Crossroads: Fiscal 4Q10 Financial Results

Crossroads Systems, Inc. announced results for its fiscal fourth quarter (Q4’10) and fiscal year ended October 31, 2010 (FY’10).

Fiscal Fourth Quarter 2010
Revenue totaled $5.4 million for Q4’10 compared to $3.2 million in the fiscal third quarter ended July 31, 2010 (Q3’10). Product revenue totaled $1.3 million for Q4’10 compared to $884,000 for Q3’10. Revenue from IP license, royalty and other totaled $4.1 million for Q4’10 compared to $2.3 million for Q3’10.

Gross profit was $4.7 million, or 87 percent for Q4’10, compared to $2.7 million, or 86 percent for Q3’10. Total operating expenses were $4.8 million for Q4’10, which included $0.5 million of stock based compensation, compared to $4.2 million of operating expense for Q3’10, including $55,000 of stock based compensation. Net loss for Q4’10 was $124,000, or $0.00 cents loss per share, compared to a net loss of $1.5 million, or $0.05 cents loss per share in Q3’10.

Cash increased from $6.2 million in Q3’10 to $13.8 million in Q4’10. This increase was attributable to the private equity financing that the Company completed in October. The Company received net proceeds from the offering of $9.2 million, after deducting placement agent fees and financing expenses. The Company sold 12,500,000 shares of its common stock at $0.80 per share for gross proceeds to the Company of $10.0 million and issued warrants to purchase an additional 4,296,875 shares of common stock (including shares underlying a warrant issued to the placement agent) with an exercise price of $0.80 per share.

"2010 represented a strong year of execution against our strategic goals," said Rob Sims, President and CEO. "While overall revenue was flat versus fiscal 2009, it is important to note that our Crossroads branded revenue contribution grew significantly. This growth offset the declining OEM business that the Company had made a strategic decision to deemphasize as part of the transition to our current software solutions and services business model. Additionally, we continued to demonstrate our ability to generate substantial high margin revenue from our intellectual property portfolio. Crossroads has generated $50 million in IP licensing revenue over the past six years, primarily from one patent family representing less than 10 percent of total patents."

Sims further stated: "The equity financing is another key execution milestone, providing Crossroads with the necessary working capital to greatly accelerate the adoption of our innovative solutions targeting Tier 3 data storage, which is made up of fixed content, long-term and compliance-based storage, projected to grow more than 300 percent in the next six years. This financing, representing our first funding since the initial IPO in 1999, was effectively priced at nearly a 100 percent premium to where our shares had been trading. The funding further signals to current and prospective customers, partners and investors that we believe Crossroads is now poised to emerge out of ‘stealth mode’ as a leader in providing dramatically lower cost solutions targeted at managing the explosion of Tier 3 data within the enterprise and in the cloud."

Fiscal Year 2010
Total revenue for FY’10 totaled $16.4 million, compared with $16.8 million for fiscal year 2009 (FY’09). Gross profit for FY’10 was $13.9 million, or 85 percent, compared with $14.2 million, or 84 percent, for FY’09. Net loss for FY’10 was $4.1 million, or $0.14 cents loss per share, compared to a net loss of $4.4 million, or $0.15 cents loss per share in FY’09.