.comment-link {margin-left:.6em;}

Tuesday, February 13, 2007

Re-examining BakBone Software (BKBO)

Recent comments in the last post about BKBO (combined links, sec) provide a good wakeup call to go back and take a closer look at the company. While the decrease in cash is accounted for by expenses, a good question is why cash hasn't actually increased if things are going so well. Also, have we been in the dark about any additional dilution beyond the 18 million preferred shares that were outstanding back in 2004? These are damn good questions and it's one reason I put everything out here in public.

The last financial statement was this 10-Q for the period ending June 30, 2004. There were 64.5 million shares outstanding on July 31, 2004. There were 18 million shares of preferred stock outstanding on June 30, 2004. All of them had been released from lockup by August 2004. There were also 7.2 million anti-dilutive stock options. There were a total of 24.2 million anti-dilutive potential shares from options and convertible preferred. The weighted average common shares is listed as 64.5 million which is the same as the undiluted count. So the fully diluted share count on June 30, 2004 is 88.7 million shares.

Now let's walk through the 8-K statements after this point.

8/31/04: Restated 2003 reports.

10/12/04: Auditor resigned, letter, press release

10/25/04: New auditors D&T

Halloween 2004: CEO resigned, agreement, new CEO agreement, press release

Dec 7, 2004: Canadian trading halt awaiting new financial statements (that still haven't happened)

Dec 23, 2004: 2004 statements will need to be restated
The restatement is due to an error in the calculation of a non-cash beneficial conversion feature related to the Company’s shares of Series A Convertible Preferred Stock sold in July 2003 at a price that was less than the market value of the Company’s underlying common stock
Jan 31, 2005: Open letter $19.2 million in cash, positive operating cash flow
25 percent of the total value of new bookings in NA was derived from repeat customers with 75 percent coming from new customers – this compares to 10 percent from repeat customers and 90 percent from new customers just one year ago – a clear indicator that current customers are continuing to buy BakBone products. Specific to the competitive landscape in NA, the majority of all transactions continue to be Veritas replacements.
Feb 11, 2005: Kicked off the OTC BB and onto the Pink Sheets

May 3, 2005: Open letter $19.5 million cash, operating cash flow positive

June 23, 2005: Open letter Full year bookings were $37.5 million for the year ending March 31, 2005. Cash dropped to $18.0 million due to D&O liability insurance renewal, capex, and SOX expenses.

Nov 18, 2005: BakBone acquires Constant Data privately held. Paid $5 million, total of $5.5 million including assumed assets/liabilities. No financial statements shown. Here's the contract.

Jan 18, 2006: TSX delisting imminent

Jan 23, 2006: golden parachutes

April 27, 2006: new CFO, employment agreement
$275K per year plus TBD bonus plus $50K signing bonus. But wait! You also get 300K restricted stock units (one share each), vesting 50% after 2 years, etc.

May 9, 2006: Open letter
Fiscal year bookings (ending Mar 31, 2006) were $45.2 million (both SW sales and maintenance contracts). This was a 20.5% increase from $37.5 million for the prior year 2005.
Q3 2006 bookings were $13.3 million (both SW and maint), a 21.6% increase from prior year.
Q4 2006 bookings were $11.5 million (both), a 7.5% increase from prior year.
cash $9.8 million (vs $14.7 million at end of Sept 2006), due to acquisition.

The acquisition became "NetVault: Replicator"

Q&A Session on same day. All the questions are about the delisting in Canada.

June 28, 2006: Press release. More accounting problems

July 19, 2006: More golden parachutes sample here

August 8, 2006: More bad accounting, numbers in rear view mirror are not as they appear (in other words, just more of the same stuff).

August 8, 2006: Open letter, dated July 27, 2006, my sister's birthday.
Q1 bookings: $11.5 million, up 28% from the $9 million the year before.
Cash is $9.1 million down $716K due to severance payments to former executives (CFO?)... and capex.
Doing well with Apple customers.

Nov 20, 2006: Open letter, dated Nov 14, 2006.
Q2 bookings $12.4 million, 9% increase from $11.4 million in the prior year.
Cash is $8.2 million due to internal review costs of $1.6 million... and because the sun rises in the east.

Dec 21, 2006: worldwide agreement with Sun Microsystems.

and finally, we have this:
Feb 8, 2007: Press release.
Q3 bookings $17.2 million, 27% increase from the prior year.
Cash is down yet again to $5.9 million due to $1.5 million internal investigation and $443K payment related to the acquisition above... also because Charlie left the window open and a bunch of cash just flew out the window [not really].

For all those millions of dollars of constantly increasing bookings, when exactly does the cash flow back in?

They were pretty close to break-even back in 2004. Cash flow from operations seemed to be getting reasonably close. Assuming that all these excuses are correct/accurate, then they'd be well into positive free cash flow territory.


I ask myself if this is another Epolin or Liveworld or one of many other solid, but somewhat anemic small companies that I seem to buy into. Maybe. At least that's not a dangerous thing to have happen.

I continue to own the stock.

UPDATE same day:
I added a comment to this post about BakBone. Also, it's time for another pointless off-topic link:
tilt shift photos are for real?

Bruce -
I thought you might find this article interesting:

BakBone Axes Execs, Says Move Isn't Prelude To Sun Acquisition

BakBone Software has let go of three of its top managers, a move that has some VARs concerned that the data protection software maker may be preparing for a possible acquisition by Sun Microsystems.

San Diego-based BakBone confirmed that it has eliminated the positions of Charlie Giametta, vice president of North America sales; Mark Milford, senior vice president of worldwide sales; and Doug Spencer, head of R&D.
On Friday, Horner told CRN that the executive changes aren't related to any speculation about BakBone being acquired by Sun.
Going forward, Milford's worldwide sales management duties will be handled by James Johnson, BakBone president and CEO. Horner's position has been expanded to handle both marketing and sales for North America. And Spencer's position as head of R&D has been merged with the quality assurance management post and is now handled by Bob Woodward, senior vice president of product delivery.

Horner said his assumption of North American sales management duties comes as a result of his work in helping develop the company's sales strategy.

Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?