Crossroads Systems Reports Third Quarter Results.AUSTIN, Texas -- Crossroads Systems, Inc. (Nasdaq:CRDS CRDS Contribution pour Le Remboursement de la Dette Sociale (French: Social Debt Repayment Contribution) CRDS Cavity Ring-Down Spectroscopy CRDS Community Rehabilitation and Disability Studies ), a leading provider of business information assurance solutions for secure storage and data management, today reported results for its fiscal third quarter ended July 31, 2005 (Q3'05). Revenue totaled $5.8M for Q3'05 compared to $4.3M in the fiscal second quarter ended April 30, 2005 (Q2'05). The primary factor affecting the increase in revenue in Q3'05 compared with Q2'05 was due to an increase in OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and revenue. Gross margin percentage was 76% for Q3'05, compared to 69% for Q2'05. Net loss for Q3'05 was $0.5M net loss, or $0.2 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , compared to $3.7M net loss, or $0.14 per share in Q2'05. In December 2003, Crossroads entered into a strategic relationship with NexQL Corporation, a development stage company, for the joint development of hardware accelerated data management solutions. FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). Interpretation No. 46 (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51," and the revised interpretations, require consolidation by business enterprises of Variable Interest Entities, as defined by FIN 46. As a result, the operating results of NexQL were accounted for under the equity method in Q1'04, and the company began consolidating the statements of operations and cash flows of NexQL beginning May 1, 2004, such that the three and nine months ended Q3'05 reflect the consolidated operations and cash flows of NexQL. The consolidation of NexQL had a direct impact on Crossroads' net loss for the three and nine months ended Q3'05. Net operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. attributable to NexQL for Q3'05 was $0.7M, compared with $1.0M in Q2'05. "We continue to execute our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategic plan by leveraging our current and new OEM partner relationships while investing in emerging market opportunities," said Rob Sims Rob Sims (b. December 6, 1983) is an American football offensive guard, who currently plays for the National Football League's Seattle Seahawks. He was drafted in round four, pick 128 of the 2006 NFL Draft. , president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , Crossroads Systems. "We have begun to see the results of last quarter's restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and our ongoing efforts to contain expenses and conserve cash." Recent Operational Highlights: --Crossroads Announces OEM Agreement with Tributary Systems (TSI TSI Total Solar Irradiance (sum solar light in energy per unit of time) TSI Trading Standards Institute (UK) TSI Transportation Safety Institute (US DOT) ): Crossroads announced the two companies have entered into an OEM agreement for the support of HP NonStop HP's brand name for its fault-tolerant servers, which range in size from four CPUs to 4,000 CPUs. The NonStop line was created by Tandem Computers, which was acquired by Compaq, which later became part of HP. system environment. Under terms of the agreement, TSI will become the first provider of Crossroads storage router See data mover. and ServerAttach solutions for the HP NonStop platform --Crossroads Expands Management Team: Crossroads appointed Neal Hartsell as its vice president of product marketing and product management. Conference Call The conference call will be held at 3:30pm CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT (4:30pm EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ) August 25th. Interested parties can listen to the call by dialing 1-866-459-7779 (or 1-678-460-1867 for international callers). An audio-only replay of the call will be available by August 25th for a limited time by calling 1-866-453-6660 (or 1-678-460-1860 for international callers) and using passcode 202073. An audio replay will be available for a limited time by visiting the Crossroads web site. About Crossroads Systems, Inc. With headquarters in Austin, Texas, Crossroads Systems (Nasdaq:CRDS) is a leading provider of business information assurance solutions for secure storage and data management. Crossroads' solutions serve the growing data storage, data management and information assurance markets, and are designed to help companies store, manage and ensure the security, validity and accessibility of their data. Crossroads' products are in solutions from companies such as EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. , HP, Quantum and StorageTek, and are distributed through partners such as ACAL ACAL Asociación de Archiveros de Castilla Y León (Castille and Leon, Spain) ACAL Academia de Ciencias de América Latina (Spanish: Academy of Sciences of Latin America, Venezuela) , Bell Micro, DLT (Digital Linear Tape) A magnetic tape technology originally developed by Digital for its VAX line. The technology was later sold to Quantum, which makes it available to other manufacturers. DLT uses half-inch, single-hub cartridges similar to IBM's 3480/3490/3590 line. Solutions, Info-X, and Promark. Crossroads is a voting member of the Storage Networking Industry Association An association of producers and consumers of storage networking products, whose goal is to further storage networking technology and applications. The Storage Networking Industry Association, or SNIA (SNIA (Storage Networking Industry Association, San Francisco, CA, www.snia.org) An organization devoted to the advancement of mission critical storage systems. Founded in 1997, its goal is to determine the standards that must be developed to allow hosts and storage systems to interact via ). For more information about Crossroads Systems, please visit www.crossroads.com or call 800-643-7148. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "expect," "intend," "plan," "project," "will" and similar phrases as they relate to Crossroads are intended to identify such forward-looking statements. These statements reflect the current views and assumptions of Crossroads, and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: the quarterly fluctuations of Crossroads' operating results and Crossroads' inability to accurately predict revenue and budget for expenses for future periods; the extent to which Crossroads can reduce its cash consumption and achieve positive cash flow; the company's ability to maintain its operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ; the acceptance by our existing customers of any new family of products; the performance of NexQL with whom we are required to consolidate our financial statements; our ability to incorporate the assets of Teracruz that we acquired into our products and/or to develop new products based on Teracruz technology that achieve market acceptance; any general economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , including, in particular, related expense reductions by organizations affecting their IT spending and budget which could impact sales; the dependence of Crossroads' business on the storage area network market which has been declining and is unpredictable; unforeseen changes in anticipated expenses or revenues; the continuation of Crossroads' successful relationships with its limited number of OEM customers; Crossroads' inability to protect its intellectual property rights; our ability to retain the services of key employees; as well as, other factors detailed in Crossroads' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Reports on 10-Q. Crossroads expressly disclaims any obligation to release publicly any updates or revisions to the information contained in this press release or with respect to any future distribution of its stock by investors, or to update or revise any forward-looking statements to reflect any changes in expectations, or any change in events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or on which those statements are based, unless otherwise required by law.
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
October 31, July 31,
2004 2005
------------- -------------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $28,537 $19,974
Accounts receivable, net 2,581 2,631
Inventories, net 1,160 1,240
Prepaids and other current assets 669 811
------------- -------------
Total current assets 32,947 24,656
Property and equipment, net 2,909 2,023
Intangible, net 809 607
Other assets 104 23
------------- -------------
Total assets $36,769 $27,309
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,901 $391
Accrued expenses 3,432 2,245
Accrued warranty costs 508 278
Deferred revenue 1,262 1,205
------------- -------------
Total current liabilities 7,103 4,119
Stockholders' equity 29,666 23,190
------------- -------------
Total liabilities and stockholders'
equity $36,769 $27,309
============= =============
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Nine Months Ended
July 31, July 31,
----------------------- -----------------------
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenue:
Product $2,920 $3,232 $12,551 $7,504
Royalty and other 1,957 2,544 6,876 7,219
----------- ----------- ----------- -----------
Total revenue 4,877 5,776 19,427 14,723
Cost of revenue:
Product 1,305 1,352 5,934 4,259
Royalty and other 41 42 158 115
----------- ----------- ----------- -----------
Total cost of
revenue 1,346 1,394 6,092 4,374
----------- ----------- ----------- -----------
Gross profit 3,531 4,382 13,335 10,349
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 1,019 540 3,403 2,137
Research and
development 3,892 3,182 9,993 11,313
General and
administrative 1,159 1,240 3,858 3,827
NexQL research and
development - - 721 -
Business
restructuring
expense (73) - (187) 544
Non-controlling
interest (215) - (215) -
Amortization of
intangibles - 67 - 201
----------- ----------- ----------- -----------
Total operating
expenses 5,781 5,029 17,573 18,022
----------- ----------- ----------- -----------
Loss from operations (2,250) (647) (4,238) (7,673)
Interest income 120 148 346 441
----------- ----------- ----------- -----------
Net Loss $(2,130) $(499) $(3,892) $(7,232)
=========== =========== =========== ===========
Basic and diluted net
loss per share (0.08) (0.02) (0.16) (0.28)
Shares used in
computing basic and
diluted net loss per
share 25,318,050 26,459,053 25,061,443 26,083,604
=========== =========== =========== ===========
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