Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CROSSROADS SYSTEMS INC | v389117_8k.htm |
| EX-99.2 - EXHIBIT 99.2 - CROSSROADS SYSTEMS INC | v389117_ex99-2.htm |
Exhibit 99.1
PRESS RELEASE
| Company Contacts: | Investor Contact: |
| Jennifer Crane | Mark Hood |
| Crossroads Systems | Crossroads Systems |
| jcrane@crossroads.com | mhood@crossroads.com |
| 512.928.6897 | 512.928.7330 |
| Press Contact: | |
| Matthew Zintel | |
| Zintel Public Relations | |
| matthew.zintel@zintelpr.com | |
| 281.444.1590 |
FOR IMMEDIATE RELEASE
Crossroads Systems Reports Fiscal Third Quarter 2014 Financial Results
AUSTIN, Texas – September 9, 2014 – Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal third quarter ended July 31, 2014.
Revenue for fiscal Q3 2014 was $2.1 million, a decrease of 25 percent from $2.8 million in the same quarter a year ago. The decrease is primarily attributable to a decrease in the company’s OEM SPHiNX business. StrongBox revenue also decreased compared to Q3 2013, which included one-time payments from both FujiFilm and Iron Mountain for custom development agreements. Gross profit for fiscal Q3 2014 was $1.7 million, or 79 percent of total revenue, as compared to $2.1 million, or 75 percent of total revenue, in the same quarter a year ago.
Operating expenses for fiscal Q3 2014 totaled $3.4 million as compared to $5.7 million in the same period a year ago, a decrease of 41 percent, due to employee and operating expense reductions. The Company has continued to closely monitor expenses resulting in an additional $0.3 million decrease from Q2 2014 to Q3 2014.
Net loss available to common stockholders for fiscal Q3 2014 totaled $2.4 million or $0.16 loss per share, compared to a net loss available to common stockholders of $4.1 million or $0.34 loss per share in the same quarter a year ago.
At July 31, 2014, cash and cash equivalents decreased $3.6 million to $7.1 million from $10.7 million in the previous quarter. Payments to Fortress this quarter totaled $3.0 million, including an optional principal payment of $2.0 million.
Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, “Crossroads completed pivotal product enhancements this quarter. StrongBox is now capable of disrupting the economics of virtually any enterprise storage environment. Despite declines in our legacy OEM product sales, we are confident that our future product and IP licensing revenues will provide strong returns for our investors.”
Conference Call Information
Crossroads will hold a conference call on Tuesday, September 9, 2014 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 of Corporate Development, Mark Hood will host the call. A question and answer session will follow management's presentation.
Date: Tuesday, September 9, 2014
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: 80133243
To access the live or recorded webcast, visit:
https://engage.vevent.com/rt/crossroadssystems_ao~090914
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 from 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 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, 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 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.
©2014 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.
*Tables Attached*
| CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (In thousands, except share data) | ||||||||||||
| July 31, | October 31, | |||||||||||
| ASSETS | 2014 | 2013 | ||||||||||
| (Unaudited) | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 6,810 | $ | 7,795 | ||||||||
| Restricted cash | 270 | - | ||||||||||
| Total cash, cash equivalents and restricted cash | 7,080 | 7,795 | ||||||||||
| Accounts receivable, net of allowance for doubtful | ||||||||||||
| accounts of $104 and $94, respectively | 2,002 | 2,301 | ||||||||||
| Inventory | 296 | 313 | ||||||||||
| Prepaid expenses and other current assets | 486 | 694 | ||||||||||
| Total current assets | 9,864 | 11,103 | ||||||||||
| Property and equipment, net | 581 | 1,031 | ||||||||||
| Other assets | 91 | 256 | ||||||||||
| Total assets | $ | 10,536 | $ | 12,390 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 818 | $ | 1,066 | ||||||||
| Accrued expenses | 1,174 | 2,095 | ||||||||||
| Deferred revenue | 1,048 | 1,090 | ||||||||||
| Current portion of long term debt, net of debt discount | 3,116 | 1,605 | ||||||||||
| Total current liabilities | 6,156 | 5,856 | ||||||||||
| Long term debt, net of debt discount | 2,573 | 6,984 | ||||||||||
| Long term derivative liability | - | 772 | ||||||||||
| Other long term liabilities | 368 | 299 | ||||||||||
| Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, | ||||||||||||
| 4,231,154 shares issued and outstanding, net at October 31, 2013 (transferred | ||||||||||||
| to stockholders equity as of April 30, 2014)(Note 8) | - | 6,394 | ||||||||||
| Stockholders' equity (deficit): | ||||||||||||
| Common stock, $0.001 par value, 75,000,000 shares authorized, | ||||||||||||
| 15,334,103 and 11,949,937 shares issued and outstanding, respectively | 15 | 12 | ||||||||||
| Convertible preferred stock, $0.001 par value, 25,000,000 shares authorized, | ||||||||||||
| 3,747,447 shares issued and outstanding, net as of July 31, 2014 | 4 | - | ||||||||||
| Additional paid-in capital | 225,937 | 208,702 | ||||||||||
| Accumulated other comprehensive loss | (55 | ) | (51 | ) | ||||||||
| Accumulated deficit | (224,462 | ) | (216,578 | ) | ||||||||
| Total stockholders' equity (deficit) | 1,439 | (7,915 | ) | |||||||||
| Total liabilities and stockholders' equity | $ | 10,536 | $ | 12,390 | ||||||||
| 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, | |||||||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Product | $ | 600 | $ | 1,239 | $ | 2,925 | $ | 4,203 | ||||||||||||||||
| IP license, royalty and other | 1,487 | 1,555 | 5,581 | 4,879 | ||||||||||||||||||||
| Total revenue | 2,087 | 2,794 | 8,506 | 9,082 | ||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||
| Product | 138 | 189 | 578 | 569 | ||||||||||||||||||||
| IP license, royalty and other | 296 | 511 | 934 | 1,887 | ||||||||||||||||||||
| Total cost of revenue | 434 | 700 | 1,512 | 2,456 | ||||||||||||||||||||
| Gross profit | 1,653 | 2,094 | 6,994 | 6,626 | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Sales and marketing | 872 | 1,771 | 2,842 | 5,640 | ||||||||||||||||||||
| Research and development | 1,351 | 2,203 | 4,399 | 8,050 | ||||||||||||||||||||
| General and administrative | 1,146 | 1,732 | 3,664 | 3,513 | ||||||||||||||||||||
| Total operating expenses | 3,369 | 5,706 | 10,905 | 17,203 | ||||||||||||||||||||
| Loss from operations | (1,716 | ) | (3,612 | ) | (3,911 | ) | (10,577 | ) | ||||||||||||||||
| Gain on settlement | - | - | 1,050 | - | ||||||||||||||||||||
| Loss before other expenses | (1,716 | ) | (3,612 | ) | (2,861 | ) | (10,577 | ) | ||||||||||||||||
| Other expense: | ||||||||||||||||||||||||
| Interest expense | (184 | ) | (53 | ) | (662 | ) | (187 | ) | ||||||||||||||||
| Amortization of debt discount and issuance costs | (301 | ) | (16 | ) | (967 | ) | (16 | ) | ||||||||||||||||
| Change in value of derivative liability | - | 771 | (2,765 | ) | 771 | |||||||||||||||||||
| Other expense | - | - | (17 | ) | 4 | |||||||||||||||||||
| Net loss | $ | (2,201 | ) | $ | (2,910 | ) | $ | (7,272 | ) | $ | (10,005 | ) | ||||||||||||
| Dividends attributable to preferred stock | $ | (152 | ) | $ | (1,146 | ) | $ | (400 | ) | $ | (2,010 | ) | ||||||||||||
| Net loss available to common stockholders, basic and diluted | $ | (2,353 | ) | $ | (4,056 | ) | $ | (7,672 | ) | $ | (12,015 | ) | ||||||||||||
| Net loss per share available to common stockholders, | ||||||||||||||||||||||||
| basic and diluted | $ | (0.16 | ) | $ | (0.34 | ) | $ | (0.56 | ) | $ | (1.01 | ) | ||||||||||||
| Weighted average number of common shares | ||||||||||||||||||||||||
| outstanding, basic and diluted | 15,165,629 | 11,881,928 | 13,705,434 | 11,845,796 | ||||||||||||||||||||
| CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| (In thousands) |
| Nine Months Ended | ||||||||
| July 31, | ||||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,272 | ) | $ | (10,005 | ) | ||
| Adjustments to reconcile net loss to net cash used in | ||||||||
| operating activities: | ||||||||
| Depreciation | 517 | 617 | ||||||
| Non cash interest paid on conversion to preferred stock | - | 55 | ||||||
| Loss (gain) on change in value of derivative liability | 2,765 | (771 | ) | |||||
| Amortization of debt discount | 967 | 16 | ||||||
| Gain on disposal of property and equipment | (15 | ) | - | |||||
| Stock-based compensation | 1,312 | 848 | ||||||
| Provision for doubtful accounts receivable | 10 | (2 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 286 | 443 | ||||||
| Inventory | 17 | 87 | ||||||
| Prepaid expenses and other assets | 96 | (617 | ) | |||||
| Accounts payable | (252 | ) | (415 | ) | ||||
| Accrued expenses | (950 | ) | (411 | ) | ||||
| Deferred revenue | 37 | 116 | ||||||
| Net cash used in operating activities | (2,482 | ) | (10,039 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (71 | ) | (334 | ) | ||||
| Proceeds from sale of property and equipment | 18 | - | ||||||
| Net cash used in investing activities | (53 | ) | (334 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of expenses | 5,461 | 68 | ||||||
| Proceeds from issuance of preferred stock, net of expenses | - | 7,332 | ||||||
| Proceeds from issuance of bridge loan | - | 550 | ||||||
| Proceeds from issuance of debt | - | 9,716 | ||||||
| Repayment of debt | (3,633 | ) | (4,318 | ) | ||||
| Net cash provided by financing activities | 1,828 | 13,348 | ||||||
| Effect of foreign exchange rate on cash and cash equivalents | (8 | ) | 1 | |||||
| Change in cash and cash equivalents | (715 | ) | 2,976 | |||||
| Cash and cash equivalents, beginning of period | 7,795 | 6,895 | ||||||
| Cash, cash equivalents, and restricted cash end of period | $ | 7,080 | $ | 9,871 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 676 | $ | 113 | ||||
| Cash paid for income taxes | $ | 2 | $ | 3 | ||||
| Supplemental disclosure of non cash financing activities: | ||||||||
| Conversion of promissory note to preferred stock | $ | - | $ | 605 | ||||
| Conversion of preferred stock to common stock | $ | 729 | $ | - | ||||
| Beneficial conversion associated with preferred stock | $ | - | $ | 1,090 | ||||
| Common stock dividends issued to preferred shareholders | $ | 612 | $ | 106 | ||||
| Issuance of common stock warrants | $ | - | $ | 1,543 | ||||
| Conversion of derivative liability to equity | $ | 3,537 | $ | - | ||||
| Discount associated with long term debt | $ | - | $ | 1,375 | ||||