Court filing
Crossroads Systems Q1 FY2021 Earnings: CPF Extended $65.6M PPP Loans to 1,200+ Businesses
Filed March 4, 2021 in Crossroads Capital Plus Otc Filings; one of 12 filings from this case.
Record facts
| Filed | 2021-03-04 |
|---|
Full text
4514 Cole St. Suite 1600 Dallas, Texas 75205 Main: 214-999-0149
Crossroads Systems Reports Fiscal First Quarter 2021
Financial Results
DALLAS, Texas, March 4, 2021 – Crossroads Systems, Inc. (OTCQX: CRSS) (“Crossroads”
or the “Company”), a holding company focused on investing in businesses that promote
economic vitality and community development, reported financial results for its fiscal first
quarter 2021 ended January 31, 2021.
Fiscal First Quarter 2021 Key Performance Indicators (KPIs)
• Added $3.7 million in new single-family mortgages during the fiscal first quarter.
• The Company’s mortgage portfolio grew to $130.9 million from $123.3 million for the
comparative period in 2020.
• The serious delinquency rate as of the period ended January 31, 2021 was 1.4%,
compared to 1.4% at the end of the same period in 2020. The Federal Home Loan
Mortgage Corporation (Freddie Mac) reported a single-family serious delinquency rate
of 2.6% as of the period ended January 31, 2021. The serious delinquency rate is based
on the number of mortgage loans that are three monthly payments or more past due or in
the process of foreclosure.
• Held 107 properties in inventory compared to 134 at the same time in 2020. As of January
31, 2021, gross inventory was $11.2 million compared to $13.1 million as of January 31,
2020. The Company is looking to build inventory to not only meet current demand but
also to plan for renovated housing units to be ready for the spring 2021 sales season. The
Company expects the upcoming spring demand for housing to be in line with historical
periods compared to the COVID disrupted Spring in 2020.
Fiscal First Quarter 2021 Financial Highlights
• Total property sales income was $4.0 million for the quarter compared to $4.2 million
for the same period in 2020. The decrease in property sales income for the quarter was
primarily due to lower unit sales related to the COVID-19 pandemic and its impact on
the Company’s office staff, resulting in a portion of sales being pushed to the fiscal
second quarter.
• Total interest income was $3.3 million, up from $3.2 million in the comparative 2020
period. The increase in interest income was the result of growth in the total mortgage
note receivable portfolio during the period.
4514 Cole St. Suite 1600 Dallas, Texas 75205 Main: 214-999-0149
• Operating income was $1.1 million compared to $1.3 million in the same period in 2020.
• Cash EPS (operating income less income to non-controlling interests) was $0.13
compared to $0.15 for the comparative period in 2020. The Company booked $112,000
of state and federal income tax expense, which will be offset against the Company’s
deferred tax asset. The adjusted cash EPS after adjusting for one-time transaction costs
and stock option compensation of $108,000 was $0.15.
• Book value as reported was $51.2 million, or $8.57 per share. Adjusted book value
including $3.5 million of subordinated debt totaled $54.7 million, or $9.16 per share.
• As of January 31, 2021, the Company held a cash balance of $1.4 million compared to
$2.1 million as of October 31, 2020.
Management Commentary
“As we closed out 2020 and entered the new year, CPF continued to make measurable progress
in expanding our mortgage portfolio while also taking advantage of exclusive opportunities to
provide much needed relief to small businesses in the communities we serve,” said Eric A.
Donnelly, Chief Executive Officer of Crossroads Systems. “Texas’ rapidly growing housing
market has opened up remarkable economic opportunities for our borrowers, many of whom
work in these industries. As a result, we have witnessed a noticeable declining trend in the
volume of forbearance requests. While COVID-19 vaccine rollout initiatives begin to ramp up,
we have worked through temporary underwriting delays which have pushed some property sales
into fiscal Q2 and have expanded next quarter’s pipeline. Nevertheless, we remain optimistic in
our ability to drive property sales and execute on our long-term operational goals.
“The latest government aid programs have also enabled CDFIs like us to extend much-needed
support to local businesses. We were quick to take advantage of this opportunity at the onset of
the calendar year. After an exceptionally active application period, we are proud to share that
we have extended a total of $65.6MM in PPP loans to over 1,200 small businesses in need of
capital, 95% of whom employ fewer than 20 people. While we continue to make meaningful
progress towards consummating our pending acquisition of Rice Bancshares, we have also
diversified our inventory composition by making key investments in new markets, including a
pool of rental units in San Antonio and a development lot in McAllen. These new ventures
provide yet another way for us to work alongside municipalities and local communities in
creating affordable housing without sacrificing our bottom line.”
About Crossroads Systems
Crossroads Systems, Inc. (OTCQX: CRSS) is a holding company focused on investing in businesses that promote economic
vitality and community development. Crossroads’ subsidiary, Capital Plus Financial (CPF), is a certified Community
4514 Cole St. Suite 1600 Dallas, Texas 75205 Main: 214-999-0149
Development Financial Institution (CDFI) and certified B- Corp, which supports Hispanic homeownership with a long term,
fixed-rate single-family mortgage product.
Important Cautions Regarding Forward-Looking Statements
This press release includes forward-looking statements that relate to the business and expected future events or future
performance of Crossroads Systems, Inc. and Capital Plus Financial and involve known and unknown risks, uncertainties
and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from
any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will,"
"would," "could," and similar expressions or phrases identify forward-looking statements. Forward-looking statements
include, but are not limited to, statements about Crossroads Systems' and Capital Plus Financial’s ability to implement their
business strategy, and their ability to achieve or maintain profitability. The future performance of Crossroads Systems and
Capital Plus Financial may be adversely affected by the following risks and uncertainties: economic changes affecting
homeownership in the geographies where Capital Plus Financial conducts business, developments in lending markets that
may not align with Capital Plus Financial’s expectations and that may affect Capital Plus Financial’s plans to grow its
portfolio, variations in quarterly results, developments in litigation to which we may be a party, technological change in the
industry, future capital requirements, regulatory actions or delays and other factors that may cause actual results to be
materially different from those described or anticipated by these forward-looking statements. For a more detailed discussion
of these factors and risks, investors should review Crossroads Systems' annual and quarterly reports. Forward-looking
statements in this press release are based on management's beliefs and opinions at the time the statements are made. All
forward-looking statements are qualified in their entirety by this cautionary statement, and Crossroads Systems undertakes
no duty to update this information to reflect future events, information or circumstances.
©2021 Crossroads Systems, Inc., Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems,
Inc. All trademarks are the property of their respective owners.
Company Contact:
Crossroads Systems
IR@crossroads.com
Investor Relations Contact:
Gateway Investor Relations
Matt Glover and Tom Colton
CRSS@gatewayir.com
(949) 574-3860
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
ASSETS
January 31,
2021
October 31,
2020
CURRENT ASSETS
Cash and cash equivalents
1,441,075
$
2,127,059
$
Restricted cash
830,852
3,004,051
Interest receivable
1,031,601
930,871
Current portion of notes receivable
1,142,767
1,527,234
Current portion of other notes receivable
5,208
7,014
Inventory
11,191,675
10,544,236
Prepaid expenses and other current assets
319,388
411,645
Total current assets
15,962,566
18,552,110
NOTES RECEIVABLE, net of current maturities and allowance of $0
128,662,990
127,304,450
OTHER NOTES RECEIVABLE, net of current maturities, participations and allowance of $0
1,486,354
1,583,761
GOODWILL
18,566,966
18,566,966
DEFERRED TAX ASSET
18,187,889
18,300,334
TOTAL ASSETS
182,866,765
$
184,307,621
$
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
309,219
$
222,610
$
Accrued liabilities
307,090
353,901
Escrow liabilities
266,091
2,886,249
Current portion of credit facilities
77,539,280
75,694,845
Current portion of other note payable (subordinated)
144,660
191,337
Current portion of acquisition notes payable
1,871,379
2,495,172
Total current liabilities
80,437,719
81,844,114
CREDIT FACILITIES, net of current maturities
38,728,473
39,481,435
OTHER NOTE PAYABLE, net of current maturities (subordinated)
1,144,233
1,144,234
ACQUISITION NOTES PAYABLE, net of current maturities (includes $2.2M subordinated)
10,591,275
10,582,769
PAYROLL PROTECTION PROGRAM LOAN
376,800
376,800
OTHER LONG-TERM LIABILITIES
393,692
407,091
TOTAL LIABILITIES
131,672,192
133,836,443
EQUITY
Common stock, $0.001 par value: 75,000,000 shares
authorized, 5,971,994 shares issued and outstanding
5,972
5,972
Additional paid in capital
242,544,918
242,471,412
Accumulated deficit
(209,406,800)
(210,057,986)
Crossroads Systems, Inc. stockholders' equity
33,144,091
32,419,398
Non-controlling interests
18,050,485
18,051,780
TOTAL EQUITY
51,194,576
50,471,178
TOTAL LIABILITIES AND EQUITY
182,866,767
$
184,307,621
$
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
Jan 31, 2021
Jan 31, 2020
REVENUES
Interest income
3,269,907
$
3,179,853
Property sales
3,999,060
4,180,400
Other revenue
50,491
284,321
Total revenues
7,319,458
7,644,575
COSTS AND EXPENSES
Interest expense
1,402,949
1,515,581
Cost of properties sold
3,614,442
3,669,899
General and administrative
499,467
471,810
Salaries and wages
743,698
673,464
Total costs and expenses
6,260,556
6,330,753
Income from operations
1,058,902
1,313,821
OTHER EXPENSES
Interest expense
(137,771)
(211,876)
Total other expenses
(137,771)
(211,876)
Income before income tax provision
921,132
1,101,945
INCOME TAX PROVISION
(112,445)
(131,370)
NET INCOME
808,687
970,575
Less: net income attributable to non-controlling interests
(157,500)
(158,795)
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS
651,187
$
811,780
$
Earnings (loss) per share:
Cash income attributable to common shareholders
763,632
943,150
Weighted average shaes outstanding
5,971,994
5,971,994
Cash income per share
0.13
$
0.16
$
For the Three Months Ended
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
As of January
31, 2021
As of January
31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
808,687
$
970,575
$
Adjustments to reconcile net income to net cash
used in operating activities:
Loss on derivative related activity
(105,702)
(6,803)
Stock based compensation
-
(1,680)
Amortization of deferred financing fees
-
11,450
Provision for income taxes
112,445
131,370
Changes in operating assets and liabilities:
Interest receivable
(100,730)
(426,006)
Notes receivable (Mortgages and other)
(775,647)
(1,276,506)
Inventory
(647,439)
(1,259,759)
Prepaids and other assets
92,257
56,606
Accounts payable
86,609
(21,794)
Accrued liabilities
45,492
95,170
Escrow liabilities
(2,620,158)
(2,206,246)
Net cash used in operating activities
(3,104,186)
(3,933,623)
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred equity dividend distributions
(158,795)
(158,795)
Paycheck Protection Program loan
-
-
Borrowings on credit facilities, net
4,671,957
5,137,946
Principal payments on credit facilities
(3,580,486)
(3,580,421)
Principal payments on other notes payable
(46,678)
(43,748)
Principal payments on acquisition note payable
(615,287)
(623,792)
Principal payments on participations in mortgage notes and other receivables
(99,213)
-
Net cash provided by financing activities
171,498
731,190
Net change in cash and cash equivalents and restricted cash
(2,932,688)
(3,202,432)
Cash and cash equivalents and restricted cash at beginning of period
5,131,110
3,615,424
Cash and cash equivalents and restricted cash at end of period
2,198,422
$
412,992
$
SUPPLEMENTAL INFORMATION
Cash paid for interest
1,520,702
$
1,887,976
$
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
Crossroads
Capital Plus
Systems, Inc.
Financial, LLC
Eliminations
Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents
24,325
$
1,416,750
$
-
$
1,441,075
$
Restricted cash
-
830,852
-
830,852
Interest receivable
-
1,031,601
-
1,031,601
Current portion of notes receivable
-
$1,142,767
-
1,142,767
Current portion of other notes receivable
-
5,208
-
5,208
Intercompany receivables
3,143,910
22,393,266
(25,537,176)
-
Inventory
-
11,191,675
-
11,191,675
Prepaid expenses and other current assets
134,380
185,008
-
319,388
Total current assets
3,302,615
38,197,127
(25,537,176)
15,962,566
NOTES RECEIVABLE, net of current
-
128,662,990
-
128,662,990
maturities and allowance of $0
-
-
-
OTHER NOTES RECEIVABLE, net of current
-
1,486,354
-
1,486,354
maturities and allowance of $0
-
-
-
GOODWILL
18,566,966
-
-
18,566,966
DEFERRED TAX ASSET
18,187,889
-
-
18,187,889
INVESTMENT IN SUBSIDIARY
13,386,175
-
(13,386,175)
-
OTHER NON-CURRENT ASSETS
-
-
-
-
TOTAL ASSETS
53,443,645
$
168,346,471
$
(38,923,351)
$
182,866,765
$
CURRENT LIABILITIES
Accounts payable
-
$
307,540
$
-
$
307,540
$
Accrued liabilities
40,444
266,646
-
307,090
Escrow liabilities
-
266,091
266,091
Intercompany payables
22,393,266
-
(22,393,266)
-
Current portion of credit facilities
-
77,539,280
-
77,539,280
Current portion of other note payable (subordinated debt)
-
144,660
-
144,660
Current portion of acquisition notes payable
1,871,379
-
-
1,871,379
Total current liabilities
24,305,089
78,524,217
(22,393,266)
80,436,040
CREDIT FACILITIES, net of current maturities
-
38,728,473
-
38,728,473
OTHER NOTE PAYABLE, net of current maturities (subordinated)
-
1,144,233
-
1,144,233
ACQUISITION NOTES PAYABLE, net of current maturities (includes $2.2M sub
10,591,275
-
-
10,591,275
maturities (includes $2.2M subordinated debt)
PAYCHECK PROTECTION PROGRAM LOAN
376,800
-
376,800
OTHER LONG-TERM LIABILITIES
-
393,692
-
393,692
TOTAL LIABILITIES
34,896,364
119,167,415
(22,393,266)
131,670,513
EQUITY
Common stock, $0.001 par value: 75,000,000 shares
authorized, 5,971,994 shares issued and outstanding
5,972
-
-
5,972
Additional paid in capital
242,546,598
-
-
242,546,598
Accumulated earnings (deficit)
(224,005,289)
31,128,574
(16,530,085)
(209,406,800)
Crossroads Systems, Inc. stockholders' equity
18,547,281
31,128,574
(16,530,085)
33,145,770
Non-controlling interests
-
18,050,485
-
18,050,485
TOTAL EQUITY
18,547,281
49,179,059
(16,530,085)
51,196,255
TOTAL LIABILITIES AND EQUITY
53,443,645
$
168,346,474
$
(38,923,351)
$
182,866,768
$
LIABILITIES AND EQUITY
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
Crossroads
Capital Plus
Systems, Inc.
Financial, LLC
Total
REVENUES
Interest income
-
$
3,269,907
$
3,269,907
$
Property sales
-
3,999,060
3,999,060
Other revenue
-
50,491
50,491
Total revenues
-
7,319,458
7,319,458
COSTS AND EXPENSES
Interest expense
-
1,402,949
1,402,949
Cost of properties sold
-
3,614,442
3,614,442
General and administrative
97,960
401,507
499,467
Salaries and wages
73,506
670,191
743,698
Total costs and expenses
171,466
6,089,089
6,260,556
Income (loss) from operations
(171,466)
1,230,369
1,058,902
OTHER EXPENSES
Interest expense
(137,771)
-
(137,771)
Total other expenses
(137,771)
-
(137,771)
Income (loss) before income tax provision
(309,237)
1,230,369
921,132
INCOME TAX PROVISION
(112,445)
-
(112,445)
NET INCOME (LOSS)
(421,682)
1,230,369
808,687
Less: net income attributable to non-controlling interests
-
(157,500)
(157,500)
NET INCOME (LOSS) ATTRIBUTABLE TO
CONTROLLING INTERESTS
(421,682)
$
1,072,869
$
651,187
$
Fiscal First Quarter
Shareholder Report for
the Three Months Ended
January 31, 2021
Crossroads Systems, Inc.
Delaware
74-284664
(State of Incorporation) (IRS Employer Identification No.)
4514 Cole St.
Suite 1600
Dallas, TX 75205
(Address of principal executive office)
(214) 999-0149
(Company’s telephone number)
Common Stock
$0.001 Par Value
Trading Symbol: CRSS
Trading Market: OTCQX
75,000,000 Common Shares Authorized
5,971,994 Shares Issued and Outstanding as of January 31, 2021
Dear Shareholder:
This letter is being written from the backdrop of one of the most unique and challenging
weeks in recent state memory. With the worst seemingly behind us, I hope this finds you
all safe and healthy. For Crossroads, we are working diligently on numerous statewide
recovery initiatives.
One of the most promising indicators of economic recovery is Texas’ continued red-hot
housing market, which hasn’t showed signs of stopping any time soon. Many of our
community members work in housing and construction-related fields and have benefitted
from the increased demand for labor even as economic pressures in other regions intensify.
Our typical seasonality at the start of the year was offset by record interest income
generated by our rapidly expanding mortgage portfolio. We experienced a minor decrease
in sales for the quarter, which was a result of staffing impacts from the ongoing COVID-
19 pandemic, which unfortunately affected our workforce during the quarter. These
deferments resulted in temporarily delays in underwriting, which have substantially
increased the size of our sales pipeline. Thankfully, early traction in vaccine distribution
bodes well for the return to optimal operational efficiency at Capital Plus and our staff have
already made considerable progress in working through opportunities in the sales funnel.
This past quarter brought with it several atypical, yet promising opportunities for us to give
back to those in need. Like other CDFIs, we got a clear runway at the beginning of the
rollout of second draw PPP loans, allowing us to quickly extend our support to small
businesses eligible for relief. Across America, small business owners account for 46% of
U.S. GDP and employ 47% of the workforce. During the pandemic, the country witnessed
more than 400,000 small businesses collapse and even more on the brink of total shutdown.
Small businesses have long been the heart of our country, and now more than ever is the
time for us to support them as they do us. Infusing capital into these communities that we
serve is not just the right moral choice—it’s the right economic choice.
Understanding technological enablement would be core to a successful program. To
expedite the PPP loan application process, we partnered with BlueAcorn, an online
financial platform that caters directly to the same underserved communities with whom we
interact daily. In the past few months, we received an extraordinary volume of loan
applications. We are happy to report that as of month end February 2021, CPF has
generated $65.6MM in PPP loans with another $6.4MM pending approval to a more than
1,200 small businesses in all parts of the country. More importantly, businesses receiving
our loans employ an average of 7 employees, for an average loan of $58k. These smaller
businesses, who are often staples in local communities, have needed the most support
during this time. We see it as an honor to be there for them where necessary. We will be
working diligently to process these loans in the coming quarter and expect to provide future
updates on the status of these loans next quarter.
Our operating history has shown us that the need for affordable housing expands well
beyond the reaches of Texas’ major population centers. To that end, we made further
headway on our ongoing development project in McAllen this quarter. As a reminder, we
purchased land in McAllen earlier last year with the intention of developing it into about
48 single-family homes. Newer ventures like these are particularly exciting for us. We have
a deeply personal understanding of the requirements that affordable housing units must
meet to properly serve those in need. With the agency to develop these units as we see fit,
we believe that we can maintain pricing power while exercising greater control of our
inventory on a quarterly basis. Another new market for Crossroads is San Antonio, where
we recently purchased a pool of rental properties. Again, while this is a departure for us,
we see it as another high-value opportunity, bringing us closer with municipal partners and
exposing immediately expanding the size of our market. Ultimately, we are working to
convert these into affordable housing units over the coming months.
CPF’s outstanding mortgage loan portfolio balance at the end of the quarter was $130.9
million and generated $3.3 million in interest income. Operating income for the quarter
was approximately $1.1 million before income attributable to non-controlling interests of
$158,000 and accruing for a non-cash tax provision of $112,000. Cash income attributable
to common shareholders for the fiscal first quarter was $764,000, resulting in a cash EPS
of $0.13. When adjusting for one-time costs related to the pending acquisition as well as
stock option compensation, cash EPS totals $0.15. As of January 31, 2021, CPF’s
unadjusted leverage was 2.31x and the consolidated cash coverage ratio, adjusted for one-
time and transaction expenses, was 1.64x.
Lastly, I would like to share that we are making very meaningful progress towards closing
our proposed acquisition of Rice Bancshares. There are a few final steps that we are eagerly
navigating through now, and we hope to share an update in the near future.
Now is an exciting time for CPF. Though a lot has changed in the last 12 months, we see
the initial efforts by state and local partners to distribute critical aid and treatments as a
positive indication of what is to come. Amid the uncertainty that many have experienced
during the past year, Capital Plus has stood at the ready to our homeowners and—with the
help of federal aid—the small businesses that power and define our communities.
Saludos Cordiales,
Robert H. Alpert & Eric A. DonnellyFile and source
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