SOURCE: Crossroads Systems

Crossroads Systems

December 12, 2013 16:05 ET

Crossroads Systems Reports Fiscal Fourth Quarter and Full Year 2013 Financial Results

AUSTIN, TX--(Marketwired - Dec 12, 2013) - Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal fourth quarter and full year ended October 31, 2013.

Fiscal Q4 and Full Year 2013 Financial Results
Total revenue for fiscal Q4 2013 decreased 20% to $3.6 million from $4.4 million in the same quarter a year ago. The decrease was mainly due to decreases in our legacy OEM business.

Total revenue for the fiscal full year 2013 decreased 10% to $12.6 million from $14.0 million in the prior year. The decrease was due to a decrease in sales to one large customer of our Read Verify Appliance and decreases in our legacy OEM business. The decreases were partially offset by an increase in revenue from our StrongBox product.

Gross profit for fiscal Q4 2013 was $2.8 million or 80% of total revenue, compared to $3.1 million, or 70% of total revenue in the same quarter a year ago. Gross profit for fiscal year 2013 was $9.5 million or 75% of total revenue, compared to $11.1 million or 79% of total revenue in fiscal 2012. The period-to-period decreases in gross profit were mainly due to a decrease in total revenue. The year-over-year decrease in gross profit as a percentage of revenue was primarily due to lower margin service revenue from Iron Mountain.

Operating expenses for fiscal Q4 2013 totaled $4.9 million, compared to $5.7 million in the same period a year ago. Operating expenses for fiscal year 2013 totaled $22.1 million, compared to $21.5 million in the prior year. The year-over-year increase was primarily due to StrongBox product launch expenses and increases in professional fees associated with our preferred stock and Fortress financing activities and other securities law compliance matters. On October 24, 2013 we reduced our workforce by approximately 40%. Corresponding expense reductions will be reflected in future reporting periods.

Net loss available to common stockholders for fiscal Q4 2013 totaled $2.3 million or $(0.19) loss per share, compared to a net loss of $2.6 million or $(0.23) loss per share in the same quarter a year ago. Net loss available to common stockholders for fiscal year 2013 totaled $14.3 million or $(1.20) loss per share, compared to a net loss of $10.7 million or $(0.95) loss per share in fiscal 2012. Approximately $1.5 million of other income is attributable to the change in value of the derivative instrument issued in connection with our March 2013 preferred stock private placement. These derivative instruments will be marked to market each quarter and a change in the value of the derivative instruments may cause fluctuations in our loss per share from quarter to quarter.

At October 31, 2013, cash and cash equivalents totaled $7.8 million compared to $9.9 million in the previous quarter.

Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, "During the fourth quarter, we saw continued growth and market acceptance for our StrongBox product. StrongBox revenue from unit sales and licenses was up 33 percent over the prior quarter, and total revenue was up 27 percent over the prior quarter. The positive momentum in product sales, along with our recent expense reductions, positions us to be cash flow positive from operations in fiscal year 2014."

Conference Call Information
Crossroads will hold a conference call on Thursday, December 12, 2013 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, December 12, 2013
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: (877) 221-8809
International: (706) 679-8667
Conference ID # 14496553

To access the live or recorded webcast, visit:
http://us.meeting-stream.com/crossroadssystemsinc_121213

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, expected cost savings from the recent reduction of its workforce, our ability to retain our Nasdaq listing, and Crossroads' 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, our ability to maintain, protect and/or monetize our patents 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.

©2013 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)  
             

ASSETS
  October 31,
2012
    October 31,
2013
 
                 
Current assets:                
  Cash and cash equivalents   $ 6,895     $ 7,795  
  Accounts receivable, net of allowance for doubtful accounts of $102 and $94, respectively     2,847       2,301  
  Inventory     376       313  
  Prepaid expenses and other current assets     309       694  
                 
    Total current assets     10,427       11,103  
                 
Property and equipment, net     1,521       1,031  
Other assets     76       256  
                 
    Total assets   $ 12,024     $ 12,390  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
Current liabilities:                
  Accounts payable   $ 1,260     $ 1,066  
  Accrued expenses     2,879       2,095  
  Deferred revenue     1,306       1,090  
  Current portion of long term debt, net     2,948       1,605  
                 
    Total current liabilities     8,393       5,856  
                 
                 
Long term debt, net     1,370       6,984  
Long term derivative liability     -       772  
Other long term liabilities     264       299  
                 
Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, 0 and 4,231,154 shares issued and outstanding, respectively, net     -       6,394  
                 
  Stockholders' equity (deficit):                
  Common stock, $0.001 par value, 75,000,000 shares authorized, 11,679,860 and 11,949,937 shares issued and outstanding, respectively     12       12  
  Additional paid-in capital     204,582       208,702  
  Accumulated other comprehensive loss     (39 )     (51 )
  Accumulated deficit     (202,558 )     (216,578 )
                 
    Total stockholders' equity (deficit)     1,997       (7,915 )
                 
    Total liabilities and stockholders' equity (deficit)   $ 12,024     $ 12,390  
                 
                 
   
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In Thousands, Except Share and Per Share Data)  
             
    Year Ended  
    October 31,  
    2012     2013  
Revenue:                
  Product   $ 5,856     $ 5,412  
  IP license, royalty and other     8,143       7,222  
                 
    Total revenue     13,999       12,634  
                 
Cost of revenue:                
  Product     642       777  
  IP license, royalty and other     2,301       2,401  
                 
    Total cost of revenue     2,943       3,178  
                 
Gross profit     11,056       9,456  
                 
Operating expenses:                
  Sales and marketing     6,386       6,941  
  Research and development     11,408       10,475  
  General and administrative     3,590       4,728  
  Amortization of intangible assets     110       -  
                 
    Total operating expenses     21,494       22,144  
                 
Loss from operations     (10,438 )     (12,688 )
                 
Interest expense     (241 )     (909 )
Change in value of derivative liability     -       1,538  
Other (expense) income     (17 )     2  
                 
Net loss   $ (10,696 )   $ (12,057 )
                 
Dividends and beneficial conversion on preferred stock   $ -     $ (2,208 )
Net loss available to common stockholders, basic and diluted   $ (10,696 )   $ (14,265 )
Net loss per share available to common stockholders, basic and diluted   $ (0.95 )   $ (1.20 )
                 
Shares used in computing net loss per share:                
  Available to common stockholders, basic and diluted     11,245,913       11,857,879  
                 
                 
             
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
             
    Year Ended  
    October 31,  
    2012     2013  
                 
Cash flows from operating activities:                
  Net loss   $ (10,696 )   $ (12,057 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation     711       821  
    Interest incurred on conversion to preferred stock     -       55  
    Gain on change in value of derivative liability     -       (1,539 )
    Amortization of debt discount     -       370  
    Amortization of intangible assets     110       -  
    Loss on disposal of property and equipment     17       6  
    Stock-based compensation     1,680       1,034  
    Provision for doubtful accounts receivable     31       (8 )
  Changes in assets and liabilities:                
    Accounts receivable     (219 )     563  
    Inventory     (188 )     63  
    Prepaid expenses and other assets     (27 )     (607 )
    Accounts payable     (968 )     (171 )
    Accrued expenses     665       (475 )
    Deferred revenue     435       (199 )
      Net cash used in operating activities     (8,449 )     (12,144 )
Cash flows from investing activities:                
  Purchase of property and equipment     (944 )     (333 )
  Proceeds from sale of property and equipment     15       -  
  Purchase of held-to-maturity investments     (185 )     -  
  Maturity of held-to-maturity investments     3,570       -  
      Net cash provided by (used in) investing activities     2,456       (333 )
Cash flows from financing activities:                
  Proceeds from issuance of common stock, net of expenses     3,212       87  
  Proceeds from issuance of preferred stock, net of expenses     -       7,333  
  Proceeds from issuance of bridge loan     -       550  
  Proceeds from issuance of debt     3,000       9,719  
  Repayment of debt     (655 )     (4,318 )
  Net cash provided by financing activities     5,557       13,371  
                 
Effect of foreign exchange rate on cash and cash equivalents     (5 )     6  
Net (decrease) increase in cash and cash equivalents     (441 )     900  
Cash and cash equivalents, beginning of period     7,336       6,895  
Cash and cash equivalents, end of period   $ 6,895     $ 7,795  
                 
                 

Contact Information

  • Company Contacts:
    Jennifer Crane
    Crossroads Systems
    Email Contact
    512.928.6897 or 800.643.7148

    Investor Contact:
    Mark Hood
    Crossroads Systems
    Email Contact
    512.928.7330

    Press Contact:
    Matthew Zintel
    Zintel Public Relations
    Email Contact
    281.444.1590