Crossroads Systems Reports Fiscal Third Quarter 2013 Financial Results

Crossroads Systems Reports Fiscal Third Quarter 2013 Financial Results 
AUSTIN, TX -- (Marketwired) -- 09/12/13 --  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 Jenni
fer 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. 
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,     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 
                                                    ==========   ========== 

  
Company Contacts: 
Jennifer Crane 
Crossroads Systems 
jcrane@crossroads.com 
512.928.6897 
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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