Crossroads Systems Reports Fiscal Third Quarter 2016 Financial Results

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

July 31,

October 31,

ASSETS

2016

2015

(unaudited)

Current assets:

Cash and cash equivalents

$    2,718

$         5,314

Restricted cash

2,192

6,478

Total cash, cash equivalents and restricted cash

4,910

11,792

Accounts receivable, net of allowance for doubtful

accounts of $0 and $5, respectively

1,049

656

Current assets of discontinued operations

-

1,544

Prepaid expenses and other current assets

172

218

Total current assets

6,131

14,210

Non-current assets of discontinued operations

-

562

Other assets

186

141

Total assets

$    6,317

$       14,913

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$       409

$         1,823

Accrued expenses

508

1,727

Deferred revenue, current portion

2,280

6,343

Current liabilities of discontinued operations

-

1,359

Total current liabilities

3,197

11,252

Non-current liabilities of discontinued operations

-

597

Commitments and contingencies (See Note 4)

-

-

Total liabilities

3,197

11,849

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,

1,225,472 and 1,209,126 shares issued and outstanding, respectively

1

1

Additional paid-in capital

239,708

238,905

Accumulated other comprehensive loss

-

(90)

Accumulated deficit

(236,592)

(235,755)

Total stockholders' equity

3,120

3,064

Total liabilities and stockholders' equity

$    6,317

$       14,913

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,

2016

2015

2016

2015

Revenue:

IP license, royalty and other revenue

$                   57

$                 445

$                 477

$                 838

Cost of revenue:

IP license, royalty and other cost of revenue

23

188

122

242

Gross profit

34

257

355

596

Operating expenses:

General and administrative

1,186

2,809

4,891

6,876

Total operating expenses

1,186

2,809

4,891

6,876

Loss from operations

(1,152)

(2,552)

(4,536)

(6,280)

Other expense:

Interest expense

-

(79)

-

(306)

Amortization of debt discount and issuance costs

-

(122)

-

(522)

Other income

713

(1)

4,012

18

Loss from continuing operations

(439)

(2,754)

(524)

(7,090)

Discontinued operations:

Loss on discontinued operations

-

(503)

(1,812)

(1,989)

Gain on disposal of discontinued operations

-

-

1,771

-

Gain (loss) from discontinued operations

-

(503)

(41)

(1,989)

Net income (loss)

$               (439)

$            (3,257)

$               (565)

$            (9,079)

Dividends attributable to preferred stock

$                 (42)

$                 (43)

$               (171)

$               (228)

Net loss available to common stockholders, basic and diluted

$               (481)

$            (3,300)

$               (736)

$            (9,307)

Earnings (loss) per share, basic and diluted:

Discontinued operations

$                     -

$              (0.52)

$              (0.03)

$              (2.19)

Continuing operations

$              (0.36)

$              (2.84)

$              (0.43)

$              (7.79)

Available to common stockholder

$              (0.39)

$              (3.40)

$              (0.60)

$            (10.22)

Weighted average number of common shares

outstanding, basic and diluted

1,225,472

971,403

1,224,801

910,300

CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended

July 31,

2016

2015

Cash flows from operating activities:

Net loss

$      (565)

$     (9,079)

Adjustments to reconcile net loss to net cash used in

operating activities:

Depreciation from discontinued operations

69

300

Gain on sale of discontinued operations

(919)

-

Amortization of debt discount

-

512

Stock-based compensation

557

743

Provision for doubtful accounts receivable

(4)

61

Changes in assets and liabilities:

Accounts receivable

641

260

Inventory

54

(123)

Prepaid expenses and other assets

62

209

Accounts payable

(1,310)

1,337

Accrued expenses

(737)

211

Deferred revenue

(5,300)

154

Net cash used in operating activities

(7,452)

(5,415)

Cash flows from investing activities:

Purchase of property and equipment from discontinued operations

(28)

(180)

Proceeds from sale of discontinued operations

852

-

Maturity of held-to-maturity investments

-

-

Net cash provided by (used in) investing activities

824

(180)

Cash flows from financing activities:

Proceeds from issuance of common stock, net of expenses

-

10,549

Preferred dividends

(133)

-

Repayment of debt

-

(2,534)

Net cash (used in) provided by financing activities

(133)

8,015

Effect of foreign exchange rate on cash and cash equivalents

(121)

(55)

Change in cash and cash equivalents

(6,882)

2,365

Cash, cash equivalents, and restricted cash beginning of period

11,792

4,946

Cash, cash equivalents, and restricted cash end of period

$     4,910

$       7,311

Supplemental disclosure of cash flow information:

Cash paid for interest

$            -

$          309

Cash paid for income taxes

$           2

$              1

Supplemental disclosure of non cash financing activities:

Conversion of preferred stock to common stock

$        302

$          418

Common stock dividends issued to preferred shareholders

$        139

$          298

Warrants issued with private placement stock

$             -

$       1,893

Lease incentive received, non-cash addition to fixed assets

$             -

$          243