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Crossroads Systems Reports Fiscal Second Quarter 2019 Financial Results

DALLAS, June 13, 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 second quarter ended April 30, 2019.

Crossroads Systems -  www.crossroads.com (PRNewsFoto/Crossroads Systems)

The overall performance for the quarter was in line with expectations. Portfolio growth remained in line with historical growth. Additionally, to increase the availability of affordable housing in our markets, a concerted effort was made to acquire more inventory which has skewed the cost of goods figures to sales as those homes make their way through the system to their ultimate sale.

The company, as did much of Texas, faced weather challenges in March and April which resulted in delays related to remodels which impacted inventory for sale. 

Fiscal Q2 2019 Financial Highlights

  • Total property sales income was $7.4 million for the quarter and remained flat to the comparative period of 2018
  • Total interest income was $2.9 million up from $2.4 million from the comparative period of 2018
  • Operating income of $1.4 million, up from $1.3 million for the comparative period of 2018
  • Earnings per share of $0.23 compared to earnings per share of $0.22 for the comparative period of 2018
  • Held 108 properties in inventory compared to 58 at the same time in 2018
  • Added $6.4 million in new single-family mortgages during the quarter
  • Tangible Net Book Value of $32.2 million
  • Cash balance of $904,000

Eric A. Donnelly, Chief Executive Officer at Crossroads Systems, said, "We are pleased to announce another consistent quarter of community impact, loan growth and profitability. As a social enterprise focused on double bottom line results, our unwavering commitment to improving communities, realizing the dream of homeownership for thousands of deserving borrowers while building shareholder value remains the balanced focus of our business. Conscious capitalism works and has a place in public markets."

Recent developments

During the second quarter, CPF successfully completed the annual recertification with the Community Development Financial Institution Fund ("CDFI Fund"). In addition, CPF had a site visit from the Bond Guaranty Program ("BGP") which it applied for in February.  CPF plans to refinance its existing debt with the BGP which will allow the Company to better serve its mission. 

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.

©2018 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 ir@crossroads.com 

Press Contact: Matthew ZintelZintel Public Relations matthew.zintel@zintelpr.com 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)













April 30,







2019


ASSETS











Current assets:






Cash and cash equivalents


$           904



Restricted Cash


1,279



Accounts receivable, net 


1,006



Current portion of mortgage notes receivable


1,033



Inventories



10,041



Prepaids and other current assets


335




Total current assets 


14,599









Mortgage Notes Receivable


115,183


Goodwill



18,567


Deferred tax asset


21,401


Other non-current assets


419




Total assets


$     170,168









LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:





Accounts payable 


$           475



Accrued expenses 


664



Escrow liabilities


1,222



Current portion of senior secured credit facilities


61,829



Current portion of other note payable


168



Current portion of acquisition note payable


2,495




Total current liabilities


66,853









Senior secured credit facilities, net


40,865


Acquisition debt, net


11,644




Total liabilities 


119,362









Stockholders' equity


50,806




Total liabilities and stockholders' equity


$     170,168









 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands)









For the three months ended





April 30, 2019












Revenue:





Interest income

$                                2,948



Property sales

7,438



Other revenue 

66




Total revenue

10,452







Cost of revenue:




Interest expense

1,602



Cost of properties sold

6,178




Total cost of revenue

7,779







Gross profit


2,673







Operating expenses:




General and administrative 

419



Salaries and wages

629




Total operating expenses

1,048







Income (loss) from operations 

1,625







Other income (expense):




Interest (expense) income 

(269)



Other (expense) income 

-








Income before provision for income taxes

1,356








Income tax provision

(203)


Net Income (loss) 

$                                1,154







 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands)









For the six months ended





April 30, 2019












Revenue:





Interest income

$                                5,796



Property sales

11,754



Other revenue 

112




Total revenue

17,662







Cost of revenue:




Interest expense

2,993



Cost of properties sold

9,856




Total cost of revenue

12,849







Gross profit


4,813







Operating expenses:




General and administrative 

832



Salaries and wages

1,366




Total operating expenses

2,198







Income (loss) from operations 

2,615







Other income (expense):




Interest (expense) income 

(569)



Other (expense) income 

-








Income before provision for income taxes

2,046








Income tax provision

(264)


Net Income (loss) 

$                                1,782







 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In Thousands)




For the six months ended


April 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES


Net income

1,782

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

(275)

Notes receivable

(7,193)

Inventories

(2,553)

Prepaids and other assets

176

Accounts payable

683

Accrued and other liabilities

(301)

Escrow liabilities

(1,311)

Net cash used in operating activities

(9,138)



CASH FLOWS FROM INVESTING ACTIVITIES


Restricted cash

1,263

Net cash used in investing activities

1,263



CASH FLOWS FROM FINANCING ACTIVITIES


Preferred equity contributions

2,500

Preferred equity dividend distributions

(294)

Borrowings on credit facilities, net

8,351

Principal payments on credit facilities

(840)

Principal payments on other notes payable

(82)

Principal payments on acquisition note payable

(3,180)

Net cash provided by financing activities

6,455



Net change in cash and cash equivalents

(1,419)

Cash and cash equivalents at beginning of the year

2,324

Cash and cash equivalents at end of the year

904



SUPPLEMENTAL INFORMATION


Cash paid for interest

$                   3,297



 

CROSSROADS SYSTEMS, INC.





Supplemental Schedule - Unaudited Consolidated Balance Sheet





As of April 30, 2019
























 Unaudited 


 Unaudited 


 Unaudited 


 Unaudited 







 Crossroads 


 CPF 


 Elimination Entries 


 Consolidated 







April 30, 2019


April 30, 2019


April 30, 2019


April 30, 2019

ASSETS











Current assets:












Cash and cash equivalents


25,145


879,097


-


904,241



Restricted cash


-


1,279,273


-


1,279,273



Accounts receivable, net


-


1,006,308


-


1,006,308



Inventories


-


10,041,043


-


10,041,043



Intercompany receivable


3,143,910


16,494,943


(19,638,853)


-



Prepaids and other current assets


206,541


44,242


-


250,784



Earnest money deposits


-


84,390


-


84,390



Mortgage notes receivable (residential)


-


114,194,803


-


114,194,803



Discount on notes receivables acquired


-


(3,825)




(3,825)



Mortgage notes receivable (Commerical property)


-


2,024,641




2,024,641




Total current assets 


3,375,596


146,044,915


(19,638,853)


129,781,658















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 


200,649


193,573


-


394,222


Deferred tax asset


21,400,797


-


-


21,400,797




Total assets


$            56,930,183


$          146,263,028


$             (33,025,028)


$             170,168,183














LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:












Accounts payable


204


474,429


-


474,633



Accrued and other current liabilities 


226,104


438,138


-


664,242



Escrow liabilities


-


1,221,990


-


1,221,990



Due to subsidiaries


16,494,943


-


(16,494,943)


-



Revolving line of credit, inventory


-


8,326,953


-


8,326,953



Revolving line of credit, mortgage notes (current maturities)


-


55,226,997


(1,724,723)


53,502,274



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


16,721,251


65,688,507


(15,556,435)


66,853,323















Senior secured term notes (long-term)


-


39,140,036


1,724,723


40,864,759


Acquisition debt (long-term)


14,139,287


-


(2,495,160)


11,644,127




Total liabilities


30,860,538


104,828,544


(16,326,872)


119,362,210















Stockholders' equity:










Total participating payables


-


156,688


-


156,688


Total preferred equity investment


-


18,051,781


-


18,051,781


Total subordinated debt


2,199,377


1,600,295


(168,071)


3,631,601



Members equity in CPF


-


18,846,554


-


18,846,554



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


(997,660)


2,779,167


-


1,781,506




Total stockholders' equity (deficit)


26,069,645


41,434,485


(16,698,156)


50,805,973




Total liabilities and stockholders' equity (deficit)


$            56,930,183


$          146,263,028


$             (33,025,028)


$             170,168,183














 

 CROSSROADS SYSTEMS, INC.


 Supplemental Schedule - Unaudited Consolidated Income Statement


 For the Quarter Ended April 30, 2019















Unaudited

Unaudited

Unaudited






Crossroads

CPF

Consolidated






April 30, 2019

April 30, 2019

April 30, 2019


Revenue:








Interest income


$                  -

$                          2,947,604

$                      2,947,604



Property sales


-

7,438,400

7,438,400



Other revenue 



66,490

66,490




Total revenue 

-

10,452,494

10,452,494










Cost of revenue:







Interest expense


-

1,601,854

1,601,854



Cost of properties sold

-

6,177,597

6,177,597




Total cost of revenue

-

7,779,451

7,779,451










Gross Profit


-

2,673,043

2,673,043










Operating expenses:







General and administrative 

74,622

344,265

418,887



Salaries and wages

-

628,802

628,802




Total operating expenses 

74,622

973,067

1,047,689










Income (Loss) from operations 

(74,622)

1,699,976

1,625,354










Other income (expense):






Interest (expense) income 

(268,989)

-

(268,989)


       Total other income (expense)

(268,989)

-

(268,989)










Income before provision for income taxes

(343,611)

1,699,976

1,356,365











Income tax provision

(202,763)

-

(202,763)


Net Income (Loss) 


$          (546,374)

$                          1,699,976

$                      1,153,602


















Outstanding shares




5,971,994










Earnings per share, net income



$                              0.23









 

 CROSSROADS SYSTEMS, INC.


 Supplemental Schedule - Unaudited Consolidated Income Statement


For the Six Months Ended April 30, 2019























Crossroads

CPF

Consolidated






April 30, 2019

April 30, 2019

April 30, 2019


Revenue:








Interest income


$                      -

$                          5,796,261

$                      5,796,261



Property sales


-

11,753,503

11,753,503



Other revenue 


-

112,094

112,094




Total revenue 

-

17,661,859

17,661,859










Cost of revenue:







Interest expense


-

2,992,878

2,992,878



Cost of properties sold

-

9,855,743

9,855,743



Other cost of revenue

-

-

-




Total cost of revenue

-

12,848,621

12,848,621










Gross Profit


-

4,813,238

4,813,238










Operating expenses:







General and administrative 

163,913

667,787

831,700



Salaries and wages

-

1,366,285

1,366,285




Total operating expenses 

163,913

2,034,071

2,197,984










Income (Loss) from operations 

(163,913)

2,779,167

2,615,254










Other income (expense):






Interest (expense) income 

(569,258)

-

(569,258)



Other (expense) income 

-


-


       Total other income (expense)

(569,258)

-

(569,258)










Income before provision for income taxes

(733,171)

2,779,167

2,045,995











Income tax provision

(264,489)


(264,489)


Net Income (Loss) 


$          (997,660)

$                          2,779,167

$                      1,781,506










Outstanding shares




5,971,994










Earnings per share, net income



$                              0.30









 

Unaudited Fiscal Second Quarter 2019 Shareholder Report for

The Three Months Ended

April 30, 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 April 30, 2019

 

Dear Shareholder:

We are pleased to announce another quarter of community impact and profitability. While Texas experienced a very wet March and April which slowed down the pace of remodeling and homes ready for sale, we are quite confident that the increased number of homes in the pipeline for remodel and ultimately for sale will meet our mission of impacting more people in more communities we serve at an affordable price and will deliver scale.

Portfolio performance continues to be strong validating the creditworthiness of unbanked and underbanked borrowers. The impact that our affordable home and credit product has made on the lives of thousands of deserving families should hopefully make your investment in our public social enterprise all the more rewarding as we not only build value for your investment but transform the lives of those seeking upward mobility.

As previously stated, we are proud to serve alongside our fellow CDFIs in the change we all make in the communities we serve. To that end, we are collaborating with another area CDFI to help scale that business. Additionally, a site visit from the CDFI Bond Guarantee Program was completed this quarter for the application CPF made earlier in the year. CPF through its Crossroads ownership is the first publicly traded CDFI BGP applicant, making CPF a unique candidate. We hope to be a model for other CDFIs to access public markets and bring awareness to the incredible work the industry does. We believe strongly that conscious capitalism and a balance between impact and profitability and sustainability has a place in public markets.

CPF's outstanding mortgage balance portfolio continued to grow at its historical pace and is currently at $114 million. For the second quarter, CPF generated $2.9 million in interest income from its $114 million fixed-rate conventional mortgage portfolio and $7.4 million in sales income from the sale of properties in low to moderate income census tracts. The consolidated operating income for the quarter was approximately $1.4 million before accruing for a non-cash tax provision of $203,000.  The net income after the provision was $1.2 million.  Note the Company offsets this provision against its deferred tax asset of $21.6 million.  At April 30, 2019, CPF's unadjusted leverage was 2.53x and the consolidated cash coverage ratio, adjusted for one-time and transaction expenses, was 2.64x.

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