Crossroads Systems Reports Fiscal Fourth Quarter and Full Year 2013 Financial Results

Crossroads Systems Reports Fiscal Fourth Quarter and Full Year 2013 Financial 
Results 
AUSTIN, TX -- (Marketwired) -- 12/12/13 --  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, 2013. 
Fiscal Q4 and Full Year 2013 Financial Results
 Total revenue for
fiscal Q4 2013 decreased 20% to $3.6 million from $4.4 million in the
same quarter a year ago. The decrease was mainly due to decreases in
our legacy OEM business.  
Total revenue for the fiscal full year 2013 decreased 10% to $12.6
million from $14.0 million in the prior year. The decrease was due to
a decrease in sales to one large customer of our Read Verify
Appliance and decreases in our legacy OEM business. The decreases
were partially offset by an increase in revenue from our StrongBox
product. 
Gross profit for fiscal Q4 2013 was $2.8 million or 80% of total
revenue, compared to $3.1 million, or 70% of total revenue in the
same quarter a year ago. Gross profit for fiscal year 2013 was $9.5
million or 75% of total revenue, compared to $11.1 million or 79% of
total revenue in fiscal 2012. The period-to-period decreases in gross
profit were mainly due to a decrease in total revenue. The
year-over-year decrease in gross profit as a percentage of revenue
was primarily due to lower margin service revenue from Iron Mountain. 
Operating expenses for fiscal Q4 2013 totaled $4.9 million, compared
to $5.7 million in the same period a year ago. Operating expenses for
fiscal year 2013 totaled $22.1 million, compared to $21.5 million in
the prior year. The year-over-year increase was primarily due to
StrongBox product launch expenses and increases in professional fees
associated with our preferred stock and Fortress financing activities
and other securities law compliance matters. On October 24, 2013 we
reduced our workforce by approximately 40%. Corresponding expense
reductions will be reflected in future reporting periods. 
Net loss available to common stockholders for fiscal Q4 2013 totaled
$2.3 million or $(0.19) loss per share, compared to a net loss of
$2.6 million or $(0.23) loss per share in the same quarter a year
ago. Net loss available to common stockholders for fiscal year 2013
totaled $14.3 million or $(1.20) loss per share, compared to a net
loss of $10.7 million or $(0.95) loss per share in fiscal 2012.
Approximately $1.5 million of other income is attributable to the
change in value of the derivative instrument issued in connection
with our March 2013 preferred stock private placement. These
derivative instruments will be marked to market each quarter and a
change in the value of the derivative instruments may cause
fluctuations in our loss per share from quarter to quarter. 
At October 31, 2013, cash and cash equivalents totaled $7.8 million
compared to $9.9 million in the previous quarter. 
Management Commentary
 Richard K. Coleman, Jr., President and CEO at
Crossroads Systems, said, "During the fourth quarter, we saw
continued growth and market acceptance for our StrongBox product.
StrongBox revenue from unit sales and licenses was up 33 percent over
the prior quarter, and total revenue was up 27 percent over the prior
quarter. The positive momentum in product sales, along with our
recent expense reductions, positions us to be cash flow positive from
operations in fiscal year 2014." 
Conference Call Information
 Crossroads will hold a conference call
on Thursday, December 12, 2013 at 4:30 p.m. Eastern Time (3:30 p.m.
Central Time) to discuss the financial results. 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: Thursday, December 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
 Conference ID # 14496553 
To access the live or recorded webcast, visit: 
http://us.meeting-stream.com/crossroadssystemsinc_121213  
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 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
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, expected cost
savings from the recent reduction of its workforce, our ability to
retain our Nasdaq listing, and Crossroads' 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,
our ability to maintain, protect and/or monetize our patents 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-l
ooking
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,  October 31, 
                      ASSETS                           2012         2013    
                                                   -----------  ----------- 
                                                                            
Current assets:                                                             
  Cash and cash equivalents                        $     6,895  $     7,795 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $102 and $94, respectively       2,847        2,301 
  Inventory                                                376          313 
  Prepaid expenses and other current assets                309          694 
                                                   -----------  ----------- 
                                                                            
    Total current assets                                10,427       11,103 
                                                                            
Property and equipment, net                              1,521        1,031 
Other assets                                                76          256 
                                                   -----------  ----------- 
                                                                            
    Total assets                                   $    12,024  $    12,390 
                                                   ===========  =========== 
                                                                            
                                                                            
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                            
                                                                            
Current liabilities:                                                        
  Accounts payable                                 $     1,260  $     1,066 
  Accrued expenses                                       2,879        2,095 
  Deferred revenue                                       1,306        1,090 
  Current portion of long term debt, net                 2,948        1,605 
                                                   -----------  ----------- 
                                                                            
    Total current liabilities                            8,393        5,856 
                                                                            
                                                                            
Long term debt, net                                      1,370        6,984 
Long term derivative liability                               -          772 
Other long term liabilities                                264          299 
                                                                            
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 11,949,937                             
   shares issued and outstanding, respectively              12           12 
  Additional paid-in capital                           204,582      208,702 
  Accumulated other comprehensive loss                     (39)         (51)
  Accumulated deficit                                 (202,558)    (216,578)
                                                   -----------  ----------- 
                                                                            
    Total stockholders' equity (deficit)                 1,997       (7,915)
                                                   -----------  ----------- 
                                                                            
    Total liabilities and stockholders' equity                              
     (deficit)                                     $    12,024  $    12,390 
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
                 CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES                  
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
              (In Thousands, Except Share and Per Share Data)               
                                                                            
                                                          Year Ended        
                                                          October 31,       
                                                   ------------------------ 
                                                       2012         2013    
                                                   -----------  ----------- 
Revenue:                                                                    
  Product                                          $     5,856  $     5,412 
  IP license, royalty and other                          8,143        7,222 
                                                   -----------  ----------- 
                                                                            
    Total revenue                                       13,999       12,634 
                                                                            
Cost of revenue:                                                            
  Product                                                  642          777 
  IP license, royalty and other                          2,301        2,401 
                                                   -----------  ----------- 
                                                                            
    Total cost of revenue                                2,943        3,178 
                                                   -----------  ----------- 
                                                                            
Gross profit                                            11,056      
  9,456 
                                                   -----------  ----------- 
                                                                            
Operating expenses:                                                         
  Sales and marketing                                    6,386        6,941 
  Research and development                              11,408       10,475 
  General and administrative                             3,590        4,728 
  Amortization of intangible assets                        110            - 
                                                   -----------  ----------- 
                                                                            
    Total operating expenses                            21,494       22,144 
                                                   -----------  ----------- 
                                                                            
Loss from operations                                   (10,438)     (12,688)
                                                                            
Interest expense                                          (241)        (909)
Change in value of derivative liability                      -        1,538 
Other (expense) income                                     (17)           2 
                                                   -----------  ----------- 
                                                                            
Net loss                                           $   (10,696) $   (12,057)
                                                   ===========  =========== 
                                                                            
Dividends and beneficial conversion on preferred                            
 stock                                             $         -  $    (2,208)
                                                   -----------  ----------- 
Net loss available to common stockholders, basic                            
 and diluted                                       $   (10,696) $   (14,265)
                                                   ===========  =========== 
Net loss per share available to common                                      
 stockholders, basic and diluted                   $     (0.95) $     (1.20)
                                                   ===========  =========== 
                                                                            
Shares used in computing net loss per share:                                
  Available to common stockholders, basic and                               
   diluted                                          11,245,913   11,857,879 
                                                   ===========  =========== 
                                                                            
                                                                            

 
                                                                            
                 CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES                  
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                               (In thousands)                               
                                                                            
                                                          Year Ended        
                                                          October 31,       
                                                   ------------------------ 
                                                       2012         2013    
                                                   -----------  ----------- 
                                                                            
Cash flows from operating activities:                                       
  Net loss                                         $   (10,696) $   (12,057)
  Adjustments to reconcile net loss to net cash                             
   used in operating activities:                                            
    Depreciation                                           711          821 
    Interest incurred on conversion to preferred                            
     stock                                                   -           55 
    Gain on change in value of derivative                                   
     liability                                               -       (1,539)
    Amortization of debt discount                            -          370 
    Amortization of intangible assets                      110            - 
    Loss on disposal of property and equipment              17            6 
    Stock-based compensation                             1,680        1,034 
    Provision for doubtful accounts receivable              31           (8)
  Changes in assets and liabilities:                                        
    Accounts receivable                                   (219)         563 
    Inventory               
                              (188)          63 
    Prepaid expenses and other assets                      (27)        (607)
    Accounts payable                                      (968)        (171)
    Accrued expenses                                       665         (475)
    Deferred revenue                                       435         (199)
                                                   -----------  ----------- 
      Net cash used in operating activities             (8,449)     (12,144)
                                                   -----------  ----------- 
Cash flows from investing activities:                                       
  Purchase of property and equipment                      (944)        (333)
  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                                        2,456         (333)
                                                   -----------  ----------- 
Cash flows from financing activities:                                       
  Proceeds from issuance of common stock, net of                        
    
   expenses                                              3,212           87 
  Proceeds from issuance of preferred stock, net                            
   of expenses                                               -        7,333 
  Proceeds from issuance of bridge loan                      -          550 
  Proceeds from issuance of debt                         3,000        9,719 
  Repayment of debt                                       (655)      (4,318)
                                                   -----------  ----------- 
  Net cash provided by financing activities              5,557       13,371 
                                                   -----------  ----------- 
                                                                            
Effect of foreign exchange rate on cash and cash                            
 equivalents                                                (5)           6 
                                                   -----------  ----------- 
Net (decrease) increase in cash and cash                                    
 equivalents                                              (441)         900 
Cash and cash equivalents, beginning of period           7,336        6,895 
                                                   -----------  ----------- 
Cash and cash equivalents, end of period           $     6,895  $     7,795 
                                                   ===========  =========== 

  
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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