Crossroads: Fiscal 3Q16 Financial Results

(in $ million)	3Q15	3Q16	9 mo. 16	9 mo. 16
Revenues	0.445	0.057	0.838	0.477
*Growth*		-87%		*-43%*
Net income (loss)	(3.3)	(0.04)	(9.1)	(0.577)

Crossroads Systems, Inc. reported financial results for its fiscal third quarter ended July 31, 2016.

On March 22, 2016, Crossroads sold its product business to Canadian-based StrongBox Data Solutions, Inc. 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 third quarter was $57,000, compared to $445,000 in the same quarter a year ago.

Gross profit was $34,000, or 60% of total revenue, compared to $257,000 or 58% of total revenue in the same quarter a year ago.

Operating expenses for the third quarter decreased to $1.2 million, compared to $2.8 million in the same period a year ago. This decrease is primarily due to lower headcount and lower intellectual property litigation expenses.

Net loss available to common stockholders was $(481,000) or $(0.39) loss per share, compared to a net loss available to common stockholders of $(3.3) million or $(3.40) loss per share in the same quarter a year ago.

At July 31, 2016, cash, cash equivalents, and restricted cash totaled $4.9 million compared to $6.1 million in the previous quarter.

Richard K. Coleman, Jr., president and CEO, said: “We are near the end of the scheduled bidding process for the non-972 portfolio. Although we cannot guarantee the results or timing of a sale, we hope to consummate a transaction in 2016. Also in the third quarter, we continued our appeals related to the ‘972 patent portfolio before the US Court of Appeals for the Federal Circuit. We remain confident that Crossroads has compelling arguments and look forward to the hearing in January.“

Comments

Jennifer Crane, CFO:
"The year-over-year decline reflects two factors, first the third quarter of last year included settlement revenue from Huawei and secondly although we expect to receive the entire amount of Dot Hill's past year royalty revenue into our existing license agreement, we reserve 10% of Dot Hill's booked but uncollected payments."

Rick Coleman, president and CEO:
"I'll begin with an update on the 972 litigation and our cases before the U.S. Court of Appeals for the Federal Circuit. Last month in spite of Crossroads objections, the Federal Circuit approved two separate motions for schedule extensions and slightly adjusted the key dates related to our cases.
"The current anticipated timing is as follows; for the Oracle and NetApp IPR appeals, Crossroads initial appeal brief was filed on June 27, appellees responses are due September 22, and Crossroads' reply is due October 6.
"For the Cisco and Quantum IPR appeals, Crossroads initial appeal brief was filed on July 11, appellees responses are due September 21 and Crossroads reply is due October 5. Finally for both sets of appeals, we expect oral hearings during the first week in January and the court's ruling prior to mid-year 2017.
"Another '972 litigation update relates to Dot Hill. On July 21, the court denied Crossroads request to lift the '972 litigation stay for the limited purpose of compelling Dot Hill to pay royalties owed under their existing license agreement."