Exhibit 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE
Crossroads Systems Reports Fiscal Second Quarter 2016 Financial Results
AUSTIN, Texas – June 2, 2016 – Crossroads Systems, Inc. (NASDAQ: CRDS), an intellectual property licensing company, reported financial results for its fiscal second quarter ended April 30, 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 second quarter was $210,000, compared to $190,000 in the same quarter a year ago. Gross profit was $161,000, or 77 percent of total revenue, compared to $174,000 or 92 percent of total revenue in the same quarter a year ago.
Operating expenses for the second quarter decreased to $1.4 million, compared to $2.6 million in the same period a year ago, primarily due to reduced employee related costs and litigation expenses.
Net loss available to common stockholders was $(69,000) or less than a penny per share, compared to a net loss available to common stockholders of $(3.6) million or $(0.19) loss per share in the same quarter a year ago.
At April 30, 2016, cash, cash equivalents, and restricted cash totaled $6.1 million compared to $7.7 million in the previous quarter.
Management Commentary
Richard K. Coleman, Jr., President and CEO at Crossroads Systems, said, “We are continuing to take those actions we believe are necessary to increase shareholder value. The sale of the product business protects our balance sheet and potential future proceeds from the sale of the non-‘972 patents could enhance our cash position. We hope to have a positive outcome on the inter partes review (IPR) appeals within the next twelve months and will then petition the Western District Court to lift the stay on litigation and schedule trial dates as soon as possible.”
Conference Call Information
Crossroads will hold a conference call on Thursday, June 2, 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, June 2, 2016
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: (888) 455-2263
International: (719) 325-2469
Conference ID: 5464448
To access the live or recorded webcast, visit:
http://edge.media-server.com/m/p/sj6bq5y6
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
*Tables Attached*
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| April 30, | October 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,994 | $ | 5,314 | ||||
| Restricted cash | 3,122 | 6,478 | ||||||
| Total cash, cash equivalents and restricted cash | 6,116 | 11,792 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $3 and $5, respectively | 1,056 | 1,632 | ||||||
| Inventory | - | 437 | ||||||
| Prepaid expenses and other current assets | 227 | 348 | ||||||
| Total current assets | 7,399 | 14,209 | ||||||
| Property and equipment, net | - | 533 | ||||||
| Other assets | 140 | 171 | ||||||
| Total assets | $ | 7,539 | $ | 14,913 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 434 | $ | 2,224 | ||||
| Accrued expenses | 591 | 1,799 | ||||||
| Deferred revenue, current portion | 3,010 | 7,234 | ||||||
| Total current liabilities | 4,035 | 11,257 | ||||||
| Long term portion of deferred revenue, net of current portion | - | 595 | ||||||
| Commitments and contingencies | - | - | ||||||
| Total liabilities | 4,035 | 11,852 | ||||||
| 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, 24,509,435 and 24,182,524 shares issued and outstanding, respectively | 25 | 24 | ||||||
| Additional paid-in capital | 239,497 | 238,881 | ||||||
| Accumulated other comprehensive loss | - | (90 | ) | |||||
| Accumulated deficit | (236,021 | ) | (235,757 | ) | ||||
| Total stockholders' equity | 3,504 | 3,061 | ||||||
| Total liabilities and stockholders' equity | $ | 7,539 | $ | 14,913 | ||||
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| April 30, | April 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue: | ||||||||||||||||
| IP license, royalty and other | 210 | 190 | 420 | 392 | ||||||||||||
| Total revenue | 210 | 190 | 420 | 392 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| IP license, royalty and other | 49 | 16 | 100 | 53 | ||||||||||||
| Total cost of revenue | 49 | 16 | 100 | 53 | ||||||||||||
| Gross profit | 161 | 174 | 320 | 339 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 1,356 | 2,638 | 3,705 | 4,066 | ||||||||||||
| Total operating expenses | 1,356 | 2,638 | 3,705 | 4,066 | ||||||||||||
| Loss from operations | (1,195 | ) | (2,464 | ) | (3,385 | ) | (3,727 | ) | ||||||||
| Other expense: | ||||||||||||||||
| Interest expense | - | (99 | ) | - | (227 | ) | ||||||||||
| Amortization of debt discount and issuance costs | - | (179 | ) | - | (400 | ) | ||||||||||
| Other income. | 627 | - | 3,299 | 19 | ||||||||||||
| Discontinued operations: | ||||||||||||||||
| Loss on discontinued operations | (531 | ) | (774 | ) | (1,149 | ) | (1,487 | ) | ||||||||
| Disposal of fixed assets | (499 | ) | - | (499 | ) | - | ||||||||||
| Disposal of inventory | (386 | ) | - | (386 | ) | - | ||||||||||
| Relief of deferred revenue | 1,795 | - | 1,795 | - | ||||||||||||
| Other assets and liabilities | 198 | - | 198 | - | ||||||||||||
| Gain (loss) on discontinued operations | 577 | (774 | ) | (41 | ) | (1,487 | ) | |||||||||
| Net loss | $ | 9 | $ | (3,516 | ) | $ | (127 | ) | $ | (5,822 | ) | |||||
| Dividends attributable to preferred stock | $ | (78 | ) | $ | (72 | ) | $ | (129 | ) | $ | (156 | ) | ||||
| Net loss available to common stockholders, basic and diluted | $ | (69 | ) | $ | (3,588 | ) | $ | (256 | ) | $ | (5,978 | ) | ||||
| Net loss per share available to common stockholders, basic and diluted | $ | (0.00 | ) | $ | (0.19 | ) | $ | (0.01 | ) | $ | (0.34 | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | 24,784,822 | 19,286,525 | 24,534,672 | 17,584,841 | ||||||||||||
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Six Months Ended | ||||||||
| April 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (127 | ) | $ | (5,822 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 69 | 220 | ||||||
| Gain on sale of discontinued operations | 438 | - | ||||||
| Amortization of debt discount | - | 400 | ||||||
| Stock-based compensation | 512 | 536 | ||||||
| Provision for doubtful accounts receivable | (1 | ) | 67 | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (367 | ) | 468 | |||||
| Inventory | 53 | (167 | ) | |||||
| Prepaid expenses and other assets | 48 | 147 | ||||||
| Accounts payable | (1,620 | ) | (80 | ) | ||||
| Accrued expenses | (796 | ) | 316 | |||||
| Accrued warranty costs | - | - | ||||||
| Deferred revenue | (4,559 | ) | 175 | |||||
| Net cash used in operating activities | (6,351 | ) | (3,740 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (28 | ) | (146 | ) | ||||
| Proceeds from sale of discontinued operations | 833 | - | ||||||
| Net cash provided by (used in) investing activities | 805 | (146 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of expenses | - | 6,013 | ||||||
| Repayment of debt | - | (1,973 | ) | |||||
| Net cash provided by financing activities | - | 4,040 | ||||||
| Effect of foreign exchange rate on cash and cash equivalents | (131 | ) | (50 | ) | ||||
| Change in cash and cash equivalents | (5,677 | ) | 104 | |||||
| Cash and cash equivalents, beginning of period | 11,792 | 4,946 | ||||||
| Cash, cash equivalents, and restricted cash end of period | $ | 6,115 | $ | 5,050 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | 227 | ||||
| Cash paid for income taxes | $ | 2 | $ | 1 | ||||
| Supplemental disclosure of non cash financing activities: | ||||||||
| Conversion of preferred stock to common stock | $ | 795 | $ | 418 | ||||
| Common stock dividends issued to preferred shareholders | $ | 139 | $ | 169 | ||||
| Warrants issued with private placement stock | $ | - | $ | 1,893 | ||||
| Lease incentive received, non-cash addition to fixed assets | $ | - | $ | 243 | ||||