NEWPORT BEACH, Calif., April 09, 2024 (GLOBE NEWSWIRE) -- CV Holdings, Inc. (OTC Pink Limited: CVHL) (the "Company") today reported a net loss for the year ended December 31, 2023 of $(15,959,005) or $(0.25) per common share with weighted average common shares of 64,413,784 issued and outstanding during 2023. Taking into account the December 31, 2023 balance of 64,413,784 common shares issued and outstanding and 4,148,532 common shares issuable upon exercise of warrants outstanding, the net loss was $(0.23) per diluted common share based on 68,562,316 common shares outstanding on a fully-diluted basis. The net loss for the year ended December 31, 2023 was primarily due to interest expense on preferred equity of $12,860,976 as well as the Company's provision for loan losses of $7,423,794 and interest expense on debt of $7,986,605. Salaries and related payroll expenses were $6,649,628 and general and administrative expenses were $4,518,766. For comparative purposes, for the year ended December 31, 2022, the Company reported a net loss of $(11,844,043) or $(0.18) per common share with weighted average common shares of 64,413,784 issued and outstanding during 2022. Taking into account the December 31, 2022 balance of 64,413,784 common shares issued and outstanding and 6,922,774 common shares issuable upon exercise of warrants and stock options outstanding, the net loss was $(0.17) per diluted common share based on 71,336,558 common shares outstanding on a fully diluted basis. Interest expense on preferred equity during 2021 was $11,478,988, provision for loan losses was $4,297,028, interest expense on debt was $3,664,551, salaries and related payroll expenses were $5,244,937 and general and administrative expenses were $4,746,251. Liquidity As of December 31, 2023, the Company had unrestricted cash of $2,536,509, as compared to $10,958,353 of unrestricted cash as of December 31, 2022. The Company's primary sources of cash flow consisted of interest earned on equipment finance contracts held by its principal business, Centra Funding, LLC ("Centra"). As described below, the Company was unable to begin redeeming its Senior Non-Convertible Preferred Stock, the initial installment of which was required to be paid in June 2020, and this obligation was deferred for a period of one year.   Since June 2021, this obligation has been deferred in six-month increments, most recently to June 30, 2024, in the sole discretion of Colborne (as defined below), the sole holder of the Company's preferred stock. As noted below, as of December 31, 2023, the liquidation preference of the Senior Non-Convertible Preferred Stock had reached approximately $115 million, and this amount continues to accrete additional dividends while it remains outstanding. The Company remains unable to redeem the Senior Non-Convertible Preferred Stock as required, is unlikely to become able to do so for the foreseeable future and may never be able to do so. If the Company is unsuccessful in negotiating continued forbearance or a restructuring of these obligations, Colborne may, at its election, require that all outstanding shares of Colborne Preferred Stock (as defined below) be redeemed, including those which are not currently scheduled to be redeemed, or otherwise pursue remedies against the Company.   If Colborne were to pursue remedies, the Company could be required to take drastic measures, including the liquidation and winding down of its operations, and it is unclear how much, if any, value would be allocated to the Company's common stock as a result. There can be no assurance that Colborne will continue to forbear or agree to a restructuring of these obligations that would provide significant value to common stockholders, and, consequently, an investment in the common stock of the Company is highly risky and speculative. Colborne Investment Update Since its first investment in 2015, Colborne Brighton, LLC ("Colborne"), an entity formerly controlled by Corvid Peak Capital Management and currently managed by the Company's Chairman and Chief Executive Officer, has funded a total of $50,000,000 in capital, fulfilling its $50,000,000 commitment in the form of a $20,000,000 investment in the Company's Senior Non-Convertible Preferred Stock and a $30,000,000 investment in the Company's Senior Perpetual Preferred Stock (together the "Colborne Preferred Stock"). During 2021, the outstanding Senior Perpetual Preferred Stock was converted automatically to Senior Non-Convertible Preferred Stock pursuant to its terms as described more fully in the Company's April 2016 press release. As of December 31, 2023, the Company had issued a total of 32,258,811 common shares to Colborne related to the Colborne Preferred Stock, and Colborne remained entitled to another 27,622,907 common shares upon redemption of its remaining Senior Perpetual Preferred Stock. On a pro forma basis, assuming the full amount of common stock associated with the Colborne Preferred Stock is issued to Colborne, the Company's outstanding fully diluted shares of common stock would increase from the current fully diluted amount of 68,562,316 to 93,239,765, and Colborne will own, through Company-issued stock, approximately 50% of the total shares outstanding. The Company has also approved unrelated open-market third-party purchases by Colborne from third-party shareholders, which, combined with the aforementioned shares, will result in Colborne owning approximately 64% of the total shares outstanding. The Company was required to begin redeeming the outstanding shares of Senior Non-Convertible Preferred Stock through cash payments to be made by the Company in equal quarterly installments over a two-year period beginning in June 2020. In June 2020, the Company informed Colborne that it did not have sufficient legally available funds to complete these redemptions and offered to discuss the remedies available to Colborne or other mutually acceptable options. In response, Colborne offered to toll the mandatory redemption for one year while reserving all the rights and remedies available to it, and to work with the Company on mutually acceptable alternatives. In June 2021, this obligation was deferred for an additional six months, was subsequently deferred in a series of additional six-month increments through June 30, 2024 and may be deferred further in six-month increments in the sole discretion of Colborne. Important Reminder Regarding Transfer and Ownership Restrictions Current and potential investors in the Company's common stock are reminded that the Company's Articles of Incorporation and Bylaws, each as amended and/or restated from time to time (collectively, the "Charter"), restrict beneficial ownership and constructive ownership and transfer of the Company's common stock for the purpose, among others, of the Company's maintenance of its ability to utilize the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any "net unrealized built-in loss" within the meaning of section 382 of the Internal Revenue Code, of the Company or any direct or indirect subsidiary thereof ("tax benefits"). Among other restrictions, the Charter provides that no person may beneficially own or constructively own shares of the Company's common stock in excess of 4.9 percent (by value or by number of shares, whichever is more restrictive) of the outstanding shares of common stock of the Company or such other percentage determined by the board of directors unless such person is an excepted holder (in which case the excepted holder limit for such excepted holder shall be applicable). As of the date hereof, this limitation is 3,156,275 shares.   Any person who beneficially owns or constructively owns or attempts to beneficially own or constructively own shares of common stock which causes or will cause a person to beneficially own or constructively own shares of common stock in excess or in violation of the above limitation must immediately notify the Company, or in the case of such a proposed or attempted transaction, give at least fifteen (15) days prior written notice, and shall provide to the Company such other information as the Company may request in order to determine the effect, if any, of such transfer on the Company's ability to utilize its tax benefits. If the restrictions on transfer or ownership are violated, the shares of common stock in excess or in violation of the above limitation (or any of the other ownership and transfer limitations set out in the Charter) will be automatically transferred to a trustee of a trust for the benefit of one or more charitable beneficiaries effective as of the close of business on the business day prior to the date of such transfer (or other event). In addition, the Company may redeem shares upon the terms and conditions specified by the board of directors in its sole discretion, refuse to give effect to such transfer on the books of the Company or institute proceedings to enjoin such transfer or other event if the board of directors determines that ownership or a transfer or other event may violate the restrictions described above. Furthermore, if the ownership restrictions above would be violated, or upon the occurrence of certain events, attempted transfers in violation of the restrictions described above may be void ab initio. As noted above, from time to time, the Company has made or approved privately negotiated purchases of its common stock. Any shareholder wishing to sell common stock is encouraged to contact the Company. Financial Reporting Included in this press release are the audited consolidated balance sheets, statements of operations, and statements of cash flows of CV Holdings, Inc. and its subsidiary entities as of and for the years ended December 31, 2023 and December 31, 2022. Update on the Business Consolidated Update During 2023, Centra, the Company's equipment finance business, continued to grow but its profitability decreased as a result of lower origination volumes, increased reserving for losses, certain one-time expenses and increases in its cost of funds (described more fully below). Progress was made on the resolution of the two remaining loans held by its commercial real estate loan joint venture, which were written down significantly in value during 2023. The Company has substantially completed the liquidation of its other businesses. As of December 31, 2023, the Company had investments in approximately $148,000,000 of wholly owned equipment finance contracts and commercial real estate loans held indirectly through a joint venture of CV Capital Funding, LLC ("CVCF"), the Company's commercial real estate lending business. This compares with approximately $140,000,000 as of December 31, 2022. Approximately $141,000,000 of these investments as of December 31, 2022, were equipment finance contracts originated by Centra, as opposed to approximately $130,000,000 of such contracts at the end of the prior year. From an operating cash flow standpoint, as shown in the following table, excluding the pay-in-kind dividends on the Colborne Preferred Stock, the Company had EBITDA of $(2,941,687) in the year ended December 31, 2023 compared to $(250,988) in the year ended December 31, 2022. The Company's income from operations increased by nearly 49% to $4,986,504 despite reduced origination volume at Centra, increased allowance for credit losses at Centra and in the CVCF joint venture, and certain one-time expenses. This increase in operating income was offset, however, by a substantial increase in Centra's cost of funds, reflected in interest on debt.   Centra's internalization of its servicing entailed staff increases which caused salaries and related payroll expenses to increase, offset by substantial reductions in general and administrative expenses related to third-party servicing.       Year Ended   Year Ended     December 31, 2023   December 31, 2022 Net loss $ (15,959,005)     $ (11,844,043)     Interest expense on preferred equity   12,860,976       11,478,988     Taxes   97,928       44,616     Depreciation   58,414       69,451   EBITDA   (2,941,687)       (250,988)   During 2023, substantial progress was made on the resolution of the two remaining commercial real estate loans held in the CVCF joint venture, which is the only significant remaining CVCF asset other than cash. During the year, the Company recognized a significant impairment of its investment in the joint venture. As noted, the Company continued to grow Centra and has substantially completed the winddown of the LongVue nonperforming residential mortgage business. Because the Company is focused on growing Centra, it has generally allocated capital received from asset sales and business winddowns to Centra. The rise in interest rates during the first seven months of 2023 and accompanying economic uncertainty have weighed on Centra's profitability, reducing loan originations and interest income while substantially increasing the Company's cost of funds. Centra also experienced higher-than-anticipated losses in loans originated between 2021 and 2023 and increased allowance for credit losses accordingly. In anticipation of falling interest rates in 2024 and opportunities offered by the retrenchment of certain of Centra's competitors, Centra expanded and simplified its range of credit offerings in early 2024, which is showing early signs of increasing the amount and quality of Centra's originations. The difficult operating environment in 2023, though, together with the continued growth of the amount owed on the Colborne Preferred Stock, which is senior to the Company's common shares, has created a dilutive effect to common stockholders. As noted above, additional dilution is likely if Colborne ceases to forbear and this leads to a restructuring of the Company. The Company's primary deferred tax asset is the net operating losses ("NOL"s), consisting of approximately $494 million and $295 million for federal and state purposes, respectively, through December 31, 2023. The federal NOLs were generated primarily from 2008 through 2012, and the state NOLs were generated primarily in California, Connecticut and Massachusetts. Centra Funding, LLC On November 28, 2016, the Company, through a newly-formed subsidiary, Centra Funding, LLC closed on its acquisition of Centra Leasing, Inc., as more fully described in the Company's November 28, 2016 press release. Centra's business is focused on commercial "small ticket" equipment leases or finance contracts. Originations utilize a vendor-based model, employing direct vendor- and broker-focused sales staff. Centra's business is nationwide and spans multiple industries, with typical leases or finance contracts not exceeding $250,000. Centra continued to grow during 2023, with net loans receivable increasing by approximately 9% year over year, but its profitability decreased, driven by several factors: (i) reduced origination volume which lowered interest income; (ii) approximately $2.3 million of additional allowance for credit losses with respect to loans originated between 2021 and 2023; (iii) approximately $270,000 of one-time expenses associated with the internalization of servicing of Centra's portfolio; and (iv) continual increases in Centra's cost of funds during the first seven months of the year. Centra increased its weighted average yield on new originations by approximately 0.6% during the year, partially offsetting the increase in its cost of funds. Reserving was also increased during the year, and a non-cash charge to equity was incurred effective January 1, 2023, as a result of the Company's adoption during 2023 of the Financial Accounting Standards Board's current expected credit losses methodology (CECL) for estimating allowances for credit losses. Centra successfully converted a substantial majority of its equipment finance contracts to fully internal servicing effective February 1, 2023. Over the course of the year, the number of contracts serviced by Centra's third party servicer was reduced to zero. The Company has continued to enhance its servicing capabilities and believes that internal servicing has been highly cost effective for Centra relative to outsourcing and has provided additional revenue opportunities. As of December 31, 2023, Centra had $112,608,949 of borrowings and was in compliance with all covenants of its debt facility agented by an affiliate of Wells Fargo Bank.   On January 26, 2024, Centra amended this facility to reflect changes to certain of the facility's terms (including certain covenants and definitions), extended its maturity date to April 30, 2026, and amended the Maximum Revolver Amount, as defined therein, to $160,000,000, which may be increased to $230,000,000. Effective November 20, 2023, Centra redeemed the remaining notes of its securitization, Centra Funding 2021-1, in accordance with their terms. The loans held in the securitization were transferred to Centra's debt facility. CV Capital Funding, LLC On December 14, 2016, the Company established a commercial real estate bridge lending business, which operates under the name CV Capital Funding, LLC ("CVCF"). CVCF provided capital for a wide range of real estate asset classes on a nationwide basis, specializing in bridge loans secured by first mortgages on commercial real estate and other assets, Property types included: multi-unit residences, industrial, office, hospitality and other commercial properties. Since inception, CVCF has originated 37 loans, totaling $120,948,500 in principal balance, principally through CVCF's joint venture with a real estate credit-oriented investment fund (the "CVCF-JV Partner") and on CVCF's own balance sheet. Effective January 1, 2022, all remaining CVCF personnel were transitioned to the CVCF-JV Partner, which assumed responsibility for administering the joint venture. During 2019, CVCF entered into a second joint venture with a different funding partner, but the partner proved unable to meet its fundraising objectives; CVCF acquired the partner's stake in 2020 and wound down the joint venture in 2021.   Resolution of the remaining loans ...