SOURCE: Crossroads Systems

Crossroads Systems

September 12, 2013 16:05 ET

Crossroads Systems Reports Fiscal Third Quarter 2013 Financial Results

AUSTIN, TX--(Marketwired - Sep 12, 2013) - Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal third quarter ended July 31, 2013.

Revenue for fiscal Q3 2013 was $2.8 million, a decrease of 21 percent from $3.5 million in the same quarter a year ago primarily attributable to a one-time deal with a large ReadVerify (RVA) customer in 2012. Gross profit for fiscal Q3 2013 was $2.1 million, or 75 percent of total revenue, as compared to $2.6 million or 75 percent of total revenue in the same quarter a year ago. Operating expenses for fiscal Q3 2013 totaled $5.7 million as compared to $5.8 million in the same period a year ago. Research and development expenses decreased by approximately $1.0 million, as expected, but were offset by increases in general and administrative expenses mainly due to severance-related expenses and professional fees.

Net loss for fiscal Q3 2013 totaled $4.1 million or $0.34 loss per share, as compared to a net loss of $3.2 million or $0.29 loss per share in the same quarter a year ago.

At July 31, 2013, cash and cash equivalents totaled $9.9 million, as compared to $6.0 million in the previous quarter. Crossroads received a net amount of approximately $9.1 million from Fortress Credit Corporation (Fortress) and re-paid its revolving and term loans to Silicon Valley Bank using $2.1 million of the proceeds.

Management Commentary
Richard K. Coleman, Jr., Interim President and CEO at Crossroads Systems, said, "During the third quarter, we took decisive action to reposition the Company across all of our key assets. Additionally, we saw continued growth and market acceptance for our StrongBox product. We also implemented cost reductions and modified our product distribution strategy. Although our financial results do not yet reflect the benefits of these improvements, we believe we have appropriately positioned the company for the future."

Conference Call Information
Crossroads will hold a conference call on Thursday, September 12, 2013 at 4:30 p.m. Eastern Time (3:30 p.m. Central Time) to discuss the financial results. Interim 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, September 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

To access the live or recorded webcast, visit:
http://us.meeting-stream.com/crossroadssystemsinc_091213

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 holds 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 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.

©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)  
             
    October 31,     July 31,  
ASSETS   2012     2013  
          (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 6,895     $ 9,871  
  Accounts receivable, net of allowance for doubtful accounts of $102 and $100, respectively.     2,847       2,411  
  Inventory     376       289  
  Prepaid expenses and other current assets     309       625  
                   
    Total current assets     10,427       13,196  
                 
Property and equipment, net     1,521       1,240  
Other assets     76       473  
                 
    Total assets   $ 12,024     $ 14,909  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
Current liabilities:                
  Accounts payable   $ 1,260     $ 961  
  Accrued expenses     2,879       2,152  
  Deferred revenue     1,306       1,471  
  Current portion of long term debt, net     2,948       645  
                   
    Total current liabilities     8,393       5,229  
                 
                 
Long term debt, net     1,370       7,692  
Long term derivative liability     -       1,539  
Other long term liabilities     264       222  
                 
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 11,942,606 shares issued and outstanding, respectively     12       12  
  Additional paid-in capital     204,582       208,394  
  Accumulated other comprehensive loss     (39 )     (47 )
  Accumulated deficit     (202,558 )     (214,526 )
                   
    Total stockholders' equity (deficit)     1,997       (6,167 )
                     
    Total liabilities and stockholders' equity (deficit)   $ 12,024     $ 14,909  
                 
   
   
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(In Thousands, Except Share and Per Share Data)  
                         
                         
                         
    Three Months Ended     Nine Months Ended  
    July 31,     July 31,  
    2012     2013     2012     2013  
Revenue:                                
  Product   $ 1,608     $ 1,239     $ 4,611     $ 4,203  
  IP license, royalty and other     1,912       1,555       4,941       4,879  
                                   
    Total revenue     3,520       2,794       9,552       9,082  
                                 
Cost of revenue:                                
  Product     235       189       471       569  
  IP license, royalty and other     658       511       1,131       1,887  
                                   
    Total cost of revenue     893       700       1,602       2,456  
                                 
Gross profit     2,627       2,094       7,950       6,626  
                                 
Operating expenses:                                
  Sales and marketing     1,573       1,771       4,516       5,640  
  Research and development     3,234       2,203       8,653       8,050  
  General and administrative     935       1,732       2,530       3,513  
  Amortization of intangible assets     16       -       110       -  
                                 
    Total operating expenses     5,758       5,706       15,809       17,203  
                                 
Loss from operations     (3,131 )     (3,612 )     (7,859 )     (10,577 )
                                 
Interest expense     (75 )     (69 )     (178 )     (203 )
Change in value of derivative liability     -       771       -       771  
Other income     (31 )     -       (16 )     4  
                                 
Net loss   $ (3,237 )   $ (2,910 )   $ (8,053 )   $ (10,005 )
                                 
Dividends and beneficial conversion on preferred stock   $ -     $ (1,146 )   $ -     $ (2,010 )
Net loss available to common stockholders, basic and diluted   $ (3,237 )   $ (4,056 )   $ (8,053 )   $ (12,015 )
Net loss per share available to common stockholders, basic and diluted   $ (0.29 )   $ (0.34 )   $ (0.73 )   $ (1.01 )
                                 
Shares used in computing net loss per share: Available to common stockholders, basic and diluted     11,194,755       11,881,928       11,072,574       11,845,796  
                                 
                                 
                                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(In thousands)  
             
    Nine Months Ended  
    July 31,  
    2012     2013  
                 
Cash flows from operating activities:                
  Net loss   $ (8,053 )   $ (10,005 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation     505       617  
    Interest incurred on conversion to preferred stock     -       55  
    Gain on change in value of derivative liability     -       (771 )
    Amortization of debt discount     -       16  
    Amortization of intangible assets     110       -  
    Loss on disposal of property and equipment     17       -  
    Stock-based compensation     1,280       848  
    Provision for doubtful accounts receivable     28       (2 )
  Changes in assets and liabilities:                
    Accounts receivable     586       443  
    Inventory     (128 )     87  
    Prepaid expenses and other assets     (2 )     (617 )
    Accounts payable     (1,177 )     (415 )
    Accrued expenses     270       (411 )
    Deferred revenue     1,094       116  
      Net cash used in operating activities     (5,470 )     (10,039 )
Cash flows from investing activities:                
  Purchase of property and equipment     (700 )     (334 )
  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     2,700       (334 )
Cash flows from financing activities:                
  Proceeds from issuance of common stock     3,160       68  
  Proceeds from issuance of preferred stock     -       7,332  
  Proceeds from issuance of bridge loan     -       550  
  Proceeds from issuance of debt     3,000       9,716  
  Repayment of debt     (422 )     (4,318 )
  Net cash provided by financing activities     5,738       13,348  
                 
Effect of foreign exchange rate on cash and cash equivalents     (14 )     1  
Net increase in cash and cash equivalents     2,954       2,976  
Cash and cash equivalents, beginning of period     7,336       6,895  
Cash and cash equivalents, end of period   $ 10,290     $ 9,871  
                 
                 
Supplemental disclosure of cash flow information:                
                 
Cash paid for interest   $ 131     $ 119  
Cash paid for income taxes   $ 1     $ 3  
                 
Supplemental disclosure of non cash financing activities:                
Conversion of prommisory notes to preferred stock   $ -     $ 605  
Issuance of common stock warrants   $ -     $ 1,543  
Beneficial conversion associated with preferred stock   $ -     $ 1,090  
Common stock dividends issued to preferred shareholders   $ -     $ 106  
Discount associated with long term debt   $ -     $ 1,375  
                 

Contact Information

  • Company Contacts:
    Jennifer Crane
    Crossroads Systems
    Email Contact
    512.928.6897
    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