
$20,000 for the three months ended December 31, 1996 and 1995, respectively. Net
interest  income was $88,000 and $41,000 for the six months  ended  December 31,
1996 and 1995,  respectively.  The increases  were due primarily to reduction of
bank borrowings  related to the New Era Acquisition and interest earned on funds
received from the initial public offering.

         Provision  for(Benefit  from) Income  Taxes.  The income tax  provision
(benefit) was $578,000 and  $(554,000)  for the three months ended  December 31,
1996 and 1995, respectively. The income tax provision (benefit) was $847,000 and
($391,000)  for the six months ended  December 31, 1996 and 1995,  respectively.
The effective  tax rate for both the three months and six months ended  December
31, 1996 was approximately  39%. Benefit from income taxes for the three and six
months  ended  December  31,  1995,  was the result of the Company  reducing its
valuation allowance during the quarter ended December 31, 1995.

Recent Pronouncements

During March 1995, the Financial Accounting Standards Board issued Statement No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of" (SFAS 121),  which  requires the Company to review the
impairment of long-lived assets, certain identifiable intangibles,  and goodwill
related to those assets  whenever  events or changes in  circumstances  indicate
that the  carrying  amount  of an asset  may not be  recoverable.  SFAS 121 will
become effective for the Company's 1997 fiscal year.

During October 1995, the Financial  Accounting  Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which establishes
a fair value based  method of  accounting  for stock based  compensation  plans.
While the Company is studying the impact of the  pronouncement,  it continues to
account for employee  stock  options under APB Opinion No. 25,  "Accounting  for
Stock  Issued  to  Employees."  SFAS  123 will be  effective  for  fiscal  years
beginning after December 15, 1995.


                                       12

<PAGE>

Liquidity and Capital Resources

Working  capital  increased  at December 31, 1996 over that at December 31, 1995
primarily due to the proceeds from the initial public offering and proceeds from
the equity investment from Cisco.

For the six months  ended  December  31,  1996,  net cash  provided by operating
activities resulted primarily from net income, depreciation and amortization and
a  decrease  in  other  assets,  partially  offset  by  a  decrease  in  accrued
liabilities  and  deferred  maintenance  and product  revenue and an increase in
inventories.  For the six  months  ended  December  31,  1995,  net cash used in
operations was primarily  from net loss and an increase in accounts  receivable,
partially  offset by  purchased  research  and  development  and an  increase in
deferred maintenance and product revenue.

For the six months ended December 31, 1996, the Company's  investing  activities
have  consisted  primarily of purchases of property and  equipment.  For the six
months ended December 31, 1995,  the Company's  investing  activities  consisted
primarily  of the  acquisition  of New Era and the  redemption  and  purchase of
available-for-sale securities.

Net cash provided by financing  activities for the six months ended December 31,
1996 consisted  primarily of proceeds from the initial  public  offering and the
equity investment by Cisco,  partially offset by payments on bank line of credit
and notes  payable.  For the six months ended  December 31, 1995,  the Company's
financing  activities  consisted  of proceeds  and  payments on the bank line of
credit, term loan and notes payable.

The Company's  business is geographically  dispersed  resulting in a significant
portion of its cash residing  outside the United  States.  At December 31, 1996,
approximately 20% of the Company's cash was in European and Canadian accounts.

At December 31, 1996, the Company had $27.1 million in cash and cash equivalents
and $22.6 million in working  capital.  The Company had $9.6 million in accounts
receivable, net of allowance for doubtful accounts, and $8.5 million of unearned
revenues, substantially all of which are expected to be earned over the 12 month
period following December 31, 1996.

The  Company  believes  that its  current  cash  balance  and its cash flow from
operations,  if any, will be sufficient to meet its anticipated  working capital
and capital expenditure requirements for at least the next 12 months.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company operates in a rapidly changing environment that involves a number of
risks, some which are beyond the Company's control, and include the following:

Competition

     General. The market in which the Company operates is intensely  competitive
and is  characterized  by  extreme  price  competition  and rapid  technological
change.  The  competitive  factors  influencing  the markets  for the  Company's
products include product performance, price, reliability, features, scalability,
interoperability across multiple platforms, adherence to industry standards, and
the provision of support and maintenance  services.  The

                                       13
<PAGE>

Company competes with a number of companies,  principally International Business
Machines Corp. ("IBM"),  that specialize in one or more of the Company's product
lines, and such  competitors may have greater  financial,  technical,  sales and
marketing  resources to devote to the  development,  promotion and sale of their
products, and may have longer operating histories, greater name recognition, and
greater market  acceptance for their products and services  compared to those of
the Company. There can be no assurance that the Company's current competitors or
any new market entrants will not develop networked systems  management  products
or  other  technologies  that  offer  significant  performance,  price  or other
advantages over the Company's technologies, the occurrence of which would have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     Network  Transport  Products.  The  Company  sells its  TCPaccess  suite of
products  principally to customers who have  installed IBM mainframes  using the
MVS operating system.  The Company's main competition for its TCPaccess products
is IBM. IBM sells TCP/IP and associated  products for its MVS mainframe  systems
that  compete  directly  with the  Company's  TCPaccess  product  line.  IBM has
continued to enhance the  functionality  and  performance of its TCP/IP product,
which  enhancements  may require the Company to update its TCPaccess  product to
remain  competitive.  There can be no assurance that the Company will be able to
make the improvements in its TCPaccess product  necessary to remain  competitive
with IBM or that any such  improvements by IBM would not have a material adverse
effect on the Company's business,  financial condition or results of operations.
In addition, IBM's OS/390 operating system, which includes TCP/IP communications
software in a bundle of software provided to purchasers of OS/390,  has been and
is aggressively  marketed by IBM, and the Company  believes it has lost sales of
the Company's  TCP/IP products as a result.  An IBM customer can request to have
the IBM TCP/IP  product  removed  from the software  bundle  provided by IBM and
thereby reduce the purchase price of the system purchased.  The reduction in the
purchase price related to the exclusion of IBM's TCP/IP for MVS product from its
software bundle, in certain model groups, is substantially  lower than the price
the customer would have to pay to purchase the Company's corresponding TCPaccess
product. Because in some IBM model groups IBM's TCP/IP product is less expensive
to purchase  than the  Company's  corresponding  TCPaccess  products in the same
model groups, there could be substantial erosion of the Company's margins if the
Company reduces the price of its TCPaccess  products in order to compete against
IBM,  which  erosion  would  have a  material  adverse  effect on the  Company's
business,  financial condition and results of operations.  Also, IBM has in some
cases  included and may continue to include its TCP/IP  product in the bundle of
software  provided to purchasers of its OS/390  operating system without charge.
The  Company  believes  that any  general  reduction  in price of the IBM TCP/IP
products,  or the widespread  bundling of those  products  without charge in its
OS/390 operating  system,  would require the Company to either reduce the prices
of  its  TCPaccess  products  or  substantially  increase  sales  and  marketing
expenses,  or both, in order to continue to sell its TCPaccess  products,  which
actions  would  have  a  material  adverse  effect  on the  Company's  business,
financial  condition  and results of  operations.  In  addition,  if IBM were to
develop or design  its OS/390  operating  system or other  products  so that its
TCP/IP  product could not be removed,  customers  who otherwise  would have been
inclined to purchase the Company's  TCPaccess product may not do so, which would
have a material adverse effect on the Company's  business,  financial  condition
and  results of  operations.  In  addition,  the Company  derives a  substantial
portion  of  its  revenues  from  maintenance   agreements  with  its  TCPaccess
customers.  If  the  Company  sells  fewer  TCPaccess  products,  either  due to
competition from IBM or otherwise,  the Company's  maintenance revenues would be
reduced,  which would have a material adverse effect on the Company's  business,
financial condition and results of operations. If IBM reduces the combined price
of its TCP/IP  products and  maintenance,  IBM's  combined  price for its TCP/IP
products and  maintenance  would be more price  competitive  with the  Company's
product  line,  and the  Company's  product and  maintenance  revenues  would be
adversely  

                                       14
<PAGE>

affected.  The  Company  also  competes  with  IBM,  Apertus  Technologies  Inc.
("Apertus"),  Computerm Corporation  ("Computerm"),  Network Solutions, Inc. and
Memorex Telex Corp.  ("Memorex")  in the network  controller  market,  where the
Company   resells  the  network   controller   manufactured   by  Bus-Tech  Inc.
("Bus-Tech"), a division of Storage Technology Corp. ("Storage Technology"),  to
provide  the  hardware  connection  which  links  the  enterprise  server to the
client/server network.

     System Management  Applications.  The primary competitors for the Company's
HARBOR Backup and HARBOR Distributed Storage Server products are IBM and Storage
Technology.  The  Company's  competition  for the  HARBOR  Distribution  product
includes IBM, Novadigm, Inc. ("Novadigm") and Tangram Enterprise Solutions, Inc.
IBM is aggressively  marketing its ADSM backup product, which is included in the
System View package on IBM's UNIX system,  AIX.  There can be no assurance  that
IBM will not include the ADSM backup  products in a software  "bundle"  with the
sale of its  mainframe  hardware  systems.  The bundling of  competing  software
products with mainframe hardware systems could have a material adverse effect on
the  Company's  business,  financial  condition and results of  operations.  The
Company also competes with software  vendors who develop and market products for
UNIX  and  Windows  NT  operating   systems,   such  as  Microsoft   Corporation
("Microsoft"),  Arcada Software, Inc., Computer Associates International,  Inc.,
EMC Corporation,  Hewlett-Packard  Company, Legato Systems Inc. ("Legato") (with
whom the Company has a strategic  alliance),  Novadigm,  OpenVision  Technology,
Inc., PLATINUM Technology, Inc., Sterling Software, Inc., Sun Microsystems, Inc.
and Unison Software,  Inc., which are focusing on enterprise  systems management
applications.  Although  the  Company  recently  signed  a  strategic  marketing
agreement  with  Legato,  the  Company  is still a  competitor  of Legato in the
storage management  market. The Company also expects increased  competition from
vendors of TCP/IP-to-Systems  Network  Architecture gateway products,  including
such companies as Microsoft, Novell, Inc., Apertus and CNT/Brixton Systems, Inc.
Competition  from these  companies  could  increase due to an expansion of their
product lines or a change in their approaches to enterprise  systems  management
or  networking  products.  The  bundling of network  transport  software  with a
network  controller by these  competitors could prevent the Company from selling
TCPaccess  to the  customers of these  competitors,  which would have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     Other Factors.  The Company's  ability to compete  successfully  depends on
many factors,  including the Company's  success in developing  new products that
implement new technologies,  performance,  price, product quality,  reliability,
success of competitors' products, general economic conditions, and protection of
Interlink  products by effective  utilization of intellectual  property laws. In
particular,  competitive  pressures from existing or new  competitors  who offer
lower prices or other incentives or introduce new products could result in price
reductions which would adversely affect the Company's  profitability.  There can
be no assurance  that the Company's  current or other new  competitors  will not
develop  enhancements to, or future  generations of,  competitive  products that
offer superior price or performance  features,  that the Company will be able to
compete  successfully in the future, or that the Company will not be required to
incur   substantial   additional   investment   costs  in  connection  with  its
engineering,  research,  development,  marketing and customer service efforts in
order to meet  any  competitive  threat.  The  Company  expects  competition  to
intensify,  and increased  competitive pressure could cause the Company to lower
prices for its products,  or result in reduced  profit margins or loss of market
share,  any of which  could  have a  material  adverse  effect on the  Company's
business, financial condition and results of operations.


                                       15
<PAGE>


Reliance on IBM and Emergence of Mainframe as Enterprise Server

     The Company's  current software  products are designed for use with IBM and
IBM-compatible mainframe computers. Specifically, these software products target
users of the MVS  operating  system,  the Customer  Information  Control  System
communications  subsystem and the IMS and DB2 database  management systems. As a
result, future sales of the Company's existing products and associated recurring
maintenance  revenues are dependent  upon  continued use of mainframes and their
related systems software. In addition, because the Company's products operate in
conjunction  with IBM  systems  software,  changes to IBM systems  software  may
require the Company to adapt its products to these changes, and any inability to
do so, or delays in doing so,  may  adversely  affect  the  Company's  business,
financial  condition  and  results  of  operations.  Currently,  TCP/IP  is  the
communications   protocol  for  the  Internet  and  is  being  adopted  by  some
organizations as the communications  protocol for their client/server local area
networks and wide area  networks.  This  adoption has allowed IBM MVS  mainframe
computers to act as enterprise  servers on such networks.  The use of mainframes
as enterprise servers is relatively new and still emerging. The Company's future
financial  performance will depend in large part on the acceptance and growth in
the  market   for   centralized   network   management.   Adoption   of  another
communications   protocol   on   client/server   networks   could  make   TCP/IP
communication  not viable,  which would  undermine  the demand for the Company's
TCPaccess  products,  and  have a  material  adverse  effect  on  the  Company's
business, financial condition and results of operations.

Dependence on Distributors and Strategic Relationships

     The Company's  sales are primarily made through the Company's  direct sales
force  and  the  Company's  distributors  in  international  markets.  A  former
distributor of the Company's TCPaccess products in Italy,  Selesta  Integrazioni
SRL  ("Selesta"),  has  threatened  legal action over the recent  termination of
Selesta as a distributor of the Company's  TCPaccess  products.  The Company has
also  discontinued its existing  distributor  relationship  with Selesta for the
distribution of the Company's  HARBOR products in Italy and Spain.  The loss of,
or a significant reduction in revenues from, the Company's  distributors through
which the Company sells its products could have a material adverse effect on the
Company's business,  financial condition and results of operations. In addition,
if one of the Company's distributors declares bankruptcy,  becomes insolvent, or
is declared  bankrupt before the distributor  remits to the Company the payments
for the Company's  products,  the Company may not be able to obtain the revenues
to which it would be entitled  for sales made by such  distributor  prior to the
bankruptcy or insolvency  proceeding.  In addition,  the Company's  distributors
generally offer other products and these  distributors  may give higher priority
to sales of such other products.

     Alliance  with  Legato.  In May 1996 the Company  entered  into a strategic
marketing agreement with Legato. The Company has no historical relationship with
Legato,  and there can be no assurance that the Company will be able to sell its
products through Legato.

      Alliance  with  Cisco.  In  January,  1997,  the  Company  entered  into a
strategic  alliance with Cisco pursuant to which Cisco and the Company agreed to
cooperate to develop  certain TCP/IP  software that operates with Cisco products
and to have Cisco sell such  products.  This alliance  requires that the Company
devote a substantial portion of the Company's software development resources and
personnel to the development of such products,  that the Company bundle a number
of its existing  products into the new Cisco products,  that Cisco and Interlink
jointly  market  the  products,  and that  Cisco  and  Interlink  share  support
obligations for customers of the products.

                                       16
<PAGE>

      To date,  all of the Company's  core  technologies  have been acquired and
have not been developed internally.  There can be no assurance that the software
development can be completed  successfully,  in a timely manner,  or at all. The
alliance may divert the Company from developing  other  stand-alone  products or
enhancing  existing  stand-alone  products  to  compete  against  IBM or others,
allowing IBM or others to sell more advanced products to the Company's  customer
base prior to the  availability of the new products beings developed with Cisco,
which could result in loss of sales and maintenance revenue,  which would have a
material  adverse effect on the Company's  business,  financial  condition,  and
results of operations. Furthermore, the timing of software development cannot be
predicted with accuracy,  and the Company's software development efforts for the
Cisco products will be subject to technological  risks including the possibility
that the software will not operate with Cisco's products in a manner  acceptable
to customers,  that the software may not be compatible with customers' networks,
that the bundling of the Company's software will result in unforeseen  technical
obstacles,  that  Cisco and the  Company  may  disagree  about  the  development
objectives, or that competitors,  including IBM, will develop competing products
that make the jointly developed products obsolete. In addition, Cisco may not be
successful  in marketing  the jointly  developed  software once the products are
completed, and the Company is not guaranteed any minimum sales revenues from the
alliance.  Because the Company is not  permitted  to sell the jointly  developed
products  independently of Cisco,  the Company,  after incurring the substantial
costs of  development  and  diversion of resources  away from  developing  other
products, may not receive sufficient revenues from Cisco sales, which would have
a material adverse effect on the Company's business,  financial  condition,  and
results of  operations.  There can be no assurance that Cisco will be successful
in selling the jointly  developed  products or that the Company will receive any
revenues from such products.

         The Company has no significant  experience  working with Cisco, and the
alliance  with  Cisco is  subject to all the risks  inherent  in such  strategic
relationships  including  the  failure of the  parties to meet their  respective
obligations  under  the  terms of the  alliance,  the risk of loss of  rights to
important  intellectual property either jointly developed in connection with the
alliance or  otherwise,  and the risk of a dispute  over key  provisions  of the
alliance.  There can be no assurance that the parties will meet their objectives
under the terms of the  alliance or that the Company  will not lose control over
its  intellectual  property.  The failure of either the Company or Cisco to meet
their  obligations under the terms of the alliance would have a material adverse
effect  on  the  Company's  business,   financial  condition,   and  results  of
operations.

     The  Company  is  currently  investing,  and plans to  continue  to invest,
significant  resources to develop  additional  relationships,  which investments
could adversely  affect the Company's  operating  margins.  The Company believes
that its success in penetrating  markets for its products  depends in large part
on  its  ability  to  maintain  these  relationships,  to  cultivate  additional
relationships  and  to  cultivate  alternative   relationships  if  distribution
channels  change.  There  can  be no  assurance  that  any  distributor,  system
integrator or strategic  partner will not discontinue its relationship  with the
Company, form competing arrangements with the Company's competitors,  or dispute
the Company's other strategic relationships.

New Products and Rapid Technological Change

     The  markets  for the  Company's  network  transport  products  and systems
management  applications are  characterized  by rapidly  changing  technologies,
evolving  industry  standards,  frequent  new  product  introductions  and rapid
changes in customer  requirements.  The Company believes that its future success
will depend upon its ability to develop,  manufacture  and market products which
meet changing user needs, to continue to enhance its products and to develop and
introduce in a timely manner new products that take  advantage of  technological

                                       17
<PAGE>

advances,   keep  pace  with  emerging  industry  standards,   and  address  the
increasingly  sophisticated  needs of its  customers.  There can be no assurance
whether  TCP/IP will  continue to be  accepted as a  communications  protocol on
client/server networks.  Furthermore, there can be no assurance that the Company
will be successful  in  developing  and  marketing,  on a timely basis,  product
enhancements or new products,  either  independently or with strategic partners,
that respond to technological  change or evolving industry  standards,  that the
Company  will not  experience  difficulties  that  could  delay or  prevent  the
successful  development,  introduction  and sale of these products,  or that any
such new products or product  enhancements will adequately meet the requirements
of the  marketplace  and achieve  market  acceptance.  The Company's  failure or
inability  to adapt its  products  to  technological  changes or to develop  new
products  successfully  would have a material  adverse  effect on the  Company's
business, financial condition and results of operations.

     The  introduction or announcement of products by the Company or one or more
of  its   competitors,   including  but  not  limited  to  IBM,   embodying  new
technologies,  or changes  in  customer  requirements  or the  emergence  of new
industry  standards and practices could render the Company's  existing  products
obsolete and  unmarketable.  As markets for the Company's  products  develop and
competition  increases,  the Company  anticipates  that product life cycles will
shorten and average selling prices will decline. In particular,  average selling
prices and gross  margins for each of the  Company's  products  are  expected to
decline as each product matures. There can be no assurance that the introduction
or  announcement  of new product  offerings by the Company or one or more of its
competitors will not cause customers to defer  purchasing the existing  products
of the Company or that the Company will successfully  manage the transition from
older  products to new or enhanced  products in order to minimize  disruption in
customer  ordering.  Such  deferment  of  purchases  or  inability to manage the
transition  of products  could have a material  adverse  effect on the Company's
business,  financial condition and results of operations. In addition, there can
be no  assurance  that  the  Company  will  successfully  identify  new  product
opportunities, develop and bring to market in a timely manner such new products,
or that  products  or  technologies  developed  by others  will not  render  the
Company's products or technologies noncompetitive or obsolete.

Fluctuations in Operating Results; Absence of Backlog; Seasonality

     The Company's  operating results have historically  been, and will continue
to be, subject to quarterly fluctuations due to a variety of factors, including:
expenditures on research and development,  timely introduction,  enhancement and
market acceptance of new versions of the Company's  products;  seasonal customer
demand;  timing of significant  orders;  changes in the pricing  policies by the
Company or its competitors;  anticipated and unanticipated  decreases in average
unit selling prices of the Company's products; increased competition; changes in
the mix of the products  sold and in the mix of sales by  distribution  channel;
the gain or loss of significant  customers;  the introduction of new products or
product enhancements by competitors;  currency fluctuations;  and the failure to
anticipate changing customer product  requirements.  In addition,  the impact of
revenues,  if any, from the Cisco alliance cannot be estimated at this time. The
Company  typically sells its products through a trial process to allow customers
to evaluate the  effectiveness  of the  Company's  products  before  determining
whether to proceed with broader deployment of such products. The Company's sales
cycle,  from the date the sales agent first  contacts a prospective  customer to
the date a customer  ultimately  purchases the Company's  product,  is typically
three to six months for the  TCPaccess  products  and six to nine months for the
HARBOR  products.  There can be no  assurance  however that the  customers  will
purchase the  Company's  products  after such trial period or that the Company's
sales cycle will not lengthen,  exposing it to the  possibility of shortfalls in
quarterly revenues,  which could have a material adverse effect on the Company's
business, financial condition or results of operations and cause results to vary
from period to period. The Company's  operating results will also be affected by
general  economic and other  conditions  affecting the timing of customer orders
and capital spending, and order cancellations or rescheduling.  Furthermore,  it
is possible that the Company's  products may be found to be defective  after the
Company has already  shipped in volume such products.  There can be no assurance
that  defects in the  Company's  products or failures in the  Company's  product
quality,  performance  and  reliability,  will not  occur  and such  defects  or
failures  will not have a material  adverse  effect on the  Company's  business,

                                       18
<PAGE>

financial  condition  and  results of  operations.  If such  defects or failures
occur,  the  Company  could  experience  a decline in revenue,  increased  costs
(including warranty expense and costs associated with customer support),  delays
in or  cancellations  or  rescheduling  of orders or  shipments,  and  increased
product  returns,  any of which  would  have a  material  adverse  effect on the
Company's business, financial condition and results of operations.

     The  Company  operates  with very  little  backlog  and most of its product
revenues  in each  quarter  result  from orders  closed in that  quarter,  and a
substantial  majority of those orders are  completed at the end of that quarter.
The Company  establishes its expenditure  levels for sales,  marketing,  product
development and other operating expenses based in large part on its expectations
as to future  revenues,  and  revenue  levels  below  expectations  could  cause
expenses to be disproportionately high. If revenues fall below expectations in a
particular quarter, operating results and net income are likely to be materially
adversely  affected.  Any  inability  of  the  Company  to  adjust  spending  to
compensate  for  failure  to  meet  sales  forecasts  or  to  collect   accounts
receivable,  or any unexpected increase in product returns or other costs, could
magnify the adverse impact of such events on the Company's operating results.

     The  Company's  business  has  experienced  and is  expected to continue to
experience significant seasonality. The Company has higher sales of its software
products in the  quarters  ending in December  and June and weaker  sales in the
quarters ending in September and March.  The decrease in product revenues in the
quarters  ending in  September  is due to the  international  customer  seasonal
buying  patterns.  The  quarters  ending in March are  historically  weak due to
government and large organization  annual budgeting cycles. Due to the foregoing
factors,   quarterly   revenue  and   operating   results  are  likely  to  vary
significantly in the future and  period-to-period  comparisons of its results of
operations  are not  necessarily  meaningful  and should  not be relied  upon as
indications  of future  performance.  Further,  it is likely that in some future
quarters  the  Company's   revenue  or  operating  results  will  be  below  the
expectations of public market analysts and investors.  In such event,  the price
of the Company's Common Stock would likely be materially adversely affected.

Integration of Acquisition; History of Acquired Technologies

     The Company has only one year of  operations  on a combined  basis with New
Era,  the  developer  of the HARBOR  products,  which the  Company  acquired  in
December  1995 in a purchase  transaction.  There can be no  assurance  that the
Company will be successful in  integrating  the  operations and personnel of New
Era into its business,  incorporating the HARBOR products and any other acquired
technologies into its product lines,  deriving significant future sales from the
HARBOR  products,  establishing  and maintaining  uniform  standards,  controls,
procedures and policies, avoiding the impairment of relationships with employees
and customers as a result of changes in management, or overcoming other problems
that may be  encountered in connection  with the  integration of New Era. To the
extent that the Company is unable to  accomplish  the  foregoing,  the Company's
business,  financial  condition  and results of  operations  would be materially
adversely  affected.  The  expansion  of  installed  IOS/390  sites will provide
increased sales  opportunities for HARBOR and other Interlink  applications. 

                                       19

<PAGE>

     As the Company  transitions  to this  model,  there could be some impact on
near-term  business  and a more  gradual  growth in overall  Systems  Management
Applications.  In  addition,  in order to sell the HARBOR  product,  the Company
established a direct HARBOR sales channel in the U.S. and  integrated the HARBOR
product  into its  European  sales  channel.  Given that lead time for closing a
HARBOR sale can be as much as nine months, the ability of the Company to produce
significant  HARBOR product sales in future  periods is highly  dependent on the
Company's  success with these changes.  If the Company is  unsuccessful  in such
implementation,  HARBOR product sales will likely not increase over the level of
sales during the  calendar  year ended  December  31,  1996,  which could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     To  date,  the  Company's  core  technologies  for  its  principal  network
transport  products and systems  management  applications have been acquired and
have not been developed  internally.  There can be no assurance that the Company
will have the opportunity to successfully acquire or develop new technologies in
the future or that such technology,  if acquired, can be successfully integrated
and  commercialized  by  the  Company.  An  inability  to  acquire,  develop  or
commercialize  new  technologies  would  have a material  adverse  effect on the
Company's business,  financial condition and results of operations.  The Company
may also seek to acquire or invest in businesses,  products or technologies that
expand,  complement  or otherwise  relate to the Company's  current  business or
product  line.  There  can  be no  assurance  that  such  acquisitions  will  be
successfully  or   cost-effectively   integrated  into  the  Company's   current
operations,  or that  the  acquired  technologies  will  provide  the  necessary
complement  to  the  Company's  current  products.  If the  Company  consummates
additional  acquisitions  in the  future  that must be  accounted  for under the
purchase  method of  accounting,  such  acquisitions  would likely  increase the
Company's  amortization  expenses.  In addition,  any such acquisitions would be
subject  to the risks of  integration  mentioned  above.  The  Company  does not
currently have any understandings, commitments or agreements with respect to any
potential acquisition or corporate partnering arrangements,  nor is it currently
engaged in any discussions or negotiations with respect to any such transaction.

Reliance on and Risks Associated with International Sales

     During the three  months  ended  December  31, 1996 and 1995,  41% and 46%,
respectively,  of the  Company's  total  revenues  were  derived  from  sales to
international  customers.  The Company's international sales have been primarily
to European  markets,  and sales are generally  denominated in local currencies.
The Company  expects that  international  revenue  will  continue to represent a
significant  portion of its total  revenue.  The  Company  intends to enter into
additional  international  markets  and to  continue  to expand  its  operations
outside  of  North  America  by  expanding   its  direct  sales  force,   adding
distributors and pursuing additional strategic  relationships which will require
significant  management  attention  and  expenditure  of  significant  financial
resources.  To the  extent  that  the  Company  is  unable  to  make  additional
international  sales  in a timely  manner,  the  Company's  growth,  if any,  in
international  revenues will be limited,  and the Company's business,  financial
condition and results of  operations  would be  materially  adversely  affected.
Sales to  international  customers  are subject to  additional  risks  including
longer receivables collection periods, greater difficulty in accounts receivable
collection,  failure of distributors to report sales of the Company's  products,
political and economic  instability,  nationalization,  trade restrictions,  the
impact of possible  recessionary  environments  in economies  outside the United
States,  reduced protection for intellectual  property rights in some countries,
currency  fluctuations  and  tariff  regulations  and  requirements  for  export
licenses. There can be no assurance that foreign intellectual property laws will
adequately  protect the Company's  intellectual  property  rights.  In addition,
effective copyright and trade secret protection may be unavailable or limited in
certain foreign countries.  Substantially all of the

                                       20
<PAGE>

Company's  distribution  and other  agreements with  international  distributors
require any dispute  between  the Company and any  distributor  to be settled by
arbitration.  Under these  agreements,  the party  bringing the action,  suit or
claim is required to conduct the  arbitration  in the domicile of the defendant.
The result is that, if the Company has a cause of action against a party, it may
not be feasible  for the  Company to pursue such  action,  as  arbitration  in a
foreign  country  could prove to be  excessively  costly and have a less certain
outcome  depending  on the  laws  and  customs  in the  foreign  country.  These
international  factors could have a material  adverse  effect on future sales of
the  Company's  products  to  international  end users  and,  consequently,  the
Company's business, financial condition and results of operations.

     Most  of  the  Company's  international  sales  are  denominated  in  local
currencies.  The Company has not  historically  attempted  to reduce the risk of
currency  fluctuations by hedging except in certain limited  circumstances where
the Company has held an account  receivable  expected  to be  outstanding  for a
period of at least 12 months.  The Company may be disadvantaged  with respect to
its competitors operating in foreign countries by foreign currency exchange rate
fluctuations that make the Company's  products more expensive  relative to those
of  local  competitors.  The  Company  may  attempt  to  reduce  these  risks by
continuing to hedge in certain limited transactions in the future.  Accordingly,
changes in the  exchange  rates or exchange  controls may  adversely  affect the
Company's  results of  operations.  There can be no assurance that the Company's
current or any future currency  exchange strategy will be successful in avoiding
exchange  related losses or that any of the factors listed above will not have a
material  adverse  effect  on the  Company's  future  international  sales  and,
consequently,  on the  Company's  business,  financial  condition and results of
operations.

Dependence  Upon  Proprietary   Technology;   Risk  of  Third-Party   Claims  of
Infringement

     The Company's  success and ability to compete is dependent in part upon its
proprietary  information.  The Company  relies  primarily  on a  combination  of
copyright and trademark laws, trade secrets, software security measures, license
agreements and  nondisclosure  agreements to protect its proprietary  technology
and software products. There can be no assurance,  however, that such protection
will be adequate to deter  misappropriation,  deter  unauthorized  third parties
from  copying  aspects  of, or  otherwise  obtaining  and using,  the  Company's
software  products  and  technology  without  authorization,  or that the rights
secured thereby will provide competitive advantages to the Company. In addition,
the  Company  cannot be  certain  that  others  will not  develop  substantially
equivalent or superseding  proprietary  technology,  or that equivalent products
will not be  marketed  in  competition  with  the  Company's  products,  thereby
substantially   reducing  the  value  of  the  Company's   proprietary   rights.
Furthermore,  there  can be no  assurance  that any  confidentiality  agreements
between  the  Company  and its  employees  or any  license  agreements  with its
customers  will provide  meaningful  protection  for the  Company's  proprietary
information  in  the  event  of  any  unauthorized  use or  disclosure  of  such
proprietary information.

     There  can be no  assurance  that  others  will not  independently  develop
similar  products or duplicate  the  Company's  products.  Despite the Company's
efforts to protect its proprietary rights,  unauthorized  parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as  proprietary.  There can be no assurance that the steps taken
by  the   Company  to  protect   its   proprietary   technology   will   prevent
misappropriation  of such  technology,  and such  protections  may not  preclude
competitors from developing  products with  functionality or features similar to
or superior to the Company's  products.  A  substantial  amount of the Company's
sales are in international  markets,  and the laws of other countries may afford
the Company little or no effective protection of its intellectual property.

                                       21

<PAGE>

     While the Company believes that its products and trademarks do not infringe
upon the proprietary rights of third parties, there can be no assurance that the
Company will not receive future communications from third parties asserting that
the Company's products infringe,  or may infringe,  on the proprietary rights of
third  parties.  The  Company was denied a  trademark  registration  of the name
"Interlink" based on the use of similar names by other companies in the computer
industry.   The  Company  expects  that  software  product  developers  will  be
increasingly  subject  to  infringement  claims as the  number of  products  and
competitors in the Company's  industry segments grow and the  functionalities of
products in  different  industry  segments  overlap.  Any such  claims,  with or
without  merit,  could  be time  consuming,  result  in  costly  litigation  and
diversion of technical and management  personnel,  cause product shipment delays
or  require  the  Company  to develop  non-infringing  technology  or enter into
royalty or  licensing  agreements,  any of which  could have a material  adverse
effect on the Company's business, financial condition and results of operations.
Such royalty or licensing agreements, if required, may not be available on terms
acceptable  to the  Company  or at all.  In the event of a  successful  claim of
product infringement against the Company and failure or inability of the Company
to  develop  non-infringing  technology  or  license  the  infringed  or similar
technology,   the  Company's  business,   financial  condition  and  results  of
operations could be materially adversely affected. In addition,  the Company may
initiate  claims or litigation  against third  parties for  infringement  of the
Company's  proprietary  rights or to  establish  the  validity of the  Company's
proprietary  rights.  Any such claims could be time consuming,  result in costly
litigation,  or lead the Company to enter into royalty or  licensing  agreements
rather than litigating such claims on their merits. Moreover, an adverse outcome
in litigation or similar  adversarial  proceedings  could subject the Company to
significant  liabilities  to third parties,  require  expenditure of significant
resources to develop  non-infringing  technology,  require disputed rights to be
licensed  from others or require the  Company to cease the  marketing  or use of
certain  products,  any of which  could  have a material  adverse  effect on the
Company's business, financial condition and results of operations.

Product Errors; Product Liability

     Software  products as complex as those offered by the Company often contain
undetected  errors or failures  when first  introduced  or as new  versions  are
released.  Testing of the Company's products is particularly challenging because
it is difficult to simulate the wide variety of computing  environments in which
the Company's  customers may deploy its products.  Accordingly,  there can be no
assurance  that,  despite  testing by the Company  and by current and  potential
customers,  errors will not be found after commencement of commercial shipments,
resulting in lost revenues,  loss of or delay in market  acceptance and negative
publicity about the Company and its products, any of which could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     The  Company's   license   agreements  with  customers   typically  contain
provisions  designed  to limit  the  Company's  exposure  to  potential  product
liability  claims.  The  limitation  of liability  provisions  contained in such
license  agreements may not be effective  under the laws of some  jurisdictions,
particularly  if the Company in the future relies on "shrink wrap" licenses that
are not signed by licensees. The Company's products are generally used to manage
data  critical  to  organizations,  and as a  result,  the sale and  support  of
products  by the  Company  may entail the risk of product  liability  claims.  A
successful  liability  claim  brought  against the Company could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

                                       22

<PAGE>


Reliance on TCP/IP and Maintenance; Concentration of Product Sales

     During the three  months  ended  December  31, 1996 and 1995,  sales of the
TCPaccess   products,   excluding   maintenance  and  hardware,   accounted  for
approximately  39% and 46%, and,  including  related  maintenance  and hardware,
accounted for  approximately 64% and 76%,  respectively,  of the Company's total
revenues. Accordingly, the Company's operating results, particularly in the near
term, are  significantly  dependent upon the continued market  acceptance of the
TCPaccess  products.  A portion of the maintenance  revenues are from historical
customers  of the  Company's  DECnet  product.  The  Company no longer  actively
markets the DECnet product,  and maintenance revenues from DECnet customers have
declined  each year since the fiscal year ended June 30, 1993,  and are expected
to continue to decline.  The life cycles of the Company's products are difficult
to  estimate  due in part to the  effect  of  future  product  enhancements  and
competition.  A decline in the demand for the Company's  products as a result of
competition, technological change or other factors would have a material adverse
effect on the Company's business, financial condition and results of operations.

     The Company  estimates  that the total number of potential  sites where its
TCPaccess  products  could be  installed  is  limited.  Many of those sites have
already been serviced by either IBM or the Company.  The Company expects that it
will continue to depend upon this limited number of prospective  customers for a
significant  portion  of its  revenues  in future  periods.  As a result of this
concentration,  the  Company's  business,  financial  condition  and  results of
operations could be materially  adversely affected by the failure of anticipated
orders to materialize and by deferrals or cancellations of orders as a result of
changes in customer  requirements.  In addition,  the Company's  future  success
depends upon the capital  spending  patterns of such customers and the continued
demand by such  customers for the Company's  products.  The Company's  operating
results   may  in  the  future  be  subject  to   substantial   period-to-period
fluctuations  as a  consequence  of such  concentration  and  factors  affecting
capital spending in the enterprise networked systems management market.

Dependence on Key Personnel

     The Company is highly  dependent  on the  continued  service of, and on its
ability to  attract  and  retain,  qualified  technical,  sales,  marketing  and
managerial personnel. While the Company intends to expand its field sales force,
experienced  field sales personnel in the Company's  industry are in high demand
and may not be  attracted  and  retained on terms  advantageous  to the Company.
Furthermore,  there can be no assurance that the Company's efforts to expand its
field sales force will be successful. The competition for qualified personnel in
the software industry is intense,  and the loss of any such persons,  as well as
the failure to recruit additional key personnel in a timely manner, could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of  operations.  There can be no assurance that the Company will be able
to continue  to attract and retain the  qualified  personnel  necessary  for the
development of its business.  The Company has employment agreements with certain
executive officers, but such agreements do not ensure their continued service to
the  Company  or  prevent  their   competition  with  the  Company  following  a
termination of employment.  The Company does not maintain key man life insurance
on the lives of its key employees.

Possible Volatility of Share Price

     There can be no  assurance  that the market price of the  Company's  Common
Stock will not decline  below the initial  public  offering  price.  The trading
prices of the  Company's  Common  Stock may be subject to wide  fluctuations  in
response to a number of factors,  including  variations  in  operating  results,
alliances,  changes in

                                       23
<PAGE>

earnings estimates by securities analysts, announcements of extraordinary events
such as litigation,  alliances, or acquisitions,  announcements of technological
innovations or new products or new contracts by the Company or its  competitors,
announcements  and reports  about the  declining  number of mainframe  computers
shipped,  press  releases  or  reports of IBM or other  competitors  introducing
competitive or substitute products,  as well as general economic,  political and
market  conditions.   In  addition,  the  stock  market  has  from  time-to-time
experienced  significant  price and volume  fluctuations  that have particularly
affected the market  prices for the common  stocks of  technology  companies and
that have  often been  unrelated  to the  operating  performance  of  particular
companies.  These broad market fluctuations may also adversely affect the market
price  of  the  Company's  Common  Stock.  In the  past,  following  periods  of
volatility  in the market  price of a  company's  securities,  securities  class
action  litigation  has occurred  against the issuing  company.  There can be no
assurance that such  litigation will not occur in the future with respect to the
Company.  Such litigation  could result in substantial  costs and a diversion of
management's attention and resources, which could have a material adverse effect
on the Company's business,  financial  condition and results of operations.  Any
adverse  determination  in such  litigation  could also  subject  the Company to
significant liabilities.

                                       24

<PAGE>









                           PART II: OTHER INFORMATION


                                       25
<PAGE>


ITEM 2.    Changes in Securities

           On December 12, 1996,  the Company sold 622,000  shares of its Common
           Stock to Cisco for an aggregate  purchase price of approximately $6.8
           million.  The sale of the shares of Common  Stock to Cisco was deemed
           to be exempt from  registration  under the Securities Act in reliance
           upon Section 4(2) of the Securities Act as a transaction by an issuer
           not involving a public offering.  Cisco  represented its intention to
           acquire the securities for investment  only and not with a view to or
           for  sale  in  connection  with  any  distribution   thereof  and  an
           appropriate legend was affixed to the share certificate issued in the
           transaction. Cisco had adequate public information about the Company.

ITEM 6.    Exhibits and Reports on Form 8-K

           (a)      Exhibit 10.3           1996   Director  Stock  Option  Plan,
                                           as  amended, and  form  of  agreement
                                           thereto

           (b)      Exhibit 10.20          Stock purchase agreement between  the
                                           Company and Cisco dated  December 12,
                                           1996

           (c)      Exhibit 11.1           Statement  Regarding  Computation  of
                                           Net Income (Loss) Per Share

           (d)      Exhibit 27             Financia Data Schedule (EDGAR version
                                           only)

           (e)      Reports on Form 8-K    The  Company filed  a current  report
                                           on Form 8-K  on  December 16, 1996.


                                       26
<PAGE>


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Date: February 12, 1997              INTERLINK COMPUTER SCIENCES INC.
                                     AND SUBSIDIARIES
                                     (Registrant)



                                     By:  /s/Gloria M. Purdy
                                         ---------------------------------------
                                          Gloria M. Purdy
                                          Chief Financial Officer and Secretary


                                       27