Crossroads Systems Reports Fiscal Second Quarter 2013 Financial Results

Crossroads Systems Reports Fiscal Second Quarter 2013 Financial Results 
AUSTIN, TX -- (Marketwired) -- 06/07/13 --  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. 
Copyright2013 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                       -                4 
   outstanding, respectively                                                
  Common stock, $0.001 par value,                                           
   75,000,000 shares authorized,                                            
   11,679,860 and 11,845,986 shares issued              12               12 
   and outstanding, respectively                                            
  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 
                                                   ===========  =========== 

  
Company Contacts: 
Jennifer Crane 
Crossroads Systems 
jcrane@crossroads.com 
512.928.6897 or 800.643.7148  
Investor Contact: 
Mark Hood
Crossroads Systems
mhood@crossroads.com 
512.928.7330 
Press Contact:
Matthew Zintel
Zintel Public Relations
matthew.zintel@zintelpr.com
281.444.1590 
 
 
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