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Crossroads: Fiscal 2Q16 Financial Results

Now only IP licensing with only $210,000 quarterly sales

(in $ thousand) 2Q15 2Q16 6 mo. 15 6 mo. 16
Revenue 190 210 392 420
Growth   11%   7%
Net income (loss) (3.5) 9 (5.8) (127)

Crossroads Systems, Inc., an IP licensing company, reported financial results for its fiscal second quarter ended April 30, 2016.

On March 22, 2016, Crossroads sold its product business to Canadian-based StrongBox Data Solutions, Inc. for net proceeds of $1.85 million. The presentation of the company’s quarterly financial results excludes product revenues and expenses, which are now reflected as discontinued operations.

IP license revenue for the fiscal second quarter was $210,000, compared to $190,000 in the same quarter a year ago. Gross profit was $161,000, or 77% of total revenue, compared to $174,000 or 92% of total revenue in the same quarter a year ago.

Operating expenses for the second quarter decreased to $1.4 million, compared to $2.6 million in the same period a year ago, primarily due to reduced employee related costs and litigation expenses.

Net loss available to common stockholders was $(69,000) or less than a penny per share, compared to a net loss available to common stockholders of $(3.6) million or $(0.19) loss per share in the same quarter a year ago.

At April 30, 2016, cash, cash equivalents, and restricted cash totaled $6.1 million compared to $7.7 million in the previous quarter.

Rick Coleman, president and CEO, said: “We are continuing to take those actions we believe are necessary to increase shareholder value. The sale of the product business protects our balance sheet and potential future proceeds from the sale of the non-‘972 patents could enhance our cash position. We hope to have a positive outcome on the inter partes review (IPR) appeals within the next twelve months and will then petition the Western District Court to lift the stay on litigation and schedule trial dates as soon as possible.

Comments

Abstracts of the earnings call transcript:

Rick Coleman, president and CEO:
"In March, we also announced our intent to sell our non-'972 patents. As a reminder, these patents are owned by a limited partnership controlled by an affiliate of Fortress Investment Group. Over the last two months, we've been working with our patent broker, Aqua Licensing, to prepare the portfolio for sale. Next week, Aqua should begin marketing the patents to potential buyers.
"It's a large portfolio, 140 patents separated into five families: optimizing command processing, enabling interoperability, managing the network, enhancing tape libraries, and improving data systems. The average remaining life on the patents is about nine years.
"Robert G. Pearse, a member of our board since 2013, has agreed to serve as our new chairman [replaing Jeff Eberwein]."

Jennifer Crane, CFO:
" (...) six employees remain at Crossroads.
"On March 2, we’ve received a notice from Nasdaq indicating that the company is not in compliance with the dollar minimum bid price requirement for continued listing. In order to resolve the Nasdaq issue, we asked shareholders to approve a 20-for-1 reverse stock split. The measure was approved at our annual meeting on May 25 and we plan to effectuate the reverse split in the near future."

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