Exhibit 99.1
Crossroads Systems Reports Third Quarter Results
AUSTIN, Texas--(BUSINESS WIRE)--Aug. 25, 2005--Crossroads Systems,
Inc. (Nasdaq:CRDS), 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 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, 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
Interpretation No. 46 (FIN 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 attributable to NexQL for Q3'05
was $0.7M, compared with $1.0M in Q2'05.
"We continue to execute our long-term strategic plan by leveraging
our current and new OEM partner relationships while investing in
emerging market opportunities," said Rob Sims, president and chief
operating officer, Crossroads Systems. "We have begun to see the
results of last quarter's restructuring and our ongoing efforts to
contain expenses and conserve cash."
Recent Operational Highlights:
-- Crossroads Announces OEM Agreement with Tributary Systems
(TSI): Crossroads announced the two companies have entered
into an OEM agreement for the support of HP NonStop system
environment. Under terms of the agreement, TSI will become the
first provider of Crossroads storage router 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 (4:30pm 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, HP, Quantum and StorageTek, and are distributed through
partners such as ACAL, Bell Micro, DLT Solutions, Info-X, and Promark.
Crossroads is a voting member of the Storage Networking Industry
Association (SNIA). For more information about Crossroads Systems,
please visit www.crossroads.com or call 800-643-7148.
Forward-Looking Statements
This release may include forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, 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; 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, 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 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 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
=========== =========== =========== ===========
CONTACT: Crossroads Systems, Inc., Austin
Valerie Savage, 512-928-6897 or 800-643-7148
info@crossroads.com