Results

Crossroads Systems Inc.

09/12/2019 | Press release | Distributed by Public on 09/12/2019 07:57

Crossroads Systems Reports Fiscal Third Quarter 2019 Financial Results

DALLAS, Sept. 12, 2019/PRNewswire / -- Crossroads Systems, Inc. (OTC Pink: CRSS), a holding company focused on investing in businesses that promote economic vitality and community development, reported financial results for its fiscal third quarter ended July 31, 2019.

The overall performance for the quarter was consistent with expectations. Portfolio growth remained in line with historical growth. The results of additional homes in inventory converting to additional sales volume has begun and updates will continue to be made on this initiative.

For the second year in a row, Capital Plus Financial (CPF) was recognized by the B Corporation for the company's commitment to its customers with the Best for World Honoree.

CPF also completed its first Impact Assessment. The full report can be found on the website and we encourage shareholders and prospective investors to review the impact investment dollars are supporting.

Fiscal Q3 2019 Financial Highlights

  • Total property sales income was $7.0 millionfor the quarter compared to $5.8 millionfor the comparative period of 2018
  • Total interest income was $3.0 millionup from $2.6 millionfrom the comparative period of 2018
  • Operating income of $1.3 million, up from $1.2 millionfor the comparative period of 2018
  • Cash earnings1 per share $0.22compared $0.20for the comparative period of 2018
  • Held 137 properties in inventory compared to 63 at the same time in 2018
  • Added $7.0 millionin new single-family mortgages during the quarter
  • Book Value of $51.8 millionor $8.68per share
  • Cash balance of $834,000

1 Cash earnings represent net income before non-cash expenses.

Eric A. Donnelly, Chief Executive Officer at Crossroads Systems, said, 'We are honored to be recognized with our fellow B Corporations for our commitment to our customers. We recognize that true impact can only grow with assessing each of our metrics and as such, we are proud to unveil CPF's first formal impact assessment completed this quarter. This will be an annual report as part of our ongoing commitment to our stakeholders. Our continued profitability along with our community impact should make our shareholders proud of their investment.'

About Crossroads Systems

Crossroads Systems, Inc. (OTC Pink: CRSS), is a holding company focused on investing in businesses that promote economic vitality and community development. Crossroads' subsidiary, Capital Plus Financial (CPF), is a certified Community Development Financial Institution (CDFI) and certified B- Corp which supports Hispanic homeownership with a long term, fixed rate single family mortgage product.

Important Cautions Regarding Forward-Looking Statements

This press release includes forward-looking statements that relate to the business and expected future events or future performance of Crossroads Systems, Inc. and Capital Plus Financial and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, 'believe,' 'expect,' 'anticipate,' 'estimate,' 'intend,' 'plan,' 'targets,' 'likely,' 'will,' 'would,' 'could,' and similar expressions or phrases identify forward-looking statements. Forward- looking statements include, but are not limited to, statements about Crossroads Systems' and Capital Plus Financial's ability to implement their business strategy, and their ability to achieve or maintain profitability. The future performance of Crossroads Systems and Capital Plus Financial may be adversely affected by the following risks and uncertainties: economic changes affecting homeownership in the geographies where Capital Plus Financial conducts business, developments in lending markets that may not align with Capital Plus Financial's expectations and that may affect Capital Plus Financial's plans to grow its portfolio, variations in quarterly results, developments in litigation to which we may be a party, technological change in the industry, future capital requirements, regulatory actions or delays and other factors that may cause actual results to be materially different from those described or anticipated by these forward-looking statements. For a more detailed discussion of these factors and risks, investors should review Crossroads Systems' annual and quarterly reports. Forward-looking statements in this press release are based on management's beliefs and opinions at the time the statements are made. All forward-looking statements are qualified in their entirety by this cautionary statement, and Crossroads Systems undertakes no duty to update this information to reflect future events, information or circumstances.

©2019 Crossroads Systems, Inc., Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All trademarks are the property of their respective owners.

Investor Contact:
Crossroads Systems
[email protected]

Press Contact:
Matthew Zintel
Zintel Public Relations
[email protected]

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

July 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$ 834

Restricted Cash

1,742

Accounts receivable, net

840

Current portion of mortgage notes receivable

1,479

Inventories

11,672

Prepaids and other current assets

409

Total current assets

16,976

Mortgage Notes Receivable

118,930

Goodwill

18,567

Deferred tax asset

21,262

Other non-current assets

305

Total assets

$ 176,039

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 232

Accrued expenses

571

Escrow liabilities

1,804

Current portion of senior secured credit facilities

63,052

Current portion of other note payable

168

Current portion of acquisition note payable

2,495

Total current liabilities

68,323

Senior secured credit facilities, net

44,851

Acquisition debt, net

11,020

Total liabilities

124,194

Stockholders' equity

51,844

Total liabilities and stockholders' equity

$ 176,039

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands)

For the three months ended

July 31, 2019

Revenue:

Interest income

$ 3,030

Property sales

6,966

Other revenue

233

Total revenue

10,228

Cost of revenue:

Interest expense

1,623

Cost of properties sold

5,745

Total cost of revenue

7,368

Gross profit

2,861

Operating expenses:

General and administrative

574

Salaries and wages

703

Total operating expenses

1,277

Income (loss) from operations

1,584

Other income (expense):

Interest (expense) income

(255)

Other (expense) income

-

Income before provision for income taxes

1,329

Income tax provision

(139)

Net Income (loss)

$ 1,190

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands)

For the nine months ended

July 31, 2019

Revenue:

Interest income

$ 8,826

Property sales

18,720

Other revenue

345

Total revenue

27,890

Cost of revenue:

Interest expense

4,615

Cost of properties sold

15,601

Total cost of revenue

20,216

Gross profit

7,674

Operating expenses:

General and administrative

1,406

Salaries and wages

2,069

Total operating expenses

3,475

Income (loss) from operations

4,199

Other income (expense):

Interest (expense) income

(824)

Other (expense) income

-

Income before provision for income taxes

3,375

Income tax provision

(404)

Net Income (loss)

$ 2,971

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In Thousands)

For the nine

months ended

July 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

2,971

Adjustments to reconcile net income to net cash used in operating activities:

Stock compensation

(2)

Gain on derivative related activity

(155)

Amortization of deferred financing fees

11

Provision for income taxes

-

Changes in operating assets and liabilities:

Interest receivable

(108)

Notes receivable

(11,386)

Inventories

(4,183)

Prepaids and other assets

216

Accounts payable

579

Accrued and other liabilities

(343)

Escrow liabilities

(729)

Net cash used in operating activities

(13,128)

CASH FLOWS FROM INVESTING ACTIVITIES

Restricted cash

800

Net cash used in investing activities

800

CASH FLOWS FROM FINANCING ACTIVITIES

Preferred equity contributions

2,500

Preferred equity dividend distributions

(455)

Borrowings on credit facilities, net

12,721

Principal payments on credit facilities

-

Principal payments on other notes payable

(125)

Principal payments on acquisition note payable

-

Net cash provided by financing activities

(3,804)

10,838

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of the year

(1,490)

Cash and cash equivalents at end of the year

2,324

834

SUPPLEMENTAL INFORMATION

Cash paid for interest

$ 5,175

CROSSROADS SYSTEMS, INC.

Supplemental Schedule - Unaudited Consolidated Balance Sheet

As of July 31, 2019

Unaudited

Unaudited

Unaudited

Unaudited

Crossroads

CPF

Elimination Entries

Consolidated

July 31, 2019

July 31, 2019

July 31, 2019

July 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

30,620

803,148

-

833,768

Restricted cash

-

1,741,777

-

1,741,777

Accounts receivable, net

-

839,798

-

839,798

Inventories

-

11,671,759

-

11,671,759

Intercompany receivable

3,143,910

17,614,943

(20,758,853)

(0)

Prepaids and other current assets

189,199

141,375

-

330,574

Earnest money deposits

-

78,890

-

78,890

Mortgage notes receivable (residential)

-

118,662,328

-

118,662,328

Discount on notes receivables acquired

-

(3,825)

(3,825)

Mortgage notes receivable (Commercial property)

-

1,750,435

1,750,435

Total current assets

3,363,729

153,300,628

(20,758,853)

135,905,504

Property and equipment, net

-

24,540

-

24,540

Investment in subsidiaries

13,386,175

-

(13,386,175)

-

Goodwill

18,566,966

-

-

18,566,966

Other assets

190,789

89,238

-

280,027

Deferred tax asset

21,261,756

-

-

21,261,756

Total assets

$ 56,769,415

$ 153,414,407

$ (34,145,028)

$ 176,038,794

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

204

231,747

-

231,951

Accrued and other current liabilities

174,042

397,223

-

571,265

Escrow liabilities

-

1,804,094

-

1,804,094

Due to subsidiaries

17,614,943

-

(17,614,943)

(0)

Revolving line of credit, inventory

-

10,237,389

-

10,237,389

Revolving line of credit, mortgage notes (current maturities)

-

54,539,620

(1,724,723)

52,814,897

Current portion of other note payable

168,071

168,071

Current portion of acquisition note payable

2,495,160

2,495,160

Payroll liabilities

-

-

-

-

Total current liabilities

17,789,189

67,210,072

(16,676,435)

68,322,826

Senior secured term notes (long-term)

-

43,126,464

1,724,723

44,851,187

Acquisition debt (long-term)

13,515,495

-

(2,495,160)

11,020,335

Total liabilities

31,304,684

110,336,536

(17,446,872)

124,194,348

Stockholders' equity:

Total participating payables

-

156,433

-

156,433

Total preferred equity investment

-

18,051,781

-

18,051,781

Total subordinated debt

2,199,377

1,557,942

(168,071)

3,589,248

Members equity in CPF

-

18,738,016

-

18,738,016

Common stock

5,972

-

-

5,972

Additional paid-in capital

242,361,362

-

(13,351,925)

229,009,437

(Accumulated deficit)/Retained Earnings

(217,499,406)

-

(3,178,160)

(220,677,566)

Current year net (loss) income

(1,602,575)

4,573,698

-

2,971,123

Total stockholders' equity (deficit)

25,464,730

43,077,871

(16,698,156)

51,844,445

-

Total liabilities and stockholders' equity (deficit)

$ 56,769,415

$ 153,414,407

$ (34,145,028)

$ 176,038,793

CROSSROADS SYSTEMS, INC.

Supplemental Schedule - Unaudited Consolidated Income Statement

For the Quarter Ended July 31, 2019

Crossroads

CPF

Consolidated

July 31, 2019

July 31, 2019

July 31, 2019

Revenue:

Interest income

$ -

$ 3,029,581

$ 3,029,581

Property sales

-

6,966,000

6,966,000

Other revenue

232,902

232,902

Total revenue

-

10,228,482

10,228,482

Cost of revenue:

Interest expense

-

1,622,559

1,622,559

Cost of properties sold

-

5,745,208

5,745,208

Other cost of revenue

-

-

Total cost of revenue

-

7,367,767

7,367,767

Gross Profit

-

2,860,715

2,860,715

Operating expenses:

General and administrative

210,855

363,180

574,035

Salaries and wages

-

703,004

703,004

Total operating expenses

210,855

1,066,184

1,277,039

Income (Loss) from operations

(210,855)

1,794,531

1,583,676

Other income (expense):

Interest (expense) income

(255,018)

-

(255,018)

Other (expense) income

-

-

-

Total other income (expense)

(255,018)

-

(255,018)

Income before provision for income taxes

(465,873)

1,794,531

1,328,658

Income tax provision

(139,041)

-

(139,041)

Net Income (Loss)

$ (604,914)

$ 1,794,531

$ 1,189,617

Outstanding shares

5,971,994

Earnings per share, Income before taxes

$ 0.22

CROSSROADS SYSTEMS, INC.

Supplemental Schedule - Unaudited Consolidated Income Statement

For the Nine Months Ended July 31, 2019

Crossroads

CPF

Consolidated

July 31, 2019

July 31, 2019

July 31, 2019

Revenue:

Interest income

$ -

$ 8,825,841

$ 8,825,841

Property sales

-

18,719,503

18,719,503

Other revenue

-

344,996

344,996

Total revenue

-

27,890,341

27,890,341

Cost of revenue:

Interest expense

-

4,615,437

4,615,437

Cost of properties sold

-

15,600,951

15,600,951

Other cost of revenue

-

-

-

Total cost of revenue

-

20,216,388

20,216,388

Gross Profit

-

7,673,953

7,673,953

Operating expenses:

General and administrative

374,768

1,030,967

1,405,735

Salaries and wages

-

2,069,288

2,069,288

Total operating expenses

374,768

3,100,255

3,475,023

Income (Loss) from operations

(374,768)

4,573,698

4,198,930

Other income (expense):

Interest (expense) income

(824,277)

-

(824,277)

Other (expense) income

-

-

Total other income (expense)

(824,277)

-

(824,277)

Income before provision for income taxes

(1,199,045)

4,573,698

3,374,653

Income tax provision

(403,530)

(403,530)

Net Income (Loss)

$ (1,602,575)

$ 4,573,698

$ 2,971,123

Outstanding shares

5,971,994

Earnings per share, Income before taxes

$ 0.57

Unaudited Fiscal Third Quarter 2019 Shareholder Report for

The Three Months Ended

July 31, 2019

Crossroads Systems, Inc.

Delaware

74-284664

(State of Incorporation)

(IRS Employer Identification No.)

8214 Westchester Drive

Suite 950

Dallas, TX 75225

(Address of principal executive office)

(214) 999-0149

(Company's telephone number)

Common Stock

$0.001 Par Value

Trading Symbol: CRSS

Trading Market: OTC Pink Open Market

75,000,000 Common Shares Authorized

5,971,994 Shares Issued and Outstanding as of July 31, 2019

Dear Shareholder:

We are pleased to announce a profitable third quarter and recognition again by B Corporation as a 2019 Honoree Best for World Customers for our commitment to those we are fortunate to serve. Additionally, we completed our first Impact Assessment which will be an annual report to our stakeholders to highlight our impact metrics. As a social enterprise, we are ever mindful of profitability to our shareholders and impact to our communities. We hope you will agree that we are making great strides in both and that you can be proud of your investment in us.

Net mortgage loan growth is $17 millionthrough the 3rd quarter, well within growth goals. We continue to push inventory levels up to increase the number of homes we can provide to the communities we serve. To that end, we are pleased to report that our first homes in the Rio Grande Valley (McAllenarea) have been sold and we look forward to additional volume from this market and will continue to update you on this progress.

CPF's outstanding mortgage balance portfolio continued to grow at its historical pace and is currently at $118.5 million. For the third quarter, CPF generated $3.0 millionin interest income from its $118.5 millionfixed-rate conventional mortgage portfolio and $7.0 millionin sales income from the sale of properties in low to moderate income census tracts. The consolidated operating income for the quarter was approximately $1.3 millionbefore accruing for a non-cash tax provision of $135,000. The net income after the provision was $1.2 million. Note the Company offsets this provision against its deferred tax asset of $21.3 million. At July 31, 2019, CPF's unadjusted leverage was 2.56x and the consolidated cash coverage ratio, adjusted for one-time and transaction expenses, was 3.12x.

The financials are presented on a consolidated basis. The expenses at the holding company (Crossroads) level have been reduced to essential operating expenses and interest expense on the original acquisition loan. We continue to focus on impacting communities and delivering long term shareholder value while operating at efficiency expense ratios.

We thank you for your continued support of our mission.

Saludos cordiales,

Robert H. Alpert& Eric A. Donnelly

SOURCE Crossroads Systems