Crossroads Impact Corp. OTC Quarterly Disclosure Statement, quarter ended July 31, 2022
Summary
Crossroads Impact Corp. (a Delaware corporation) files its OTC quarterly disclosure statement for the period ending July 31, 2022. The statement reports 10,618,834 shares of common stock outstanding as of July 31, 2022, against 5,971,994 shares as of April 30, 2022, and says the company closed an issuance of 4,646,840 restricted shares for proceeds of $50 million on July 6, 2022. In its management discussion, the company reports total revenue from operations of $93.3 million for the nine months ended July 31, 2022, compared with $970.5 million for the same period of 2021, and attributes the decrease to a reduction in PPP fee income of approximately $877 million. Eric Donnelly, Chief Executive Officer, and Farzana Giga, Chief Financial Officer, give certifications dated September 13, 2022.
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“Crossroads Impact Corp. OTC Quarterly Disclosure Statement, quarter ended July 31, 2022.”
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CROSSROADS IMPACT CORP.
A Delaware Corporation
4514 Cole Avenue, Suite 1600
Dallas, TX 75205
________________________________
(214) 999-0149
www.crossroads.com
SIC CODE: 6712
Quarterly Report
For the Period Ending: July 31, 2022
(the “Reporting Period”)
The number of shares outstanding of our Common Stock is 10,618,834 SHARES as of July
31, 2022.
The number of shares outstanding of our Common Stock was 5,971,994 SHARES as of
April 30, 2022 (end of previous reporting period).
Indicate by check mark whether the company is a shell company (as defined in Rule 405
of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934):
Yes: No: (Double-click and select “Default Value” to check)
Indicate by check mark whether the company’s shell status has changed since the previous
reporting period:
Yes: No:
Indicate by check mark whether a change in control of the company has occurred over this
reporting period:
Yes: No:
Part A General Company Information
Item 1 Name of the issuer and its predecessors (if any) and the address of its principal executive officers
Crossroads Impact Corp.
Prior Symbol CRDS - Bankruptcy Plan Effective October 3, 2017;
Current CRSS: OTCQX
The address of the issuer’s principal executive offices.
Crossroads Impact Corp.
4514 Cole Avenue, Suite 1600
Dallas, TX 75205
(214) 999-0149
www.crossroads.com; www.capitalplusfin.com
ir@crossroads.com; info@capitalplusfin.com
Item 2 Shares Outstanding
COMMON STOCK
As of July As of October As of October
31, 2022 31, 2021 31, 2020
Number of Shares Authorized 175,000,000 75,000,000 75,000,000
Number of Shares outstanding 10,618,834 5,971,994 5,971,994
Number of Shares in Public Float 1,330,241 1,330,241 1,330,241
Total Number of Shareholders of record 129 134 162
Total Number of Shareholders holding at least 100 43 41 57
shares
List of securities offerings and shares issued for services in the past two years
On June 14, 2022, the Board of Directors approved the increase in the number of authorized shares of common
stock from 75,000,000 to 175,000,000.
On July 6, 2022 and July 11, 2022, Crossroads Impact Corp. entered contracts with P10 Commenda Impact Fund
Onshore, LLC, P10 Commenda Impact Fund Offshore, LLC, Conversant Impact Fund (A) LP, and Conversant
Impact Fund (B) LP to issue a total of 16,728,619 shares of common stock for $180 million by January 31, 2023.
The shares, offered at $10.76, are restricted.
On July 6, 2022, the Company closed an issuance of 4,646,840 restricted shares of common stock for proceeds
of $50 million with P10 Commenda Impact Fund Onshore, LLC and P10 Commenda Impact Fund Offshore,
LLC. The shares, offered at $10.76, are restricted.
Item 3 Financial information for the issuer’s most recent fiscal period.
The Company has provided the following financial statements for the most recent quarter ending July 31, 2022
which are attached hereto as Exhibit A and are hereby incorporated by reference:
• Consolidated Balance Sheet
• Consolidated Statement of Operations
• Consolidated Statement of Cash Flows
• Notes to the Consolidated Financial Statements
Similar financing information for such part of the two preceding fiscal years as the issuer or its predecessor
has been in existence.
The Company has provided the following financial statements for the two most recent fiscal years ending October
31, 2021 and October 31, 2020 (“Fiscal 2021”) and (“Fiscal 2020”):
• Report of Independent Public Accounting Firm
• Consolidated Balance Sheet
• Consolidated Statement of Operations
• Consolidated Statement of Changes in Equity
• Consolidated Statement of Cash Flows
• Notes to the Consolidated Financial Statements
These are published as Exhibit A to “Annual Reports” for each of Fiscal 2021 and Fiscal 2020 and filed
through the OTC Disclosure and News Service, available at www.otcmarkets.com, and are hereby
incorporated by reference.
Item 4 Management’s Discussion and Analysis
The following discussion provides information and analysis of the Company’s results of operations and its
liquidity and capital resources and should be read in conjunction with the Company’s Consolidated Financial
Statements and the other financial information included in Exhibit A and elsewhere in this Quarterly Report.
This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s
actual results could differ materially from those anticipated in these forward-looking statements as a result
of any number of factors.
The Company’s operating and reporting period is on a fiscal year ending on October 31. The quarterly
reporting period is from May 1, 2022 to July 31, 2022. The comparative period is from May 1, 2021 to July
31, 2021.
Fiscal 2022 Financial Overview & Results of Operations
Operations
As we indicated in our annual 2021 disclosure statement, fiscal 2021 was a transformational year for the Company.
We continued working through unwinding Payroll Protection Program (“PPP”) in the third quarter of 2022 along with
growing our partnership with Enhanced Capital Group (“ECG”) and growing our Rise Line Business Credit (“RLBC”)
acquisition. Total revenue from operations for the nine months ended July 31, 2022 was $93.3 million compared with
$970.5 million for the same period of 2021. The decrease in revenue was due to a reduction in PPP fee income of
approximately $877 million. Net operating income before taxes and non-controlling interest for the nine months ended
July 31, 2022 was $56.9 million compared to $320.2 million for the same period of 2021.
Net Earnings Per Share
Net earnings per share from operations before taxes and after non-controlling interests for the nine months ended July
31, 2022 was $8.72 compared to $53.54 for the nine months ended July 31, 2021. The decrease in earnings per share
was related to the PPP fee income earned in 2021.
Results of Operations
Comparison of the Three Months Ended July 31, 2022 to the Three Months Ended July 31, 2021.
The following table sets forth selected consolidated operating results stated in dollars and percentage from the prior
year:
For the Three Months Ended Increase/(Decrease)
July 31, 2022 July 31, 2021 $ %
REVENUES
Interest income $ 9,931,747 $ 14,910,841 $ (4,979,094) -33.4%
Property sales 3,284,200 6,092,931 (2,808,731) -46.1%
PPP administrative fees 55,322 465,547,952 (465,492,630) -100.0%
Other revenue 324,880 62,337 262,543 421.2%
Total revenues 13,596,149 486,614,061 (473,017,912) -97.2%
COSTS AND EXPENSES
Interest expense 2,291,441 5,576,284 (3,284,843) -58.9%
Cost of properties sold 2,887,270 5,391,903 (2,504,633) -46.5%
General and administrative 1,491,718 3,501,782 (2,010,064) -57.4%
PPP processing fees 738,797 287,264,283 (286,525,486) -99.7%
Salaries and wages 6,078,192 19,204,171 (13,125,979) -68.3%
Management Bonus - - -
Total costs and expenses 13,487,418 320,938,423 (307,451,005) -95.8%
Income from operations 108,731 165,675,638 (165,566,907) -99.9%
OTHER EXPENSES
Interest expense (104,565) (111,250) 6,685 -6.0%
Total other expenses (104,565) (111,250) 6,685 -6.0%
Income before income tax provision 4,166 165,564,388 (165,560,222) -100.0%
INCOME TAX PROVISION 2,229,717 (38,452,695) 40,682,412 -105.8%
NET INCOME 2,233,883 127,111,693 (124,877,810) -98.2%
Less: net income attributable to non-controlling interests (157,500) (155,773) (1,727) 1.1%
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS $ 2,076,383 $ 126,955,920 $ (124,879,537) -98.4%
EARNINGS PER SHARE
Income attributable to common shareholders before tax and after non-controlling interest (153,334) 165,408,615 (165,561,949) -100.1%
Earnings per share from operations before tax and after non-controlling interest $ (0.02) $ 27.70 $ (27.72) -100.1%
Cash income attributable to common shareholders (153,334) 126,955,920 (127,109,254) -100.1%
Weighted average shares outstanding 7,425,690 5,971,994 1,453,696 0.0%
Cash income per share $ (0.02) $ 21.26 $ (21.28) -100.1%
Total Revenues
Total property sales revenue from the sale of recently rehabilitated homes was $3.3 million for the quarter ended July
31, 2022, compared to $6.1 million for the quarter ended July 31, 2021. Sales during the third quarter of 2022 were
lower compared to the quarter ended July 31, 2021, due to fewer homes being available for sale during the period. We
continued to experience higher sales prices during the quarter with an average sales price of $182,000 compared to
$174,000 for the same period last year.
Total interest income revenue generated from the Company’s mortgage note receivable portfolio, its impact loan
portfolio and the PPP loans it processed in 2021 decreased to $9.9 million for the quarter ended July 31, 2022,
compared to $14.9 million for the quarter ended July 31, 2021. The increase in interest income from the mortgage
note receivable portfolio and impact loan portfolio was offset by a $7.9 million decrease in PPP interest income as
PPP is winding down. The Company funded a total of $6.3 billion in PPP loans generating an annual interest rate of
1% during 2021. The balance of the PPP loans receivable was $1.2 billion at the end of the quarter.
Processing fee income generated from the Company’s participation in PPP was $55,000 for the quarter ended July 31,
2022. This fee income was booked as deferred income at the end of fiscal 2021 and is being taken into income as PPP
loans are forgiven. The Company has approximately $19 million in deferred income as of July 31, 2022. PPP
processing fees for the same period of 2021 totaled $466 million.
Cost of Goods Sold
The cost of goods sold related to the sale of homes were at $2.9 million for the quarter ended July 31, 2022, compared
to $5.4 million for the quarter ended July 31, 2021. The average cost of a property sold during the quarter increased
an average of $6,000 to $160,000 compared to $154,000 for the same period last year as both property and
rehabilitation costs have increased.
Cost of goods sold includes all the direct costs of the inventory sold as well as the costs related to the rehabilitation of
the homes sold. In addition, cost of goods sold includes carrying costs of all the properties sold and inventory on hand.
The second component of the cost of goods sold is the interest expense on the Company’s loan portfolio which includes
first lien mortgages and PPP loans. The interest expense related to the loan portfolios was $2.3 million for the quarter
ended July 31, 2022, compared to $5.6 million for the quarter ended July 31, 2021. The interest expense was lower
due to the decrease in the Company’s participation in the PPP program. As of July 31, 2022, the outstanding balance
on the PPPLF was $1.3 billion with a cost of 35 bps per annum.
Processing fee expense related to PPP was $739,000 for the quarter ended July 31, 2022. These fees relate to PPP
related operations.
Operating Expenses
Operating expenses consist primarily of the following: compensation, sales and marketing, technology, legal,
professional fees, insurance, and other operating expenses.
Total operating expenses were $7.6 million for the quarter ended July 31, 2022, compared to $22.7 million for the
quarter ended July 31, 2021. July 31, 2022 operating expenses include $4.2 million of costs related to the modification
of stock-based awards while July 31, 2021 included $18.7 million in company paid executive, board and employee
bonuses. Normal operating expenses, as a percentage of total revenues excluding PPP, was 25.0% for the quarter
ended July 31, 2022 and increased from 19.0% from the quarter ended July 31, 2021. The main drivers for the
increased expenses were related to the addition of impact loan management fees totaling $683,000 for the quarter and
$26,000 in expenses related to the addition of RLBC.
Additionally, salaries and wage expense for the quarter was $888,000 higher for the quarter due to increased
headcount.
Other Income/Expense
Total other interest expenses increased $7,000 from the quarter ended July 31, 2022, compared to the quarter ended
July 31, 2021, as the decrease in balance on acquisition debt was offset by higher interest rates. The balance on the
acquisition debt as of July 31, 2022, was $6.6 million compared to $9.1 million as of July 31, 2021.
Comparison of the Nine Months Ended July 31, 2022, to the Nine Months Ended July 31, 2021
For the Nine Months Ended Increase/(Decrease)
July 31, 2022 July 31, 2021 $ %
REVENUES
Interest income $ 26,412,840 $ 23,777,722 $ 2,635,118 11.1%
Property sales 13,429,700 16,733,791 (3,304,091) -19.7%
PPP administrative fees 52,818,217 929,776,569 (876,958,352) -94.3%
Other revenue 646,677 207,575 439,102 211.5%
Total revenues 93,307,434 970,495,657 (877,188,223) -90.4%
COSTS AND EXPENSES
Interest expense 8,052,794 9,134,509 (1,081,715) -11.8%
Cost of properties sold 12,025,855 14,468,546 (2,442,691) -16.9%
General and administrative 4,234,959 8,848,984 (4,614,025) -52.1%
PPP processing fees 2,860,734 600,175,295 (597,314,561) -99.5%
Salaries and wages 8,988,875 20,731,003 (11,742,128) -56.6%
Management bonus - - -
Total costs and expenses 36,163,217 653,358,337 (617,195,120) -94%
Income from operations 57,144,217 317,137,320 (259,993,103) -82.0%
OTHER INCOME (EXPENSES)
Other Income - 3,447,921 (3,447,921) 0%
Interest expense (291,878) (372,859) 80,981 -21.7%
Total other income (291,878) 3,075,062 80,981 2.6%
Income before income tax provision 56,852,339 320,212,382 (259,912,122) -81.2%
INCOME TAX PROVISION (9,638,847) (69,991,591) 60,352,744 -86.2%
NET INCOME 47,213,492 250,220,791 (199,559,378) -79.8%
Less: net income attributable to non-controlling interests (472,500) (469,910) (2,590) 0.6%
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS $ 46,740,992 $ 249,750,881 $ (199,561,968) -79.9%
EARNINGS PER SHARE
Income attributable to common shareholders before tax and after non-controlling interest 56,379,839 319,742,472 (263,362,633) -82.4%
Earnings per share from operations before tax and after non-controlling interest $ 8.72 $ 53.54 $ (44.82) -83.7%
Cash income attributable to common shareholders 46,740,992 271,594,104 (224,853,112) -82.8%
Weighted average shares outstanding 6,461,884 5,971,994 489,890 0.0%
Cash income per share $ 7.23 $ 45.48 $ (38.24) -84.1%
Total Revenues
Total property sales revenue from the sale of recently rehabilitated homes was $13.4 million for the nine months ended
July 31, 2022 compared to $16.7 million for the nine months ended July 31, 2021. Although home sales for the period
were lower, we continued to experience higher sales prices. The average sales price for the nine months of 2022 is
$177,000 compared to $166,000 for the same period of 2021.
Interest income for the nine months ended July 31, 2022 was $26.4 million compared to $23.8 million for the same
period of 2022. Interest income generated from the Company’s mortgage note receivable portfolio increased by
$432,000. The additional increase of $2.2 million was $4.3 million in interest from the ECG loan portfolio which grew
from $7.5 million at October 31, 2021 to $121.4 million as of July 31, 2022 and $619,000 from the asset based lending
business offset by lower PPP interest of $2.7 million. PPP loans generate interest income of one percent per annum
until the loans are forgiven. The Company had $11.3 million in PPP interest income for the nine months ended July
31, 2022.
Processing fee income generated from the Company’s participation in PPP was $52.8 million for the nine months
ended July 31, 2022. This fee income was booked as deferred income at the end of fiscal 2021 and is being taken into
income as PPP loans are forgiven. The Company has approximately $19 million in deferred income as of July 31,
2022.
Cost of Goods Sold
The cost of goods sold related to the sale of homes were at $12.0 million for the nine months ended July 31, 2022
compared to $14.5 million for the nine months ended July 31, 2021. The decrease in costs was the result of fewer
home sales during the nine months ended July 31, 2022 compared to the same period of 2021. However, the average
cost per home sold increased by 9.4% from the prior period.
Cost of goods sold includes all the direct costs of the inventory sold as well as the costs related to the rehabilitation of
the homes sold. In addition, cost of goods sold includes carrying costs of all the properties sold and inventory on hand.
The second component of cost of goods sold is the interest expense on the Company’s note portfolios. Total interest
expense related to the portfolio income was $3.2 million for the nine months ended July 31, 2022 compared to $3.7
million for the nine months ended July 31, 2021. The lower interest expense was the result of lower debt outstanding
for the quarter ended July 31, 2022. The remaining interest expense of $4.8 million was associated with the PPP and
interest paid on the loan facility for the nine months ended July 31, 2022 compared to $5.4 million of such expense
for the same period of 2021.
Processing fee expense related to PPP was $2.9 million for the nine months ended July 31, 2022, versus $600 million
for the nine months ended July 31, 2021. These fees were paid to the Company’s lending service partners.
Operating Expenses
Operating expenses consist primarily of the following: compensation, sales and marketing, technology, legal,
professional fees, insurance and other operating expenses.
Total operating expenses were $13.2 million for the nine months ended July 31, 2022 compared to $29.6 million for
the nine months ended July, 2021. July 31, 2022 operating expenses include $4.2 million of costs related to
modification of stock-based awards while July 31, 2021 include $18.7 million in company paid executive, board and
employee bonuses and $2.2 million of bank service charges. Normal operating expenses, as a percentage of total
revenues excluding PPP, were 22.3% for the nine months ended July 31, 2022 and increased from 21.3% from the
nine months ended July 31, 2021. The main drivers of the increased expenses were $1.4 million related to impact loan
management fees and $102,000 of administrative expenses for RLBC. Additionally, salary and wage expenses were
$2.8 million higher during the period as a result of increased headcount and non-cash stock compensation expense
related to new stock award grants.
Other Income/Expense
The other interest expense relates to interest from acquisition debt. Total other interest expenses decreased
approximately $81,000 for the nine months ended July 31, 2022 compared to the nine months ended July 31, 2021
due to the principal reduction on this debt. The balance on the acquisition debt at July 31, 2022 was $6.6 million.
Liquidity and Capital Resources
We define liquidity as our ability to generate sufficient cash to fund current loan demand at the subsidiary level and
to operate on an ongoing basis. Our liquidity requirements are met primarily through cash flow from operations,
receipt of pre-paid and maturing balances in our loan portfolios, debt financing, and preferred equity investments.
As of July 31, 2022, CPF had lines of credit available with its current banking partners in excess of $6.7 million in
addition to unpledged loans and cash on hand. We continue to monitor our financing needs.
The Company also offers a Preferred Equity instrument to its bank partners which is considered a qualified investment
under the Community Reinvestment Act (“CRA”) investment test for banks. Banks purchase units of the preferred
investment which generates cash for the Company and provides banks with an “innovative” investment, providing a
more favorable CRA assessment from their regulators.
Working Capital
Mortgage Note Portfolio
The mortgage note portfolio consists of $133 million of long term fixed, amortizing single family residential
mortgages in the Dallas/Fort Worth, Houston and San Antonio markets. The Company provides a mortgage for the
purchase of a property with an equity down payment from the potential buyer. Our mortgage portfolio is comprised
of first-time home buyers, and in over 60% of the cases, first time credit recipients. We believe the risk associated
with these borrowers is mitigated by their history of debt aversion. Plainly said, those who have shown the financial
discipline to operate without debt should be rewarded and not punished as is often the case with a zero-credit score
borrower attempting to qualify for a mortgage. Each borrower is manually underwritten, and all are given the
opportunity to demonstrably prove their ability to repay. A 43% debt to income (“DTI”) ratio is the maximum ratio
for approved mortgages, but the average DTI ratio in our portfolio is 29.6%, further reinforcing the quality of our
borrowers. All mortgages are originated in house and are Qualified Mortgages (QM). Our average rate on the portfolio
was 10.33% at July 31, 2022.
The Company has a default rate below 3% per year and when it does take a property back into inventory, it is able to
put it back into its rehab cycle and resell it. Given its ability to rehab and resell the properties at a profit, the Company
has determined a reserve for delinquent and defaulted mortgages is not necessary as of July 31, 2022.
As of July 31, 2022, the Company had a mortgage note receivable balance of $133 million compared to $132 million
as of July 31, 2021.
Commercial and Other Note Portfolio
In addition, the company carries higher value residential mortgage notes held for sale in its securities portfolio held to
provide needed liquidity. From time to time, the Company will also provide commercial real estate loans as part of its
community development mission. The outstanding balance of these loans at July 31, 2022 was $1.3 million compared to
$1.4 million at July, 2021.
In 2021, the Company entered into an advisory agreement with Enhanced Capital Group (“Enhanced”) to support their
origination of impact loans into emerging communities by financing impact real estate projects, capital finance and small
business loans to minority owned businesses and/or underserved communities. The Company funded twenty-five impact
loans with outstanding principal of $105.4 million as of July 31, 2022. The impact loans have an average interest rate of
9.4% with the loans maturing from 10 months to 10 years. The Company had purchased no such loans for the nine months
ended July 31, 2021.
PPP Loan Portfolio
During fiscal 2021, CPF funded approximately $6.3 billion in PPP loans with a stated interest rate of one percent and
a five-year loan term. The loans are unsecured and fully guaranteed by the SBA and are eligible for forgiveness. As
of July 31, 2022, approximately 80% of the loan volume was forgiven and the outstanding loan balance was
approximately $1.2 billion. The loans are pledged to the federal reserve PPPLF and accrue interest at 35 bps per
annum.
Inventory
Inventory consists of properties that are currently undergoing remodeling or are being held for sale. Inventory includes
the initial costs of acquiring the property, remodeling costs, real estate taxes and other direct costs incurred while
remodeling the property. All indirect overheard costs, such as compensation of sales personnel, management and
advertising costs are charged to salaries and wages or other general and administrative expenses as incurred.
The initial direct costs to acquire properties and remodeling costs account for approximately 89.5% of cost of
properties sold in the consolidated statement of operations for the nine months ended July 31, 2022. As of July 31,
2022, 56 properties were being remodeled and 32 were completed and held for sale. Generally, the Company holds
properties in inventory from acquisition to resale for 3 to 4 months.
The Company regularly evaluates inventories that are slow-moving or incurring costs in excess of budgeted costs.
The Company determined a reserve for slow-moving inventory was not necessary as of July 31, 2022.
As of July 31, 2022, gross inventory was $11.2 million compared to $10.2 million as of July 31, 2021, an increase of
$1 million. The increase in inventory valuation is the result of increased property costs due to demand on the overall
housing market and rehabilitation costs as the number of properties on-hand has decreased since July 31, 2021. We
expect the inventory levels to remain constant.
Revolving Credit Facility
The Company has a revolving line of credit for the acquisition of properties and another for its mortgage loans. The
outstanding balance on the inventory line at July 31, 2022 was $3.5 million compared to $7.7 million at July 31, 2021.
The decrease in the outstanding balance is due to properties purchased with cash and decreasing inventories.
The outstanding balance on the mortgage loan revolving credit facility was $43.2 million as of July 31, 2022, compared
to $42.1 million as of July 31, 2021.
Cash Flows Provided by Operations
Continuing Operations
Net cash provided by operating activities during the nine months ended July 31, 2022 was $1.4 billion compared to
$5.6 billion of net cash used for the nine months ended July 31, 2021. The main driver of cash provided was the
reduction in PPP loans receivable during the quarter.
Cash Flows Used in Investing and Financing Activities
Net cash used by financing activities during the nine months ended July 31, 2022 was $1.8 billion compared to $6.2
billion provided for the nine months ended July 31, 2021. The usage was the result of the PPP loans paid off on the
PPPLF during the quarter. During July 2022, the Company raised $49.7 million through an equity raise.
There are no known trends, events or uncertainties that have or are reasonably likely to have a material impact on the
company’s short-term or long-term liquidity. The internal sources of liquidity are profits generated from the
company’s operating subsidiary, Capital Plus Financial, and its external sources of liquidity remain debt and equity
from banking institutions that assist in the institutions compliance with the Community Reinvestment Act (CRA). The
company has no material commitments for capital expenditures and the expected source of funds for such
expenditures. There are no known trends, events, or uncertainties that had had or that are reasonably expected to have
a material impact on the net sales or revenues or income from continuing operations. There are no significant elements
of income or loss that do not arise from the company’s continuing operations. There are also no causes for any material
changes from period to period in one or more line items on the Company’s financial statements nor are the seasonal
aspects that had a material effect on the financial condition of the results of operations.
Critical Accounting Policies and changes
N/A
Off-Balance Sheet Arrangements.
NA
Item 5 Legal Proceedings
As of the date of this report, Crossroads is currently involved in the following litigation and investigations.
Greathouse et. al. v. Capital Plus Financial LLC and Crossroads Systems Inc., Case No. 4:21-cv-1243-BRW, (E.D.
Ark)
Suit brought for failure to fund paycheck protection program claims. On July 19, 2022, the court dismissed this case
in full for lack of personal jurisdiction over Defendants in Arkansas.
Greathouse et. al. v. Capital Plus Financial LLC, Crossroads Systems Inc., Eric A. Donnelly, and Robert H. Alpert,
Case No. 422cv686, (N.D. TX)
Suit brought alleging claims of breach of contract, unjust enrichment, and violations of the California and North
Carolina Unfair Competition Laws for alleged failure to fund Paycheck Protection Program loans. This case was filed
on August 9, 2022, and Defendants have not been served to date.
Oto Analytics Inc. v. Capital Plus Financial LLC et. al., 3:21-cv-02636-B (N.D. TX)
On September 9, 2021, Womply commenced this action in the 95th Judicial District Court Dallas County TX (docket
number DC-21-13097), which the Company and other defendants removed to the Northern District of Texas.
Following removal and an amendment of their original complaint on December 23, 2021, the case alleges various
torts, including fraud and tortious interference with contract, in connection with Womply’s allegations regarding its
entitlement to the fees Womply allegedly earned by creating and providing technology infrastructure for the federal
PPP. The Company denies allegations of any wrongdoing and intends to vigorously defend the case. On January 31,
2022, the Company filed a motion to dismiss all counts for failure to state a claim. The Court issued a ruling on the
motion to dismiss on May 11th granting it in part and denying it in part, and providing Plaintiffs leave to amend. A
protective order was entered on April 21, 2022, and the Parties are in the early stages of discovery and there was a
second amended complaint filed on July 12.
Congress and the Department of Justice are investigating paycheck protection program lending, including the
Company’s subsidiary, Capital Plus Financial. The Company is cooperating in these investigations.
Item 6 Defaults upon senior securities.
None
Item 7 Other Information.
None
Item 8 Exhibits.
EXHIBIT A
Financial Statements for the Period Ending July 31, 2022
Condensed Consolidated Balance Sheets as of July 31, 2022, and October 31, 2021
Condensed Consolidated Statements of Operations for the fiscal quarter ended July 31, 2022, and July 31, 2021 and
for the nine months ended July 31, 2022 and July 31, 2021
Condensed Consolidated Statements of Cash Flows for the fiscal quarter ended July 31, 2022, and July 31, 2021
Notes to the Consolidated Financial Statements
CROSSROADS IMPACT CORP
CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, October 31,
2022 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 86,963,090 $ 278,984,781
Restricted cash 64,270,741 310,026,085
Interest receivable 14,337,015 15,254,327
Current portion of mortgage notes receivable 438,506 1,727,844
Current portion of commercial/other notes receivable 9,503,138 7,880,071
Inventory 11,223,783 10,212,770
Prepaid expenses and other current assets 2,347,727 1,110,164
Total current assets 189,084,000 625,196,042
MORTGAGE NOTES RECEIVABLE, net of current maturities and allowance of $0 132,098,082 130,281,822
COMMERCIAL/OTHER NOTES RECEIVABLE, net of current maturities and allowance of $0 106,333,319 8,533,246
PPP LOANS RECEIVABLE, net of discounts and allowance of $0 1,235,591,471 2,759,667,440
INVESTMENTS - DEBT SECURITIES (Held-to-Maturity) 16,000,000 -
INVESTMENT IN SOLAR TAX CREDIT FUND (Equity Method) 9,380,944 9,380,944
GOODWILL 18,566,966 18,566,966
TOTAL ASSETS $ 1,707,054,782 $ 3,551,626,460
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 583,378 $ 315,544
Accrued liabilities 220,110,099 269,448,624
Escrow liabilities 2,622,088 3,113,208
Income tax payable 10,248,388 28,725,428
Current portion of credit facilities 28,083,564 63,670,466
Current portion of other note payable 52,285 204,151
Current portion of acquisition notes payable 699,403 2,495,172
Total current liabilities 262,399,205 367,972,593
CREDIT FACILITIES, net of current maturities 68,918,020 36,451,501
OTHER NOTE PAYABLE, net of current maturities 940,084 940,083
ACQUISITION NOTES PAYABLE, net of current maturities 5,796,546 5,919,412
PPP LOAN PAYABLE - 376,800
FEDERAL PPP LIQUIDITY FACILITY ("PPPLF") 1,260,012,462 3,132,566,332
DEFERRED TAX LIABILITY - 184,113
OTHER LONG-TERM LIABILITIES 518,917 558,425
TOTAL LIABILITIES 1,598,585,234 3,544,969,259
EQUITY
Common stock, $0.001 par value: 175,000,000 shares
authorized, 10,618,834 shares issued and outstanding 10,619 5,972
Additional paid in capital 58,954,499 3,889,086
Accumulated deficit 31,451,355 (15,289,637)
Crossroads Systems, Inc. stockholders' deficit 90,416,473 (11,394,579)
Non-controlling interests 18,053,075 18,051,780
TOTAL EQUITY 108,469,548 6,657,201
TOTAL LIABILITIES AND EQUITY $ 1,707,054,782 $ 3,551,626,460
CROSSROADS IMPACT CORP
CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended Increase/(Decrease)
July 31, 2022 July 31, 2021 $ %
REVENUES
Interest income $ 26,412,840 $ 23,777,722 $ 2,635,118 11.1%
Property sales 13,429,700 16,733,791 (3,304,091) -19.7%
PPP administrative fees 52,818,217 929,776,569 (876,958,352) -94.3%
Other revenue 646,677 207,575 439,102 211.5%
Total revenues 93,307,434 970,495,657 (877,188,223) -90.4%
COSTS AND EXPENSES
Interest expense 8,052,794 9,134,509 (1,081,715) -11.8%
Cost of properties sold 12,025,855 14,468,546 (2,442,691) -16.9%
General and administrative 4,234,959 8,848,984 (4,614,025) -52.1%
PPP processing fees 2,860,734 600,175,295 (597,314,561) -99.5%
Salaries and wages 8,988,875 20,731,003 (11,742,128) -56.6%
Management bonus - - -
Total costs and expenses 36,163,217 653,358,337 (617,195,120) -94%
Income from operations 57,144,217 317,137,320 (259,993,103) -82.0%
OTHER INCOME (EXPENSES)
Other Income - 3,447,921 (3,447,921) 0%
Interest expense (291,878) (372,859) 80,981 -21.7%
Total other income (291,878) 3,075,062 80,981 2.6%
Income before income tax provision 56,852,339 320,212,382 (259,912,122) -81.2%
INCOME TAX PROVISION (9,638,847) (69,991,591) 60,352,744 -86.2%
NET INCOME 47,213,492 250,220,791 (199,559,378) -79.8%
Less: net income attributable to non-controlling interests (472,500) (469,910) (2,590) 0.6%
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS $ 46,740,992 $ 249,750,881 $ (199,561,968) -79.9%
EARNINGS PER SHARE
Income attributable to common shareholders before tax and after non-controlling interest 56,379,839 319,742,472 (263,362,633) -82.4%
Earnings per share from operations before tax and after non-controlling interest $ 8.72 $ 53.54 $ (44.82) -83.7%
Cash income attributable to common shareholders 46,740,992 271,594,104 (224,853,112) -82.8%
Weighted average shares outstanding 6,461,884 5,971,994 489,890 0.0%
Cash income per share $ 7.23 $ 45.48 $ (38.24) -84.1%
CROSSROADS IMPACT CORP
CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
As of July 31, As of July 31,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 47,213,492 $ 250,220,790
Adjustments to reconcile net income to net cash
used in operating activities:
Loss on derivative related activity - (105,702)
Stock based compensation 5,362,339 224,697
Amortization of deferred financing fees 31,188 (132,673)
Provision for income taxes 9,638,847 18,300,334
Changes in operating assets and liabilities:
Interest receivable 917,312 (14,270,414)
Notes receivable (Mortgage and commercial/other) (99,950,062) (6,148,983,964)
PPP loans receivable 1,524,075,969 -
Inventory (1,011,013) (62,183)
Prepaids and other assets (1,237,563) 106,450
Accounts payable 267,834 26,485
Accrued liabilities (67,855,073) 302,511,385
Escrow liabilities (491,120) (395,749)
Income tax payable (9,822,960) -
Net cash provided/(used) in operating activities 1,407,139,190 (5,592,560,544)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Paid for Investments - Debt Securities (16,000,000) -
Net cash used in investing activities (16,000,000) -
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred equity contributions
Preferred equity dividend distributions (471,205) (471,206)
Common equity distributions 49,707,721 (238,879,760)
Paycheck Protection Program loan (376,800) -
Borrowings on credit facilities (mortgage line) - 2,752,674
Principal payments on credit facilities (mortgage line) (1,462,248) (17,953,429)
Borrowings on credit facilities (inventory line) 2,752,674 -
Principal payments on credit facilities (inventory line) (4,410,809) -
Principal payments on other notes payable (151,865) (142,333)
Principal payments on acquisition note payable (1,949,823) (4,045,236)
Proceeds from the PPPLF - 6,422,368,423
Payments to the PPPLF (1,872,553,870) -
Net cash provided/(used) by financing activities (1,828,916,225) 6,163,629,133
Net change in cash and cash equivalents and restricted cash (437,777,035) 571,068,589
Cash and cash equivalents and restricted cash at beginning of period 589,010,866 5,131,110
Cash and cash equivalents and restricted cash at end of period $ 151,233,831 $ 576,199,699
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 8,239,986 $ 4,289,921
Cash paid for income taxes $ - $ -
1. COMPANY PROFILE AND NATURE OF OPERATIONS
Crossroads Impact Corp., formerly Crossroads Systems, Inc., (OTCQX: CRSS) (“CRSS” or “Parent”) was an
intellectual property licensing company headquartered in Austin, Texas. Founded in 1996 as a product solutions
company, CRSS created some of the storage industry's most fundamental patents and licensed patents to more than
50 companies prior to filing for re-organization under Chapter 11 of the Federal Bankruptcy Code on August 13, 2017.
On December 18, 2017, the Parent closed on the acquisition of 100% of the common equity of Capital Plus Financial,
LLC (“CPF”), a Texas based community development financial institution (“CDFI”). CPF’s mission is to make
homeownership available to the Hispanic market throughout Texas. CPF is also a certified B Corporation which is a
group of for-profit companies certified to meet rigorous standards of social and environmental performance,
accountability and transparency. In Texas, CPF acquires, renovates, and sells single family homes providing seller
financing through notes receivable. During the fiscal year ended October 31, 2021, CPF participated in the second
round of the Cares Act implementation of the PPP through the United States Department of the Treasury and Small
Business Administration (“SBA”).
CRSS entered into an advisory agreement with Enhanced Capital Group (“ECG”) on September 14, 2021,
an investment firm committed to socially responsible investment initiatives and impact manager of P10 Holdings,
Inc ("P10"), a leading, specialized multi-asset class private markets solutions provider. The advisory agreement allows
for the participation in loans infusing capital into emerging communities through small businesses and projects that
spur job creation, promote environmental sustainability, support women, minority and veteran-owned businesses and
stimulate underserved communities across the country.
On May 19, 2022, CRSS formed three Special Purpose Vehicles (“SPV”) for the sole purpose of holding impact loans:
CRSS Impact Real Estate LLC, CRSS Climate Finance, LLC and CRSS Small Business Lending LLC. All three
entities are 100% owned subsidiaries of CRSS.
2. BUSINESS COMBINATION
Crossroads acquired 100% of the equity interests in Rise Line Business Credit, LLC (“RLBC”) on September 24,
2021 for cash consideration totaling $10,079,046, funded through cash on hand. RLBC is a nationwide asset-based
lending firm that provides innovative working capital solutions. Through this transaction, Crossroads anticipates being
able to provide better accessibility to banking for small businesses and assist in their transition into the conventional
banking system where many are currently underserved. The acquisition was accounted for using the acquisition
method of accounting where the results of operations for RLBC are included beginning September 24, 2021. The fair
value of the net assets acquired in the acquisition equaled the purchase price so no goodwill was recorded and
management identified no intangibles for recognition. Net assets acquired in the acquisition included approximately
$2.2 million in cash, $283,000 in interest receivable and other current assets, $7.6 million of asset-based loans and
$16,000 of current liabilities.
CPF acquired 100% of the preferred securities of EC Butler Preferred, LLC (“Butler”) on February 28, 2022 for cash
consideration totaling $10 million, funded through cash on hand. The acquisition was accounted for using the
acquisition method of accounting where the results of operations for Butler are included beginning February 28, 2022.
Net assets acquired in the acquisition included a $10 million investment in the redeemable preferred securities of OSP
Enhanced, LLC (“OSP”).
Butler owns approximately 82% of OSP, a joint venture, with a second member owning the remining shares. Butler’s
equity interest in OSP is accounted for as a debt security.
CPF acquired 100% of the preferred securities of EC Rune Preferred, LLC (“Rune”) on May 24, 2022 for cash
consideration totaling $6 million, funded through cash on hand. The acquisition was accounted for using the
acquisition method of accounting where the results of operations for Rune are included beginning May 24, 2022. Net
assets acquired in the acquisition included a $6 million investment in the redeemable preferred securities of The Rune
JV, LLC.
Rune owns approximately 54% of The Rune JV, LLC, a joint venture, with a second member owning the remining
shares. Rune’s equity interest in The Rune JV, LLC is accounted for as a debt security.
CRSS Real Estate Impact, LLC acquired 100% of the membership interest of EC Decennial Lender, LLC
(“Decennial”) on July 19, 2022, for cash consideration totaling $13 million. The acquisition was accounted for using
the acquisition method of accounting where the results of operations for Decennial are included beginning July 19,
2022. Net assets acquired in the acquisition included a $13 million mezzanine loan.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America. The operations are for the period from November 1,
2021 through July 31, 2022.
Principals of Consolidation
The consolidated financial statements include the accounts of CRSS, CPF and RLBC. The SPVs are wholly owned
by CRSS. EC Decennial Lender, LLC is wholly owned by CRSS Impact Real Estate, LLC. Capital Mortgage
Servicing, LLC (“CMS”), EC Butler Preferred, LLC, and EC Rune Preferred, LLC are wholly owned by CPF
(collectively, “we”, “us”, or the “Company”). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all currency on hand, money market accounts, and highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Restricted cash includes approximately $2.8 million in
escrow accounts related primarily to CMS’s mortgage servicing obligations, $34.1 million in PPP related funds due to
the Federal Reserve to payoff loans and $27.4 million for investing impact loans.
Mortgage Notes Receivable
The Company originates predominantly 30-year notes receivable through sales of rehabilitated homes or purchases notes
receivable that are secured by an assignment of a deed of trust. The Company intends to hold the notes until maturity as
it has the ability to fund the notes receivable through borrowings from lenders that are secured by the notes receivable
and properties. Mortgage notes receivable are stated at their unpaid principal balances less an allowance for loan losses.
The average contractual interest rate per note was approximately 10.33% as of July 31, 2022. Interest income is
recognized monthly per the terms of the respective loan agreements. Mortgage notes receivable have maturities that range
from 4 to 30 years. All of the Company’s loans and underlying collateral are located in Texas.
The Company uses payment history to monitor the credit quality of the mortgage notes receivable on an ongoing basis.
The Company assesses the carrying value of its mortgage notes receivable for impairment when it determines that
impairment indicators are present. Notes are evaluated for impairment when it is probable the Company will be unable
to collect all amounts due for scheduled principal and interest payments, including notes in the process of repossession.
Impaired notes are generally measured based on the fair value of the collateral. Impaired notes, or portions thereof,
are charged off when deemed uncollectible. A specific reserve is created for impaired notes based on the fair value of
the underlying collateral. No specific impairment was deemed necessary as of July 31, 2022.
The Company may also receive escrow payments for property taxes and insurance included in its mortgage note
receivable collections. The liabilities associated with these escrow collections totaled $2.6 million as of July 31, 2022
and are included in escrow liabilities on the consolidated balance sheet.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Allowance for Loan Losses on Mortgage Notes Receivable
The allowance for loan losses reflects management’s estimate of probable and inherent losses in the notes receivable
balances that may be uncollectible based upon review and evaluation of the loan portfolio as of the consolidated
balance sheet date. An allowance for loan losses is determined after giving consideration to, among other things, the
loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency
and historical loss experience.
In addition, the Company considers such factors as changes in the nature and volume of the portfolio, overall portfolio
quality, and current economic conditions in the application of various strategies to mitigate risks associated with the
portfolio. The Company has determined that an allowance for probable and inherent loan losses was not required as
of July 31, 2022.
Allowance for Loan Losses on Mortgage Notes Receivable, Continued
The Company’s policy is to place a note receivable on nonaccrual status when either principal or interest is past due
and remains unpaid for 90 days or more. Accrued interest receivable is reversed for notes placed on nonaccrual status.
Payments received on nonaccrual notes receivable are accounted for on a cash basis, first to interest and then to
principal, as long as the remaining book balance of the asset is deemed to be recoverable. The accrual of interest
resumes when the past due principal becomes current. The unpaid principal balance of notes receivable on nonaccrual
status was $133 million at July 31, 2022.
The Company assesses the collectability of notes receivable on a note by note basis to determine if formal foreclosure
proceedings are necessary. The total principal balance of notes receivable for which the Company has begun formal
foreclosure proceedings totaling $109,000 as of July 31, 2022.
Commercial/Other Notes Receivable
From time to time, the Company will provide higher value financing for residential or commercial real estate. As of
July 31, 2022, the Company had an outstanding balance of $1.3 million in such financing on residential property. The
interest rate on the financing for the residential property is 9.99%. The residential property requires monthly principal
and interest payments based on 30-year amortization schedule maturing in 2049.
In 2021, the Company entered into an advisory agreement with Enhanced Capital Group to purchase impact loans to
infuse capital into emerging communities. The Company has purchased impact loans with an outstanding principal
balance totaling $105.4 million as of July 31, 2022.
The Company acquired two asset-based loans in the RLBC acquisition which totaled $9 million as of July 31, 2022.
The asset-based loans were recorded at their estimated fair values at acquisition which approximated their amortized
cost basis that includes the origination amount of the loan adjusted for applicable accrued interest, net deferred fees,
audit and legal costs and cash collections. One of the two asset-based loans, a revolving loan totaling $3.6 million, is
in default. The Company is in negotiations to settle the loan and believes the estimated value of the secured collateral
is sufficient to cover the loan’s outstanding balance.
Due to their individually significant balances, the Company continually monitors commercial/other notes receivable
for potential losses and the need for an allowance for loan losses. Notes are stated at amounts due from customers, net
of allowance for loan losses. The Company determines the allowance by considering several factors, including the
aging of the past due balance, the customer’s payment history and the Company’s previous loss history. The Company
establishes an allowance reserve composed of specific and general reserve amounts. As of July 31, 2022, all
commercial/other notes receivable, except for the $3.6 million asset-based loan discussed above, were current and in
good standing, and based on the borrowers’ history and values of the associated properties, the Company determined
no allowance for loan losses was required as of July 31, 2022.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Paycheck Protection Loans Receivable
The Company is actively participating in the second round of the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”) implementation of the PPP through the United States Department of the Treasury and SBA.
PPP loans have the following characteristics: an interest rate of 1.0%; principal and interest payments are deferred for
nine months from the date of disbursement; a five-year loan term to maturity for loans made on or after June 5, 2020
(loans made prior to June 5, 2020 have a two-year term, however borrowers and lenders may mutually agree to extend
the maturity for such loans to five years); and they are unsecured and guaranteed by the SBA.
Interest is recognized as interest income in the consolidated statements of operations when earned and deemed
collectible. PPP administrative fee revenue are deferred and recognized over the estimated life of the loans. PPP
administrative fee revenue for all loans paid in full or forgiven are recognized as earned at the time paid in full.
Management estimated life for all loans equal to or less than $150,000 to be 12-months while the administrative fees
for all loans greater than $150,000 are amortized over their stated terms, an average of 60 months. As of July 31, 2022,
approximately $19 million in PPP administrative fees were deferred.
Inventory
Inventory consists of properties that are currently undergoing remodeling or are being held for sale. Inventory is stated
at the lower of its cost or net realizable value using the specific identification method. Repair costs, commissions,
closing costs, interest and other costs associated with individual properties are included in the cost of the property and
are expensed as part of the cost of sales when the property is sold.
The Company regularly evaluates inventories that are aged significantly or incurring costs in excess of budgeted costs.
The Company determined that no reserves or impairments of inventory were necessary as of July 31, 2022.
Investments
Investments are preferred redeemable securities that meet the debt securities criteria of Financial Accounting Standards
Board Accounting Standards Codification (“ASC”) 320, Investments-Debt Securities. Debt securities are classified as
held-to-maturity and carried at amortized costs on the balance sheet. Interest and fee income are included in earnings.
Unrealized gains and losses are disclosed in the notes to the financial statements but not recognized in the financial
statements until realized. The initial investment and principal payments of those investments are classified as investing
activities and the interest collected is classified as operating activities in our consolidated statement of cash flow.
Management evaluates debt securities for other-than-temporary impairment on at least a quarterly basis and more
frequently when economic and market conditions warrant such an evaluation. Our impairment assessment is a subjective
process requiring the use of judgments and assumptions. Accordingly, we regularly evaluate the extent and impact of
any credit deterioration associated with the financial and operating performance and value of the underlying project. For
the nine months ended July 31, 2022, the Company invested approximately $16 million in debt securities. The Company
determined no debt securities were in an unrealized loss position at July 31, 2022.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Equity Method Investment
The Company accounts for its investment in a partnership that in turn makes equity investments in projects eligible to
receive federal energy tax credits in order to promote climate change in accordance with ASC 321, Investments –
Equity Securities. The Company’s investment does not have a readily determinable fair value. Accordingly, the
investment is measured at cost minus impairment, if any, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or a similar investment of the same issuer. The Company evaluates
its investments in equity securities for impairment whenever events or circumstances indicate that there is a loss in
value of the investment, which is other than temporary. In the event that the loss in value of an investment is other
than temporary, the Company would record a charge to earnings to adjust the carrying value to fair value. For the nine
months ended July 31, 2022, the Company invested approximately $9.4 million in the partnership to be re-invested in
projects qualifying for tax credits that the Company expects will be utilizable beginning in fiscal year 2022. The
Company determined no impairment to the investment value was necessary at July 31, 2022 based on expectations
for future tax credits to be realized.
Goodwill
Goodwill resulted from the acquisition of CPF on December 18, 2017. Goodwill is accounted for in accordance with
ASC 350, Intangibles – Goodwill. Management evaluates goodwill for impairment annually or when circumstances
indicate the estimated fair value exceeds the reporting unit’s carrying value indicating potential impairment of
goodwill. The Company determined that goodwill was not impaired at July 31, 2022.
Revenue Recognition
Interest income on mortgage notes receivable, commercial/other notes receivable and PPP loans receivable is
recognized on the accrual basis when earned using the effective interest method. Revenue from residential home sales
is recognized when title passes to the purchaser and collectability is reasonably assured. Revenue is recognized based
on the contracted sales price.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, mortgage notes receivable,
commercial/other notes receivable, credit facilities, other note payable and acquisition notes payable. The carrying
amount of cash and cash equivalents approximates its fair value because it is short-term in nature. This is considered
a Level I valuation technique. The credit facilities, other note payable and acquisition notes payable generally have
short-term maturity dates or variable interest rates that reflect market rates and the Company has determined that their
fair value approximates their carrying value. This is considered a Level II valuation technique. The Company assessed
the fair value of mortgage notes receivable and commercial/other notes receivable and determined their fair value
approximates their book value based on anticipated cash flows for principal and interest and relatively immaterial
interest rate fluctuations, net of other factors.
Deferred Financing Fees
The Company incurred costs for deferred financing fees when obtaining the acquisition note payable to Veritex
Community Bank detailed in Note 11. The debt issuance costs are presented as a deduction against the corresponding
debt on the consolidated balance sheet. The deferred financing fees are amortized over the respective debt agreement
with amortization expense included in other interest expense in the accompanying consolidated statement of
operations. Amortization expense was $28,353 for the nine months ended July 31, 2022. Net deferred financing fees
were $82,222 as of July 31, 2022.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Stock-Based Compensation
The Company recognizes compensation expense related to stock options and restricted stock on a straight-line basis
over the requisite service period based on the estimated fair value of the awards on the date of grant. Compensation
cost associated with stock options granted is determined using a calculated option value. The calculated value of each
stock option grant was derived using the Black Scholes option-pricing model based on significant inputs including the
Company’s common stock price on the grant date, risk-free interest rate, expected option life, and expected volatility.
The Company used the contractual life as the expected option life since no historical data exists. The Company used
historical common stock data to estimate expected volatility for valuation of the stock options.
Income Taxes
The Company accounts for income taxes using the liability method of accounting. Under the liability method, deferred
taxes are determined based on the differences between the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance
is recorded to reduce the carrying amounts of deferred tax if it is more likely than not such assets will not be realized.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.
The Company recognizes the financial statement benefit of a tax position that does not meet the more-likely-than-not
threshold only after expiration of the statute of limitations of the relevant tax authority sustains our position following
an audit. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon the ultimate
settlement with the relevant tax authority. We recognize interest and penalties related to uncertain tax positions in
income tax expense. There were no identified tax benefits or liabilities that were considered uncertain positions at July
31, 2022.
Tax credits from our equity method investments in partnerships investing in projects eligible to receive federal energy
tax credits, when realized, are recognized as a reduction of tax liabilities under the flow-through method, at which
time the corresponding equity investment is written down to reflect the remaining value of the future benefits to be
realized. No tax credits were realized or recognized as of the quarter ended July 31, 2022.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash
equivalents and mortgage notes receivable. The mortgage notes receivable is secured either by the residential homes
that were financed through the loan or by the borrower’s assets. The Company maintains deposits with major financial
institutions, which from time-to-time, may exceed the federally insured limits at each institution. The Company has
experienced no losses related to its deposits and management believes any potential credit risk is minimal.
Risks and Uncertainties
The Company's business is affected, directly and indirectly, by domestic and international economic and political
conditions and by governmental monetary and fiscal policies. Conditions such as inflation, recession, real estate
values, volatile interest rates, governmental monetary policy and other factors beyond the Company's control may
adversely affect the Company's results of operations. Adverse economic conditions could result in an increase in notes
receivable delinquencies, foreclosures and non-performing assets and a decrease in the value of property or other
collateral which secures the Company's loans.
The Company relies on various forms of revolving and long-term borrowings to finance its working capital
requirements and has historically demonstrated the ability to obtain additional financing or refinance maturing
obligations as needed to support the Company’s ongoing financing needs. As disclosed in Note 10 of these
consolidated financial statements, the Company has approximately $28.1 million in current debt obligations maturing
within one year prior.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of income and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates that could change in the near term and have a significant
impact on the consolidated financial statements include the adequacy of the allowance for loan losses.
Recent Accounting Pronouncements
During June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit
Losses on Financial Instruments. ASU No. 2016-13 requires financial assets measured at amortized cost to be
presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the
amortized cost basis. The measurement of expected credit losses is based on relevant information about past events,
including historical experience, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amount. During November 2018, April 2019, May 2019, November 2019 and March
2020, the FASB also issued ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11 and ASU
No. 2020-03. ASU No. 2018-19 clarifies the effective date for nonpublic entities and that receivables arising from
operating leases are not within the scope of Subtopic 326-20, ASU Nos. 2019-04 and 2019-05 amend the transition
guidance provided in ASU No. 2016-13, and ASU Nos. 2019-11 and 2020-03 amend ASU No. 2016-13 to clarify,
correct errors in, or improve the guidance. ASU No. 2016-13 (as amended) is effective for annual periods and interim
periods within those annual periods beginning after December 15, 2022 with early adoption permissible for the current
period. The Company is currently assessing the effect that ASU No. 2016-13 (as amended) will have on its
consolidated results of operations, financial position and cash flows.
4. MORTGAGE NOTES RECEIVABLE
The principal balance outstanding on the mortgage notes receivable and the expected principal collections for the next
five years and thereafter are as follows for the year ending October 31:
2022 $ 438,506
2023 2,083,191
2024 2,276,349
2025 2,494,785
2026 2,719,248
Thereafter 122,524,509
$ 132,536,588
4. MORTGAGE NOTES RECEIVABLE, CONTINUED
A detailed aging of mortgage notes receivable that are past due as of July 31, 2022 are as follows:
%
Total notes receivable $ 132,536,588 100.0
Past due notes receivable:
31-60 days past due $ 3,617,429 2.7
61-90 days past due 650,394 0.5
91-120 days past due 645,918 0.5
Greater than 120 days past due 640,764 0.5
Total past due notes receivable $ 5,554,505 4.2
5. COMMERCIAL/OTHER NOTES RECEIVABLE
The principal balance outstanding on the other notes receivable and the expected principal collections for the next five
years and thereafter, excluding offsets for the $518,917 loan participation, are as follows for the years ending October
31:
Residential/
Commercial Asset-based
Loans Loans Total
2022 $ 342,990 $ 9,160,148 $ 9,503,138
2023 8,675,020 8,675,020
2024 15,400,161 15,400,161
2025 24,851,704 24,851,704
2026 3,385,792 3,385,792
Thereafter 54,020,642 54,020,642
$ 106,676,309 $ 9,160,148 $ 115,836,457
All other notes receivable were current and in good standing as of July 31, 2022 except for $3.6 million in asset-based
loans previously discussed in Note 3.
6. PAYCHECK PROTECTION PROGRAM LOANS RECEIVABLE
On March 27, 2020, the U.S. Congress approved, and former President Trump signed into law, the CARES Act. The
CARES Act provides approximately $2 trillion in financial assistance to individuals and businesses resulting from the
outbreak of COVID-19. The CARES Act, among other things, provides certain measures to support individuals and
businesses in maintaining solvency through monetary relief in the form of financing and loan forgiveness and/or
forbearance. The primary catalyst of small business stimulus in the CARES Act is referred to as the PPP, an SBA loan
that temporarily supports businesses in order to retain their workforce during the COVID-19 pandemic. Through the
CARES Act, the initiative calls for select lenders to extend loans to small businesses to cover payroll, occupancy and
operating expenses through the PPP. Furthermore, the PPP includes a 100% guarantee from the federal government
for loans up to $10 million and principal forgiveness for borrowers if the funds are used primarily for retaining
employees. The Company, as a CDFI, began participating as a lender for the second round of the PPP.
In the aggregate, the Company has facilitated the fundings of approximately $6.3 billion of loans through this program.
The Company has elected fair value option for these loans that are held-for-investment.
6. PAYCHECK PROTECTION PROGRAM LOANS RECEIVABLE, CONTINUED
The Company entered into a Lender Service Provider (“LSP”) agreement with a third-party. Under this agreement,
the Company paid a portion of the administration fees to the LSP for originating, underwriting, and processing PPP
loans, processing forgiveness with the SBA, and servicing the outstanding portfolio of PPP loan receivable.
The Company also partnered with a handful of banks that referred loans to the Company. These loans were processed
through a third-party platform. The Company paid an administration fee to the platform provider and the SBA
authorized referral fees to the banks. In total, approximately 500 loans were processed on the third-party platform.
The Company purchased approximately $133 million of PPP loans receivable from a third-party bank at 98.5% of
their unpaid principal balance at acquisition. The unearned discount as of July 31, 2022 was $299,347 with $985,068
of the original discount being amortized and recognized as a component of interest income on the consolidated
statement of operations.
During the first nine months of the fiscal year, the Company recognized approximately $53 million in net PPP income.
7. INVESTMENTS
The Company has a $16 million preferred equity investment that is treated as debt security in accordance with ASC
320. The investment is classified as a held-to-maturity security. No impairment or other activities affecting the cost
of the investment balance were required for the quarter ended July 31, 2022. The following table summarizes the
allowance for credit losses and the unrealized positions for held-to-maturity securities.
2022 2021
Amortized cost basis $ 16,000,000 $ -
Allowance for credit losses - -
Net carrying amount $ 16,000,000 $ -
Gross unrealized gains - -
Gross unrealized losses - -
Fair value $ 16,000,000 $ -
The amortized cost basis and fair value of debt securities at July 31, 2022, by contractual maturity, are shown below.
Amortized Costs Fair Value
Held-to-maturity securities
Due in one year or less $ - $ -
Due after one year through five years 6,000,000 6,000,000
Due after five years through 10 years 10,000,000 10,000,000
Due after ten years - -
$ 16,000,000 $ 22,000,000
8. EQUITY METHOD INVESTMENT IN SOLAR TAX CREDIT FUND
The Company committed to invest $15 million into a fund investing in solar projects eligible to receive federal energy
tax credits in order to promote climate change. The balance of the Company’s investment in the fund as of July 31,
2022 was $9,380,944. No impairment or other activities affecting the cost of the investment balance were required for
the quarter ended July 31, 2022.
9. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at July 31, 2022:
Accrued Liabilities
Board Compensation $ 20,250
Professional Fees 205,568
Salaries & Wages 80,000
Interest Payable 98,792
Enhanced Capital Fees 260,550
Deferred Income - Impact Loans 1,852,633
Management Bonus 3,000,000
PPP Accruals 214,574,893
Other 17,413
Total Other Accruals $ 220,110,099
10. DEBT
Credit Facilities
The Company uses various types of credit facilities to finance notes receivable and inventories. The loans are secured
by notes receivable or inventories.
In connection with the credit facilities, the Company has agreed to comply with certain financial and non-financial
covenants provided for in the agreements. Management was not aware of any covenant violations for the period ended
July 31, 2022.
The Company had the following credit facilities as of July 31, 2022:
10. DEBT, CONTINUED
Lender Interest Rate Maturity Date Balance
Prosperity USA (formerly Legacy Bank Texas) 4.85% (b) 8/11/2022 (a,c) $ 24,857,019
Veritex Bank (fromerly Green Bank) 5.54% (b) 3/2/2023 (a,c) 18,360,912
First National Bank of Ballinger 4.75% 6/1/2023 9,354,730
Oakwood Bank 3.75% 1/16/2025 9,423,741
Oakwood Bank Accordian with Spirit Bank 3.75% 1/16/2025 9,516,976
Texas Citizens Bank 9950 5.07% 9/30/2035 (a) 3,100,881
Happy State Bank Term 4 3.75% 9/18/2041 15,063,909
Happy State Bank Interim 2 5.25% (b) 9/3/2022 (c) 3,872,838
Happy State Bank Term 3.75% 10/1/2043 1,944,491
Happy State Bank Interim Rental Line 6.50% (b) 7/28/2022 (d) 249,261
Happy State Bank Interim Rental Line 2 6.50% 5/11/2023 458,428
Happy State Bank Flood Line 4.50% (b) 7/28/2022 (d) 88,509
Texas Regional Bank Lot Line 4.50% 12/5/2022 202,497
Texas Regional Bank 4.50% 11/16/2022 87,195
Texas Regional Bank Master 6.00% 12/15/2022 420,197
97,001,584
Less current portion of credit facilities (28,083,564)
Credit facilities, net of current maturities $ 68,918,020
(a) These facilities are due on demand and presented as current.
(b) These facilities require only monthly interest payments through maturity.
(c) This facility allows for incramental borrowings, each due within a 12 month period.
(d) This facility matured and was not renewed. The line will be paid down as properties are sold.
Future minimum principal payments for the credit facilities are as follows for the years ending October 31:
2022 $ 28,083,564
2023 30,388,209
2024 1,504,249
2025 17,414,451
2026 746,621
Thereafter 18,864,490
$ 97,001,584
10. DEBT, CONTINUED
Acquisition Notes Payable
To fund consideration in the December 18, 2017, acquisition of CPF, the Company entered into a $22 million note
payable with Veritex Community Bank (the “Veritex Note”) and a $2.2 million note payable to CrossFirst Bank (the
“CrossFirst Note”). The CrossFirst Note was paid in full during the year ended October 31, 2021.
The Veritex Note bears interest at the annual LIBOR rate plus an applicable margin of 4.50%, which was 6.89% at
July 31, 2022. The Veritex Note requires monthly principal payment of $233,134, plus interest, through maturity on
December 18, 2024. The Veritex Note is collateralized by certain operating assets of the Company not already
collateralized by the credit facilities. The balance on the Veritex Note, net of amortizing deferred financing fees of
$82,222, was $6,578,171 at July 31, 2022.
The Company is required to comply with certain financial and non-financial covenants under the Veritex Note. The
Company was in compliance with all covenants as of July 31, 2022.
Future minimum principal payments for the acquisition notes payable are as follows for the years ending October 31:
2022 $ 699,403
2023 2,797,613
2024 2,797,613
2025 201,319
$ 6,495,949
11. OTHER NOTE PAYABLE
The Company assumed a note payable in the December 2017 acquisition of CPF with an outstanding principal balance
as of the date of the acquisition totaling $1,827,750 (the “Other Note”). The Other Note is subordinate to the other
debt obligations, accrues interest at 6.50% per annum, calls for monthly payments of principal and interest of $22,710,
and matures on December 31, 2026. The balance on the Other Note was $992,369 at July 31, 2022.
Future minimum principal payments for the Other Note are as follows for the years ending October 31:
2022 $ 52,285
2023 217,823
2024 232,411
2025 247,976
2026 241,874
$ 992,369
12. PAYMENT PROTECTION PROGRAM LIQUIDITY FACILITY
The Company was authorized to incur indebtedness from the U.S. Federal Reserve Bank under the PPPLF to facilitate
PPP lending under round 2 of the CARES Act. Such borrowings are secured by pledges of loans to small businesses
under the PPP loan program, whether originated or purchased by the Company. Interest will accrue at a rate of 0.35%
of the outstanding balance. Repayments of principal and accrued interest are due in proportion to the amounts received,
upon receipt of any PPP loan forgiveness payments received from the SBA, receipt of any proceeds from the sale of
any loans to the SBA, or receipt of payment from the borrower. Borrowings under the PPPLF will mature with the
maturity date of the associated PPP loans pledged as collateral, which are scheduled to mature on various dates
between January 23, 2026 and July 29, 2026. The outstanding advances on the PPPLF at July 31, 2022 was
$1,260,012,462.
13. OPERATING LEASES
The Company is obligated, as lessee, under non-cancelable operating lease agreements for office space located in
Bedford, Texas and Houston, Texas. The lease agreements require monthly payments of $12,600. Both leases expire
in December 2022.
Future minimum payments required under non-cancelable operating lease agreements are as follows for the years
ending October 31:
2022 $ 37,800
2023 25,200
$ 63,000
Rent expense associated with non-cancelable operating leases for the nine months ended July 31, 2022 was $113,400,
and is included in general and administrative expenses in the consolidated statement of operations.
14. PAYCHECK PROTECTION PROGRAM LOAN PAYABLE
On July 31, 2020, the Company qualified for and received a loan pursuant to the PPP, a program implemented by the
SBA under the Coronavirus Aid, Relief, and Economic Security Act, from a qualified lender (the “PPP Lender”), for
an aggregate principal amount of $376,800. The PPP Loan bears interest at a rate of 1.0% per annum, with the first
nine months interest deferred, has a term of two years, and is unsecured and guaranteed by the SBA. The loan was
repaid in full during the quarter ended July 31, 2022.
15. STOCKHOLDERS’ EQUITY
The Company is authorized to issue up to 175 million shares of $0.001 par value common stock and 25 million shares
of $0.001 par value preferred stock. As of July 31, 2022, 10,618,834 shares of common stock were issued and
outstanding and no shares of preferred stock were issued and outstanding.
On July 6, 2022, the Company closed on a transaction to issue 6,040,892 shares of common stock for proceeds of $65
million before deducting offering expenses with P10 Commenda Impact Fund Onshore, LLC and P10 Commenda
Impact Fund Offshore, LLC. On the same day, the Company issued 4,646,840 common shares of the transaction for
proceeds of $50 million. The remaining issuance of 1,394,052 shares of common stock will be completed on August
1, 2022. All proceeds from the offering are restricted for impact loan investments.
16. STOCK BASED COMPENSATION
In June of 2018, the Company established the 2018 Stock Incentive Plan (“Stock Plan”) in which shares of common
stock are made available for grant to qualified officers, employees, directors and other key personnel of the Company.
The plan is authorized to issue up to 800,000 shares of the Company’s common stock.
The vesting of the options is determined by the Company with current options granted vesting over three years. The
Company recognizes compensation expense for the options granted using the straight-line method over the vesting
period. As of July 31, 2022, unrecognized stock-based compensation expense was $876,650 and is expected to be
recognized over a weighted average period of 2.69 years.
The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for the June 2020 and June 2022 grants.
Weighted Average Risk Average Estimated Weighted Average
Award Share Price Volatility Free Interest Rate Expected Term Grant Date Fair Value
June 2020 $ 8.30 67.6% 0.71% 6.00 $ 5.16
June 2022 $ 12.26 96.2% 3.24% 6.50 $ 13.58
The Company estimated the expected term of the options using comparable market data since no historical data was
available for stock option grants. On July 5, 2022, the Board of Directors approved the accelerated vesting of the June 18,
2020 and January 6, 2022 stock-based compensation awards resulting in the immediate vesting of 478,600 shares of
common stock for $4.2 million of compensation expense. Stock-based compensation expense for the nine months ended
July 31, 2022 was $5.4 million.
The Black-Scholes option-pricing model requires the input of highly subjective assumptions. The Company continues to
assess the assumptions and methodologies used to calculate the established fair value of share-based compensation.
Circumstances may change and additional data may become available over time, which could result in changes to these
assumptions and methodologies, which could materially impact the fair value determinations.
17. NON-CONTROLLING INTERESTS – CPF PREFERRED EQUITY
CPF has 36 preferred units at $500,000 per unit outstanding as of July 2022.
The rights and privileges of preferred units are as follows:
§ Duration and Voting: preferred units have no maturity date and have no voting rights.
§ Dividends: Holders of preferred units are entitled to receive cumulative dividends at an annual rate of 3.50%
for the first five years of their investment. Upon the five-year anniversary of their investment, the rate will reset
to the prime rate on a quarterly basis for the remainder of the investment period.
§ Conversion and Redemption: preferred units are not convertible into common units or any other equity of CPF
or the Company and are redeemable at the Company’s option after the fifth anniversary of the date of issuance.
§ Liquidation preference: holders of preferred units are entitled to a liquidation preference equal to all dividends
in arrears plus the initial capital contribution.
During the nine months ended July 31, 2022, CPF paid preferred dividends totaling $471,025 and had an accrued
balance of $53,075 at July 31, 2022. Accrued dividends are included as a component of total ending equity for non-
controlling interests at July 31, 2022.
18. RELATED PARTY ACTIVITIES
On September 14, 2021, the Company entered into an advisory agreement with Enhanced Capital Group (“ECG”), an
investment firm committed to socially responsible investment initiatives and impact manager of P10, Inc., a leading,
specialized multi-asset class private markets solutions provider. Mr. Alpert and Mr. Webb, who are members of the
Company’s board of directors, are Co-Chief Executive Officers and directors of P10, Inc. Mr. Alpert is chairman of
the board of P10, Inc. ECG receives a 1.5% monthly management fee on performing loans and an incentive fee of
15% over a 7% hurdle rate. Processing fees accrued to ECG were $1,394,547 for the nine months ended July 31, 2022.
In addition, on July 6, 2022, the Company closed on an issuance of 4,646,840 shares of common stock for proceeds
of $50 million with P10 Commenda Impact Fund Onshore, LLC and P10 Commenda Impact Fund Offshore, LLC.
The funds are managed by P10, Inc.
Capital Plus Financial leases office space on a month-to-month basis from 210 Capital whose principals, Mr. Alpert
and Mr. Webb, are members of the Company’s board of directors. Monthly payments under the lease were $1,700 and
total rental payments for the nine months ended July 31, 2022, were $13,600 with rent owed at July 31, 2022 totaled
$1,700.
19. CONTINGENCIES
The Company is party to certain legal proceedings in the ordinary course of business. Common legal proceedings
include, among other things, breach of contract and unlawful eviction. Although litigation is inherently uncertain,
based on past experience and the information currently available, management does not believe that such claims will
have a material adverse effect on the Company's financial position, liquidity, or results of operations.
20. INCOME TAXES
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse. A reconciliation of the provision for income taxes
is as follows for the period ended July 31, 2022:
Current $ 10,248,388
Deferred -
$ 10,248,388
As of July 31, 2022, the Company did not have federal operating loss carry-forwards (“NOL’s”) or research and
experimentation credits (“R&E Credits”) available to reduce future taxable income as they were utilized in 2021.
21. SUBSEQUENT EVENTS
In accordance with ASC 855, Subsequent Events, the Company evaluated all material events or transactions that
occurred after July 31, 2022, the consolidated balance sheet date, and through June 14, 2022, the date the consolidated
financial statements were available to be issued, noting the following events or transactions for disclosure as
subsequent events.
As part of the Company’s participation as a lender in the PPP, a total of 326,963 loans were forgiven and/or paid in
full as of August 31.
On August 1, 2022, the Company and P10 Commenda Impact Fund Onshore, LLC and P10 Commenda Impact Fund
Offshore, LLC closed on their remaining commitment to purchase an additional 1,394,052 shares of common stock
for proceeds of $15 million before deducting offering expenses. All proceeds from the offering are restricted for
investments in impact loans.
21. SUBSEQUENT EVENTS, CONTINUED
On August 1, 2022, the Company and Conversant Impact Fund (A) LP and Conversant Impact Fund (B) LP (together
“Conversant”) closed on an issuance of 4,275,092 shares of common stock for proceeds of $46 million before
deducting offering expenses. In connection with the share issuance, Conversant is committed to acquiring an additional
6,412,635 shares for $69 million by January 31, 2023. All proceeds from the offering are restricted for investments in
impact loans.
On September 1, the Company and Conversant Impact Fund (A) LP and Conversant Impact Fund (B) LP (together
“Conversant”) closed on an issuance 1,282,527 shares of common stock for $14 million before deducting offering
expenses. All proceeds from the offering are restricted for investments in impact loans.
SUPPLEMENTAL IFNROMATION
CROSSROADS IMPACT CORP. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE I: CONSOLIDATED BALANCE SHEET
JULY 31, 2022
UNAUDITED
Crossroads Crossroads Capital Plus Rise Line Business
Systems, Inc. Impact SPV's Financial, LLC Credit, LLC Eliminations Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 167,922 $ - $ 85,937,253 $ 857,915 $ - $ 86,963,090
Restricted cash 27,359,970 - 36,910,771 - - 64,270,741
Interest receivable - 102,222 14,234,793 - - 14,337,015
Current portion of mortgage notes receivable - - 438,506 - - 438,506
Current portion of commercial/other notes receivable - - 342,990 9,160,148 - 9,503,138
Intercompany receivables - - 335,296,776 - (335,296,776) -
Inventory - - 11,223,783 - - 11,223,783
Prepaid expenses and other current assets 128,625 - 2,160,605 58,497 - 2,347,727
Total current assets 27,656,517 102,222 486,545,477 10,076,560 (335,296,776) 189,084,000
MORTGAGE NOTES RECEIVABLE, net of current maturities and allowance of $0 - - 132,098,082 - - 132,098,082
COMMERCIAL/OTHER NOTES RECEIVABLE, net of current maturities and allowance of $0 - 23,000,000 83,333,319 - - 106,333,319
PPP LOANS RECEIVABLE - - 1,235,591,471 - - 1,235,591,471
PREFERRED INVESTMENT - - 16,000,000 - - 16,000,000
INVESTMENT IN SOLAR TAX CREDIT FUND (Equity Method) 9,380,944 - - - - 9,380,944
GOODWILL 18,566,966 - - - - 18,566,966
INVESTMENT IN SUBSIDIARY 40,134,750 - - - (40,134,750) - -
TOTAL ASSETS $ 95,739,177 $ 23,102,222 $ 1,953,568,349 $ 10,076,560 $ (375,431,526) $ 1,707,054,782
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 204 $ - $ 583,414 $ (240) $ - $ 583,378
Accrued liabilities 3,035,837 384,165 216,690,097 - - 220,110,099
Escrow liabilities - - 2,622,088 - - 2,622,088
Income taxes payable 10,248,388 - - - - 10,248,388
Intercompany payables 312,653,577 22,640,029 - 3,170 (335,296,776) -
Current portion of credit facilities - - 28,083,564 - - 28,083,564
Current portion of other note payable - - 52,285 - - 52,285
Current portion of acquisition notes payable 699,403 - - - - 699,403
Total current liabilities 326,637,409 23,024,194 248,031,448 2,930 (335,296,776) 262,399,205
CREDIT FACILITIES, net of current maturities - - 68,918,020 - - 68,918,020
OTHER NOTE PAYABLE, net of current maturities - - 940,084 - - 940,084
ACQUISITION NOTES PAYABLE, net of current maturities 5,796,546 - - - - 5,796,546
PPP LOAN PAYABLE - - - - - -
FEDERAL PPP LIQUIDITY FACILITY ("PPPLF") - - 1,260,012,462 - - 1,260,012,462
OTHER LONG-TERM LIABILITIES - - 518,917 - - 518,917
TOTAL LIABILITIES 332,433,955 23,024,194 1,578,420,931 2,930 (335,296,776) 1,598,585,234
EQUITY
Common stock, $0.001 par value: 175,000,000 shares
authorized, 10,618,834 shares issued and outstanding 10,619 - - - - 10,619
Additional paid in capital 58,954,498 - - 10,079,046 (10,079,046) 58,954,498
Accumulated earnings (deficit) (295,659,895) 78,028 357,094,343 (5,416) (30,055,704) 31,451,356
Crossroads Systems, Inc. stockholders' equity/deficit (236,694,778) 78,028 357,094,343 10,073,630 (40,134,750) 90,416,473
Non-controlling interests - - 18,053,075 - - 18,053,075
TOTAL EQUITY (236,694,778) 78,028 375,147,418 10,073,630 (40,134,750) 108,469,548
TOTAL LIABILITIES AND EQUITY $ 95,739,177 $ 23,102,222 $ 1,953,568,349 $ 10,076,560 $ (375,431,526) $ 1,707,054,782
CROSSROADS IMPACT CORP. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE II: CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 2022
UNAUDITED
Crossroads Crossroads Capital Plus Rise Line Business
Systems, Inc. Impact SPV's Financial, LLC Credit, LLC Eliminations Total
REVENUES
Interest income $ - $ 102,222 $ 25,689,675 $ 620,943 $ - $ 26,412,840
Property sales - - 13,429,700 - - 13,429,700
PPP administrative fees - - 52,818,217 - - 52,818,217
Other revenue - 5,305 621,477 19,895 - 646,677
Total revenues - 107,527 92,559,069 640,838 - 93,307,434
COSTS AND EXPENSES
Interest expense - - 8,052,794 - - 8,052,794
Cost of properties sold - - 12,025,855 - - 12,025,855
General and administrative 723,210 29,499 3,379,767 102,483 - 4,234,959
PPP processing fees - - 2,860,734 - - 2,860,734
Salaries and wages 5,362,339 - 3,070,803 555,733 - 8,988,875
Management bonus - - - - - -
Total costs and expenses 6,085,549 29,499 29,389,953 658,216 - 36,163,217
Income (loss) from operations (6,085,549) 78,028 63,169,116 (17,378) - 57,144,217
OTHER INCOME (EXPENSES)
Other Income - - - - - -
Interest expense (291,878) - - - - (291,878)
Total other income (expenses) (291,878) - - - - (291,878)
Income (loss) before income tax provision (6,377,427) 78,028 63,169,116 (17,378) - 56,852,339
INCOME TAX PROVISION (9,638,847) - - - - (9,638,847)
NET INCOME (LOSS) (16,016,274) 78,028 63,169,116 (17,378) - 47,213,492
Less: net income attributable to non-controlling interests - - (471,205) - - (471,205)
NET INCOME (LOSS) ATTRIBUTABLE TO
CONTROLLING INTERESTS $ (16,016,274) $ 78,028 $ 62,697,911 $ (17,378) $ - $ 46,742,287
CROSSROADS IMPACT CORP. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE III: CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 2022
UNAUDITED
Capital Plus
Crossroads Crossroads Financial, Rise Line Business
Impact Corp Impact SPV's LLC Credit, LLC Eliminations Total
REVENUES
Interest income $ - $ 102,222 $ 9,613,610 $ 215,915 $ - $ 9,931,747
Property sales - - 3,284,200 - - 3,284,200
PPP administrative fees - - 55,322 - - 55,322
Other revenue - 5,305 314,333 5,242 - 324,880
Total revenues - 107,527 13,267,465 221,157 - 13,596,149
COSTS AND EXPENSES
Interest expense - - 2,291,441 - - 2,291,441
Cost of properties sold - - 2,887,270 - - 2,887,270
General and administrative 249,506 29,499 1,186,266 26,447 - 1,491,718
PPP processing fees - - 738,797 738,797
Salaries and wages 4,760,487 - 1,106,130 211,575 - 6,078,192
Management Bonus - - - - -
Total costs and expenses 5,009,993 29,499 8,209,904 238,022 - 13,487,418
Income (loss) from operations (5,009,993) 78,028 5,057,561 (16,865) - 108,731
OTHER EXPENSES
Interest expense (104,565) - - - - (104,565)
Other income (expense) - - - - -
Total other expenses (104,565) - - - - (104,565)
Income (loss) before income tax provision (5,114,558) 78,028 5,057,561 (16,865) - 4,166
INCOME TAX PROVISION 2,229,717 - - - 2,229,717
NET INCOME (LOSS) (2,884,841) 78,028 5,057,561 (16,865) - 2,233,883
Less: net income attributable to non-controlling interests - - (157,500) - - (157,500)
NET INCOME (LOSS) ATTRIBUTABLE TO
CONTROLLING INTERESTS $ (2,884,841) $ 78,028 $ 4,900,061 $ (16,865) $ - $ 2,076,383
Item 9: Certifications
10) Issuer Certification
I, Eric Donnelly, certify that:
I have reviewed this quarterly disclosure statement of Crossroads Impact Corp.;
Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this disclosure statement; and
Based on my knowledge, the financial statements, and other financial information included or incorporated by
reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations
and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
Date: September 13, 2022
Eric Donnelly
Chief Executive Officer
I, Farzana Giga, certify that:
I have reviewed this quarterly disclosure statement of Crossroads Impact Corp.;
Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this disclosure statement; and
Based on my knowledge, the financial statements, and other financial information included or incorporated by
reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations
and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
Date: September 13, 2022
Farzana Giga
Chief Financial Officer
File and source
- File
- q3-2022-otc-disclosure-statement-final-091222-pdf_43956cbb4cc5fa8a.pdf
- Size
- 1,847,379 bytes
- SHA-256
- c9a87af27aa7e9b85159d1dfad39ea7f975e6c95821120808219fb6ad0ca340a
- Original
- crossroads.com