As we move to close out what has certainly been the worst all-around year in modern history, with a political civil war, a wave of riots across the country, a deep recession, and hundreds of thousands dead from a rampaging viral pandemic, the asset market landscape continues to reveal many interesting dynamics that investors must take into account to properly identify core trends and seek out new and interesting opportunities.
The recent rise of Bitcoin is one such trend, and it suggests many important sub-themes in its wake – a possible transition underway in terms of “store of value” hedging as major players transition away from a gold-only process, a redefinition of the concept of “money”, and a new target for speculative-minded “zillennials” looking for somewhere to aim their $68 trillion in inherited capital over the coming decade.
With that in mind, we would point to the interesting rise of a micro-cap with strong exposure to the space that has been substantively reforming its equity structure in important ways: ISW Holdings Inc (OTCMKTS:ISWH), a company that has strong momentum in two major growth trends and has now established a strong anti-dilution program that deserves a close look.
The key here is that ISWH has laid down a recent track record of success in its telehealth and home healthcare segment and is verging on a breakout in commercial-stage operations for its cryptocurrency mining segment, producing what may be a major topline growth story now and throughout the year ahead.
A New Chapter
ISW Holdings Inc (OTCMKTS:ISWH) is a diversified player with commercial stage operations in home and telehealth care and development stage operations in the cryptocurrency mining space, but is also closing in on igniting commercial-stage growth in its crypto arm over the near-term ahead, based on its recent communications.
However, as we approach that key moment where the company’s “pod5” crypto mining solution goes live and starts churning out mining revenues and then starts to attract interest as a product in the mining equipment space, the company has also recently taken another big step: streamlining its capital structure by curtailing dilution risk, canceling debt, and reducing outstanding shares by a substantial margin.
To wit, in ISWH’s most recent release: the company announced that the Company and its largest noteholders have reached an agreement whereby about 50% of the current convertible debt owed by the Company will be exchanged for restricted preferred equity, eliminating a significant portion of the dilution potential from convertible debentures now carried in the Company’s books.
According to the release, the Company and its largest noteholder have agreed to exchange convertible debentures (principal and interest) with an aggregate value of $602K for restricted Preferred B equity, thereby reducing total debt and significantly curtailing dilution potential over the coming months and years.
“The Preferred B Shares will be restricted for a period of one year,” said Alonzo Pierce, President and Chairman of ISW Holdings, Inc. “After one year, the Preferred B Shares can only be converted at a maximum 12.5% per quarter of the original common share issuance (a total of 4.5 million common shares). So basically, no more than 562,500 common shares will hit the market in any given quarter.”
The Path Ahead
Perhaps even more importantly, in the release, management noted that the Agreement will form the basic template the Company will use in future financing rounds to prevent dilution risk from re-emerging.
“This move really shows the confidence of the debt holders that a strong upward trajectory for the company and its stock price is imminent,” added Pierce. “This action, of course, follows record revenue gains recorded in Q3 from the Home and Telehealth Healthcare segment, with over $769K in revenues in the first nine months of this year, growing at over 140%. Now, we are eliminating dilution risk proactively and driving major strength on the balance sheet.”
This pairs with its already strong growth trend in its telehealth and home healthcare segment.
In fact, for the three months ended December 31, 2020, following another breakout quarter during the three months ended September 30, 2020, which set new record high revenues for the Company, driven primarily by continued growth in its Home Healthcare and Telehealth segment – the third consecutive quarter featuring breakout growth for ISW Holdings this year.
Pierce added, “We are confident in the stability and growth we see from our Home/Telehealth operations, but our overall performance data can swell dramatically with strong execution from our Cryptocurrency Mining and Mining Equipment segment in the months ahead given the timing of our investments in this space and the tailwinds that have come together to define a very productive context.”