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AUSTIN, TX -- (Marketwire) -- 12/19/12 -- Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data archive solutions, reported financial results for its fiscal fourth quarter and full year ended October 31, 2012.

Fiscal Q4 and Full Year 2012 Financial Results
Total revenue for fiscal Q4 2012 decreased 29% to $4.4 million from $6.2 million in the same quarter a year ago. The decrease was due to a 38% decrease in intellectual property (IP) licensing, royalty and other revenue offset by an increase of 21% in product revenue from fiscal Q4 2011.

Total revenue for the fiscal full year 2012 decreased 7% to $14 million from $15 million in the prior year. The decrease was due to a 23% decrease in IP licensing, royalty and other revenue, offset by a 32% increase in product revenue. The company's IP licensing campaign resulted in fewer contractual settlements in fiscal year 2012. We intend on continuing our IP licensing campaign in fiscal year 2013.

Gross profit for fiscal Q4 2012 was $3.1 million or 70% of total revenue, as compared to $4.7 million, or 76% of total revenue in the same quarter a year ago. Gross profit for fiscal year 2012 was $11.1 million or 79% of total revenue, as compared to $12.3 million or 82% of total revenue in fiscal 2011. The decrease was mainly due to the lower margin associated with the recognition of the Iron Mountain service revenue in fiscal 2012.

Operating expenses for fiscal Q4 2012 totaled $5.7 million, including $400,000 of stock-based compensation, as compared to $5.4 million, including $575,000 of stock-based compensation in the same period a year ago. Operating expenses for fiscal year 2012 totaled $21.5 million, including $1.7 million of stock-based compensation, as compared to $19.7 million, including $877,000 of stock-based compensation in the prior year. The increase was primarily due to increased headcount in order to support the sales and marketing efforts around the company's StrongBox product.

Net loss for fiscal Q4 2012 totaled $2.6 million or $(0.23) loss per share, as compared to a net loss of $726,000 or $(0.07) loss per share in the same quarter a year ago. Net loss for fiscal year 2012 totaled $10.7 million or $(0.95) loss per share, as compared to a net loss of $7.5 million or $(0.69) loss per share in fiscal 2011.

At October 31, 2012, cash and cash equivalents totaled $6.9 million as compared to $10.3 million in the previous quarter. The decrease in cash was due to the timing of payments received as well as increased costs related to the company's StrongBox initiative.

Management Commentary
"Our StrongBox go-to-market strategy remains on plan," said Rob Sims, President and CEO of Crossroads Systems. "Our sales team along with our channel partners, continue to successfully penetrate key market verticals where we believe Strongbox is poised to become a leader in long-term archive solutions. Additionally, the revenue pipeline continues to grow over the prior quarter. We saw our first follow-on order from a StrongBox customer, confirming the capacity-based revenue model that StrongBox brings. The Iron Mountain development effort is on schedule and we remain excited about this pivotal relationship. The overall strength of our model was shown over the course of this last year as product revenue increased 32% from the prior year, positioning Crossroads for continued market leadership in 2013 and beyond."

Conference Call
Crossroads will hold a conference call later today (Wednesday, December 19, 2012) to discuss financial results. Crossroads' CEO Rob Sims and CFO Jennifer Crane will host the call starting at 4:30 p.m. Eastern Time. A question and answer session will follow management's presentation.

To participate in the call, dial the number 5-10 minutes prior to the start time and ask for the Crossroads Systems conference call:

Date: Wednesday, December 19, 2012
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: 1-877-221-8809
International: 1-706-679-8667

The conference call will be broadcasted and available for replay at http://us.meeting-stream.com/crossroadssystemsinc_121912 and via the company's Web site in the Investor Relations Events & Presentations section.

For the webcast, please visit the Web site at least 15 minutes early to register, download, and install any necessary audio software.

About Crossroads Systems
Crossroads Systems, Inc. (NASDAQ: CRDS) is a global provider of data archive solutions. Through the innovative use of new technologies, Crossroads delivers customer-driven solutions that enable proactive data security, advanced data archiving, optimized performance and significant cost-savings. Founded in 1996 and headquartered in Austin, TX, Crossroads holds more than 100 patents and has been honored with numerous industry awards for data archiving, storage and protection. Visit www.crossroads.com.

Important Cautions Regarding Forward-Looking Statements
This press release includes forward-looking statements that relate to the business and future events or future performance of Crossroads Systems, Inc. and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," and similar expressions or phrases identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about Crossroads Systems' ability to implement its business strategy, including the transition from a hardware storage company to a software solutions and services provider, its ability to expand its distribution channels, its ability to maintain or broaden relationships with existing distribution channels and strategic alliances and develop new industry relationships, the performance of third parties in its distribution channels and of its strategic alliances, uncertainties relating to product development and commercialization, the ability to obtain, maintain or protect patent and other proprietary intellectual property rights, technological change in its industry, market acceptance of its products and services, future capital requirements, regulatory actions or delays, competition in general and other factors that may cause actual results to be materially different from those described herein. Forward-looking statements in this press release are based on management's beliefs and opinions at the time the statements are made. Crossroads Systems does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

©2012 Crossroads Systems, Inc. Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All trademarks are the property of their respective owners. All specifications are subject to change without notice.

                 CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share data)

                                                October 31,    October 31,
                    ASSETS                          2011           2012
                                               -------------  -------------

Current assets:
  Cash and cash equivalents                    $       7,336  $       6,895
  Short-term investments                               3,385              -
                                               -------------  -------------

    Total cash, cash equivalents and short-
     term investments                                 10,721          6,895

  Accounts receivable, net of allowance for
   doubtful accounts of $71 and $102,
   respectively                                        2,659          2,847
  Inventory                                              188            376
  Prepaid expenses and other current assets              297            309
                                               -------------  -------------

    Total current assets                              13,865         10,427

Property and equipment, net                            1,320          1,521
Intangible assets, net                                   110              -
Other assets                                              56             76
                                               -------------  -------------

    Total assets                               $      15,351  $      12,024
                                               =============  =============




     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                             $       2,228  $       1,260
  Accrued expenses                                     2,156          2,879
  Deferred revenue                                     1,009          1,306
  Current portion of long term debt                    1,973          2,948
                                               -------------  -------------

    Total current liabilities                          7,366          8,393


Long term liabilities                                    126          1,634

Commitments and contingencies                              -              -

Stockholders' equity:
  Common stock, $0.001 par value, 75,000,000
   shares authorized, 10,923,543 and
   11,679,860 shares issued and outstanding,
   respectively                                           11             12
  Additional paid-in capital                         199,750        204,582
  Accumulated other comprehensive loss                   (40)           (39)
  Accumulated deficit                               (191,862)      (202,558)
                                               -------------  -------------

    Total stockholders' equity                         7,859          1,997
                                               -------------  -------------

    Total liabilities and stockholders' equity $      15,351  $      12,024
                                               =============  =============




                 CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS
              (In Thousands, Except Share and Per Share Data)



                            Three Months Ended            Years Ended
                                October 31,               October 31,
                         ------------------------  ------------------------
                             2011         2012         2011         2012
                         -----------  -----------  -----------  -----------
Revenue:
  Product                $     1,032  $     1,245  $     4,441  $     5,856
  IP license, royalty
   and other                   5,201        3,202       10,546        8,143
                         -----------  -----------  -----------  -----------

    Total revenue              6,233        4,447       14,987       13,999

Cost of revenue:
  Product                         72          171          357          642
  IP license, royalty
   and other                   1,426        1,170        2,308        2,301
                         -----------  -----------  -----------  -----------

    Total cost of
     revenue                   1,498        1,341        2,665        2,943
                         -----------  -----------  -----------  -----------

Gross profit                   4,735        3,106       12,322       11,056
                         -----------  -----------  -----------  -----------

Operating expenses:
  Sales and marketing          1,534        1,870        5,218        6,386
  Research and
   development                 2,850        2,755       10,702       11,408
  General and
   administrative              1,011        1,060        3,158        3,590
  Amortization of
   intangible assets              47            -          629          110
                         -----------  -----------  -----------  -----------

    Total operating
     expenses                  5,442        5,685       19,707       21,494
                         -----------  -----------  -----------  -----------

Loss from operations            (707)      (2,579)      (7,385)     (10,438)

Interest expense                 (13)         (63)        (104)        (241)
Other expense                     (6)          (1)          (6)         (17)
                         -----------  -----------  -----------  -----------

Net loss                 $      (726) $    (2,643) $    (7,495) $   (10,696)
                         ===========  ===========  ===========  ===========

Basic and diluted net
 loss per share                (0.07)       (0.23)       (0.69)       (0.95)
                         ===========  ===========  ===========  ===========

Basic and diluted
 average common shares
 outstanding              10,909,371   11,671,416   10,820,028   11,245,813
                         ===========  ===========  ===========  ===========




       CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Unaudited)
                    (In thousands)

                                                            Years Ended
                                                            October 31,
                                                       --------------------
                                                          2011       2012
                                                       ---------  ---------

Cash flows from operating activities:
  Net loss                                             $  (7,495) $ (10,696)
  Adjustments to reconcile net loss to net cash used
   in operating activities:
    Depreciation                                             537        711
    Amortization of intangible assets                        629        110
    Loss on disposal of property and equipment                 8         17
    Stock-based compensation                                 877      1,680
    Provision for doubtful accounts receivable                52         31
  Changes in assets and liabilities:
    Accounts receivable                                    2,895       (219)
    Inventory                                                (95)      (188)
    Prepaid expenses and other assets                         (4)       (32)
    Accounts payable                                       1,314       (968)
    Accrued expenses                                        (114)       665
    Deferred revenue                                        (485)       440
                                                       ---------  ---------
      Net cash used in operating activities               (1,881)    (8,449)
                                                       ---------  ---------
Cash flows from investing activities:
  Purchase of property and equipment                      (1,290)      (944)
  Proceeds from sale of property and equipment                 -         15
  Purchase of held-to-maturity investments                (6,669)      (185)
  Maturity of held-to-maturity investments                 3,284      3,570
                                                       ---------  ---------
      Net cash (used in) provided by investing
       activities                                         (4,675)     2,456
                                                       ---------  ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock, net of
   expenses                                                  144      3,212
  Proceeds from borrowing on debt                              -      3,000
  Paydown of debt                                              -       (655)
                                                       ---------  ---------
      Net cash provided by financing activities              144      5,557
                                                       ---------  ---------

Effect of foreign exchange rate on cash and cash
 equivalents                                                 (63)        (5)
                                                       ---------  ---------
Net (decrease) increase in cash and cash equivalents      (6,475)      (441)
Cash and cash equivalents, beginning of period            13,811      7,336
                                                       ---------  ---------
Cash and cash equivalents, end of period               $   7,336  $   6,895
                                                       =========  =========