SOURCE: Crossroads Systems

Crossroads Systems

December 15, 2010 16:00 ET

Crossroads Systems Reports Fiscal Fourth Quarter and Fiscal 2010 Full Year Financial Results

AUSTIN, TX--(Marketwire - December 15, 2010) - Crossroads Systems, Inc. (PINKSHEETS: CRDS), a global leading provider of solutions to connect, protect, secure and restore data, today announced results for its fiscal fourth quarter (Q4'10) and fiscal year ended October 31, 2010 (FY'10).

Fiscal Fourth Quarter 2010

Revenue totaled $5.4 million for Q4'10 compared to $3.2 million in the fiscal third quarter ended July 31, 2010 (Q3'10). Product revenue totaled $1.3 million for Q4'10 compared to $884,000 for Q3'10. Revenue from IP license, royalty and other totaled $4.1 million for Q4'10 compared to $2.3 million for Q3'10.

Gross profit was $4.7 million, or 87 percent for Q4'10, compared to $2.7 million, or 86 percent for Q3'10. Total operating expenses were $4.8 million for Q4'10, which included $0.5 million of stock based compensation, compared to $4.2 million of operating expense for Q3'10, including $55,000 of stock based compensation. Net loss for Q4'10 was $124,000, or $0.00 cents loss per share, compared to a net loss of $1.5 million, or $0.05 cents loss per share in Q3'10.

Cash increased from $6.2 million in Q3'10 to $13.8 million in Q4'10. This increase was attributable to the private equity financing that the Company completed in October. The Company received net proceeds from the offering of $9.2 million, after deducting placement agent fees and financing expenses. The Company sold 12,500,000 shares of its common stock at $0.80 per share for gross proceeds to the Company of $10.0 million and issued warrants to purchase an additional 4,296,875 shares of common stock (including shares underlying a warrant issued to the placement agent) with an exercise price of $0.80 per share.

"2010 represented a strong year of execution against our strategic goals," said Rob Sims, President and CEO. "While overall revenue was flat versus fiscal 2009, it is important to note that our Crossroads branded revenue contribution grew significantly. This growth offset the declining OEM business that the Company had made a strategic decision to deemphasize as part of the transition to our current software solutions and services business model. Additionally, we continued to demonstrate our ability to generate substantial high margin revenue from our intellectual property portfolio. Crossroads has generated $50 million in IP licensing revenue over the past six years, primarily from one patent family representing less than 10 percent of total patents."

Sims further stated, "The equity financing is another key execution milestone, providing Crossroads with the necessary working capital to greatly accelerate the adoption of our innovative solutions targeting Tier 3 data storage, which is made up of fixed content, long-term and compliance-based storage, projected to grow more than 300 percent in the next six years. This financing, representing our first funding since the initial IPO in 1999, was effectively priced at nearly a 100 percent premium to where our shares had been trading. The funding further signals to current and prospective customers, partners and investors that we believe Crossroads is now poised to emerge out of 'stealth mode' as a leader in providing dramatically lower cost solutions targeted at managing the explosion of Tier 3 data within the enterprise and in the cloud."

Fiscal Year 2010

Total revenue for FY'10 totaled $16.4 million, compared with $16.8 million for fiscal year 2009 (FY'09). Gross profit for FY'10 was $13.9 million, or 85 percent, compared with $14.2 million, or 84 percent, for FY'09. Net loss for FY'10 was $4.1 million, or $0.14 cents loss per share, compared to a net loss of $4.4 million, or $0.15 cents loss per share in FY'09.

For additional financial information, visit www.crossroads.com/InvestorRelations/.

About Crossroads Systems, Inc.

Headquartered in Austin, Texas, Crossroads Systems is a global leading provider of solutions to connect, protect, secure and restore data-at-rest. Crossroads (PINKSHEETS: CRDS) trades over-the-counter on Pink Sheets and posts its financial disclosure reports, press releases and other related documentation on the OTCIQ Web service of the Pink Sheets Web site. Visit www.crossroads.com.

Forward-Looking Statements

This release may include forward-looking statements. The words "believe," "expect," "intend," "plan," "project," "will" and similar phrases as they relate to Crossroads are intended to identify such forward-looking statements. These statements reflect the current views and assumptions of Crossroads and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.

©2010 Crossroads Systems, Inc. Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All specifications are subject to change without notice.

                CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)
                              (In Thousands)

                                                    October 31, October 31,
                                                       2009        2010
                                                    ----------- -----------
                       ASSETS

Current assets:
  Cash and cash equivalents                         $     5,297 $    13,811
  Accounts receivable, net                                5,124       5,607
  Inventories, net                                          111          93
  Prepaid expenses and other current assets                 423         293
                                                    ----------- -----------
    Total current assets                                 10,955      19,804

Property and equipment, net                                 830         575
Intangible, net                                           1,502         442
Investment in subsidiaries                                  940         940
Other assets                                                 69          60
                                                    ----------- -----------
    Total assets                                    $    14,296 $    21,821
                                                    =========== ===========

       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                  $     1,036 $       990
  Accrued expenses                                        1,877       2,241
  Accrued warranty costs                                     18          30
  Deferred revenue                                          199       1,517
  Line of credit                                          1,973       1,973
                                                    ----------- -----------
    Total current liabilities                             5,103       6,751

Long-term liabilities                                        59         103
Stockholders' equity                                      9,134      14,967
                                                    ----------- -----------
    Total liabilities and stockholders' equity      $    14,296 $    21,821
                                                    =========== ===========




                CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
              (In Thousands, Except Share and Per Share Data)

                              Three Months Ended          Year Ended
                                  October 31,             October 31,
                            ----------------------  ----------------------
                               2009        2010        2009        2010
                            ----------  ----------  ----------  ----------
Revenue:
   Product                  $    1,872  $    1,325  $    5,870  $    4,243
   IP license, royalty and
    other                        4,132       4,119      10,978      12,125
                            ----------  ----------  ----------  ----------
      Total revenue              6,004       5,444      16,848      16,368

Cost of revenue:
   Product                          91          96         653         422
   IP license, royalty and
    other                          757         631       2,081       2,070
                            ----------  ----------  ----------  ----------
      Total cost of revenue        848         727       2,734       2,492
                            ----------  ----------  ----------  ----------

Gross profit                     5,156       4,717      14,114      13,876
                            ----------  ----------  ----------  ----------

Operating expenses:
   Sales and marketing           1,210       1,409       5,494       5,270
   Research and development      2,309       2,312       9,730       8,907
   General and administrative      572         812       2,116       2,623
   Amortization of
    intangibles                    265         265       1,079       1,060
                            ----------  ----------  ----------  ----------

      Total operating
       expenses                  4,356       4,798      18,419      17,860
                            ----------  ----------  ----------  ----------

Income (loss) from
 operations                        800         (81)     (4,305)     (3,984)

Interest expense                   (25)        (42)       (113)       (110)
Other (expense) income              (0)         (1)         12          (4)
                            ----------  ----------  ----------  ----------

Net Income (loss)           $      775  $     (124) $   (4,406) $   (4,098)
                            ==========  ==========  ==========  ==========

Basic net gain (loss) per
 share                            0.03       (0.00)      (0.15)      (0.14)
Fully diluted net gain
 (loss) per share                 0.03       (0.00)      (0.15)      (0.14)

Shares used in computing:
   Basic net gain (loss)
    per share               29,216,522  31,337,003  29,032,451  30,345,374
                            ----------  ----------  ----------  ----------
   Fully Diluted net gain
    (loss) per share        29,393,710  31,337,003  29,032,451  30,345,374
                            ----------  ----------  ----------  ----------





                CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                              (In thousands)

                                                            Years Ended
                                                            October 31,
                                                        ------------------
                                                          2009      2010
                                                        --------  --------
Cash flows from operating activities:
   Net loss                                             $ (4,406) $ (4,098)
   Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
      Depreciation                                           839       553
      Amortization of intangibles                          1,079     1,060
      Loss on disposal of fixed assets                         1         0
      Stock-based compensation                               716     1,099
      Provision for doubtful accounts receivable             (70)      (16)
      Provision for excess and obsolete inventory            108        20
   Changes in assets and liabilities:
      Accounts receivable                                    527      (468)
      Inventories                                            110        (2)
      Prepaids and other current assets                      (77)      128
      Accounts payable                                      (698)      126
      Accrued expenses and other                              54        90
      Deferred revenue and other                            (151)    1,329
                                                        --------  --------
         Net cash used in operating activities            (1,968)     (179)
                                                        --------  --------
Cash flows from investing activities:
   Purchase of property and equipment                       (216)     (320)
                                                        --------  --------
         Net cash used in investing activities              (216)     (320)
                                                        --------  --------
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of
    issuance costs                                             1     9,178
   Paydown of line of credit                                 (51)        -
                                                        --------  --------
         Net cash (used in) provided by financing
          activities                                         (50)    9,178
                                                        --------  --------

Effect of exchange rate on cash                              445      (165)
Net (decrease) increase in cash and cash equivalents      (1,789)    8,514
Cash and cash equivalents, beginning of period             7,086     5,297
                                                        --------  --------
Cash and cash equivalents, end of period                $  5,297  $ 13,811
                                                        ========  ========

Contact Information

  • Investor Contact:
    Jennifer Crane
    Crossroads Systems
    Email Contact
    512.928.6897 or 800.643.7148

    Press Contact:
    Matthew Zintel
    Zintel Public Relations
    Email Contact
    317.848.8804