BakBone Bolsters Backup, But Not Financial Reports

BakBone overhauled its backup story this week, adding CDP to its NetVault offering, although a major question mark still hangs over the vendor's financials.

The vendor took the wraps off its latest backup offering yesterday, joining a growing list of vendors touting CDP, which monitors write- and log-I/Os with timestamps to enable recovery from any point in time.

Built on software from BakBone's acquisition of Constant Data, NetVault: Backup 8.0 now offers CDP for devices running Linux and Windows. The vendor, which OEMs NetVault to Sun, has also integrated CDP with its backup technology in an attempt to offer users a storage/data protection combo.

"Customers only really want one application touching their data and storing it at different locations," says Jeff Drescher, BakBone's vice president of marketing. "There's a lot of startups doing CDP today, but they typically lack integration with core backup and recovery applications."

"It represents the next step in BakBone's integrated data protection strategy," added Matt Law, the vendor's product marketing manager, explaining that the CDP feature will be available at the end of this month, priced from $800 for 10 client devices.Although the vendor was only too willing to talk up its CDP software, BakBone was less forthcoming on the subject of its financials, which are a major source of frustration for at least one shareholder.

"I have found shareholder value to be lacking," writes William Peterson on the SeekingAlpha Website, alluding to a string of problems dating back to 2004, when the firm announced it would restate earnings because of mistakes made while moving to U.S. GAAP standards from Canadian GAAP. Since then, BakBone has changed CEOs and accountants, got dropped from the Toronto Stock Exchange, and then from the Over-the-Counter Bulletin Board (OTCBB) because of blown filing deadlines. BakBone's stock currently trades on the pink sheets.

Four months ago the vendor announced that it needed additional time to complete the filing of its 10-K for fiscal year ended March 31, 2006. In a press release, CEO Jim Johnson blamed the missed deadline on "the complexity of the issues at hand," specifically, the "appropriate allocation of revenues, as well as the appropriate recording and timing of expenses."

"These accounting problems have plagued the company for years now," writes Peterson on SeekingAlpha, describing the situation as "intolerable."

The shareholder goes on to express "serious doubts" about BakBone's ability to complete its audit process and file the necessary documentation to satisfy the Toronto Exchange or be current with its SEC filings.Earlier this year BakBone confirmed that the SEC had agreed to a request from the vendor to file one comprehensive form 10-K for fiscal year ended March 31, 2006. This would be in lieu of filing amendments to previously filed reports and in lieu of filing delinquent annual and interim reports.

By eliminating the number of reports, BakBone hoped to speed up its reporting process, although this does not appear to have happened.

Back in June, CEO Johnson said that BakBone expected to file its 10-K for FY06 no sooner than the end of July, citing the "complex technology and accounting matters relating to each transaction from earlier periods -- and the volume of materials to be evaluated."

Four months later, and BakBone's form 10-K is yet to materialize, and the climate of uncertainty appears to be biting into the vendor's coffers. The firm's cash balance at the end of June was $9.6 million, compared to $11.4 million just three months earlier. Expenses related to audit fees were responsible for eating away at BakBone's cash position, as well as one-time R&D expenses related to its Sun OEM.

Making matters worse, there has also been something of a revolving door at the backup specialist. In May, Doug Lindroth resigned his position as CFO after just over a year in the role to become a member of the board. Clifford Flowers then took over from Lindroth as interim financial chief but resigned last month, to be replaced by Michael Compton, another interim CFO.There have also been boardroom changes. In a document filed with the SEC in August, BakBone confirmed that Andrew Sheehan had resigned from the firm's board of directors, although the filing said there was no disagreement between Sheehan and the company "on any matter relating to BakBones operations, policies or practices."

At this stage, BakBone's end game remains shrouded in mystery, and the firm's Investor Relations department did not respond to calls and emails from Byte and Switch over the last few days.

Could the firm be on the block? "It sounded like they were trying to clean up the balance sheet to get acquired," said an exec from a rival vendor, who asked not to be named. "The big rumor was Sun, because of their relationship."

Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.