How will the $1.9 million acquisition affect Interlink's cash balance and earnings per share in the upcoming quarters?

Cash balance – The $1.9 million purchase is paid entirely in cash (half at closing, the remainder spread over a three‑year earn‑out). Assuming Interlink’s current cash on hand is in the low‑single‑digit‑million range – as is typical for a company that has been self‑funded and generating only modest revenue – the deal will shave a noticeable but not catastrophic amount off the balance sheet. In the first quarter after close the company will see a downward‑adjustment of roughly $1 million (the cash portion paid at closing). The earn‑out stream will be reflected as a small, incremental cash outflow of about $300 k per quarter over the next 12‑18 months, leaving the cash position still above the $1‑2 million threshold that analysts currently view as the “liquidity floor”.

Earnings per share (EPS) – Because the target business broke even on ~ $5 million of revenue and will be consolidated into Interlink’s results, the immediate effect on EPS will be downward‑pressure. The cash‐payment at closing is recorded as a goodwill charge (or as an acquisition‑related expense) that reduces net income in the quarter it occurs. In addition, the earn‑out liabilities are booked as an expense as they are accrued, dragging net income a further $0.02–$0.04 per share lower for each of the next two‑three quarters, depending on how aggressively Interlink funds the earn‑out. The net result is an estimated EPS decline of 5–8 % versus the prior‐guidance baseline for the next 2‑3 quarters.

Trading implications

• Short‑term view: Expect a modest sell‑off (2‑4 % intra‑day) as the market prices out the cash draw‑down and the EPS dip. The price‑action around the earnings‑release window will be key – any upside‑guidance on post‑integration margins could truncate the decline.
• Mid‑term outlook: If Interlink can demonstrate that the acquired UK contract‑manufacturing capability adds > 10 % gross margin uplift on the combined base, the EPS drag will be offset and the stock could rebound. Watch for management commentary on synergy timelines and the earn‑out schedule in the next earnings call.
• Action: Stay short or reduced‑size long until the first post‑close earnings release. If EPS guidance is revised up (e.g., the earn‑out is re‑priced lower), flip back to a neutral‑long position. Technical support: the stock is currently testing a support level near the 20‑day SMA; a break below could signal deeper weakness, while a bounce off that trend line may indicate the market has already absorbed the cash‑impact surprise.