Crossroads Systems: Fiscal 1Q16 Financial Results

(in $ million)	1Q15	1Q16	Growth
Revenue	2.2	2.0	*-10%*
Net income (loss)	(2.3)	(0.1)

Crossroads Systems, Inc. reported financial results for its fiscal first quarter ended January 31, 2016.

Revenue for fiscal Q1 2016 was $2.0 million, compared to $2.2 million in the same quarter a year ago.

The decrease is primarily attributable to lower OEM SPHiNX and RVA product revenue.

Gross profit for fiscal Q1 2016 was $1.4 million, or 74% of total revenue, compared to $1.6 million or 73% of total revenue in the same quarter a year ago. The increase in gross profit margin is due to a change in the mix of products sold during the quarter.

Operating expenses for fiscal Q1 2016 increased to $4.3 million, compared to $3.6 million in the same period a year ago, primarily due to patent related legal expenses.

Net loss available to common stockholders was $(189,000) or $(0.1) loss per share, compared to a net loss available to common stockholders of $(2.4) million or $(0.15) loss per share in the same quarter a year ago.

At January 31, 2016, cash, cash equivalents, and restricted cash totaled $7.7 million compared to $11.8 million in the previous quarter.

Richard K. Coleman, Jr., president and CEO, said: “We are executing on our plan to enhance shareholder value by exploring strategic alternatives related to the product business and near-term monetization options related to our non-‘972 patent portfolio. On February 22, 2016, we filed a notice of appeal with the United States Court of Appeals for the Federal Circuit related to two of the four Final Written Decisions issued by the Patent Trial and Appeal Board. We remain confident in our legal position and will continue to take every action necessary to prevent unauthorized uses of our intellectual property.“

Comments

Jennifer Crane, CFO:
"StrongBox product and maintenance revenue was $756,000, a 17% increase from $649,000 during the same quarter last year."

Rick Coleman, president and CEO:
"There can be no certainty regarding the outcome of our litigation, but I want to emphasize three important points regarding our 972 patent monetization efforts. First, the PTABs rulings affect some, but not all of the patents we have asserted in litigation. In particular, our 311 patent is being asserted solely against net op and is not subject to an IPR. We also still have another IPR decision for which a final written decision has not been issued. As I mentioned, we expect that decision by March 17th.
"Second, our litigation with Dot Hill is a contract dispute. The fact that Dot Hill now Seagate joined the IPRs and are attempting to avoid ongoing payment obligations is simply a creative legal tactic, which we believe they concocted to delay their accountability. We intend to petition the court to move forward quickly to bring this matter to trial and we expect to prevail. Third, our recent $10 million litigation financing provides us capital to support our 972 litigation including the cost of appeals. As we shift from the issue of patent volatility and moved toward trial preparation, we will begin to enjoy the benefits of our contingency legal agreements and our expenses should decline significantly."