AUSTIN, Texas, June 4, 2015 /PRNewswire/ -- Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data storage solutions, reported financial results for its fiscal second quarter ended April 30, 2015.
Revenue for fiscal Q2 2015 was $1.7 million, compared to $2.3 million in the same quarter a year ago. The decrease is primarily attributable to a decrease in custom development revenue as well as an expected decrease from our OEM SPHiNX product. Gross profit for fiscal Q2 2015 was $1.3 million, or 75 percent of total revenue, compared to $1.8 million, or 80 percent of total revenue in the same quarter a year ago. The decrease is due to a change in the mix of hardware and software products sold during the quarter.
Operating expenses for fiscal Q2 2015 increased twenty five percent to $4.5 million, compared to $3.6 million in the same period a year ago. The increase is attributable to litigation expenses related to the company's ongoing patent infringement lawsuits against NetApp, Oracle, Cisco, Quantum, Huawei and Dot Hill.
Net loss available to common stockholders was $(3.6) million or $(0.19) loss per share, compared to a net loss available to common stockholders of $(1.8) million, or $(0.14) loss per share, in the same quarter a year ago.
At April 30, 2015, cash, cash equivalents, and restricted cash totaled $5.1 million compared to $8.4 million in the previous quarter.
Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, "Although several major sales opportunities were delayed past the end of the quarter, our newest strategic partners, TIM AG in Germany and ARJ Distribution AB in Sweden, have well known and successful enterprise storage distribution channels and are working to expand our StrongBox opportunities in Europe. Litigation expenses were higher than anticipated, but reflect our recent successful efforts to consolidate scheduling and accelerate certain inter partes review proceedings. Our Intellectual Property monetization strategy is unfolding as expected as we pursue companies that have been illegally using Crossroads' proprietary technology. We have previously advised investors that the potential compensatory damages could be in excess of $200 million and have no reason to revise that estimate. We remain confident that we will deliver significant returns to our investors."
Conference Call Information
Crossroads will hold a conference call on Thursday, June 4, 2015 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., CFO Jennifer Crane, and EVP Mark Hood will host the call. A question and answer session will follow management's presentation.
Date: Thursday, June 4, 2015
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: (888) 438-5535
International: (719) 325-2448
Conference ID: 3732527
To access the live or recorded webcast, visit:
http://edge.media-server.com/m/p/8nzwuz5u
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. For those unable to listen to the live call, a webcast replay of the call will be available the day after the call in the Investor Relations Events & Presentations section of the Crossroads website.
About Crossroads Systems
Crossroads Systems, Inc. (NASDAQ: CRDS) is a global provider of data storage 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, the potential market for our data storage products, changes in the fair value of its derivative instruments 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, developments in litigation to which we may be a party, 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, Form 10-Q,Form 8-K and other reports 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. All forward-looking statements are qualified in their entirety by this cautionary statement, and Crossroads Systems undertakes no duty to update this information to reflect future events, information or circumstances.
©2015 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.
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Company Contacts: |
Investor Contact: |
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Jennifer Crane |
Mark Hood |
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Crossroads Systems |
Crossroads Systems |
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512.928.6897 |
512.928.7330 |
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Press Contact: |
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Matthew Zintel |
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Zintel Public Relations |
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281.444.1590 |
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CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES | |||||
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CONSOLIDATED BALANCE SHEETS | |||||
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(In thousands, except share data) | |||||
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April 30, |
October 31, | ||||
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ASSETS |
2015 |
2014 | |||
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(unaudited) |
|||||
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Current assets: |
|||||
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Cash and cash equivalents |
$ 4,780 |
$ 4,676 | |||
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Restricted cash |
270 |
270 | |||
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Total cash, cash equivalents and restricted cash |
5,050 |
4,946 | |||
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Accounts receivable, net of allowance for doubtful accounts of $8 and $151, respectively |
1,691 |
2,252 | |||
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Inventory |
513 |
357 | |||
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Prepaid expenses and other current assets |
518 |
798 | |||
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Total current assets |
7,772 |
8,353 | |||
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Property and equipment, net |
608 |
440 | |||
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Other assets |
87 |
63 | |||
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Total assets |
$ 8,467 |
$ 8,856 | |||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
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Current liabilities: |
|||||
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Accounts payable |
$ 1,352 |
$ 1,443 | |||
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Accrued expenses |
1,706 |
1,397 | |||
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Deferred revenue, current portion |
1,060 |
1,032 | |||
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Current portion of long term debt, net of debt discount |
2,772 |
3,160 | |||
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Total current liabilities |
6,890 |
7,032 | |||
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Long term debt, net of current portion and debt discount |
357 |
1,651 | |||
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Long term portion of deferred revenue, net of current portion |
511 |
423 | |||
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Stockholders' equity (deficit): |
|||||
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Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, 3,041,257 and 3,318,197 shares issued and outstanding, respectively |
3 |
3 | |||
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Common stock, $0.001 par value, 75,000,000 shares authorized, 19,398,345 and 15,831,810 shares issued and outstanding, respectively |
19 |
16 | |||
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Additional paid-in capital |
233,174 |
226,208 | |||
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Accumulated other comprehensive loss |
(79) |
(60) | |||
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Accumulated deficit |
(232,408) |
(226,417) | |||
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Total stockholders' equity (deficit) |
709 |
(250) | |||
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Total liabilities and stockholders' equity |
$ 8,467 |
$ 8,856 | |||
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CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
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(Unaudited) | |||||||||||
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(In Thousands, Except Share and Per Share Data) | |||||||||||
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Three Months Ended |
Six Months Ended | ||||||||||
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April 30, |
April 30, | ||||||||||
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2015 |
2014 |
2015 |
2014 | ||||||||
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Revenue: |
|||||||||||
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Product |
$ 584 |
$ 1,096 |
$ 1,446 |
$ 2,326 | |||||||
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IP license, royalty and other |
1,137 |
1,199 |
2,445 |
4,094 | |||||||
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Total revenue |
1,721 |
2,295 |
3,891 |
6,420 | |||||||
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Cost of revenue: |
|||||||||||
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Product |
220 |
204 |
502 |
440 | |||||||
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IP license, royalty and other |
206 |
256 |
517 |
639 | |||||||
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Total cost of revenue |
426 |
460 |
1,019 |
1,079 | |||||||
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Gross profit |
1,295 |
1,835 |
2,872 |
5,341 | |||||||
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Operating expenses: |
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Sales and marketing |
808 |
939 |
1,658 |
1,971 | |||||||
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Research and development |
1,173 |
1,517 |
2,549 |
3,048 | |||||||
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General and administrative |
2,553 |
1,180 |
3,880 |
2,518 | |||||||
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Total operating expenses |
4,534 |
3,636 |
8,087 |
7,537 | |||||||
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Loss from operations |
(3,239) |
(1,801) |
(5,215) |
(2,196) | |||||||
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Gain on settlement |
- |
- |
- |
1,050 | |||||||
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Loss before other expenses |
(3,239) |
(1,801) |
(5,215) |
(1,146) | |||||||
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Other expense: |
|||||||||||
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Interest expense |
(98) |
(232) |
(226) |
(477) | |||||||
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Amortization of debt discount and issuance costs |
(179) |
(325) |
(400) |
(667) | |||||||
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Change in value of derivative liability |
- |
635 |
- |
(2,765) | |||||||
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Other income |
- |
(18) |
19 |
(18) | |||||||
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Net loss |
$ (3,516) |
$ (1,741) |
$ (5,822) |
$ (5,073) | |||||||
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Dividends attributable to preferred stock |
$ (72) |
$ (93) |
$ (156) |
$ (248) | |||||||
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Net loss available to common stockholders, basic and diluted |
$ (3,588) |
$ (1,834) |
$ (5,978) |
$ (5,321) | |||||||
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Net loss per share available to common stockholders, basic and diluted |
$ (0.19) |
$ (0.14) |
$ (0.34) |
$ (0.41) | |||||||
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Weighted average number of common shares outstanding, basic and diluted |
19,286,525 |
13,577,795 |
17,584,841 |
12,963,235 | |||||||
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CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES | ||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
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(Unaudited) | ||||||||
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(In thousands) | ||||||||
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Six Months Ended | ||||||||
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April 30, | ||||||||
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2015 |
2014 | |||||||
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Cash flows from operating activities: |
||||||||
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Net loss |
$ (5,822) |
$ (5,073) | ||||||
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
220 |
380 | ||||||
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Loss on change in value of derivative liability |
- |
2,765 | ||||||
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Amortization of debt discount |
400 |
667 | ||||||
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Gain on disposal of property and equipment |
- |
(15) | ||||||
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Stock-based compensation |
536 |
1,008 | ||||||
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Provision for doubtful accounts receivable |
67 |
4 | ||||||
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Changes in assets and liabilities: |
||||||||
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Accounts receivable |
468 |
284 | ||||||
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Inventory |
(167) |
8 | ||||||
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Prepaid expenses and other assets |
147 |
34 | ||||||
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Accounts payable |
(80) |
(277) | ||||||
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Accrued expenses |
316 |
(1,150) | ||||||
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Deferred revenue |
175 |
42 | ||||||
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Net cash used in operating activities |
(3,740) |
(1,323) | ||||||
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Cash flows from investing activities: |
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Purchase of property and equipment |
(146) |
(56) | ||||||
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Proceeds from sale of property and equipment |
- |
15 | ||||||
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Net cash used in investing activities |
(146) |
(41) | ||||||
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Cash flows from financing activities: |
||||||||
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Proceeds from issuance of common stock, net of expenses |
6,013 |
5,123 | ||||||
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Repayment of debt |
(1,973) |
(833) | ||||||
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Net cash provided by financing activities |
4,040 |
4,290 | ||||||
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Effect of foreign exchange rate on cash and cash equivalents |
(50) |
2 | ||||||
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Change in cash and cash equivalents |
104 |
2,928 | ||||||
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Cash and cash equivalents, beginning of period |
4,946 |
7,795 | ||||||
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Cash, cash equivalents, and restricted cash end of period |
$ 5,050 |
$ 10,723 | ||||||
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ 227 |
$ 492 | ||||||
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Cash paid for income taxes |
$ 1 |
$ 1 | ||||||
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Supplemental disclosure of non cash financing activities: |
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Conversion of preferred stock to common stock |
$ 418 |
$ 674 | ||||||
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Common stock dividends issued to preferred shareholders |
$ 169 |
$ 366 | ||||||
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Warrants issued with private placement stock |
$ 1,893 |
$ - | ||||||
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Conversion of derivative liability to equity |
$ - |
$ 3,537 | ||||||
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Lease incentive received, non-cash addition to fixed assets |
$ 243 |
$ - | ||||||
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SOURCE Crossroads Systems
