Crossroads Systems Reports Fiscal Fourth Quarter and Full Year

Crossroads Systems Reports Fiscal Fourth Quarter and Full Year 2012
Results 
Product Revenue Up 32% Year Over Year 
AUSTIN, TX -- (Marketwire) -- 12/19/12 --  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, 2012.  
Fiscal Q4 and Full Year 2012 Financial Results
 Total revenue for
fiscal Q4 2012 decreased 29% to $4.4 million from $6.2 million in the
same quarter a year ago. The decrease was due to a 38% decrease in
intellectual property (IP) licensing, royalty and other revenue
offset by an increase of 21% in product revenue from fiscal Q4 2011.  
Total revenue for the fiscal full year 2012 decreased 7% to $14
million from $15 million in the prior year. The decrease was due to a
23% decrease in IP licensing, royalty and other revenue, offset by a
32% increase in product revenue. The company's IP licensing campaign
resulted in fewer contractual settlements in fiscal year 2012. We
intend on continuing our IP licensing campaign in fiscal year 2013. 
Gross profit for fiscal Q4 2012 was $3.1 million or 70% of total
revenue, as compared to $4.7 million, or 76% of total revenue in the
same quarter a year ago. Gross profit for fiscal year 2012 was $11.1
million or 79% of total revenue, as compared to $12.3 million or 82%
of total revenue in fiscal 2011. The decrease was mainly due to the
lower margin associated with the recognition of the Iron Mountain
service revenue in fiscal 2012. 
Operating expenses for fiscal Q4 2012 totaled $5.7 million, including
$400,000 of stock-based compensation, as compared to $5.4 million,
including $575,000 of stock-based compensation in the same period a
year ago. Operating expenses for fiscal year 2012 totaled $21.5
million, including $1.7 million of stock-based compensation, as
compared to $19.7 million, including $877,000 of stock-based
compensation in the prior year. The increase was primarily due to
increased headcount in order to support the sales and marketing
efforts around the company's StrongBox product. 
Net loss for fiscal Q4 2012 totaled $2.6 million or $(0.23) loss per
share, as compared to a net loss of $726,000 or $(0.07) loss per
share in the same quarter a year ago. Net loss for fiscal year 2012
totaled $10.7 million or $(0.95) loss per share, as compared to a net
loss of $7.5 million or $(0.69) loss per share in fiscal 2011. 
At October 31, 2012, cash and cash equivalents totaled $6.9 million
as compared to $10.3 million in the previous quarter. The decrease in
cash was due to the timing of payments received as well as increased
costs related to the company's StrongBox initiative. 
Management Commentary
 "Our StrongBox go-to-market strategy remains
on plan," said Rob Sims, President and CEO of Crossroads Systems.
"Our sales team along with our channel partners, continue to
successfully penetrate key market verticals where we believe
Strongbox is poised to become a leader in long-term archive
solutions. Additionally, the revenue pipeline continues to grow over
the prior quarter. We saw our first follow-on order from a StrongBox
customer, confirming the capacity-based revenue model that StrongBox
brings. The Iron Mountain development effort is on schedule and we
remain excited about this pivotal relationship. The overall strength
of our model was shown over the course of this last year as product
revenue increased 32% from the prior year, positioning Crossroads for
continued market leadership in 2013 and beyond." 
Conference Call 
 Crossroads will hold a conference call later today
(Wednesday, December 19, 2012) to discuss financial results.
Crossroads' CEO Rob Sims and CFO Jennifer Crane will host the call
starting at 4:30 p.m. Eastern Time. A question and answer session
will follow management's presentation. 
To participate in the call, dial the number 5-10 minutes prior to the
start time and ask for the Crossroads Systems conference call: 
Date: Wednesday, December 19, 2012
 Time: 4:30 p.m. Eastern Time
(3:30 p.m. Central Time)
 Dial-In Number: 1-877-221-8809 
International: 1-706-679-8667 
The conference call will be broadcasted and available for replay at
http://us.meeting-stream.com/crossroadssystemsinc_121912 and via the
company's Web site in the Investor Relations Events & Presentations
section. 
For the webcast, please visit the Web site at least 15 minutes early
to register, download, and install any necessary audio software.  
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 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, uncertainties relating to product development and
commercialization, the ability to obtain, maintain or protect patent
and other proprietary intellectual property rights, technological
change in its industry, market acceptance of its products and
services, future capital requirements, regulatory actions or delays,
competition in general and other factors that may cause actual
results to be materially different from those described herein.
Forward-looking statements in this press release are based on
management's beliefs and opinions at the time the statements are
made. Crossroads Systems does not intend, and undertakes no duty, to
update this information to reflect future events or circumstances. 
Copyright2012 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,    October 31,  
                    ASSETS                          2011           2012     
                                               -------------  ------------- 
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $       7,336  $       6,895 
  Short-term investments                               3,385              - 
                                               -------------  ------------- 
                                                                            
    Total cash, cash equivalents and short-                                 
     term investments                                 10,721          6,895 
                                                                            
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $71 and $102,                                       
   respectively                                        2,659          2,847 
  Inventory                                              188            376 
  Prepaid expenses and other current assets              297            309 
                                               -------------  ------------- 
                                                                            
    Total current assets                              13,865         10,427 
                                                                            
Property and equipment, net                            1,320          1,521 
Intangible assets, net                                   110              - 
Other assets                                              56             76 
                                               -------------  ------------- 
                                                                            
    Total assets                               $      15,351  $      12,024 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                                                                            
     LIABILITIES AND STOCKHOLDERS' EQUITY                                   
                                                                            
Current liabilities:                                                        
  Accounts payable                             $       2,228  $       1,260 
  Accrued expenses                                     2,156          2,879 
  Deferred revenue                                     1,009          1,306 
  Current portion of long term debt                    1,973          2,948 
                                               -------------  ------------- 
                                                                            
    Total current liabilities                          7,366          8,393 
                                                                            
                                                                            
Long term liabilities                                    126          1,634 
                                                                            
Commitments and contingencies                              -              - 
                                                                            
Stockholders' equity:                                                       
  Common stock, $0.001 par value, 75,000,000                                
   shares authorized, 10,923,543 and                                        
   11,679,860 shares issued and outstanding,                                
   respectively                                           11             12 
  Additional paid-in capital                         199,750        204,582 
  Accumulated other comprehensive loss                   (40)           (39)
  Accumulated deficit                               (191,862)      (202,558)
                                               -------------  ------------- 
                                                                            
    Total stockholders' equity                         7,859          1,997 
                                               -------------  ------------- 
                                                                            
    Total liabilities and stockholders' equity $      15,351  $      12,024 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                                                                            
                 CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES                  
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
              (In Thousands, Except Share and Per Share Data)               
                                                                            
                                                                            
                                                                            
                            Three Months Ended            Years Ended       
                                October 31,               October 31,       
                         ------------------------  ------------------------ 
                             2011         2012         2011         2012    
                         -----------  -----------  -----------  ----------- 
Revenue:                                                                    
  Product                $     1,032  $     1,245  $     4,441  $     5,856 
  IP license, royalty                                                       
   and other                   5,201        3,202       10,546        8,143 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total revenue              6,233        4,447       14,987       13,999 
                                                                            
Cost of revenue:                                                            
  Product                         72          171          357          642 
  IP license, royalty                                                       
   and other                   1,426        1,170        2,308        2,301 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total cost of                                                           
     revenue                   1,498        1,341        2,665        2,943 
                         ----------
-  -----------  -----------  ----------- 
                                                                            
Gross profit                   4,735        3,106       12,322       11,056 
                         -----------  -----------  -----------  ----------- 
                                                                            
Operating expenses:                                                         
  Sales and marketing          1,534        1,870        5,218        6,386 
  Research and                                                              
   development                 2,850        2,755       10,702       11,408 
  General and                                                               
   administrative              1,011        1,060        3,158        3,590 
  Amortization of                                                           
   intangible assets              47            -          629          110 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total operating                                                         
     expenses                  5,442        5,685       19,707       21,494 
                         -----------  -----------  -----------  ----------- 
                                                                            
Loss from operations            (707)      (2,579)      (7,385)     (10,438)
                                                                            
Interest expense                 (13)         (63)        (104)        (241)
Other expense                     (6)          (1)          (6)         (17)
                         -----------  -----------  -----------  ----------- 
                                                                            
Net loss                 $      (726) $    (2,643) $    (7,495) $   (10,696)
                         ===========  ===========  ===========  =========== 
                                                                            
Basic and diluted net                                                       
 loss per share                (0.07)       (0.23)       (0.69)       (0.95)
                         ===========  ===========  ===========  =========== 
                                                                            
Basic and diluted                                                           
 average common shares                                                      
 outstanding              10,909,371   11,671,416   10,820,028   11,245,813 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                 
           
       CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES                            
         CONSOLIDATED STATEMENTS OF CASH FLOWS                              
                      (Unaudited)                                           
                    (In thousands)                                          
                                                                            
                                                            Years Ended     
                                                            October 31,     
                                                       -------------------- 
                                                          2011       2012   
                                                       ---------  --------- 
                                                                            
Cash flows from operating activities:                                       
  Net loss                                             $  (7,495) $ (10,696)
  Adjustments to reconcile net loss to net cash used                        
   in operating activities:                                                 
    Depreciation                                             537        711 
    Amortization of intangible assets                        629        110 
    Loss on disposal of property and equipment                 8         17 
    Stock-based compensation                                 877      1,680 
    Provision for doubtful accounts receivable                52         31 
  Changes in assets and liabilities:                                        
    Accounts receivable                                    2,895       (219)
    Inventory                                                (95)      (188)
    Prepaid expenses and other assets                         (4)       (32)
    Accounts payable                                       1,314       (968)
    Accrued expenses                                        (114)       665 
    Deferred revenue                                        (485)       440 
                                                       ---------  --------- 
      Net cash used in operating activities               (1,881)    (8,449)
                                                       ---------  --------- 
Cash flows from investing activities:                                       
  Purchase of property and equipment                      (1,290)      (944)
  Proceeds from sale of property and equipment                 -         15 
  Purchase of held-to-maturity investments                (6,669)      (185)
  Maturity of held-to-maturity investments                 3,284      3,570 
                                                       ---------  --------- 
      Net cash (used in) provided by investing                              
       activities                                         (4,675)     2,456 
                                                       ---------  --------- 
Cash flows from financing activities:                                       
  Proceeds from issuance of common stock, net of                            
   expenses                                                  144      3,212 
  Proceeds from borrowing on debt                              -      3,000 
  Paydown of debt                                              -       (655)
                                                       ---------  --------- 
      Net cash provided by financing activities              144      5,557 
                                                       ---------  --------- 
                                                                            
Effect of foreign exchange rate on cash and cash                            
 equivalents                                                 (63)        (5)
                                                       ---------  --------- 
Net (decrease) increase in cash and cash equivalents      (6,475)      (441)
Cash and cash equivalents, beginning of period            13,811      7,336 
                                                       ---------  --------- 
Cash and cash equivalents, end of period               $   7,336  $   6,895 
                                                       =========  ========= 

  
Company Contact:
Jennifer Crane
Crossroads Systems 
jcrane@crossroads.com
512.928.6897 or 800.643.7148 
Investor Contact:
John Baldissera
BPC Financial Marketing
800.368.1217 
Press Contact:
Matthew Zintel
Zintel Public Relations
matthew.zintel@zintelpr.com
281.444.1590 
 
 
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