Mako Networks shut down by liquidator, owes millions

Barely a week after director and minority shareholder Bill Farmer bragged to NBR about his company's success in the US, his company has closed its doors. UPDATED

UPDATEDMako owes Spark $26m – insider

Barely a week after director and minority shareholder Bill Farmer bragged to NBR about his company’s success in the North American market, the company has closed its doors.

An in-depth interview given by Mr Farmer now looks like nothing more than a snow job.

Steven Khov of Waterstone Insolvency has been appointed liquidator of Mako Networks, based in Albany, Auckland and its sister company Mako Networks North America.

Neale Jackson of KordaMentha has been appointed receiver of a third related company Mako Networks Holdings. Mr Jackson has also been appointed receiver for Mako Networks.

When reached by phone, Mr Khov’s colleague Kieren Jones was at Mako’s Albany office.

 “We’ve shut the business down,” he said.

Waterstone had been brought in at the request of shareholders.

“We still haven’t got to grips with what happened,” said Mr Jones.

It was not yet clear how much was owed to shareholders “but we’re talking millions” he said.

Mako employed around 35 staff in New Zealand and had around 15 overseas including a San Francisco office.

In an interview with NBR that took place on August 7, and which was featured in today’s print edition, Mr Farmer talked about 2014 being a tough year for his company – which makes network security products – especially as it grappled with demanding Fortune 50 clients Chevron (with whom he said Mako had a $4 million deal) and BP ($8 million). However, he said with two milestone deals in place and others in the pipeline, including one worth $30 million, his company was now well positioned, he said.

A staff of around 100 had been reduced to 50, which he pitched as a reflection of the fact reseller partners were now playing a bigger role in Mako’s business.

$5m government grant
Mr Farmer acknowledged his company had lost money for years as it spent upward of $25 million on R&D (including a grant of around $5 million from an agency now absorbed into Callaghan Innovation.

But he said “We’ve got to the stage where we’re losing less. Next year’s meant to be our turnaround year.”

When dealing with private companies, especially those doing most of their business in another country, you have to take a lot of what they say at face value. In this case, it wasn’t worth much.

Mr Farmer messaged NBR that “Unfortunately the challenges I spoke about in the US have risen a notch ... [It's been a] really tough week with deployments being extended again in the US and the reserves were not sufficient."

Mako's security appliances are centrally managed via the cloud, and local customers include Spark and the Ministery of Health. Asked if there was any interruption to their service, Mr Farmer messaged "Our business continuity arrangements with channel partners have kicked in and all customers are uninterrupted."

He did not immediately respond to a question about how much money is owed to creditors. 

Beyond Mr Farmer's 26% stake, Mako shares are divvied up between the company's managers and founders.

Waterstone’s initial inquiries continue. NBR expects to have an update on Monday.

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