Crossroads Systems Reports Fiscal Second Quarter 2013 Financial Results

Marketwired

AUSTIN, TX--(Marketwired - Jun 7, 2013) - Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal second quarter ended April 30, 2013.

Revenue for fiscal Q2 2013 was $2.7 million, a decrease of 20 percent from $3.5 million in the same quarter a year ago. Gross profit for fiscal Q2 2013 was $1.9 million, or 70% of total revenue, as compared to $3.1 million or 89% of total revenue in the same quarter a year ago. Operating expenses for fiscal Q2 2013 totaled $5.8 million as compared to $5.1 million in the same period a year ago. 

Net loss for fiscal Q2 2013 totaled $3.9 million or $0.41 per share, as compared to a net loss of $2.1 million or $.19 per share in the same quarter a year ago. At April 30, 2013, cash and cash equivalents totaled $6.0 million, as compared to $2.5 million in the previous quarter.

Management Commentary
Richard K. Coleman, Jr., Interim President and CEO at Crossroads Systems, said, "While the second quarter presented us with execution and revenue delivery challenges, I remain extremely optimistic about our future. Very few companies can claim a solid base of revenue from historic products, tremendous potential from a disruptive new product, and an impressive and proven Intellectual Property portfolio. There is no question that we face execution challenges, but we have a dedicated and talented workforce focused on delivering shareholder value from these assets."

Conference Call Information
Crossroads will hold a conference call later today (Friday, June 7, 2013) at 10 a.m. Eastern Time (9 a.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: Friday, June 7, 2013
Time: 10 a.m. Eastern Time (9 a.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_060713

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 Web site 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,     April 30,  
ASSETS   2012     2013  
              (Unaudited)  
Current assets:                
  Cash and cash equivalents   $ 6,895     $ 5,953  
  Accounts receivable, net of allowance for doubtful accounts of $102 and $96, respectively     2,847       1,961  
  Inventory     376       298  
  Prepaid expenses and other current assets     309       471  
    Total current assets     10,427       8,683  
                     
Property and equipment, net     1,521       1,386  
Other assets     76       82  
                 
    Total assets   $ 12,024     $ 10,151  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 1,260     $ 951  
  Accrued expenses     2,879       1,775  
  Deferred revenue     1,306       1,274  
  Current portion of long term debt     2,948       1,501  
                 
    Total current liabilities     8,393       5,501  
                 
Long term liabilities     1,634       1,044  
                 
Commitments and contingencies (See Note 7)     -       -  
                 
Stockholders' equity:                
  Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, 0 and 4,231,154 shares issued and outstanding, respectively     -
      4
 
  Common stock, $0.001 par value, 75,000,000 shares authorized, 11,679,860 and 11,845,986 shares issued and outstanding, respectively     12
      12
 
  Additional paid-in capital     204,582       214,104  
  Accumulated other comprehensive loss     (39 )     (43 )
  Accumulated deficit     (202,558 )     (210,471 )
    Total stockholders' equity     1,997       3,606  
    Total liabilities and stockholders' equity   $ 12,024     $ 10,151  
                     
                     
                     
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(In Thousands, Except Share and Per Share Data)  
                         
                         
                         
    Three Months Ended     Six Months Ended  
    April 30,     April 30,  
    2012     2013     2012     2013  
Revenue:                                
  Product   $ 1,891     $ 1,046     $ 3,003     $ 2,964  
  IP license, royalty and other     1,562       1,691       3,029       3,324  
                                   
    Total revenue     3,453       2,737       6,032       6,288  
                                 
Cost of revenue:                                
  Product     155       186       236       380  
  IP license, royalty and other     237       622       473       1,376  
                                   
    Total cost of revenue     392       808       709       1,756  
                                 
Gross profit     3,061       1,929       5,323       4,532  
                                 
Operating expenses:                                
  Sales and marketing     1,534       1,909       2,943       3,869  
  Research and development     2,662       2,990       5,419       5,847  
  General and administrative     833       905       1,595       1,781  
  Amortization of intangible assets     47       -       94       -  
                                 
    Total operating expenses     5,076       5,804       10,051       11,497  
                                 
Loss from operations     (2,015 )     (3,875 )     (4,728 )     (6,965 )
                                 
Interest expense     (53 )     (80 )     (103 )     (134 )
Other income     1       5       15       4  
                                 
Net loss   $ (2,067 )   $ (3,950 )   $ (4,816 )   $ (7,095 )
                                 
Dividends and beneficial conversion on preferred stock   $ -     $ (864 )   $ -     $ (864 )
Net loss available to common stockholders, basic and diluted   $ (2,067 )   $ (4,814 )   $ (4,816 )   $ (7,959 )
Net loss per share available to common stockholders, basic and diluted  
 
$ (0.19  
)
 
 
$ (0.41  
)
 
 
$ (0.44  
)
 
 
$ (0.67  
)
                                 
Shares used in computing net loss per share:                                
  Available to common stockholders, basic and diluted     11,048,394       11,836,140       11,010,813       11,827,430  
                                 
                                 
                                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(In thousands)  
             
    Six Months Ended  
    April 30,  
    2012     2013  
                 
Cash flows from operating activities:                
  Net loss   $ (4,816 )   $ (7,095 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation     336       409  
    Non cash interest paid on conversion to preferred stock     -       55  
    Amortization of intangible assets     94       -  
    Gain on disposal of property and equipment     (15 )     -  
    Stock-based compensation     1,179       557  
    Provision for doubtful accounts receivable     30       (5 )
  Changes in assets and liabilities:                
    Accounts receivable     299       894  
    Inventory     (96 )     78  
    Prepaid expenses and other assets     (13 )     (168 )
    Accounts payable     (1,028 )     (313 )
    Accrued expenses     293       (921 )
    Deferred revenue     604       (108 )
      Net cash used in operating activities     (3,133 )     (6,617 )
Cash flows from investing activities:                
  Purchase of property and equipment     (490 )     (273 )
  Purchase of held-to-maturity investments     (185 )     -  
  Maturity of held-to-maturity investments     3,220       -  
      Net cash provided by (used in) investing activities     2,545       (273 )
Cash flows from financing activities:                
  Proceeds from issuance of preferred stock, net of issuance cost     -       7,333  
  Proceeds from issuance of common stock, net of issuance cost     141       27  
  Proceeds from borrowing on debt     3,000       550  
  Repayment of debt     (197 )     (1,963 )
      Net cash provided by financing activities     2,944       5,947  
                 
Effect of foreign exchange rate on cash and cash equivalents     (148 )     1  
Net increase (decrease) in cash and cash equivalents     2,208       (942 )
Cash and cash equivalents, beginning of period     7,336       6,895  
Cash and cash equivalents, end of period   $ 9,544     $ 5,953  
                 
                 
Supplemental disclosure of cash flow information:                
                 
Cash paid for interest   $ 60     $ 74  
Cash paid for income taxes   $ 1     $ 2  
                 
Supplemental disclosure of non cash financing activities:                
                 
Conversion of promissory notes to preferred stock   $ -     $ 605  
                 
                 
                 
Contact:
Company
Jennifer Crane
Crossroads Systems
Email Contact
512.928.6897 or 800.643.7148

Investor
Mark Hood
Crossroads Systems
Email Contact
512.928.7330

Press
Matthew Zintel
Zintel Public Relations
Email Contact
281.444.1590
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