The CV debt conversion: TAVA does it right again! The cv debt with Renaissance Capital contained provisions whereby TAVA could pay off the debt with shares if certain performance criteria were met. TAVA met the criteria and informed Ren Cap of its intention to pay off the debt per the cv debt provisions. Ren Cap then voluntarily accelerated the process by converting the debt to shares. So, TAVA keeps the money and issues shares, extinguishing debt. That's good, because the new shares were already figured in TAVA's diluted EPS reports anyway. It's also good because TAVA saves $135,000 year in interest charges. That's 0.5/share increase in EPS BEFORE investment of the $135,000 in growing the business. It's also good because TAVA's balance sheet once again gets cleaner. There is one more major debt to pay off, and that is scheduled to be paid off prior to the close of this fiscal year. So by June 30, we've got a pristine balance sheet.
Is a pristine balance sheet good? Not always. The wise use of leverage is the path to accelerated growth. JJ is in the late stages of pulling off a stunning use of leverage. He went in debt to buy producing assets, and he made them produce. Let's give him credit in this arena. OK, enough applause; let's look to the future. What is done once is often repeated. JJ has the balance sheet and cash flow to re-leverage the company. This time, he can do it without the dilution the first go round caused. He is fully aware of the dilution that building TAVA caused. I look for some savvy deals in TAVA's not-too-distant future. They could be acquisitions, mergers, or investments in internal growth, but I certainly don't expect JJ to sit on the incoming cash. |
