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 March 31, 1997

                                       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
                                      ---       ---

    7,386,810 shares of the registrant's Common stock, $0.001 par value, were
                         outstanding as of May 1, 1997.

                                       1
<PAGE>

                        INTERLINK COMPUTER SCIENCES, INC.
                                AND SUBSIDIARIES

                                    CONTENTS

                                                                            Page
                                                                            ----
                          PART I: FINANCIAL INFORMATION

Item 1.       Financial Statements
                  Condensed Consolidated Balance Sheets:
                      March 31, 1997 and June 30, 1996.......................  4
                  Condensed Consolidated Statements of Operations:
                      Three and nine months ended March 31, 1997 and 1996....  5
                  Condensed Consolidated Statements of Cash Flows:
                      Nine months ended March 31, 1997 and 1996..............  6
                  Notes to Condensed Consolidated Financial Statements.......  7

Item 2.       Management's Discussion and Analysis of Financial
                  Condition and Results of Operations........................ 11


                           PART II: OTHER INFORMATION

Item 1        Legal Proceedings.............................................. 27
Item 4        Submission of Matters to a Vote of Security Holders............ 27
Item 6        Exhibits and Reports on Form 8-K............................... 27

Signatures    ............................................................... 28

                                       2

<PAGE>

                          PART I: FINANCIAL INFORMATION







                                       3
<PAGE>


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

                                                         March 31,      June 30,
                                                         ---------      --------
                                                           1997          1996
                                                           ----          ----
                                                        (unaudited)
ASSETS
Current assets:
     Cash and cash equivalents .....................     $ 27,007      $  6,121
     Accounts receivable, net ......................       11,072         9,445
     Inventories ...................................        1,264           700
     Other current assets ..........................        2,253         2,876
                                                         --------      --------
         Total current assets ......................       41,596        19,142
Property and equipment, net ........................        1,619         1,281
Purchased software products ........................        2,203         2,893
Other non-current assets ...........................        2,341         2,609
                                                         --------      --------
         Total assets ..............................     $ 47,759      $ 25,925
                                                         ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Bank line of credit ...........................         --           5,000
     Current portion of long-term debt .............     $    343         3,100
     Accounts payable ..............................        1,764         2,662
     Accrued liabilities ...........................        7,250         6,630
     Deferred maintenance and product revenue ......        7,601         8,121
                                                         --------      --------
         Total current liabilities .................       16,958        25,513
Long-term debt, less current portion ...............          831         2,892
Deferred maintenance revenue .......................        1,388         1,056
Other liabilities ..................................        1,080         1,049
                                                         --------      --------
     Total liabilities .............................       20,257        30,510
                                                         --------      --------
Commitments and contingencies (Note 5)
Preferred stock ....................................         --           6,310
Common stock .......................................       50,157        14,602
Cumulative translation adjustment ..................         (412)         (581)
Accumulated deficit ................................      (22,243)      (24,916)
                                                         --------      --------
     Total stockholders' equity (deficit) ..........       27,502        (4,585)
                                                         --------      --------
         Total liabilities and stockholders'
          equity (deficit) .........................     $ 47,759      $ 25,925
                                                         ========      ========

     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>
<TABLE>

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

                                                   Three months ended      Nine months ended
                                                       March 31,              March 31,
                                                      (unaudited)            (unaudited)

                                                  -------------------------------------------
                                                    1997       1996        1997       1996
                                                  -------------------------------------------
<S>                                               <C>        <C>         <C>        <C>     
Revenues:
      Product .................................   $  7,546   $  5,282    $ 18,338   $ 13,196
      Maintenance and consulting ..............      3,611      3,691      11,177     10,506
                                                  --------   --------    --------   --------
            Total revenues ....................     11,157      8,973      29,515     23,702
                                                  --------   --------    --------   --------

Cost of revenues:
      Product .................................        564        641       1,927      2,283
      Maintenance and consulting ..............      1,139      1,171       3,585      3,319
                                                  --------   --------    --------   --------
            Total cost of revenues ............      1,703      1,812       5,512      5,602
                                                  --------   --------    --------   --------

Gross profit ..................................      9,454      7,161      24,003     18,100

Operating expenses:
      Product development .....................      1,957      1,487       5,827      3,781
      Sales and marketing .....................      4,142      3,422      10,400      8,960
      General and administrative ..............      1,301      1,202       3,320      2,990
      Purchased research and development and
         product amortization .................        127        160         428     10,318
                                                  --------   --------    --------   --------
            Total operating expenses ..........      7,527      6,271      19,975     26,049
                                                  --------   --------    --------   --------

Operating income (loss) .......................      1,927        890       4,028     (7,949)

Interest and other income (expense), net ......        256       (261)        344       (220)
                                                  --------   --------    --------   --------

Income (loss) before provision for income taxes      2,183        629       4,372     (8,169)

Provision for (benefit from) income taxes .....        851        245       1,698       (146)
                                                  --------   --------    --------   --------

Net income (loss) .............................   $  1,332   $    384    $  2,674   ($ 8,023)
                                                  ========   ========    ========   ========

Net income (loss) per share ...................   $   0.16   $   0.08    $   0.36   $  (2.57)
                                                  ========   ========    ========   ========

Shares used in per share calculation ..........      8,331      5,016       7,348      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>
                                                                     Nine months ended March 31,
                                                                       1997            1996
                                                                       ----            ----
                                                                            (unaudited)
                                                                            -----------
<S>                                                                    <C>         <C>      
Cash flows from operating activities:
     Net income (loss) .............................................   $  2,674    ($ 8,023)
     Adjustments to reconcile net income (loss) to net cash
         provided by operating activities:
              Purchased research and development ...................       --        10,158
              Depreciation and amortization ........................      1,210         832
              Provision for excess and obsolete inventory ..........         30         218
              Provision  for (reduction in) doubtful accounts ......        (24)        200
              Exchange loss ........................................        311         104
              Deferred income taxes ................................       --          (923)
              Changes in operating assets and liabilities:
                  Accounts receivable ..............................     (1,926)        717
                  Inventories ......................................       (592)       (173)
                  Other assets .....................................      1,041         244
                  Accounts payable .................................       (868)       (901)
                  Accrued liabilities ..............................        747      (1,055)
                  Deferred maintenance and product revenue .........         (9)      1,873
                  Other liabilities ................................         48         271
                                                                       --------    --------
                      Net cash provided by operating activities ....      2,642       3,542
                                                                       --------    --------
Cash flows from investing activities:
     Acquisition of New Era, net of cash acquired ..................       --       (10,168)
     Proceeds from sale of available-for-sale securities ...........       --         2,525
     Acquisition of property and equipment .........................       (957)       (273)
     Capitalization of software development costs ..................       (183)       --
                                                                       --------    --------
                      Net cash used in investing activities ........     (1,140)     (7,916)
                                                                       --------    --------
Cash flows from financing activities:
     Proceeds from term loan .......................................       --         3,000
     Proceeds from bank line of credit .............................       --         5,000
     Payments on capital lease obligations .........................       (190)       (206)
     Payments on notes payable and other ...........................     (4,400)       (299)
     Payments on bank line of credit ...............................     (5,000)     (1,300)
     Proceeds from issuance of common stock, net ...................     29,265          31
                                                                       --------    --------
                      Net cash provided by financing activities ....     19,675       6,226
                                                                       --------    --------

                           Net increase in cash and cash equivalents     21,177       1,852

Effect of exchange rate changes on cash ............................       (291)        (90)
Cash and cash equivalents, beginning of period .....................      6,121       4,148
                                                                       --------    --------
Cash and cash equivalents, end of period ...........................   $ 27,007    $  5,910
                                                                       ========    ========

<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 all material 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  statements  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  nine  months  ended  March  31,  1997  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
March 31, 1997 and June 30, 1996.

3.   Sale of Common Stock:

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.

On January  27,  1997,  the Company  signed a  definitive  agreement  with Cisco
Systems,  Inc.  ("Cisco")  regarding a strategic alliance to jointly develop and
market Cisco IOS for S/390  ("S/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 then
outstanding shares) for approximately $6.8 million.

                                       7
<PAGE>

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 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  ("Claimant")  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 Services Ltd., has also
previously  used the former  distributor as a distributor of the HARBOR products
in Italy pursuant to a separate agreement.

On January 27, 1997 the former  distributor  initiated a lawsuit in Milan, Italy
against New Era Services Ltd., a Canadian company and wholly owned subsidiary of
the Company, the Company, Interlink France S.A.R.L., a French company and wholly
owned subsidiary of the Company and the Company's current  distributor in Italy.
The  litigation  is based on the  Claimant's  distribution  of Company's  HARBOR
products  pursuant to a distributor  agreement with New Era, which pre-dates the
Company's  acquisition of New Era. The Company's  distributor  relationship with
Claimant for the  distribution  of the  Company's  HARBOR  products in Italy and
Spain has terminated.  This litigation does not involve the Company's  TCPaccess
products.  Pursuant to Claimant's court documents,  Claimant alleges damages for
breach of  contract  and  related  tort  claims in the  amount of  2,500,000,000
Italian Lira (approximately $1,500,000) and requests that the defendants pay all
expenses resulting from the litigation.

On March 12, 1997 the former distributor initiated a separate lawsuit in Alameda
County, California against the Company, certain employees of the Company and the
Company's  current  Italian  distributor.  The  litigation is based upon alleged
actions taken by the Company and certain  employees of the Company.  Pursuant to
Claimant's  complaint,  Claimants  allege various tort claims,  including fraud,
deceit,  and  unfair   competition,   in  addition  to  statutory  trade  secret
misappropriation,  and breach of confidential  relationship.  Claimants  request
that  the  defendants  pay   compensatory   damages  in  excess  of  $2,000,000,
unspecified  punitive  damages,  interest,  attorneys'  fees,  and  costs of the
litigation.   The  Company  believes  it  has  meritorious   defenses  to  these
allegations and intends to defend the matters  vigorously.  No provision for any
liability that may result upon  resolution of these matters has been made in the
financial statements.  Should the Claimant prevail on such

                                       8
<PAGE>

claims, the Company's  business,  financial  condition and results of operations
would be materially  adversely  affected.
<TABLE>

6. Supplemental Cash Flow Disclosures (in thousands)
<CAPTION>
                                                            Nine months ended March 31,
                                                                 1997        1996
                                                                 ----        ----
<S>                                                            <C>        <C>     
Interest paid ..............................................   $    184   $    329
Income taxes paid ..........................................   $  1,848   $    228
Non cash transactions from financing activities:
    Conversion of preferred stock to common
         stock in connection with initial public offering ..   $  6,310       --
    Issuance of preferred and common stock warrants ........       --     $     67

    Acquisition of New Era
         Assets acquired, excluding cash ...................       --     $  2,330
         Liabilities assumed ...............................       --       (3,473)
         Purchased software products .......................       --        3,199
         Purchased research and development ................       --       10,158
         Notes payable issued to former New Era stockholders       --       (1,328)
         Accrued liabilities for acquisition costs .........       --         (403)
         Issuance of common stock warrants .................       --         (315)
                                                               --------   --------
               Net cash payments ...........................       --     $ 10,168
                                                               ========   ========
</TABLE>

 7.   Subsequent Event

On April 23, 1997 the Board of Directors  granted employees the right to convert
certain  outstanding  stock options into option grants with an exercise price of
$8.125 per share (the fair market value as of May 2, 1997, the date specified by
the Board's  authorization).  The converted option grants vest on a date that is
six months after the date such installment  would have vested had the option not
been amended by the employee  exercising  this conversion  right.  Approximately
260,000 stock options (having exercise prices ranging from $9.00 to $16.25) were
repriced pursuant to this program.

8.   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.

                                       9
<PAGE>


The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards No. 128 "Earnings Per Share".  This statement replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It also requires dual  presentation of basic and diluted earnings per
share on the face of the income  statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic  earnings per share  computation  to the numerator and  denominator of the
diluted  earnings per share  computation.  This  statement is effective  for the
periods ending after December 15, 1997, including interim periods.





                                       10
<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. In December 1996, the Company entered into a
strategic  alliance  with  Cisco to  jointly  develop a product  based  upon the
Company's  TCPaccess  product and to be sold through  Cisco's sales  channels as
S/390.

                                       11
<PAGE>

Results of Operations
<TABLE>

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                      Nine months
                                                                        ended March 31,                   ended March 31
                                                                        ---------------                   --------------
                                                                     1997             1996              1997           1996
                                                                     ----             ----              ----           ----
<S>                                                                  <C>              <C>               <C>              <C>  
Revenues:
     Product..................................................       67.6%            58.9%             62.1%            55.7%
     Maintenance and consulting...............................       32.4             41.1              37.9             44.3
                                                                     ----             ----              ----             ----
         Total revenues.......................................      100.0            100.0             100.0            100.0
                                                                    -----            -----             -----            -----

Cost of revenues:
     Product..................................................        5.1              7.1               6.5              9.6
     Maintenance and consulting...............................       10.2             13.1              12.2             14.0
                                                                     ----             ----              ----             ----
         Total cost of revenues...............................       15.3             20.2              18.7             23.6
                                                                     ----             ----              ----             ----

Gross profit..................................................       84.7             79.8              81.3             76.4

Operating expenses:
     Product development......................................       17.6             16.6              19.7             16.0
     Sales and marketing......................................       37.1             38.1              35.2             37.8
     General and administrative...............................       11.7             13.4              11.3             12.6
     Purchased research and development
         and product amortization..............................       1.1              1.8               1.5             43.5
                                                                      ---              ---               ---             ----
         Total operating expenses.............................       67.5             69.9              67.7            109.9
                                                                     ----             ----              ----            -----

Operating income (loss).......................................       17.2              9.9              13.6            (33.5)
Interest and other income (expense), net......................        2.3             (2.9)              1.2             (0.9)
                                                                     ----             -----             ----             ----
     Income (loss) before income taxes........................       19.5              7.0              14.8            (34.4)
Provision for (benefit from) income taxes.....................        7.6              2.7               5.8              (.6)
                                                                      ---              ---               ---              ----
     Net income (loss)........................................       11.9%             4.3%              9.0%           (33.8)%
                                                                     =====             ====              ====           =======

Cost of sales as a percentage of the related revenues:
     Product..................................................        7.5%            12.1%             10.5%            17.3%
     Maintenance and consulting...............................       31.5%            31.7%             32.1%            31.6%
</TABLE>

As a result  of the  acquisition  of New Era in  December  1995,  the  Company's
operating  results  for the nine  months  ended  March 31, 1997 and 1996 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  consulting revenues as services
are accepted.  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

                                       12

<PAGE>

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 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 $11.2  million and $9.0 million for the three months ended
March 31, 1997 and 1996,  respectively,  representing  an increase of 24%. Total
revenues  were $29.5  million and $23.7  million for the nine months ended March
31, 1997 and 1996, respectively,  representing an increase of 25%. Product sales
were $7.5 million and $5.3 million for the three months ended March 31, 1997 and
1996,  respectively,  representing an increase of 42%.  Product sales were $18.3
million and $13.2  million  for the nine  months  ended March 31, 1997 and 1996,
respectively,  representing  an increase of 39%. These  increases were primarily
due to an increase in average  selling price of orders as well as an increase in
revenues from HARBOR  products.  The Company  recognized $2.0 million in product
revenue for the  pre-paid  software  licenses to Cisco for the nine months ended
March 31,  1997.  $1.0  million was  recognized  in each of the  quarters  ended
December 31, 1996 and March 31, 1997.  Maintenance and consulting  revenues were
$3.6  million  and $3.7  million for the three  months  ended March 31, 1997 and
1996,  respectively,  representing an decrease of 3%. Maintenance and consulting
revenues  were $11.2  million and $10.5  million for the nine months ended March
31, 1997 and 1996, respectively, representing an increase of 7%. The increase in
the nine months  ended March 31, 1997 over the nine months  ended March 31, 1996
was  primarily  due  to an  increase  in  the  number  of  customers  purchasing
maintenance  agreements.  The  decrease in the three months ended March 31, 1997
over the three months ended March 31, 1996 resulted  principally from a decrease
in maintenance revenues from the DECnet product line.

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  $564,000  and  $641,000,  representing  8% and 12% of total  product
revenues for the three months ended March 31, 1997 and 1996, respectively.  Cost
of revenues for product sales was $1,927,000 and  $2,283,000,  representing  11%
and 17% of total  product  revenues for the nine months ended March 31, 1997 and
1996,  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.

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 $1.1 million and $1.2 million,  representing  32% of total  maintenance  and
consulting  revenues  for the  three  months  ended  March  31,  1997 and  1996,
respectively.  Cost of revenues for  maintenance and consulting was $3.6 million
and $3.3 million,  representing 32% of total maintenance and consulting revenues
for the nine months ended March 31, 1997 and 1996,  respectively.   The absolute
dollar  increase in the nine month period  comparison was due to staff additions
as a result of the acquisition of New Era.

Operating Expenses:

Total operating  expenses were $7.5 million and $6.3 million,  representing  68%
and 70% of total  revenues  for the three  months ended March 31, 1997 and 1996,
respectively.  Total  operating  expenses were $20.0 million and $26.0  million,
representing  68% and 110% of total revenues for the nine months ended March 31,
1997 and 1996, respectively.

                                       13
<PAGE>

Product Development. Product development expenses consist primarily of personnel
related costs.  Product development expenses were $2.0 million and $1.5 million,
representing  18% and 17% of total revenues for the three months ended March 31,
1997 and 1996, respectively.  Product development expenses were $5.8 million and
$3.8  million,  representing  20% and 16% of total  revenues for the nine months
ended  March  31,  1997 and  1996,  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  March  31,  1997  and  1996,
respectively,  and 87% and 88% of product  revenues  for the nine  months  ended
March 31, 1997 and 1996,  respectively.  Sales and marketing  expenses were $4.1
million and $3.4  million,  representing  37% and 38% of total  revenues for the
three months ending March 31, 1997 and 1996,  respectively.  Sales and marketing
expenses were $10.4 million and $9.0 million,  representing 35% and 38% of total
revenues for the nine months ending March 31, 1997 and 1996,  respectively.  The
increase in absolute dollars was a result of commissions on higher revenues.

General  and  Administrative.   General  and  administrative   expenses  include
personnel and other costs of the finance,  human  resources  and  administrative
departments  of the  Company.  General  and  administrative  expenses  were $1.3
million and $1.2  million,  representing  12% and 13% of total  revenues for the
three  months  ended  March  31,  1997  and  1996,  respectively.   General  and
administrative expenses were $3.3 million and $3.0 million, representing 11% and
13% of total  revenues  for the nine  months  ended  March  31,  1997 and  1996,
respectively.

Purchased Research and Development and Product Amortization.  Purchased research
and development and product amortization was $127,000 and $160,000, representing
1% and 2% of total  revenues for the three months ended March 31, 1997 and 1996,
respectively.  Purchased  research and development and product  amortization was
$428,000 and $10.3  million,  representing  2% and 44% of total revenues for the
nine months  ended March 31, 1997 and 1996,  respectively.  The decrease for the
nine  month  comparison  relates  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 and Other Income (Expense) Net. Net interest and other income (expense)
was $256,000 and  ($261,000) for the three months ended March 31, 1997 and 1996,
respectively.   Net  interest  and  other  income  (expense)  was  $344,000  and
($220,000) for the nine months ended March 31, 1997 and 1996, respectively.  The
increase in interest  income and decrease in interest  expense was due primarily
to a  reduction  of bank  borrowings  related  to the New  Era  Acquisition  and
interest earned on funds received from the initial public offering and the Cisco
minority equity purchase.

Provision for (Benefit from) Income Taxes. The income tax provision was $851,000
and $245,000  for the three months ended March 31, 1997 and 1996,  respectively.
The income tax provision  (benefit) was  $1,698,000  and ($146,000) for the nine
months ended March 31, 1997 and 1996,  respectively.  The effective tax rate for
both the three  months and nine months  ended  March 31, 1997 was  approximately
39%.  Benefit  from  income  taxes for the nine  months  ended  March 31,  1996,
included  write-off  of  purchased  research  and  development  related  to  the
acquisition of New Era and the recognition of the Company's deferred tax asset.

                                       14
<PAGE>

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.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards No. 128 "Earnings Per Share".  This statement replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It also requires dual  presentation of basic and diluted earnings per
share on the face of the income  statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic  earnings per share  computation  to the numerator and  denominator of the
diluted  earnings per share  computation.  This  statement is effective  for the
periods ending after December 15, 1997, including interim periods.



                                       15
<PAGE>

Liquidity and Capital Resources

Working  capital  increased  at March  31,  1997  over  that at March  31,  1996
primarily due to the proceeds from the initial  public  offering,  proceeds from
the equity investment from Cisco and net income.

For the nine  months  ended  March 31,  1997,  net cash  provided  by  operating
activities  resulted  primarily from net income,  depreciation and amortization,
increase in accrued liabilities and a decrease in other assets, partially offset
by an increase in accounts receivable, an increase in inventories and a decrease
in accounts payable. For the nine months ended March 31, 1996, net cash provided
by  operations  resulted  primarily  from a write-off of purchased  research and
development,   depreciation   and  amortization  and  an  increase  in  deferred
maintenance and product  revenue,  partially  offset by a net loss,  increase in
deferred   income  taxes  and  a  decrease  in  accounts   payable  and  accrued
liabilities.

For the nine months ended March 31, 1997,  the  Company's  investing  activities
have consisted  primarily of purchases of property and  equipment.  For the nine
months  ended March 31,  1996,  the  Company's  investing  activities  consisted
primarily of the acquisition of New Era and the redemption of available-for-sale
securities.

Net cash  provided by financing  activities  for the nine months ended March 31,
1997 consisted  primarily of proceeds from the initial  public  offering and the
equity  investment by Cisco,  partially offset by payments on the Company's bank
line of credit and notes payable.  For the nine months ended March 31, 1996, the
Company's financing  activities  consisted of proceeds from a term loan and bank
line of credit and payments on bank line of credit.

At March 31, 1997,  the Company had $27.0  million in cash and cash  equivalents
and $24.6 million in working capital.  The Company had $11.1 million in accounts
receivable, net of allowance for doubtful accounts, and $9.0 million of unearned
revenues, substantially all of which are expected to be earned over the 12 month
period following March 31, 1997.

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.

                                       16
<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

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

Dependence on Strategic Relationships

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 (known as Cisco IOS for S/390 ("S/390")) 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. The joint
marketing of these products is currently the only manner in which these products
are being marketed.  This is a new marketing  relationship for the Company which
previously  sold its products  through its direct sales force and  distributors.
The Company does not know at this time what effect this  marketing  relationship
will have on the sales cycle and on  obtaining  current  sales  information  for
planning purposes. In addition, customer price quotes are managed by Cisco.

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 Company's software
development can be completed  successfully,  in a timely manner,  or at all. The
products  being sold are being  used in larger  multi-sites  than the  Company's
former TCPaccess product.  This usage pattern requires greater investment by the
Company to address  compatibility,  reliability  and  performance  problems.  In
addition, the Cisco quality assurance process is stringent, and this process can
create  delays in delivery of new  versions and  enhancements.  The alliance may
divert the Company  from  developing  other  stand-alone  products or  enhancing
existing   stand-alone  products  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  International  Business  Machines
Corporation  ("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.

                                       17
<PAGE>


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.  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. In addition,
either Cisco or the Company may terminate the relationship  upon 90 days written
notice.

The Company is currently investing, and plans to continue to invest, significant
resources to develop additional strategic relationships,  such 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 disrupt the  Company's  other
strategic relationships.

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.

Changes in Sales Structure; Continued Dependence on Distributors

Historically,  the  Company's  sales were  primarily  made through the Company's
direct sales force and the Company's distributors in some international markets.
The Company has redirected its sales force in connection with the Cisco alliance
so that the  Company's  sales  force  is  working  jointly  to sell  S/390.  The
Company's direct sales team is now selling through the Cisco sales channel.  The
sales force is also continuing to sell applications and other new products. This
transition in the  responsibilities  of the direct sales force may not result in
successful sales or a successful sales relationship with Cisco.

The  loss of,  or a  significant  reduction  in  revenues  from,  the  Company's
international  distributors  through  which the  Company  sells  certain  of 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.

A former  distributor  of the  Company's  TCPaccess  products in Italy,  Selesta
Integrazioni  SRL  ("Selesta"),  has initiated  legal actions over a distributor
agreement and alleged actions taken by the Company and certain  employees of the
Company.  Selesta  has  requested  in excess of  $3,500,000  in  damages  in two
lawsuits  filed in Milan,  Italy and Alameda  County,  CA. No provision  for any
liability that may result upon  resolution of these matters has been made in the
financial  statements.  Should  Selesta  prevail on its  claims,  the  Company's
business,  financial  condition  and results of  operations  would be materially
adversely affected.

                                       18
<PAGE>

Dependence on Current Products

During the three  months ended March 31, 1997 and 1996,  sales of the  TCPaccess
products,  excluding  maintenance and hardware,  accounted for approximately 45%
and  42%,  and,  including  related  maintenance  and  hardware,  accounted  for
approximately 71% and 64%,  respectively,  of the Company's total revenues.  The
Company's operating results have historically been significantly  dependent upon
sales 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  Company's  operating  results are
expected  to become  increasingly  dependent  upon  sales of the  S/390  product
jointly marketed with Cisco.

The Company cannot  estimate with certainty the total number of potential  sites
where the S/390 product could be installed.  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  viability  of the
Internetwork  Operating System ("IOS") market and the  relationship  with Cisco.
The Company's  operating results may be subject to substantial  period-to-period
fluctuations as a consequence of capital spending in the IOS market.

The Company has experienced  difficulty in deriving  significant  sales from the
HARBOR  products since the acquisition of New Era and the HARBOR product line in
December  1995.  The Company's  operating  results are currently  dependent upon
continued HARBOR sales.  Failure to maintain sales levels of the HARBOR products
could adversely affect the Company's results of operations.

Reliance on IBM and Emergence of Mainframe as Enterprise Server

The Company's  current software  products and the S/390 product 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  and S/390  product,  and have a  material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

                                       19
<PAGE>

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 Company competes with a
number of  companies,  principally  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 historically sold its TCPaccess suite of
products principally to customers who had installed IBM mainframes using the MVS
operating system.  The Company and Cisco will begin jointly marketing with S/390
product.  The Company's main  competition for its TCPaccess  products is IBM and
that is  expected  to  continue  with the S/390  product.  IBM sells  TCP/IP and
associated products for its MVS mainframe systems that compete directly with the
S/390 product. IBM has continued to enhance the functionality and performance of
its TCP/IP product 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  TCPaccess  products as a result and may lose
sales of the S/390 product for the same reason.  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 make  marketing of the S/390 product  difficult  which
would  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

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  Enterprises  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 a number of software  vendors who develop and market
products  for UNIX and  Windows  NT  operating  systems.  Although  the  Company
recently  signed a strategic  marketing  agreement  with Legato,  the Company is
still a competitor of Legato in the storage management market.  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  S/390 to the
customers of these  competitors,  which would have a material  adverse effect on
the Company's business, financial condition and results of operations.

                                       20
<PAGE>

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.

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. The Company's Vice President of Sales has resigned effective June 30,
1997,  and the  Company  has yet to  fill  the  position  of Vice  President  of
Marketing.  While the  Company  intends  to fill  these  positions,  experienced
executive-level sales and marketing  professionals in the Company's industry are
in high demand and may not be attracted  and retained on terms  advantageous  to
the Company.  The competition for qualified  personnel in the software  industry
(including  engineers skilled in MVS operating systems) 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.

New TCP/IP 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 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,  (including the S/390  product)  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

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<PAGE>

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. 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.  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.

Product Errors; Product Liability

Software products as complex as those offered and being developed 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,
Cisco 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.

Fluctuations in Operating Results; Absence of Backlog; Seasonality

The  Company's  operating  results have  historically  been subject to quarterly
fluctuations due to a variety of factors.  The impact of revenues,  if any, from
the Cisco  alliance  cannot be estimated at this time. The Company has typically
sold 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 is not certain whether the
S/390 product will require  customer trials or what the trial process will be if
one is required.  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,  has  typically  been three to six months for the  TCPaccess
products and six to nine months for the HARBOR products. The sales cycle for the
S/390  product  has not been  established  due to lack of  selling  and  revenue
experience with the S/390 product. There can be no assurance that

                                       22
<PAGE>

customers will purchase the Company's  products after a 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 the  seasonality  on  fluctuations  of Cisco sales of the S/390
product.  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.

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 historically  experienced and is expected to continue
to experience significant  seasonality.  The Company has had 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.  The impact of
S/390 revenues,  if any, on this pattern is not certain. This includes timing of
different  fiscal periods with Cisco.  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

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.

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<PAGE>

Reliance on and Risks Associated with International Sales

During   the  three  months  ended  March  31,  1997  and  1996,  34%  and  41%,
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 decline as a percentage of
total  revenue but  continue to  represent  a  significant  portion of its total
revenue. Some of the Company's international subsidiaries have been restructured
to act as resellers of the S/390 product.  To the extent this  restructuring  is
unsuccessful,  the Company's results of operations could be 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 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  hasn't  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 6 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.

                                       24
<PAGE>

There can be no assurance  that others will not  independently  develop  similar
products or duplicate the Company's products. 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.

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.
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.

Possible Volatility of Share Price

There can be no assurance  that the market price of the  Company's  Common Stock
will not decline or remain 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 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 would 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.

                                       25
<PAGE>




                           PART II: OTHER INFORMATION


                                       26
<PAGE>


ITEM 1.  Legal Proceedings

         Incorporated  by  reference  into Part II from the  Notes to  Condensed
         Consolidated Financial Statements provided in Part I hereto.


ITEM 4.  Submission of Matters to a Vote of Security Holders

         On March 6, 1997,  the Company held an Annual  Meeting of  Stockholders
         (the  "Annual  Meeting").  At the Annual  Meeting,  Charles W.  Jepson,
         Thomas H. Bredt,  Ronald W. Braniff,  D. Benedict Dulley, and Andrew J.
         Fillat were reelected to the Company's Board of Directors.

          Director             Votes For    Votes Against   Votes Abstaining
          --------             ----------   -------------   ----------------
          Ronald W. Braniff    4,098,136       112,000         2,863,113
          Thomas H. Bredt      4,098,136       112,000         2,863,113
          D. Benedict Dulley   4,097,840       112,296         2,863,113
          Andrew J. Fillat     4,098,136       112,000         2,863,113
          Charles W. Jepson    4,098,136       112,000         2,863,113
                                                              
                                                          
ITEM 6.   Exhibits and Reports on Form 8-K

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

          (b) Exhibit 27           Financial Data Schedule
                                   (EDGAR version only)

          (c) Reports on Form 8-K  The Company filed a current report on Form 
                                   8-K on April 21, 1997 and May 1, 1997


                                       27
<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:         May 14, 1997          INTERLINK COMPUTER SCIENCES INC.
                                    AND SUBSIDIARIES
                                    (Registrant)



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


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