8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 11, 2009

BAKBONE SOFTWARE INCORPORATED

(Exact name of registrant as specified in its charter)

Canada	000-12230	Not Applicable
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

9540 Towne Center Drive, Suite 100

San Diego, California 92121

(Address of Principal Executive Offices) (Zip Code)

(858) 450-9009

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets

On May 13, 2009, BakBone Software Incorporated (“the Company”) closed its acquisition (the “Merger”) of ColdSpark, Inc. (“ColdSpark”) pursuant to the terms of the previously announced Agreement and Plan of Merger dated May 11, 2009 by and among the Company, a wholly owned subsidiary of the Company and ColdSpark, among others.

On May 14, 2009, the Company filed a Current Report on Form 8-K (the “Current Report”) to report the completion of the Merger. The sole purpose of this Amendment No. 1 to the Current Report is to file the financial statements and pro forma financial information required by Item 9.01 on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The following audited financial statements are attached hereto as Exhibit 99.2 and incorporated herein by reference:

• Independent Auditors’ Reports

• Balance Sheets as of December 31, 2008 and December 31, 2007

• Statements of Operations for each of the two years ended December 31, 2008

• Statements of Stockholder’s Equity (Deficit) for each of the two years ended December 31, 2008

• Statements of Cash Flows for each of the two years ended December 31, 2008

• Note to the Financial Statements

The following unaudited financial statements are attached hereto as Exhibit 99.3 and incorporated herein by reference:

• Balance Sheet as of March 31, 2009

• Statements of Operations for each of the three month periods ended March 31, 2008 and 2009

• Statements of Cash Flows for each of the three month periods ended March 31, 2008 and 2009

(b) Pro Forma Financial Information

The following unaudited pro forma financial information is attached hereto as Exhibit 99.4 and incorporated herein by reference:

• Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2009

• Unaudited Pro Forma Combined Statements of Operations for the year ended March 31, 2009

• Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(d) Exhibits.

2.1 (1)	Agreement and Plan of Merger, dated May 11, 2009, by and among BakBone Software Incorporated, Chickasaw Acquisition Corporation, Chickasaw Acquisition Corporation II, ColdSpark, Inc. and Tom Neustaetter as stockholder representative. Certain schedules and exhibits referenced in the Agreement and Plan of Merger have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.
23.1	Consent of Mayer Hoffman McCann P.C.
23.2	Consent of Gordon, Hughes & Banks, LLP
99.1*	Press Release of BakBone Software Incorporated issued on May 14, 2009.
99.2	Audited Financial statements listed in Item 9.01(a)
99.3	Unaudited Interim Financial statements listed in Item 9.01(a)
99.4	Unaudited Pro Forma Financial Information listed in Item 9.01(b)

(1) Incorporated by reference from Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009.

* Previously furnished as Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009. Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BAKBONE SOFTWARE INCORPORATED
July 27, 2009	By:	/s/    Steve Martin
		Steven Martin
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
2.1 (1)	Agreement and Plan of Merger, dated May 11, 2009, by and among BakBone Software Incorporated, Chickasaw Acquisition Corporation, Chickasaw Acquisition Corporation II, ColdSpark, Inc. and Tom Neustaetter as stockholder representative. Certain schedules and exhibits referenced in the Agreement and Plan of Merger have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.
23.1	Consent of Mayer Hoffman McCann P.C.
23.2	Consent of Gordon, Hughes & Banks, LLP
99.1*	Press Release of BakBone Software Incorporated issued on May 14, 2009.
99.2	Audited Financial statements listed in Item 9.01(a)
99.3	Unaudited Interim Financial statements listed in Item 9.01(a)
99.4	Unaudited Pro Forma Financial Information listed in Item 9.01(b)

(1) Incorporated by reference from Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009.

* Previously furnished as Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009. Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement (No. 333-109390) on Form S-8 of BakBone Software Incorporated of our report dated April 30, 2009, relating to our audit of the balance sheet of ColdSpark, Inc. as of December 31, 2008, and the statement of operations, changes in stockholders’ deficit and cash flows for the year then ended, which appears in this Current Report on Form 8-K/A of BakBone Software Incorporated dated July 27, 2009. Our report contains an explanatory paragraph regarding the uncertainty of ColdSpark, Inc.’s ability to continue as a going concern.

/s/    MAYER HOFFMAN MCCANN P.C.

San Diego, California

July 27, 2009

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statement (No. 333-109390) on Form S-8 of BakBone Software Incorporated of our report dated June 20, 2008 (except for Notes 1, 2j, 7 and 10 for which the date is April 28, 2009) relating to our audit of the balance sheet of ColdSpark, Inc. as of December 31, 2007 and the statements of operations, changes in stockholders’ equity and cash flows for the year then ended, which appears in the Current Report on Form 8-K/A of BakBone Software Incorporated dated July 27, 2009.

/s/    Gordon, Hughes & Banks, LLP

Golden, Colorado

July 27, 2009

EX-99.2

Exhibit 99.2

ColdSpark, Inc.

Financial Statements

Years ended December 31, 2008 and December 31, 2007 (restated)

ColdSpark, Inc.

	Contents
Independent Auditors’ Reports	2-3
Financial Statements	4
Balance Sheets	4
Statements of Operations	5
Statements of Changes in Stockholders’ Equity (Deficit)	6
Statements of Cash Flows	7
Notes to Financial Statements	8-16

1

Independent Auditors’ Report

To the Board of Directors and Stockholders of

ColdSpark, Inc.

Broomfield, Colorado

We have audited the accompanying balance sheet of ColdSpark, Inc. as of December 31, 2008, and the related statements of operations, changes in stockholders’deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. For the year ended December 31, 2008, the Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit for the year ended December 31, 2008, included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ColdSpark, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred a net loss of approximately $4,600,000 during 2008 and had a working capital deficit of approximately $4,100,000 at December 31, 2008. Those conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/    MAYER HOFFMAN MCCANN P.C.

San Diego, California

April 30, 2009

2

Gordon, Hughes & Banks, LLP

CPAs & BUSINESS ADVISORS

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of

ColdSpark, Inc.

Denver, Colorado

We have audited the accompanying balance sheet of ColdSpark, Inc. as of December 31, 2007, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 1 to the financial statements, certain errors resulting in the overstatement of net revenue for the year ended December 31, 2006 and a corresponding understatement of net revenue for the year ended December 31, 2007, were discovered by management of the Company in 2009.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ColdSpark, Inc. at December 31, 2007, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/    Gordon, Hughes & Banks, LLP

Golden, Colorado

June 20, 2008, except for Notes 1, 2j,

7 and 10 for which the date is April 28, 2009

3

ColdSpark, Inc.

Balance Sheets

December 31,

	2008			2007
				(restated, see Note 1)
Assets
Current assets
Cash and cash equivalents	$	408,006		$	340,140
Restricted cash		50,854			103,068
Accounts receivable		87,758			353,602
Prepaid Expenses		10,462			56,250
Total current assets		557,080			853,060
Property and equipment, net of accumulated depreciation of $204,026 and $109,834, respectively		209,949			186,120
Deposit		12,052			12,052
Total assets	$	779,081		$	1,051,232
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable	$	60,172		$	82,783
Accrued expenses		566,066			246,467
Deferred Revenue		1,220,834			173,069
Other current liabilities		298,031			—
Notes payable		2,500,000			—
Total current liabilities		4,645,103			502,319
Long-term liabilities		33,887			—
Total liabilities		4,678,990			502,319
Stockholders’ equity (deficit)
Series A preferred stock, $0.0001 par value, 7,500,000 shares authorized, 7,264,948 shares issued and outstanding, at liquidation value		6,405,718			6,405,718
Common stock, $.0001 par value, 30,000,000 shares authorized, 15,630,525 shares issued and outstanding		1,563			1,563
Additional paid-in capital		539,251			350,857
Accumulated deficit		(10,846,441	)		(6,209,225	)
Total stockholders’ equity (deficit)		(3,899,909	)		548,913
Total liabilities and stockholders’ equity (deficit)	$	779,081		$	1,051,232

The accompanying notes are an integral part of these financial statements.

4

ColdSpark, Inc.

Statements of Operations

For the years ended December 31,

	2008			2007
				(restated, see Note 1)
Net revenues:
Software license revenue	$	675,379		$	838,364
Service and support revenue		749,149			1,624,975
Total revenues		1,424,528			2,463,339
Operating expenses:
Sales and marketing		1,176,655			348,263
General and administrative		4,715,896			5,350,543
Total operating expenses		5,892,551			5,698,806
Loss from operations		(4,468,023	)		(3,235,467	)
Other income/(expense):
Interest income		11,960			105,034
Interest expense		(181,153	)		—
Total other income/(expense)		(169,193	)		105,034
Net loss	$	(4,637,216	)	$	(3,130,433	)

The accompanying notes are an integral part of these financial statements.

5

ColdSpark, Inc.

Statements of Changes in Stockholders’ Equity (Deficit)

For the years ended December 31, 2007 and 2008

				Stockholders’ equity (deficit)
	Series A Preferred			Common stock			Additional paid-in capital		Accumulated deficit			Total
	Shares	Amount		Shares	Amount
Balances January 1, 2007 - as restated (see Note 1)	7,264,948	$	6,405,718	15,630,525	$	1,563	$	277,254	$	(3,078,792	)	$	3,605,743
Stock-based compensation								73,603					73,603
Net (loss) for the year - as restated (see Note 1)										(3,130,433	)		(3,130,433	)
Balances, December 31, 2007	7,264,948		6,405,718	15,630,525		1,563		350,857		(6,209,225	)		548,913
Stock-based compensation								188,394					188,394
Net (loss) for the year										(4,637,216	)		(4,637,216	)
Balances, December 31, 2008	7,264,948	$	6,405,718	15,630,525	$	1,563	$	539,251	$	(10,846,441	)	$	(3,899,909	)

The accompanying notes are an integral part of these financial statements.

6

ColdSpark, Inc.

Statements of Cash Flows

For the years ended December 31,

	2008			2007
				(restated, see Note 1)
Cash flows from operating activities:
Net loss	$	(4,637,216	)	$	(3,130,433	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		94,192			68,017
Stock-based compensation		188,394			73,603
Changes in operating assets and liabilities:
Accounts receivable		265,844			392,586
Prepaid expenses and other current assets		45,788			(43,361	)
Deposit		—			(4,017	)
Accounts payable		(22,611	)		(66,633	)
Accrued expenses		319,599			—
Deferred revenue		1,047,765			(37,119	)
Other current liabilities		251,500			—
Net cash used in operating activities		(2,446,745	)		(2,747,357	)
Cash flows from investing activities:
Decrease (increase) in restricted cash		52,214			(868	)
Purchase of property and equipment		(37,076	)		(4,992	)
Net cash provided by (used in) investing activities		15,138			(5,860	)
Cash flows from financing activities:
Notes payable		2,500,000			—
Net increase in line of credit		44,461			—
Principal payments on capitalized lease obligations		(44,988	)		—
Net cash provided by financing activities		2,499,473			—
Net (decrease) increase in cash and cash equivalents		67,866			(2,753,217	)
Cash and cash equivalents, beginning of year		340,140			3,093,357
Cash and cash equivalents, end of year	$	408,006		$	340,140
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Capital expenditures funded by capital leases	$	80,945		$	—

The accompanying notes are an integral part of these financial statements.

7

ColdSpark, Inc.

Notes to the Financial Statements

December 31, 2008 and 2007

NOTE 1 – Nature of Business

ColdSpark, Inc. (“the Company”) was organized in the State of Delaware on January 27, 2006. On March 17, 2006, ColdSpark, LLC, a Colorado limited liability company founded in 2001, merged with and into ColdSpark, Inc. The Company has created the next generation of enterprise e-mail infrastructure through its SparkEngine Mail Transport Platform, a new email infrastructure that is an enterprise solution capable of supporting the next generation of global messaging networks and the evolving requirements of the world’s largest enterprises using email for mission-critical business operations. The Company generates its revenues through the sale of product licenses, professional services and support fees.

Prior Period Adjustment

The Company determined that revenue recognized in 2006 should have been recognized in 2007 as it did not meet all of the revenue recognition criteria in 2006. This resulted in an understatement of 2007 revenue of approximately $838,000.

As a result of these errors, the Company’s previously issued statement of operations for the year ending December 31, 2007, has been restated. There is no effect on the balance sheet as of December 31, 2007. The effects of these corrections on the statement of operations for the year ending December 31, 2007 are shown in the table below:

	Previously reported			Adjustment		As restated
Software license revenue	$	—		$	838,364	$	838,364
Total revenue	$	1,624,975		$	838,364	$	2,463,339
Net loss	$	(3,968,797	)	$	838,364	$	(3,130,433	)

Going Concern

The Company incurred net losses of $4,637,216 and $3,130,433 for the years ended December 31, 2008 and 2007, respectively, and has an accumulated deficit of approximately $10.8 million as of December 31, 2008. The Company had a working capital deficit of approximately $4,100,000 as of December 31, 2008.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. In addition, these financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue as a going concern.

Based on its current operating plan, the Company’s existing working capital may not be sufficient to meet the cash requirements to fund its planned operating expenses, capital expenditures, and working capital requirements through December 31, 2009 without additional sources of cash and/or the deferral, reduction or elimination of planned expenditures. The Company may need to raise significant additional funds to continue its operations. In the absence of positive cash flows from operations, the Company may be dependent on its ability to secure additional funding through the issuance of debt or equity instruments. If adequate funds are not available, the Company may be forced to significantly curtail its operations or to obtain funds through entering into additional collaborative agreements or other arrangements that may be on unfavorable terms. The Company is taking expense reduction measures to conserve cash and is exploring the possibility of being acquired.

8

ColdSpark, Inc.

Notes to the Financial Statements

December 31, 2008 and 2007

Management’s plans include the following:

• Restructuring and consolidating its debt position.

• Improving the Company’s financial performance through increased efforts in sales generation, entering into new markets, cost and headcount reduction, office consolidation and restructuring of administrative overhead.

• Exploring the potential for being acquired.

NOTE 2 – Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

(b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the estimated fair value of the Company’s Preferred Series A stock and common stock.

(c) Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with original maturity dates of three months or less to be cash equivalents.

(d) Restricted Cash

Restricted cash consists of a certificate of deposit held with a financial institution as a deposit for the use of a Company credit card.

(e) Concentration of Credit Risk

The Company has no significant off-balance sheet concentrations of credit risk. At December 31, 2008, and other times during this fiscal year, the Company’s deposits with financial institutions exceed the Federal Deposit Insurance Corporation’s limits, however, management considers the risk of related loss to be minimal. The Company’s cash equivalents are invested in financial institutions which the Company believes to be creditworthy and any potential risk of loss to be minimal.

(f) Accounts Receivable

Accounts receivable consists primarily of amounts billed to customers for license and support fees. The Company makes its best estimate of the amounts of probable credit losses in the Company’s existing accounts receivable and provides for such loss as an allowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Amounts charged off as uncollectible have been minimal in prior years. At December 31, 2008 and 2007, the Company determined that all of its accounts receivable were collectible and no allowance for doubtful accounts was recorded.

9

(g) Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization is provided for using the straight-line method over the estimated useful lives of the respective assets or lease terms, generally 3-5 years. Maintenance and repairs are expensed as incurred. Major additions, replacements and improvements are capitalized.

(h) Impairment of Long-Lived Assets

An impairment loss is recorded for assets to be held and used when the carrying amount of a long-lived asset is not recoverable from future estimated cash flows and exceeds its fair value. The Company did not record an impairment loss in 2008 or 2007.

(i) Fair Value of Financial Instruments

The Company adopted Financial Accounting Standards Board (“FASB”) Statement No. 157, Fair Value Measurements, as of January 1, 2008, which did not have a material impact on its financial statements.

SFAS No. 107 requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures regarding the fair value of financial instruments are based upon pertinent information available to management as of December 31, 2008 and 2007. Accordingly, the estimates presented in these statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

Management has estimated the fair values of cash, accounts receivable, accounts payable, accrued expenses and notes payable to be approximately their respective carrying values reported in these financial statements because of their short maturities.

(j) Income Taxes

The current provision for income taxes, if any, represents actual or estimated amounts payable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying balance sheet, and for operating losses and tax credit carry forwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. The Company’s net deferred tax asset has been offset in full by a valuation allowance of $3,780,000 and $2,189,000 at December 31, 2008 and 2007, respectively, because management did not believe it is more likely than not that the net deferred tax assets would be realized. (see Note 7). The change in valuation allowance during 2008 and 2007 was $1,591,000 and $1,114,000, respectively.

(k) Revenue Recognition

Revenues are generated primarily from the sale of software licenses to enterprise users operating locally, nationally and worldwide. Such licenses are for an indefinite period, thus related revenues are recognized when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred via acceptance of the software by the customer, (3) the sales price is fixed and determinable and (4) collection is probable. Transactions not meeting these criteria are recorded as deferred revenue until all criteria have been met. The Company determines the fair value of each element in the arrangement based on vendor-specific objective evidence (“VSOE”) of fair value.

The Company also supplies various support services such as engineering, implementation, installation and testing and maintenance services. Revenues related to these services are recognized upon completion of the related projects or ratably over the term of the agreement. Billings made or payments received in advance of delivery are deferred until the period in which the services are provided.

10

(l) Stock-based Compensation

The Company accounts for its employee stock option plans and other employee stock-based compensation arrangements in accordance with the provisions of Statement of Financial Accounting Standards No. 123R, Accounting for Stock-Based Compensation (SFAS 123R). Under SFAS 123R, all share-based payments to employees, including grants of employee stock options, are required to be recognized in the accompanying Statement of Operations based on their fair values calculated using an option pricing model. The Company uses the Black-Scholes option-pricing model for determination of the fair value of all outstanding options. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Although the fair value of employee stock options is determined in accordance with SFAS 123R using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The weighted average fair value of the options granted during 2008 of $0.22 was estimated on the grant date using the Black-Scholes pricing model with the following assumptions: fair market value of the common stock of $0.22, expected volatility of 200%, expected term of 6.5 years, risk-free interest rates of 3.24% and 1.51%, and expected dividend yield of 0%.

(m) Recent Accounting Pronouncements

In June 2006 the Financial Accounting Standards Board (“FASB”) released FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109. FIN No. 48 clarifies the accounting and reporting for uncertainties in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in an income tax return. Additionally, FIN No. 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.

In December 2008 the FASB issued FASB Staff Position (“FSP”) FIN No. 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Entities, which defers the adoption of the provisions of FIN No. 48 for the Company until fiscal 2009. As such, management has not determined the impact of FIN No. 48 on the Company’s financial statements.

In September 2006 the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.

In February 2008 the FASB issued FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, which amends SFAS No. 157, Fair Value Measurements, to delay the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). For items within its scope, FSP No. FAS 157-2 defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of the FSP. The adoption of SFAS No. 157, as it relates to financial assets and liabilities of the Company, did not have a material impact on the Company’s financial statements.

In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The adoption of SFAS No. 159 did not have a material impact on the Company’s financial statements due to the Company not designating financial assets or liabilities to be measured at fair value.

11

In December 2007 the FASB issued SFAS No. 141 (revised 2007), Business Combinations. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS No. 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. Additionally, in April of 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 141R-1 Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS No. 141R. FSP SFAS No. 141R-1 deals with the initial recognition and measurement of an asset acquired or a liability assumed in a business combination that arises from a contingency (provided the fair value on the date of acquisition of the related asset or liability can be determined). Both SFAS No. 141R and FSP SFAS No. 141R-1 are effective for fiscal years beginning after December 15, 2008. Management does not expect SFAS No. 141R and FSP SFAS No. 141R-1 to have a material impact on the Company’s financial statements.

In April 2008, the FASB issued FSP SFAS No. 142-3 Determination of the Useful Life of Intangible Assets. This staff position paper amends factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB SFAS No. 142, Goodwill and Other Intangible Assets. This FSP will be effective for fiscal years beginning on or after December 15, 2008, and early adoption is prohibited. The Company is evaluating the impact that the adoption of FSP SFAS No. 142-3 will have on the financial statements.

In May 2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS No. 162 is effective 60 days following the U.S. Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, the meaning of “Present Fairly in Conformity with GAAP”. The Company is in the process of evaluating the impact, if any, of SFAS 162 on its financial statements.

NOTE 3 – Property and Equipment

Property and Equipment at December 31, 2008 and 2007 consisted of the following:

	2008			2007
Computers, software and equipment	$	301,930		$	188,848
Office furniture and equipment		59,954			59,955
Leasehold improvements		52,091			47,151
		413,975			295,954
Less: accumulated depreciation and amortization		(204,026	)		(109,834	)
	$	209,949		$	186,120

The Company recorded depreciation and amortization expense related to these assets of $94,193 and $68,017 for the years ended December 31, 2008 and 2007, respectively.

NOTE 4 – Convertible Notes Payable

During 2008, the Company issued convertible notes payable to the preferred shareholder for total proceeds of $2,500,000. The notes accrue interest at 10%, compounded annually. The notes had original maturity dates ranging from January 2009 to November 2009. Subsequent to year-end, the maturity dates of the notes due before May 2009 were extended to May 21, 2009. The notes are unsecured and are convertible into preferred stock, if the Company enters into a qualified financing, as defined in the agreements. The conversion price is either the price paid per share for equity securities in the next equity financing or the Series A purchase price of $0.894707. In the event of a corporate transaction or initial public offering, the lender may elect to receive cash equal to two times the amount of outstanding principal and interest, or be converted into shares.

12

NOTE 5 – Stockholders’ Equity (Deficit)

The Company is authorized to issue up to 7,500,000 shares of Series A Preferred Stock, par value $0.0001, on such terms and for such consideration as the board of directors may deem appropriate. All of these authorized shares are designated as “Series A Preferred Stock”.

In March 2006, the Company raised $6,500,000 less offering expenses of $94,282 through the issuance of 7,264,948 Series A Preferred Stock.

The holders of shares of Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefore, prior and in preference to any declaration or payment of any dividend on the common stock of the Company, at the applicable dividend rate of $0.071576 per annum for each share of Series A Preferred Stock, payable when, as and if declared by the Board of Directors. Such dividends shall not be cumulative.

In the event of any liquidation event, either voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of the proceeds of such liquidation event to the holders of common stock by reason of their ownership thereof, an amount per share equal to the sum of the original issue price ($0.894707) for such series of Series A Preferred Stock, plus declared but unpaid dividends on such shares.

At any time after March 21, 2011 but within 90 days after the receipt by the Company of a written request from the holders of not less than a majority of the then outstanding Series A Preferred Stock that all of the then outstanding shares be redeemed, the Company shall redeem in two annual installments the then outstanding shares of Preferred Stock by paying in cash a sum per share equal to the applicable original issue price.

Each share of Series A Preferred Stock is convertible, at the option of the holder, into such number of fully paid and nonassessable shares of common stock as is determined by dividing the original issue price of the Series A Preferred Stock by the conversion price (original issue price), which is subject to adjustment.

The holder of each share of Series A Preferred Stock shall have the right to one vote for each share of common stock into which such Series A Preferred Stock could then be converted. The holders of the Series A Preferred Stock are entitled to elect one director of the Company at any election of directors, and the holders of Preferred Series A stock and common stock are entitled to elect any remaining directors of the Company.

The Company is authorized to issue up to 30,000,000 shares of common stock, par value $0.0001. In March 2006, the Company converted 15,630,525 member units to 15,630,525 shares of the Company’s common stock, upon conversion of the Company from a partnership to a corporation. The holders of outstanding common stock are entitled to elect two directors of the Company at any election of directors. The Company has reserved 4,487,843 shares of common stock for issuance upon exercise of awards granted under the Company’s 2006 Stock Plan (see Note 6).

NOTE 6 – Stock Plan

The Company has adopted the ColdSpark, Inc. 2006 Stock Plan (the “Plan”) under which employees, non-employee directors and consultants providing services to the Company may be offered the opportunity to acquire an equity interest in the Company. The Company has reserved 4,487,843 shares of common stock for issuance under the Plan. In 2008, the Company’s Board of Directors approved a modification to lower the exercise price of all outstanding and future stock option grants from $0.625 per share to $0.21 per share. No other terms of these options were modified. This change resulted in additional compensation expense of $15,737 in 2008.

13

A summary of stock option activity under the Plan is set forth below:

	Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, January 1, 2007	1,510,431
Granted	89,250	$	0.21
Exercised	—		—
Cancelled	594,205	$	0.21
Outstanding, December 31, 2007	1,005,476	$	0.21	8.38	$	—
Granted	3,140,372	$	0.21
Exercised	—		—
Cancelled	195,750	$	0.21
Outstanding, December 31, 2008	3,950,098	$	0.21	8.92	$	39,501

The following table summarizes information concerning outstanding and exercisable options at December 31, 2008:

OPTIONS EXERCISABLE

Options	Weighted-Average Remaining Contractual Life (years)	Weighted-Average Exercise Price	Aggregate Intrinsic Value
1,363,604	8.39	$0.21	$13,777

During the years ended December 31, 2008 and December 31, 2007, the Company had stock-based compensation expense of $188,394 and $73,603, respectively, which is recorded under operating expenses in the accompanying statements of operations. As of December 31, 2008, the Company had granted options for 2,586,494 shares of the Company’s common stock that are unvested that will result in $569,029 of compensation expense in future years if fully vested.

NOTE 7 – Income Taxes

The Company did not record any provision for federal and state income tax for the years ended December 31, 2008 and 2007. A reconciliation of expected income tax expense (benefit) calculated by applying the statutory federal tax rate to actual income tax expense for the year ended December 31, 2008 and 2007 is as follows:

	2008			2007
Income tax provision (benefit) per federal statutory rate of approximately 36%	$	(1,577,000	)	$	(1,064,000	)
State income tax provision (benefit), net of federal deduction		(136,000	)		(92,000	)
Expenses not deductible for taxes		69,000			42,000
Other, net		53,000			—
Change in valuation allowance		1,591,000			1,114,000
	$	—		$	—

14

Net deferred tax assets as of December 31, 2008 and 2007 are comprised of the following:

	2008			2007
Net operating loss carry forwards	$	3,825,000		$	2,230,000
Other		(45,000	)		(41,000	)
		3,780,000			2,189,000
Less valuation allowance		(3,780,000	)		(2,189,000	)
Deferred tax asset	$	—		$	—

The Company has approximately $10,336,000 (federal) and $10,336,000 (state) of net operating loss carry forwards available to offset future federal and state income tax expense, which begin to expire in 2027 for federal and state purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company believes that sufficient uncertainty exists regarding the realizability of the deferred tax assets such that valuation allowances equal to the entire balance of the deferred tax assets are necessary.

The Company’s utilization of net operating losses against future taxable income may be subject to limitation as a result of an ownership change as defined by Section 382 of the Internal Revenue Code. The Company has not completed a formal IRC Section 382 study and analysis to determine whether an ownership change has occurred and the amount of any limitation on the use of net operating losses.

NOTE 8 – SIMPLE IRA Plan

The Company has adopted a SIMPLE IRA Plan (the “Plan”) whereby eligible employees may make salary contributions to the Plan. The maximum contribution an employee may defer is limited to $10,500 for calendar year 2008. Under the terms of the Plan, the Company shall match the employees’ elective deferral on a dollar-for-dollar basis of up to 3% and 1% of the employees’ compensation in 2008 and 2007, respectively. All contributions made by the employee and the Company are fully vested. The Company incurred $76,251 and $27,753 in retirement plan contribution expense at December 31, 2008 and 2007, respectively, for matching of employee funds contributed to the Plan.

NOTE 9 – Commitments and Contingencies

The Company leases certain equipment under non-cancelable capital leases, which were included in fixed assets as follows:

	2008
Computer equipment	$	80,945
Less accumulated depreciation		(22,759	)
	$	58,186

Depreciation expense related to these capitalized lease obligations was $22,759 during 2008.

15

Future minimum lease payments are as follows:

Year ending December 31,
2009	$	35,269
2010		6,883
2011		735
Total minimum lease payments		42,887
Amount representing interest		6,930
Present value of minimum lease payments	$	35,957
Current portion		33,835
Long-term portion	$	2,122

The Company leases office space and co-location space under non-cancelable operating leases which expire at various dates in 2009 and 2011. The aggregate minimum requirements under these leases as of December 31, 2008 are as follows:

Year ending December 31,
2009	$	252,823
2010		229,152
2011		81,631
Total	$	563,606

Rent expense for the years ended December 31, 2008 and 2007 was $206,702 and $162,494, respectively.

NOTE 10 – Major Customers and Suppliers

For the year ended December 31, 2008, two customers accounted for 22% and 13% of total revenues, respectively. These two customers account for 28% and 22% of accounts receivable at December 31, 2008, respectively.

For the year ended December 31, 2007, two customers accounted for 33% and 19% of total revenues, respectively. The first customer above accounted for 29% of accounts receivable at December 31, 2007.

NOTE 11 – Subsequent Events

In January 2009, the Company issued an additional note payable to the preferred shareholder for $500,000. The note has the same terms as the notes issued in 2008. Additionally, the maturity dates on some of the notes issued in 2008 were extended subsequent to year-end (see Note 4).

16

EX-99.3

Exhibit 99.3

ColdSpark, Inc.

Balance Sheets

Unaudited

	March 31, 2009			December 31, 2008
Assets
Current assets
Cash and cash equivalents	$	598,356		$	408,006
Restricted cash		50,854			50,854
Accounts receivable		57,027			87,758
Prepaid expenses and other current assets		5,283			10,462
Total current assets		711,520			557,080
Property and equipment, net of accumulated depreciation of $225,966 and $204,026, respectively		188,288			209,949
Deposit		12,052			12,052
Total assets	$	911,860		$	779,081
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	46,503		$	60,172
Accrued expenses		598,476			566,066
Deferred revenue		1,546,889			1,220,834
Other current liabilities		319,394			298,031
Notes payable		3,000,000			2,500,000
Total current liabilities		5,511,262			4,645,103
Long-term liabilities		68,967			33,887
Total liabilities		5,580,229			4,678,990
Stockholders’ deficit
Series A preferred stock, $0.0001 par value, 7,500,000 shares authorized, 7,264,948 shares issued and outstanding, at liquidation value		6,405,718			6,405,718
Common stock, $.0001 par value, 30,000,000 shares authorized, 15,630,525 shares issued and outstanding		1,563			1,563
Additional paid-in capital		586,352			539,251
Accumulated deficit		(11,662,002	)		(10,846,441	)
Total stockholders’ deficit		(4,668,369	)		(3,899,909	)
Total liabilities and stockholders’ deficit	$	911,860		$	779,081

1

ColdSpark, Inc.

Statement of Operations

For the three months ended March 31,

Unaudited

	2009			2008
Net revenues:
Software license revenue	$	185,969		$	263,213
Service and support revenue		269,017			261,583
Total revenues		454,986			524,796
Operating expenses:
Sales and marketing		143,415			232,293
General and administrative		1,052,519			1,169,105
Total operating expenses		1,195,934			1,401,398
Loss from operations		(740,948	)		(876,602	)
Other income/(expense):
Interest income		—			3,766
Interest expense		(74,614	)		(23,738	)
Total other income/(expense)		(74,614	)		(19,972	)
Net loss	$	(815,562	)	$	(896,574	)

2

ColdSpark, Inc.

Statement of Cash Flows

For the three months ended March 31,

Unaudited

	2009			2008
Cash flows from operating activities:
Net loss	$	(815,562	)	$	(896,574	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		21,940			26,902
Stock-based compensation		47,101			4,678
Changes in operating assets and liabilities:
Accounts receivable		30,731			(439,192	)
Prepaid expenses and other current assets		5,179			(29,145	)
Accounts payable		(13,669	)		(39,178	)
Accrued expenses		32,410			31,611
Deferred revenue		326,055			333,385
Other current and non liabilities		66,764			—
Net cash used in operating activities		(299,051	)		(1,007,513	)
Cash flows from investing activities:
Decrease in restricted cash		—			52,214
Purchase of property and equipment		(279	)		—
Net cash used in investing activities		(279	)		52,214
Cash flows from financing activities:
Increase in notes payable		500,000			1,000,000
Payments on line of credit		(899	)		—
Principal payments on capitalized lease obligations		(9,421	)		(17,874	)
Net cash provided by financing activities		489,680			982,126
Net increase in cash and cash equivalents		190,350			26,827
Cash and cash equivalents, beginning of year		408,006			340,140
Cash and cash equivalents, end of year	$	598,356		$	366,967
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Capital expenditures funded by capital leases	$	—		$	76,179

3

EX-99.4

Exhibit 99.4

BAKBONE SOFTWARE INCORPORATED

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On May 11, 2009, BakBone Software Incorporated, a Canadian corporation (the “Company” or “BakBone”), Chickasaw Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Chickasaw Acquisition Corporation II, a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub II”), ColdSpark, Inc., a Delaware corporation (“ColdSpark”) and Tom Neustaetter as stockholder representative entered into an Agreement and Plan of Merger (the “Merger Agreement”).

Subject to the terms and conditions of the Merger Agreement, upon the filing of a certificate of merger with the Delaware Secretary of State, Merger Sub was to merge with and into ColdSpark (the "Merger"), with ColdSpark surviving the Merger as a wholly-owned subsidiary of the Company. The Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

On May 13, 2009, the Company, Merger Sub, Merger Sub II and ColdSpark consummated the Merger in accordance with the terms of the Merger Agreement.

The total purchase price is $15.938 million, consisting of $8.125 million in cash and 18,169,780 common shares with a deemed value of $7.813 million, with payments extending over three years.

The following unaudited pro forma condensed combined balance sheet as of March 31, 2009 and the unaudited pro forma combined statement of operations for the year ended March 31, 2009 are derived from the historical audited financial statements of the Company as of and for the year ended March 31, 2009 and the historical internally derived financial statements for ColdSpark as of and for the twelve months ended March 31, 2009. The assumptions, estimates and adjustments herein have been made solely for purposes of developing these unaudited pro forma consolidated financial statements.

The unaudited pro forma condensed combined balance sheet as of March 31, 2009 gives effect to the Merger as if it had occurred on March 31, 2009. The unaudited pro forma combined statement of operations for the year ended March 31, 2009 gives effect to the Merger as if it had occurred on April 1, 2008.

The Merger was accounted for under the acquisition method of accounting in accordance with Statements of Financial Accounting Standards No. 141(R), a revision of SFAS No. 141, Business Combinations (“SFAS 141R”). Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 1 and 2 to these unaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets acquired in connection with the Merger, based on the estimated fair values as of the effective date of the Merger. The allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as the Company finalizes the valuations of the net tangible assets and intangible assets. Any change could result in material variances between the Company’s consolidated future financial results and the amounts presented in these unaudited condensed combined financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

The pro forma statement of operations does not reflect any future operating efficiencies and cost savings resulting from the transaction. Unaudited pro forma combined financial information is presented for information purposes only and is not necessarily indicative of the results that actually would have been realized had the acquisition been completed on the date indicated or which may be expected to occur in the future.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the Company’s historical consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2009 and the financial statements and related notes thereto of ColdSpark for the year ended December 31, 2008 and the financial statements as of and for the three months ended March 31, 2009 included in this Current Report on Form 8-K/A.

1

BakBone Software Incorporated

Pro Forma Condensed Combined Balance Sheet as of March 31, 2009

(In Thousands)

Unaudited

	BakBone Software March 31, 2009			ColdSpark March 31, 2009			Pro Forma Adjustments			BakBone Software Combined
ASSETS
Current assets:
Cash and cash equivalents	$	8,398		$	599		$	(1,432	)(a)	$	7,565
Restricted cash		264			51			—			315
Accounts receivable, net		9,646			57			—			9,703
Prepaid expenses		873			5			—			878
Other assets		286			—			195	(g)		481
Total current assets		19,467			712			(1,237	)		18,942
Property and equipment, net		2,713			188			(101	)(b)		2,800
Intangible assets		824			—			6,210	(c)		7,034
Trademarks		—			—			400	(c)		400
Goodwill		7,615			—			6,099	(d)		13,714
Other assets		939			12			—			951
Total assets	$	31,558		$	912		$	11,371		$	43,841
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		2,291			47			—			2,338
Accrued liabilities		7,312			598			(334	)(e)		7,576
Notes payable		—			3,000			(3,000	)(f)		—
Other current liabilities		—			319			—			319
Current portion of deferred revenue		44,081			1,547			(1,378	)(g)		44,250
Total current liabilities		53,684			5,511			(4,712	)		54,483
Deferred revenue, excluding current portion		47,684			—			—			47,684
Deferred acquisition obligations		—			—			6,502	(h)		6,502
Other long-term liabilities		1,337			69			—			1,406
Total liabilities		102,705			5,580			1,790			110,075
Total shareholders’ deficit		(71,147	)		(4,668	)		9,581	(i)		(66,234	)
Total liabilities and shareholder’s deficit	$	31,558		$	912		$	11,371		$	43,841

2

BakBone Software Incorporated

Pro Forma Combined Statement of Operations

(In Thousands Except Per Share Data)

Unaudited

	BakBone Software Twelve Months Ended March 31, 2009			ColdSpark Twelve Months Ended March 31, 2009			Pro Forma Adjustments			BakBone Software Combined
Revenues, net	$	56,020		$	1,355		$	—		$	57,375
Cost of revenues		7,121			—			1,291	(c)(j)		8,412
Gross profit		48,899			1,355			(1,291	)		48,963
Operating expenses:
Sales and marketing		27,010			1,088			—			28,098
Research and development		11,220			—			2,040	(j)		13,260
General and administrative		16,751			4,599			(2,020	)(j)(k)		19,330
Total operating expenses		54,981			5,687			20			60,688
Operating loss		(6,082	)		(4,332	)		(1,311	)		(11,725	)
Interest income		68			8			—			76
Interest expense		128			(232	)		(829	)(l)		(933	)
Foreign exchange gain, net		790			—			—			790
Other expense, net		(1	)		—			—			(1	)
Loss before income taxes		(5,097	)		(4,556	)		(2,140	)		(11,793	)
Provision for income taxes		354			—			—			354
Net loss	$	(5,451	)	$	(4,556	)	$	(2,140	)	$	(12,147	)
Net loss per share, basic and diluted	$	(0.08	)							$	(0.15	)
Weighted average shares outstanding, basic and diluted		64,615									82,785

3

BAKBONE SOFTWARE INCORPORATED

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma condensed combined balance sheets as of March 31, 2009 and the unaudited pro forma combined statements of operations for the year ended March 31, 2009, are based on the historical audited financial statements of BakBone Software Incorporated (“the Company”) as of and for the year ended March 31, 2009 and the historical internally derived financial statements of ColdSpark, Inc. (“ColdSpark”) as of and for the twelve months ended March 31, 2009 after giving effect to the Company’s acquisition of ColdSpark on May 13, 2009 and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

The Company accounts for business combinations pursuant to Financial Accounting Standards Board Statement No. 141(R), a revision of SFAS No. 141, Business Combinations (“SFAS 141R”). In accordance with SFAS No. 141R, the Company is required to recognize the assets acquired, liabilities assumed, measured at their fair values as of the acquisition date. Significant assumptions and estimates have been made in determining the purchase price and the allocation of the purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the purchase price measurement period as the Company finalizes the valuations of the net tangible assets, intangible assets and contingent consideration. These changes could result in material variances between its future financial results and the amounts presented in these unaudited condensed combined financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

Accounting Periods Presented

The unaudited pro forma condensed combined balance sheet as of March 31, 2009 is presented as if the ColdSpark acquisition had occurred on March 31, 2009. The unaudited pro forma combined statement of operations for the year ended March 31, 2009 is presented as if the ColdSpark acquisition had occurred on April 1, 2008.

Reclassifications

Certain amounts in the statements of operations of ColdSpark have been reclassified to conform to the Company’s financial statement presentation.

2. PURCHASE PRICE ALLOCATION

The Company acquired ColdSpark, Inc. on May 13, 2009, by means of a merger of a wholly-owned subsidiary, such that ColdSpark became a wholly-owned subsidiary of the Company. The Company acquired ColdSpark, among others reasons, to expand and enhance its product portfolio and to further advance its Universal Data Management strategy.

The estimated acquisition date fair value of consideration transferred, assets acquired and liabilities assumed for ColdSpark are presented below and represent the Company’s best estimates.

Preliminary Fair Value of Consideration Transferred

Pursuant to the merger agreement the Company made cash payments totaling $750,000 and issued 9,117,877 common shares for 100% of the equity shares outstanding of ColdSpark. In addition, the Company will make cash payments totaling up to $7,375,000 and issue up to 9,051,903 common shares over a three year period from June 2010 to June 2012.

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The total acquisition date fair value of the consideration to be transferred is estimated at $12.85 million, which includes the initial cash payment of $750,000 and issuance of 9,117,877 shares of the Company’s common stock, and the deferred cash payments of $7,375,000 and issuance of 9,051,903 shares of the Company’s common stock. The total acquisition date fair value of consideration transferred is estimated as follows:

(in thousands)
Cash payments to ColdSpark shareholders	$	7,253
Common share issuances to ColdSpark shareholders		5,595
Total acquisition date fair value	$	12,848

The Company estimated the fair value of the cash consideration by discounting the future cash payments based upon the Company’s after tax cost of debt. In accordance with SFAS 141R, a liability will be recognized for an estimate of the acquisition date fair value of the future cash payments. The increase in the fair value of the deferred cash consideration over the three year issuance period will be accreted to interest expense using the effective interest method.

The Company estimated the fair value of the common stock consideration by multiplying the number of common shares to be issued by the closing stock price on the acquisition date and then adjusted the resulting value for: (i) the lack of marketability of the Company’s common shares as they are currently listed on the Over the Counter Bulletin Board (“OTCBB”); and (ii) the impact of the Company issuing the shares over a three year period of time rather than at the acquisition date. The increase in the fair value of the deferred stock consideration over the three year period will be accreted to interest expense using the effective interest method.

Preliminary Allocation of Consideration Transferred

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of May 13, 2009, the acquisition date. The excess of the acquisition date fair value of consideration transferred over estimated fair value of the net tangible assets and intangible assets was recorded as goodwill.

The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date.

(in thousands)
Cash and cash equivalents	$	58
Restricted cash		51
Accounts receivable		271
Prepaid expenses and other assets		270
Property and equipment		82
Intangible assets		6,210
Trademarks		400
Total identifiable assets acquired		7,342
Accounts payable and accrued liabilities		651
Other liabilities		69
Deferred revenue		168
Total liabilities assumed		888
Goodwill		6,394
Net assets acquired	$	12,848

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Intangible Assets

In determining the fair value of the intangible assets the Company considered, among other factors, the best use of acquired assets, analyses of historical financial performance and estimates of future performance of ColdSpark’s products. The fair values of the identified intangible assets related to the existing technology, patents and trademarks were calculated using a market approach which relies on empirical market data from comparable intangible assets in determining the fair value of the intangible assets acquired. The fair value of the maintenance agreements was calculated using an income approach which relies on estimates and assumptions provided by the Company. The rates utilized to discount net cash flows to their present values were based on a weighted average cost of capital of 18.5%. This discount rate was determined after consideration of the rate of return on debt capital and equity that typical investors would require in an investment in companies similar in size and operating in similar markets as ColdSpark. The following table sets forth the components of identified intangible assets associated with the ColdSpark acquisition and their estimated useful lives:

(in thousands)	Useful Life	Fair Value
Existing technology	10 years	$	4,960
Patents	10 years		1,240
Maintenance agreements	6 months		10
Trademarks	indefinite		400
		$	6,610

In accordance with FSP No. 142-3, Determination of the Useful Life of Intangible Assets, the Company determined the useful life of intangible assets based on the expected future cash flows associated with the respective asset. Existing technology is comprised of products that have reached technological feasibility and are part of ColdSpark’s product line. Patents are related to the design and development of ColdSpark’s products and this proprietary know-how can be leveraged to develop new technology and products and improve their existing products. Maintenance agreements represent the underlying relationships and agreements with ColdSpark’s installed customer base. Trademarks represent the fair value of the brand and name recognition associated with the marketing of ColdSpark’s products and services. Amortization expense for the intangible assets is included in cost of revenues.

Goodwill

Of the total estimated purchase price, approximately $6.4 million was allocated to goodwill. Goodwill represents the excess of the purchase price of the acquired business over the fair value of the underlying net tangible and intangible assets. In accordance with SFAS No. 142, goodwill resulting from business is tested for impairment at least annually and more frequently if certain indicators are present. In the event the Company determines that the value of goodwill has become impaired, it will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made. None of the goodwill is expected to be deductible for income tax purposes.

Deferred Revenue

In connection with the purchase price allocation, the Company estimated the fair value of the service obligations assumed from ColdSpark as a consequence of the acquisition. The estimated fair value of the service obligations was determined using a cost build-up approach. The cost build-up approach determines fair value by estimating the costs related to fulfilling the obligation plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that the Company would be required to pay a third party to assume the service obligations. The estimated costs to fulfill the service obligations were based on the historical direct costs related to ColdSpark’s service agreements with its customers. Profit

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associated with selling efforts was excluded because ColdSpark had concluded the selling efforts on the service contracts prior to the acquisition date. The estimated research and development costs associated with support contracts have not been included in the fair value determination, as these costs were not deemed to represent a legal obligation at the time of acquisition. The Company recorded $168,000 in deferred revenue to reflect the estimate of the fair value of ColdSpark’s service obligations assumed.

Pre-Acquisition Contingencies

The Company has evaluated and continues to evaluate pre-acquisition contingencies related to ColdSpark that existed as of the acquisition date. If these pre-acquisition contingencies that existed as of the acquisition date become probable in nature and estimable during the remainder of the measurement period, amounts recorded for such matters will be adjusted in the financial statements during the measurement period and subsequent to the measurement period. The Merger Agreement provides for the Company to reduce the future cash payments and stock consideration by up to $1,625,000 for pre-acquisition contingencies that existed as of the acquisition date. If the Company determines there were pre-acquisition contingencies in excess of the $1,625,000, the amounts would be included in the Company’s results of operations.

3. PRO FORMA AND RECLASSIFICATION ADJUSTMENTS

Pro forma adjustments are made to reflect the estimated purchase price, to adjust amounts related to ColdSpark’s net tangible assets and intangible assets to a preliminary estimate of the fair values of those assets and to reflect the amortization expense related to the estimated amortizable intangible assets. Additionally, the Company reclassified certain of ColdSpark’s balances to conform to the Company’s financial statement presentation.

The specific pro forma adjustments included in the unaudited pro forma consolidated financial statements are as follows:

(a) To reflect the cash paid to ColdSpark’s shareholders in connection with the Merger ($750,000) and estimated related transaction costs ($682,000).

(b) To reflect the difference in the fair value of the historical carrying amounts of ColdSpark’s property and equipment.

(c) To reflect the fair value of the existing technology estimated to be $5.0 million, the patents estimated to be $1.2 million, the maintenance contracts estimated to be $10,000 and the trademarks estimated to be $0.4 million. The Company has estimated the amortization expense for the year ended March 31, 2009 related to the intangibles acquired in the Merger to be $0.6 million, which is included in cost of revenues.

(d) To reflect the fair value of the acquired goodwill based on the net assets acquired as if the Merger occurred on March 31, 2009. The difference between the amount recorded on a pro forma basis and the actual balance as of the effective date of the Merger is the result of changes in the net liabilities of ColdSpark between March 31, 2009 and May 13, 2009.

(e) To reflect the removal of (i) accrued compensation costs of $0.1 million, for the former ColdSpark CEO who is a member of BakBone’s board of directors, as he waived his right to receive any consideration or other payments in connection with the Merger; and (ii) the accrued interest for ColdSpark’s notes payable balance as the balance converted into Preferred Shares of ColdSpark in connection with the Merger and no amounts remained payable after such conversion.

(f) To reflect the removal of ColdSpark’s notes payable balance as the balance converted into Preferred Shares of ColdSpark in connection with the Merger and no amounts remained payable after such conversion.

(g) To reflect the fair value of ColdSpark’s assumed legal performance obligations under its software maintenance and professional services contracts and to eliminate ColdSpark’s deferred revenue that does not represent a legal performance obligation. No adjustments were made to the unaudited pro forma consolidated statement of operations related to this pro forma balance sheet adjustment.

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(h) To reflect the fair value of the future cash payments owed to ColdSpark shareholders in connection with the Merger.

(i) To reflect the fair value of the issuance and future issuances of the Company’s common stock as part of the Merger ($5.6 million) and the elimination of ColdSpark’s shareholders’ deficit ($4.7 million), offset by the estimated direct acquisition costs incurred by the Company ($0.7 million).

(j) To reflect reclassification adjustments to conform ColdSpark’s balances to the Company’s financial statement presentation for costs of revenues of $0.7 million and research and development costs of $2.0 million, which were presented as general and administrative expenses by ColdSpark.

(k) To reflect the estimated direct acquisition costs incurred by the Company of $0.7 million.

(l) To reflect the reduction in interest expense of $0.2 million as ColdSpark’s notes payable balance converted to Preferred Shares in connection with the Merger and no amounts remained payable after such conversion, offset by the estimated annual interest expense of $1.1 million, to be incurred related to the accretion of the fair value of the purchase price over the payment period.

The fair value adjustments made herein and the allocation of purchase price is preliminary. The final allocation will be based on estimates and appraisals that will be finalized within one year of the closing of the Merger and based on the Company’s final evaluation of ColdSpark’s assets and liabilities, including both tangible and intangible assets. The final allocation of purchase price and the resulting effect on net income may differ from the pro forma amounts included herein. If the Company’s final purchase price allocation differs from the allocation used in preparing these pro forma combined financial statements, the Company’s pro forma tangible and intangible assets and pro forma net income could be higher or lower. Goodwill represents the excess purchase price after all other intangibles have been identified, and, at this time, the Company has not completed its valuation analysis of intangible assets and will update these values in future filings.

4. PRO FORMA NET LOSS PER COMMON SHARE

The pro forma basic and diluted net loss per common share is based on the weighted average number of common shares of the Company’s common stock outstanding during the period as adjusted to reflect the shares of common stock issued and to be issued as consideration in the Merger.

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