Standard Mercantile Acquisition Corp. (Formerly, Trez Capital Senior Mortgage Investment Corporation) Announces 2021 Quarter Two Results

TORONTO, Aug. 6, 2021 /CNW/ - Standard Mercantile Acquisition Corp. (TSX: SMA) (the "Company") today released its financial results for the quarter ended June 30, 2021.  The financial statements and MD&A can be found at www.sedar.com or www.standardmercantileacquisition.com.

Financial Highlights & Business Update

On May 6, 2021, the shareholders of the Company approved a special resolution at the 2021 annual and special meeting (the "2021 Meeting") of the Company authorizing an amendment (the "Orderly Wind-Up Amendment") to the previously approved orderly wind-up of the Company's assets and the return of capital to shareholders. The purpose of the Orderly Wind-Up Amendment is to provide the board of directors (the "Board") of the Company with additional flexibility to explore a transaction or series of transactions that could increase the value of Company as a publicly-listed entity,  while continuing to pursue an orderly disposition of the Company's assets and distribution of cash as and when available, and as determined to be in the best interests of the Company and its shareholders.

At the 2021 Meeting, the shareholders of the Company also approved a special resolution to authorize amendments to the articles (the "Articles") of the Company to: (i) change the name of the Company from "Trez Capital Senior Mortgage Investment Corporation" to "Standard Mercantile Acquisition Corp." (the "Name Change"), or such other name as the Board determines appropriate and as may be acceptable to applicable regulatory authorities; (ii) authorize the Board to appoint one or more additional directors in between meetings of shareholders up to a maximum of one-third of the number of directors elected at the previous meeting of shareholders; and (iii) change the Province in which the registered office of the Company is situated from British Columbia to Ontario. The Name change and other amendments to the Articles were effected on June 4, 2021.

During the quarter ended March 31, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Since that time, the situation has continued to be dynamic and the duration and magnitude of the impact on the economy and our business are not fully known at this time. These impacts could include further decreases in the fair value of our mortgage investments or potential future decreases in revenue or profitability of our ongoing operations. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company as it relates to its ability to complete the orderly wind-up plan of the Company, as amended by the Orderly Wind-Up Amendment.

Income from operations for the three months ended June 30, 2021 was lower than same quarter last year due to lower revenue from a reduced mortgage portfolio as the mortgage monetization strategy continues, and higher expenses driven by stock-based compensation expense. For the three months ended June 30, 2021 there was a decrease of $0.15 million in income from operations compared to the same period in 2020 due stock-based expense of $73 thousand in Q2 2021 and higher average mortgage portfolio in Q2 of 2020. Income from operations for the six months ended June 30, 2021 was lower than same period last year by $0.6 million due to lower revenue from a reduced mortgage portfolio and a favorable incentive fee recovery of $0.26 million.

Basic income per share from the three months ended June 30, 2021 was $0.01 compared to $0.03 in the same period in 2020 primarily due to lower revenue from a reduced mortgage portfolio as the mortgage monetization strategy continues, and higher expenses driven by stock-based compensation expense. Basic income per share from the six months ended June 30, 2021 was $0.01 compared to $(0.08) in the same period in 2020 primarily due to lower revenue from a reduced mortgage portfolio as the mortgage monetization strategy continues, and higher expenses driven by stock-based compensation expense and a fair value loss adjustment on investment in mortgages of $(1.3) million. 

At June 30, 2021, the Company had two mortgages outstanding. Of the two mortgages remaining, the more significant one is set to mature in December 2022. During the second quarter of 2020, the borrower requested a three month deferral of mortgage payments, due to the inability of tenants to pay rent as a result of the Covid-19 economic and health crisis. The deferral was granted. Regular payments resumed during the third quarter of 2020, and the Company made certain amendments to this mortgage in December 2020, including extending the term of this mortgage through December 2022 in consideration of certain lump-sum repayments which commenced in December 2020. As of June 30, 2021, the Company did not make any fair market value adjustments based on the management's assessment of the fair market value of its investment in both mortgages.

Regular Monthly & Special Distributions

In the third quarter of 2017, the Board made a decision to suspend regular monthly distributions until further notice. This decision was premised on a review of the last remaining mortgages and anticipated cash requirements at that time, as well as the fact that one of the two remaining mortgages is shared with an external senior loan-sharing partner.

There were no regular distributions made for the three months ended June 30, 2021 (June 30, 2020 - nil).

The Company made a special distribution of $0.478 per Class A share of the Company totaling, $3,510,819 on March 29, 2021.

The Board anticipates from time to time making further special distributions as the two remaining mortgages in the portfolio mature or are sold, or if the Board otherwise determines that it is appropriate to do so based on cash balances, subject to reasonable expected operating expenditures and repayment of the senior loan participant on one of the remaining mortgages.

Forward Looking Statements

Statements in this press release contain forward-looking information. Such forward-looking information may be identified by words such as "anticipates", "plans", "proposes", "estimates", "intends", "expects", "believes", "may" and "will". The forward-looking statements are founded on the basis of expectations and assumptions made by the Company. Details of the risk factors relating to the Company and its business are discussed under the heading "Business Risks and Uncertainties" in the Company's annual Management's Discussion & Analysis for the year ended December 31, 2020 and under the heading "Risk Factors" in the Company's Annual Information Form dated March 31, 2021, copies of which are available on the Company's SEDAR profile at www.sedar.com. Most of these factors are outside the control of the Company. Investors are cautioned not to put undue reliance on forward-looking information. These statements speak only as of the date of this press release. Except as otherwise required by applicable securities statutes or regulation, the Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.

About the Company

The Company holds a portfolio of mortgages in Canada. At the 2021 Meeting, the Company sought and received shareholder approval to change its name to "Standard Mercantile Acquisition Corp.", among other amendments to the Articles. The Company is focused on monetizing its remaining mortgage assets and is considering options to enable its shareholders to participate in the potential future value of the Company through transactions that could capitalize on the Company's public listing. The Board has experience in sourcing, evaluating and executing transactions of this nature.

SOURCE Standard Mercantile Acquisition Corp.

Jordan Kupinsky, CEO, Tel: [phone], Email: [email protected]