SOURCE: Crossroads Systems

Crossroads Systems

March 06, 2014 16:05 ET

Crossroads Systems Reports Fiscal First Quarter 2014 Financial Results

AUSTIN, TX--(Marketwired - Mar 6, 2014) - Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal first quarter ended January 31, 2014.

Revenue for fiscal Q1 2014 was $4.1 million, an increase of 16 percent from $3.6 million in the same quarter a year ago. The increase is primarily attributable to an increase in IP license, royalty and other revenue. Gross profit for fiscal Q1 2014 was $3.5 million, or 85 percent of total revenue, as compared to $2.6 million or 73 percent of total revenue in the same quarter a year ago.

Operating expenses for fiscal Q1 2014 totaled $3.9 million as compared to $5.7 million in the same period a year ago, a decrease of 31 percent, primarily due to our reduction in force in October 2013.

The Company improved its loss from operations to $(395,000) in the quarter from $(3.1) million in the same quarter of 2013. The Company also recorded a $1.1 million gain on the termination of a previous service contract, resulting in income before interest and derivative expense of $655,000 in fiscal Q1 2014 compared to a loss of $(3.1) million in the same quarter a year ago.

Net loss available to common stockholders for fiscal Q1 2014 totaled $(3.5) million or $(0.28) loss per share, compared to a net loss available to common stockholders of $(3.1) million or $(0.27) loss per share in the same quarter a year ago. Approximately $(3.4) million of the loss is attributable to the change in value of derivative instruments as a result of fluctuations in our stock price. These derivative instruments are marked to market each quarter and a change in the value of the derivative instruments may cause fluctuations in our net loss per share from quarter to quarter until the ratchet on our Series F preferred stock and warrants expires in March.

At January 31, 2014, cash and cash equivalents increased $0.2 million to $8.0 million from $7.8 million in the previous quarter.

Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, "I'm pleased with the progress we're making toward generating positive cash flow from operations in 2014. We continue to believe the untapped potential for our products and patents offers tremendous upside for the company and for our shareholders."

Conference Call Information
Crossroads will hold a conference call on Thursday, March 6, 2014 at 4:30 p.m. Eastern Time (3:30 p.m. Central Time) to discuss the financial results. President and CEO Richard K. Coleman, Jr., and CFO Jennifer Crane will host the call. A question and answer session will follow management's presentation.

Date: Thursday, March 6, 2014
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: (877) 221-8809
International: (706) 679-8667

To access the live or recorded webcast, visit:
http://us.meeting-stream.com/crossroadssystemsinc_030614

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. The conference call will also be available via the company's website in the Investor Relations Events & Presentations section. For more information and to view recent press releases, visit www.crossroads.com.

About Crossroads Systems
Crossroads Systems, Inc. (NASDAQ: CRDS) is a global provider of data archive solutions. Through the innovative use of new technologies, Crossroads delivers customer-driven solutions that enable proactive data security, advanced data archiving, optimized performance and significant cost-savings. Founded in 1996 and headquartered in Austin, TX, Crossroads has been awarded more than 100 patents and has been honored with numerous industry awards for data archiving, storage and protection. Visit www.crossroads.com.

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 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' ability to implement its business strategy, including the transition from a hardware storage company to a software solutions and services provider, its ability to expand its distribution channels, its ability to maintain or broaden relationships with existing distribution channels and strategic alliances and develop new industry relationships, the performance of third parties in its distribution channels and of its strategic alliances, changes in the fair value of its derivative instruments and its ability to achieve or maintain profitability. The future performance of Crossroads Systems may be adversely affected by the following risks and uncertainties: uncertainties relating to product development and commercialization, uncertain market acceptance of Crossroads Systems products, including StrongBox, intense competition in the data protection and storage markets, variations in quarterly results and a consequence of unpredictable sales cycles and other factors, the ability to obtain, maintain or protect patent and other proprietary intellectual property rights, 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' reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, which can be accessed through the SEC's website or by clicking "SEC Filings" on the company's Investor Relations website at http://investors.crossroads.com. Forward-looking statements in this press release are based on management's beliefs and opinions at the time the statements are made. Crossroads Systems undertakes no duty to update this information to reflect future events, information or circumstances.

©2014 Crossroads Systems, Inc., Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All trademarks are the property of their respective owners. All specifications are subject to change without notice. 

   
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(In thousands, except share data)  
             
    October 31,     January 31,  
ASSETS   2013     2014  
          (Unaudited)  
Current assets:                
  Cash and cash equivalents   $ 7,795     $ 7,998  
  Accounts receivable, net of allowance for doubtful accounts of $94 and $100, respectively.     2,301       3,001  
  Inventory     313       323  
  Prepaid expenses and other current assets     694       628  
                   
    Total current assets     11,103       11,950  
                 
Property and equipment, net     1,031       841  
Other assets     256       180  
                 
    Total assets   $ 12,390     $ 12,971  
                 
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
                 
Current liabilities:                
  Accounts payable   $ 1,066     $ 904  
  Accrued expenses     2,095       1,394  
  Deferred revenue     1,090       1,215  
  Current portion of long term debt, net of debt discount     1,605       2,763  
                 
    Total current liabilities     5,856       6,276  
                 
                 
Long term debt, net of debt discount     6,984       5,902  
Long term derivative liability     772       3,957  
Other long term liabilities     299       384  
                 
Commitments and contingencies     -       -  
                 
Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, 4,231,154 and 3,783,697 shares issued and outstanding, respectively, net     6,394       5,720  
                 
Stockholders' deficit:                
  Common stock, $0.001 par value, 75,000,000 shares authorized, 11,949,937 and 12,883,023 shares issued and outstanding, respectively     12       13  
  Additional paid-in capital     208,702       211,044  
  Accumulated other comprehensive loss     (51 )     (50 )
  Accumulated deficit     (216,578 )     (220,275 )
                   
    Total stockholders' deficit     (7,915 )     (9,268 )
                     
    Total liabilities and stockholders' deficit   $ 12,390     $ 12,971  
                 
                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(In Thousands, Except Share and Per Share Data)  
             
             
             
    Three Months Ended  
    January 31,  
    2013     2014  
             
Revenue:                
  Product   $ 1,918     $ 1,230  
  IP license, royalty and other     1,633       2,895  
                   
    Total revenue     3,551       4,125  
                 
Cost of revenue:                
  Product     194       236  
  IP license, royalty and other     754       383  
                   
    Total cost of revenue     948       619  
                 
Gross profit     2,603       3,506  
                 
Operating expenses:                
  Sales and marketing     1,960       1,032  
  Research and development     2,857       1,531  
  General and administrative     876       1,338  
                   
    Total operating expenses     5,693       3,901  
                 
Loss from operations     (3,090 )     (395 )
                 
Gain on settlement     -       1,050  
                 
(Loss) income before interest and derivative expense     (3,090 )     655  
                 
Other expense:                
  Interest expense     (54 )     (587 )
  Change in value of derivative liability     -       (3,400 )
  Other expense     (1 )     -  
Net loss   $ (3,145 )   $ (3,332 )
                 
Dividends attributable to preferred stock   $ -     $ (155 )
Net loss available to common stockholders, basic and diluted   $ (3,145 )   $ (3,487 )
Net loss per share available to common stockholders, basic and diluted   $ (0.27 )   $ (0.28 )
                 
Shares used in computing net loss per share:                
  Available to common stockholders, basic and diluted     11,819,003       12,368,715  
                 
                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(In thousands)  
             
    Three Months Ended  
    January 31,  
    2013     2014  
                 
Cash flows from operating activities:                
  Net loss   $ (3,145 )   $ (3,332 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation     201       198  
    Loss on change in value of derivative liability     -       3,400  
    Amortization of debt discount     -       341  
    Stock-based compensation     383       548  
    Provision for doubtful accounts receivable     (5 )     6  
  Changes in assets and liabilities:                
    Accounts receivable     570       (707 )
    Inventory     (29 )     (10 )
    Prepaid expenses and other assets     (37 )     45  
    Accounts payable     (102 )     (161 )
    Accrued expenses     (706 )     (606 )
    Deferred revenue     264       213  
      Net cash used in operating activities     (2,606 )     (65 )
Cash flows from investing activities:                
  Purchase of property and equipment     (119 )     (9 )
      Net cash used in investing activities     (119 )     (9 )
Cash flows from financing activities:                
  Proceeds from issuance of common stock, net of expenses     2       488  
  Repayment of debt     (1,720 )     (208 )
  Net cash (used in) provided by financing activities     (1,718 )     280  
                 
Effect of foreign exchange rate on cash and cash equivalents     4       (3 )
Net (decrease) increase in cash and cash equivalents     (4,439 )     203  
Cash and cash equivalents, beginning of period     6,895       7,795  
Cash and cash equivalents, end of period   $ 2,456     $ 7,998  
                 
                 
Supplemental disclosure of cash flow information:                
                 
Cash paid for interest   $ 45     $ 256  
Cash paid for income taxes   $ 1     $ -  
                 
Supplemental disclosure of non cash financing activities:                
                 
Conversion of preferred stock to common stock   $ -     $ 674  
Common stock dividends issued to preferred shareholders   $ -     $ 366  
Conversion of derivative liability to equity   $ -     $ 215  
                 

Contact Information

  • Company Contacts:
    Jennifer Crane
    Crossroads Systems
    Email Contact
    512.928.6897

    Investor Contact:
    Mark Hood
    Crossroads Systems
    Email Contact
    512.928.7330

    Press Contact:
    Matthew Zintel
    Zintel Public Relations
    Email Contact
    281.444.1590