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Crossroads Systems Reports Fiscal Third Quarter 2016 Financial Results
PR Newswire
AUSTIN, Texas

AUSTIN, Texas, Sept. 8, 2016 /PRNewswire/ -- Crossroads Systems, Inc. (NASDAQ: CRDS), an intellectual property licensing company, reported financial results for its fiscal third quarter ended July 31, 2016.  On March 22, 2016, Crossroads sold its product business to Canadian-based StrongBox Data Solutions, Inc. The presentation of the company's quarterly financial results excludes product revenues and expenses, which are now reflected as discontinued operations.

Intellectual property license revenue for the fiscal third quarter was $57,000, compared to $445,000 in the same quarter a year ago. Gross profit was $34,000, or 60 percent of total revenue, compared to $257,000 or 58 percent of total revenue in the same quarter a year ago.

Operating expenses for the third quarter decreased to $1.2 million, compared to $2.8 million in the same period a year ago.  This decrease is primarily due to lower headcount and lower intellectual property litigation expenses.

Net loss available to common stockholders was $(481,000) or $(0.39) loss per share, compared to a net loss available to common stockholders of $(3.3) million or $(3.40) loss per share in the same quarter a year ago.

At July 31, 2016, cash, cash equivalents, and restricted cash totaled $4.9 million compared to $6.1 million in the previous quarter.

Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, "We are near the end of the scheduled bidding process for the non-972 portfolio. Although we cannot guarantee the results or timing of a sale, we hope to consummate a transaction in 2016. Also in the third quarter, we continued our appeals related to the '972 patent portfolio before the US Court of Appeals for the Federal Circuit. We remain confident that Crossroads has compelling arguments and look forward to the hearing in January."

Conference Call Information
Crossroads will hold a conference call on Thursday, September 8, 2016 at 4:30 p.m. Eastern Time (3:30 p.m. Central Time) to discuss the financial results. Richard K. Coleman, Jr., President and CEO, and CFO Jennifer Crane will host the presentation followed by a question and answer period.

Date: Thursday, September 8, 2016
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: (888) 727-7725
International:  (913) 312-1520
Conference ID: 5920769

To access the live or recorded webcast, visit:
http://edge.media-server.com/m/p/dg9tm8gp

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 an intellectual property licensing company headquartered in Austin, Texas. Founded in 1996 as a product solutions company, Crossroads created some of the storage industry's most fundamental patents and has licensed patents to more than 50 companies since 2000. 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, 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: variations in quarterly results, 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.

©2016 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.

Investor Contact:
Mark Hood
Crossroads Systems
ir@crossroads.com

Press Contact:
Matthew Zintel
Zintel Public Relations
matthew.zintel@zintelpr.com

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)












July 31,


October 31,

ASSETS


2016


2015





(unaudited)



Current assets:






Cash and cash equivalents


$    2,718


$         5,314


Restricted cash


2,192


6,478










Total cash, cash equivalents and restricted cash


4,910


11,792









Accounts receivable, net of allowance for doubtful







accounts of $0 and $5, respectively


1,049


656


Current assets of discontinued operations


-


1,544


Prepaid expenses and other current assets


172


218










Total current assets


6,131


14,210








Non-current assets of discontinued operations


-


562

Other assets


186


141










Total assets


$    6,317


$       14,913






















LIABILITIES AND STOCKHOLDERS' EQUITY












Current liabilities:






Accounts payable


$       409


$         1,823


Accrued expenses


508


1,727


Deferred revenue, current portion


2,280


6,343


Current liabilities of discontinued operations


-


1,359



Total current liabilities


3,197


11,252








Non-current liabilities of discontinued operations


-


597








Commitments and contingencies (See Note 4)


-


-










Total liabilities


3,197


11,849








Stockholders' equity:






Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized,







2,591,257 and 2,791,257 shares issued and outstanding, respectively


3


3


Common stock, $0.001 par value, 75,000,000 shares authorized,







1,225,472 and 1,209,126 shares issued and outstanding, respectively


1


1


Additional paid-in capital


239,708


238,905


Accumulated other comprehensive loss


-


(90)


Accumulated deficit


(236,592)


(235,755)



Total stockholders' equity


3,120


3,064



Total liabilities and stockholders' equity


$    6,317


$       14,913

 

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,






2016


2015


2016


2015













Revenue:











IP license, royalty and other revenue


$                   57


$                 445


$                 477


$                 838

























Cost of revenue:










IP license, royalty and other cost of revenue


23


188


122


242

























Gross profit


34


257


355


596













Operating expenses:










General and administrative


1,186


2,809


4,891


6,876














Total operating expenses


1,186


2,809


4,891


6,876













Loss from operations


(1,152)


(2,552)


(4,536)


(6,280)

























Other expense:











Interest expense


-


(79)


-


(306)


Amortization of debt discount and issuance costs


-


(122)


-


(522)


Other income


713


(1)


4,012


18

Loss from continuing operations


(439)


(2,754)


(524)


(7,090)













Discontinued operations:










Loss on discontinued operations


-


(503)


(1,812)


(1,989)


Gain on disposal of discontinued operations


-


-


1,771


-

Gain (loss) from discontinued operations


-


(503)


(41)


(1,989)













Net income (loss)


$               (439)


$            (3,257)


$               (565)


$            (9,079)













Dividends attributable to preferred stock


$                 (42)


$                 (43)


$               (171)


$               (228)

Net loss available to common stockholders, basic and diluted


$               (481)


$            (3,300)


$               (736)


$            (9,307)

























Earnings (loss) per share, basic and diluted:









Discontinued operations


$                     -


$              (0.52)


$              (0.03)


$              (2.19)

Continuing operations


$              (0.36)


$              (2.84)


$              (0.43)


$              (7.79)

Available to common stockholder


$              (0.39)


$              (3.40)


$              (0.60)


$            (10.22)













Weighted average number of common shares










outstanding, basic and diluted


1,225,472


971,403


1,224,801


910,300

 

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)
















Nine Months Ended







July 31,







2016


2015










Cash flows from operating activities:






Net loss


$      (565)


$     (9,079)


Adjustments to reconcile net loss to net cash used in







operating activities:







Depreciation from discontinued operations


69


300



Gain on sale of discontinued operations


(919)


-



Amortization of debt discount


-


512



Stock-based compensation


557


743



Provision for doubtful accounts receivable


(4)


61


Changes in assets and liabilities:







Accounts receivable


641


260



Inventory


54


(123)



Prepaid expenses and other assets


62


209



Accounts payable


(1,310)


1,337



Accrued expenses


(737)


211



Deferred revenue


(5,300)


154




Net cash used in operating activities


(7,452)


(5,415)










Cash flows from investing activities:






Purchase of property and equipment from discontinued operations


(28)


(180)


Proceeds from sale of discontinued operations


852


-


Maturity of held-to-maturity investments


-


-




Net cash provided by (used in) investing activities


824


(180)

Cash flows from financing activities:






Proceeds from issuance of common stock, net of expenses


-


10,549


Preferred dividends


(133)


-


Repayment of debt


-


(2,534)


Net cash (used in) provided by financing activities


(133)


8,015










Effect of foreign exchange rate on cash and cash equivalents


(121)


(55)

Change in cash and cash equivalents


(6,882)


2,365

Cash, cash equivalents, and restricted cash beginning of period


11,792


4,946

Cash, cash equivalents, and restricted cash end of period


$     4,910


$       7,311



















Supplemental disclosure of cash flow information:














Cash paid for interest


$            -


$          309

Cash paid for income taxes


$           2


$              1










Supplemental disclosure of non cash financing activities:





Conversion of preferred stock to common stock


$        302


$          418

Common stock dividends issued to preferred shareholders


$        139


$          298

Warrants issued with private placement stock


$             -


$       1,893

Lease incentive received, non-cash addition to fixed assets


$             -


$          243

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SOURCE Crossroads Systems