Crossroads Systems Evaluating Alternatives to Protect Net Operating Loss Carryforwards

Crossroads Systems Evaluating Alternatives to Protect Net Operating Loss 
Carryforwards 
Intends to Seek Approvals for Adoption of Tax Benefit Preservation
Plan 
AUSTIN, TX -- (Marketwired) -- 10/03/13 --  Crossroads Systems, Inc.
(NASDAQ: CRDS), a global provider of data archive solutions,
announced today that it is evaluating alternatives to protect its
existing net operating loss (NOL) carryforwards and attempt to avoid
a potential "triggering event," as defined in Section 382 of the
Internal Revenue Code of 1986, as amended. Subject to the receipt of
applicable approvals required from the holders of the Company's 5.0%
Series F Convertible Preferred Stock, the company announced that its
Board of Directors intends to adopt a tax benefit preservation plan
to protect the value of its NOL carryforwards and other related tax
assets (an "NOL Plan").  
As of July 31, 2013, the Company had total federal NOL carryforwards
of approximately $100 million. 
The impairment of the Company's NOL carryforwards would be triggered
by a 50-percentage-point or more "ownership shift" by "5%
shareholders" (as defined in Section 382 of the Internal Revenue
Code) during a rolling three-year period, all as calculated under
Internal Revenue Service regulations. Even small fluctuations in the
ownership of "5% shareholders" could trigger the Section 382
impairment of the Company's NOL carryforwards.  
At this time, Crossroads is urging any shareholder or prospective
shareholder who is, or may be close to becoming, a "5% shareholder"
and any current 5% or more shareholder to contact Mark Hood, the
Company's Executive Vice President of Corporate Communications, or
Jennifer Crane, the Company's Chief Financial Officer, at the contact
information above before completing any trades to discuss the
possible consequences of such trades with respect to the Company's
NOL carryforwards. 
Following the receipt of certain approvals required to be obtained
from the holders of a majority of the Company's 5.0% Series F
Convertible Preferred Stock, the Board's adoption of an NOL Plan
would be intended to serve the interest of all Crossroads
shareholders by reducing the likelihood of an ownership change that
would impair the Company's use of its NOL carryforwards, thereby
helping to protect the Company's ability to use the NOL carryforwards
to offset future tax liabilities. The company intends to begin
seeking the requisite approvals from the holders of its 5.0% Series F
Convertible Preferred Stock relating to the NOL Plan shortly
following the date of this release. The likelihood and timing of such
stockholder approval cannot be determined at this time and,
accordingly, whether an NOL Plan will be adopted cannot be
ascertained at this time.  
In the event an NOL Plan is adopted, the Board of Directors would
expect to declare a non-taxable dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock
and each outstanding share of 5.0% Series F Convertible Preferred
Stock to holders of record as of the close of business on the record
date set by the Board of Directors. Any share issued after that date
would also receive a Right. If an NOL Plan is adopted, any person or
group that acquires beneficial ownership of 4.99% or more of the
Company's common stock without Board approval would be subject to
significant dilution in the ownership interest of that person or
group, subject to limited exceptions, and the Rights held by such
person or group would become void. Shareholders who currently
beneficially own 4.99% or more will not trigger the preferred share
purchase rights unless they acquire beneficial ownership of
additional shares.  
The Company expects to submit an NOL Plan for shareholder approval at
the next annual meeting of stockholders following the implementation
of such NOL Plan. 
If adopted, the terms of the NOL Plan are expected to provide that
the NOL Plan would expire on the earliest of (i) 5:00 p.m., New York
time, on the date that the votes of the stockholders of the Company,
with respect to the Company's next annual meeting of stockholders
following the implementation of such NOL Plan, are certified, unless
the continuation of the Rights is approved by the affirmative vote of
the majority of the voting power of the shares present in person or
represented by proxy at the Company's next annual meeting of
stockholders following the implementation of such NOL Plan (or any
adjournment or postponement thereof) duly held in accordance with the
Company's Amended and Restated Bylaws and applicable law; (ii) 5:00
p.m., New York time, on the date that is three years after the NOL
Plan is adopted; (iii) the time at which the Rights are redeemed or
exchanged under the Plan; (iv) the repeal of Section 382 or any
successor status and the Board's determination that the Plan is no
longer necessary for preservation of the Company's NOLs; or (v) the
beginning of a taxable year of the Company to which the Board of
Directors determines that no NOLs may be carried forward. In
addition, the Board of Directors would be able to terminate the NOL
Plan at any time in its discretion. 
The above summary description of the expected terms of any NOL Plan
reflects the Company's current plans only and is subject to change.
If it adopts an NOL Plan, the Company will file additional definitive
information regarding such NOL Plan with the U.S. Securities and
Exchange Commission. 
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 has been
awarded 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
earn profits in the future, its adoption of an NOL Plan and the
expected terms thereof, ownership changes with respect to its capital
stock that would result in a limitation of Crossroads' ability to use
its net operating loss carryforwards and the ability of the Company
to realize value from such tax attributes, the Company's ability to
implement its business strategy, 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: its ability to generate
revenues from the limited partnership that holds a significant
portion of our intellectual property, the risk of a default under
Crossroads' credit agreement, Crossroads' liquidity and potential
need for additional financing, the risk that Crossroads' common stock
could be delisted from the Nasdaq Capital Market, the convents and
anti-dilution provisions of its 5.0% Series F Convertible Preferred
Stock and warrants, the risks of a future ownership change that could
adversely affect the use of net operating loss carryforwards and the
ability of the Company to realize value from such tax attributes,
uncertainties relating to product development and commercialization,
uncertain market acceptance of Crossroads Systems products, 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 except as required by law. 
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.   
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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