Exhibit 99.1
Crossroads Systems Reports Fourth
Quarter, Fiscal 2005 Full Year Results
AUSTIN, Texas--(BUSINESS WIRE)--Nov. 22, 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 fourth quarter (Q4'05) and fiscal year
that ended October 31, 2005.
Fiscal Fourth Quarter 2005
Revenue totaled $5.0M for Q4'05 compared to $5.8M in the fiscal
third quarter ended July 31, 2005 (Q3'05). Gross margin percentage was
69% for Q4'05, compared to 76% for Q3'05. Net loss for Q4'05 was
$0.8M, or $0.3 cents per share, compared to $0.5M net loss, or $0.2
cents per share in Q3'05.
Fiscal Year 2005
Total revenue for fiscal year 2005 (FY'05) was $19.7 million,
compared with $26.0 million for fiscal year 2004 (FY'04). Gross profit
for FY'05 was $13.8 million compared with $18.1 million for FY'04. Net
loss for FY'05 was $8.1 million, or $0.31 cents per share, compared
with $6.4 million net loss, or $0.25 cents per share, for FY'04.
"Though we were disappointed by lower revenues, we believe we have
made significant progress this past fiscal year in both growing our
customer base as well as focusing on reducing our quarterly cash burn
from $3.1 million in Q1 2005 to $247,000 in Q4 2005 by reducing
overall headcount and by controlling our other administrative and
operational costs," said Rob Sims, president and chief executive
officer. "We continue to seek opportunities to add new customers and
improve our financial performance. Along with a planned facilities
move and consolidation of locations by April 2006, we are considering
other cost cutting measures such as a voluntary deregistration and
delisting of our common stock which we believe would reduce aggregate
financial, operational and disclosure costs."
Note Regarding FIN46R - Consolidation of Variable Interest
Entities
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 twelve months ended Q4'05 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 twelve months
ended Q4'05. Net operating expenses attributable to NexQL for Q4'05
was $0.4M, compared with $0.7M in Q3'05 and $2.8 million for FY'05,
compared with $2.4 million for FY'04.
Conference Call
The conference call will be held at 3:30pm CST (4:30pm EST)
November 22nd. Interested parties can listen to the call by dialing
866-459-7779 (or 678-460-1867 for international callers).
An audio-only replay of the call will be available by November
25th for a limited time by calling 866-453-6660 (or 678-460-1688 for
international callers) and using passcode 207529. 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 SUN, 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; the effect of FAS 123R which will require us to include
additional equity compensation expense, including that of NexQL in our
financial results; our failure to maintain the listing of our stock on
the Nasdaq National Market and/or to continue to file SEC reports; 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.
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*T
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
July 31 October 31
2005 2005
---------- ----------
ASSETS
Current assets:
Cash, cash equivalents
and short-term investments $19,974 $19,819
Accounts receivable, net 2,631 2,787
Inventories, net 1,240 909
Prepaids and other current assets 811 522
---------- ----------
Total current assets 24,656 24,037
Property and equipment, net 2,023 1,844
Intangible, net 607 539
Other assets 23 66
---------- ----------
Total assets $27,309 $26,486
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $391 $511
Accrued expenses 2,245 2,179
Accrued warranty costs 278 211
Deferred revenue 1,205 1,214
---------- ----------
Total current liabilities 4,119 4,115
Stockholders' equity 23,190 22,371
---------- ----------
Total liabilities and stockholders' equity $27,309 $26,486
========== ==========
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Fiscal Year Ended
October 31, October 31,
------------------------ --------------------------
2004 2005 2004 2005
------------ ----------- ------------ -------------
Revenue:
Product $2,485 $2,493 $15,036 $9,997
Royalty and other 4,117 2,477 10,993 9,696
------------ ----------- ------------ -------------
Total revenue 6,602 4,970 26,029 19,693
Cost of revenue:
Product 1,366 1,477 7,300 5,736
Royalty and other 436 42 594 157
------------ ----------- ------------ -------------
Total cost
of revenue 1,802 1,519 7,894 5,893
------------ ----------- ------------ -------------
Gross profit 4,800 3,451 18,135 13,800
------------ ----------- ------------ -------------
Operating
expenses:
Sales and
marketing 1,058 486 4,461 2,623
Research and
development 3,893 2,721 13,671 14,034
General and
administrative 1,584 1,193 5,442 5,019
NexQL research
and development -- -- 721 --
Business
restructuring
expense (119) -- (306) 544
Litigation
settlement 1,000 -- 1,000 --
Non-controlling
interest -- -- -- --
Amortization of
intangibles -- 67 -- 269
------------ ----------- ------------ -------------
Total operating
expenses 7,416 4,467 24,989 22,489
------------ ----------- ------------ -------------
Loss from
operations (2,616) (1,016) (6,854) (8,689)
Interest income 148 167 494 608
------------ ----------- ------------ -------------
Net Loss $(2,468) $(849) $(6,360) $(8,081)
============ =========== ============ =============
Basic and diluted
net loss
per share (0.10) (0.03) (0.25) (0.31)
Shares used
in computing
basic and diluted
net
loss per share 25,437,968 26,517,002 25,225,009 26,192,844
============ =========== ============ =============
CONTACT: Crossroads Systems, Inc., Austin
Valerie Savage, 512-928-6897 or 800-643-7148
info@crossroads.com