Open Source Wall Street Does Some Math & Administrative Details on Novell |
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Sunday, November 14 2004 @ 05:45 PM EST
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Dion Cornett's November 8, 2004 edition of Open Source Wall Street has a paragraph on the SCO legal cap I thought you might be interested in. Even though I don't personally agree with his premise that the new agreement reflects Boies confidence -- in fact, I came to the opposite conclusion -- I thought Cornett's math was well worth sharing. Also, in case you noticed on Pacer, Novell has been granted permission to file their overlength reply memorandum, and there is this Pacer notation as well:
11/10/04 59 Notice of filing by Novell Inc re: Original Declaration of
Kellie Carlton in Support of Dft Novell's Motion to
Dismiss, which contained a faxed signature page. (tsh)
[Entry date 11/12/04]
While it is hard to be sure of clerk notations, this probably just means that somehow when the Kellie Carlton Declaration was filed on November 8, it didn't have an original signature. Evidently it needed to be faxed to Novell's attorneys, and now they have filed the original with Ms. Carlton's signature, because with courts, there has to be an original filed, with a signature. A Xeroxed copy doesn't count, especially not for something being sworn to. It is too easy to Wite-Out a signature or a section of something and redo, Xerox it, and bingo, a plausible-looking fake document. Courts have seen it all, so they require originals. And I gather the Novell attorneys noticed the other side's attorneys, so they can make a federal case out of it if they want to. Joke. Joke. It's not a big deal normally.
Here is OSWS on the SCO legal cap: SCOX’s viability strengthened but not without meaningful dilution We believe that the SCO Group’s (SCOX: Market Perform) announced agreement last week with legal counsel to cap expenses will leave the Company with roughly $8 million in cash (see table below). The agreement tends to suggest continued confidence on the part of Boies, given that much of the $2 million that his firm will collect quarterly for the next six quarters will obstensibly be used to pay third-party law firms assisting in the litigation. Unfortunately, his renewed vote of confidence also comes with further increased dilution for shareholders, including rights to 33% of proceeds associated with the core software business – monies that were previously excluded. It is our belief that Boies expects to be able to sway a jury and then negotiate some greatly reduced settlement prior to appeals. In this computation, he may have miscalculated IBM’s (IBM: not rated) strategic commitment to Linux or the ability of the cases to survive pending motions, but even if he wins a $120 million settlement, investors now receive just $4 per share in proceeds versus the $5 per share given the previous 20% payout and exclusion for prior value. We commend SCOX’s management team for addressing the viability risk, but are disappointed that they did so in a way the allows Boies to capture one-third of remaining value, even if he loses.
$ 43,027 cash reported at Q3 end
$ (7,956) Payment to Boies 20% PIPE deal proceeds
$ (6,400) Accrued fees owed Boies within $13,824 Q3 "accrued expenses"
$ (3,500) Accrued fees owed other law firms within $13,824 Q3 "accrued expenses"
$ (12,000) $2M qrtly legal payments, accrual starting Sept. 1, 2004
$ (5,000) escrow account for other legal expenses e.g. travel, expert witnesses, mock juries
_______________________________________
$8,171 Remaining cash after six quarters As you know, I am not a math whiz, and I find Wall Street logic impossible to figure out, and I couldn't see where he got the $13,824 from, so I wrote and asked. He replied that this can be found in their recent earnings releases and SEC filings. The main point, and even I can get it, is that with the new legal agreement, shareholders will get less than under the old one. According to Dion, so will Boies, as far as cash payments are concerned, because he credits the company's claim that $2M is roughly what has been paid to third-party firms on a quarterly basis, and so Boies will pocket very little, if any of the quarterly payments going forward, particularly when you consider legal costs were $7.3M last quarter, he tells me. Well, all right, if you say so. All I know from my experience is, lawyers get paid. One way or another, unless they are public interest lawyers, they get paid, even if it's just by spoken or unspoken promises of future work from the client or a friend of the client. But somehow, they get paid. You can take that to the bank. Here is a more detailed look at the raw material for Dion's math. He actually sent me a graphic, but it was too large for Geeklog and when I reduced it, you couldn't read it, and the thought of hand coding it was stomach-turning, so I asked a friend, Alan Canon, if there is a pain-free way to do this, and presto, here is the result. I thought he did some computer magic. It turns out he did it by hand, meaning, it was pain-free to *me*. Thank you, Alan:
Fiscal
Year End October
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2001
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2002
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Jan-03
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Apr-03
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Jul-03
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Oct-03
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2003
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Jan-04
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Apr-04
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Jul-04
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Current Assets
Cash & Securities
Restricted Cash
Accounts Receivable
Other Current Assets
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$22,435
$16,742
$9,381
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$8,589
$1,428
$8,622
$4,483
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$4,942
$1,250
$9,489
$3,902
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$10,015
$1,779
$8,793
$4,392
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$14,661
$1,428
$7,398
$2,943
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$68,523
$2,025
$9,282
$2,450
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$88,523
$2,024
$9,282
$2,450
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$64,707
$550
$9,151
$1,864
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$61,346
$3,203
$8,811
$2,531
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$43,027
$13,506
$5,954
$2,466
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Total Current
Assets
Property and Equipment
Intangibles
Other Assets
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$48,558
$8,116
$15,408
$4,777
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$21,122
$2,021
$11,258
$3,005
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$19,583
$1,742
$10,473
$2,064
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$24,979
$1,331
$9,689
$1,873
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$26,430
$1,561
$11,431
$3,210
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$82,280
$1,148
$10,452
$1,072
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$82,280
$1,148
$10,452
$1,072
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$76,272
$1,051
$9,581
$1,311
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$73,891
$872
$6,767
$1,347
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$64,953
$799
$6,090
$1,390
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Total Assets
Current Liabilities
Accounts Payable
Accrued Expenses Payable to BayStar Capital II, LLP
Accrued Comp to law firms
Current Portion of Deferred revenue
Derivative related to convertible
Other Current Liabilities
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$74,859
$2,881
$13,641
$8,241
$9,394
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$37,406
$2,467
$10,849
$10,056
$4,082
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$33,862
$2,051
$5,700
$9,802
$5,816
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$37,872
$1,978
$5,709
$9,218
$6,620
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$42,632
$1,788
$5,559
$6,822
$8,254
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94,952
$1,978
$8,506
$10,556
$5,501
$15,224
$3,347
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$94,952
$1,978
$8,506
$10,556
$5,501
$15,224
$3,347 |
$88,215
$1,418
$9,192
$7,956
$8,952
$11,600
$1,824
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$87,877
$2,831
$10,993
$7,956
$7,554
$5,001
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$73,232
$1,825
$13,824
$13,000
$7,956
$5,936
$2,038
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Total Current Liabilities
Long Term Liabilities
Minority Interest
Convertible Preferred Stock
Stockholders Equity
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$34,157
$5,925
$173
$34,604
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$27,454
$1,625
$150
$8,177
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$23,369
$2,340
$150
$8,003
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$23,525
$618
$150
$13,579
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$20,423
$611
$150
$13,579
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$45,112
$508
$145
$29,671
$19,516 |
$45,112
$508
$145
$29,671
$19,516
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$38,942
$578
$145
$29,671
$18,879
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$34,335
$535
$0
$45,065
$2,942
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$44,579
$501
$0
$0
$28,152
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Total Liab & Equity
Cash per share
Book Value per Share
DSO's
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$74,859
$0.47
$0.72
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$37,406
$0.51
$0.63
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$33,862
$0.44
$0.71
63
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$37,872
$0.73
$0.99
$37
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$34,763
$0.91
$0.84
33
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$94,952
$4.04
$1.15
34
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$94,952
$4
$1
$34
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$88,215
$4.68
$1.37
72
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$82,877
$4.35
$2.16
60
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$72,232
$2.16
$1.41
48
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Authored by: chrisbrown on Sunday, November 14 2004 @ 05:49 PM EST |
nt [ Reply to This | # ]
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Authored by: Mecha on Sunday, November 14 2004 @ 05:57 PM EST |
My understanding of Mr. Cornett is that he is just a stock analyst. In his
capacity he is to offer his expert analytical opinion of the companies he
watches over. To me, if I am a holder of a share of SCOX, I would be want to
here something good coming out of SCOX so that I can sell it off and cut my
losses. Not continue to acrue them. Of course, I don't own any SCOX but wish I
did back in February so that I could short it and make a TON of money. Dumb Me.
Oh well. Life goes on.
---
LINUX! Because Microsoft should have no business in your business![ Reply to This | # ]
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Authored by: Acrow Nimh on Sunday, November 14 2004 @ 06:00 PM EST |
Main posts in this thread may only be made by senior managers or attorneys for
"The SCO Group". Main posts must use the name and position of the
poster at "The SCO Group". Main posters must post in their official
capacity at "The SCO Group".
Sub-posts will also be allowed from non-"The SCO Group" employees or
attorneys. Sub-posts from persons not connected with "The SCO Group"
must be very polite, address other posters and the main poster with the
honorific "Mr." or "Mrs." or "Ms.", as
appropriate, use correct surnames, not call names or suggest or imply unethical
or illegal conduct by "The SCO Group" or its employees or attorneys.
This thread requires an extremely high standard of conduct and even slightly
marginal posts will be deleted.
P.J. says you must be on your very best behavior.
If you want to comment on this thread, please post under "O/T"
---
Supporting Open Sauce since 1947 ;¬)[ Reply to This | # ]
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Authored by: DMF on Sunday, November 14 2004 @ 06:35 PM EST |
I maximized the window, and I think the chart is displaying correctly.
So why does it show liabilites to Baystar going back to 2001?
[ Reply to This | # ]
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- Baystar? - Authored by: CyberCFO on Sunday, November 14 2004 @ 07:00 PM EST
- Baystar? - Authored by: Anonymous on Sunday, November 14 2004 @ 07:43 PM EST
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Authored by: DMF on Sunday, November 14 2004 @ 06:38 PM EST |
What does the last line in the chart represent?
[ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 07:00 PM EST |
Notice how they don't have a common shares outstanding" line.
[ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 07:08 PM EST |
The lack of listing payment to Novell of 95% of any SYS V income sort of sticks
out.
What happened to the SYS V audit Novell has requested?
This would put The SCO Group as far past bankrupt.[ Reply to This | # ]
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Authored by: elcorton on Sunday, November 14 2004 @ 07:36 PM EST |
The newsletter is here
.
There are a couple of things I don't
understand.
Unfortunately, [Boies] renewed vote of confidence also
comes
with further increased dilution for shareholders, including rights to 33%
of
proceeds associated with the core software business – monies that were
previously excluded.
I don't know what Cornett means by this,
unless he's misreading the
Engagement Letter. Revenue from the UNIX business is
not included in either
the Litigation Recoveries or Transaction Recoveries on
which contingency
payment is due.
Nor do I understand how he comes up with
the idea that the agreement
is a "renewed vote of confidence." Seems more like
getting in ahead of the
other carrion-feeders to me. Boies is stuck with SCO.
He can't stop
representing them just because they run out of money.
Then he
has a table that shows deductions from SCO's cash balance over
the term of the
agreement. The bottom line is labeled "Remaining cash after
six quarters," but
no account is taken of cash flow from core business
operations. Is he assuming
the business will be cash-neutral? That's probably
not far from the truth, but
the assumption is unstated.
Dion, if you're still reading, please explain
either here or on the Y-SCOX
board. [ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 07:47 PM EST |
Now that we know (hahaha) that the copyrights that SCOG "have" are now worth
billions and billions (sorry Carl - RIP), why isn't the "newly" recognized value
of same shown in the assets? If I owned same I'd be proud to report the
value. [ Reply to This | # ]
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Authored by: jim Reiter on Sunday, November 14 2004 @ 09:19 PM EST |
I am amazed at how tens of millions of dollars and stock pop in and out of the
TSG balance sheet. This is not to say that someting funny is going on, but then
why am I laughing. [ Reply to This | # ]
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Authored by: thorpie on Sunday, November 14 2004 @ 09:20 PM EST |
If Wall Street are punting, then they reckon that the chances of winning
are:
Ø The (share price – cash backing)/ likely returns;
or
Ø ($3.45 - $2.16)/$4 = 32.25%
Maybe they are not so
smart?
Anybody here think they have a 32% chance of winning or settling
on anything? Anybody even willing to put odds on the prospect of them not being
bankrupt in 18 months time?
--- The memories of a man in his old age
are the deeds of a man in his prime - Floyd, Pink [ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 09:34 PM EST |
<i>even if he wins a $120 million settlement, investors now receive just
$4 per share in proceeds</i><p>
So if someone bought SCOX at $16, and it is selling below $4 at present, and
gets a payment of $4 if SCO wins that settlement, the investor will have still
lost $8? or am I calculating things wrong?[ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 09:51 PM EST |
BSF to scox: we don't want to work on just contingency, and we don't want your
stock. We want cash - and lots of it - right up front.
1) BSF not willing to work on just contingency means BSF has no confidence in
scox's case.
2) BSF not willing to work for scox shares shows that BSF has no confidence in
scox's future as a company.
Why would dion say this is a "vote of confidence" ? Dion is no dummy,
is he a liar?
[ Reply to This | # ]
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Authored by: _Arthur on Sunday, November 14 2004 @ 09:54 PM EST |
For some businesses, a $8M cash cushion is adequate.
But...
1) Some of the $8M might be artefacts of creative accounting; although SCO's
auditors are unlikely to turn a blind eye to such shenanigans.
2) Darl hopes that the UnixWare business will be break-even, from now on.
That remains to be seen.
3) SCO has been losing customers as a steady pace; SCO will cut R&D and
Support at a matching rate. The remaining customers might not appreciate
the reduction in support, and slipping the empty promises of a new-and-
improved version.
4) SCO current lawsuits are supposedly covered by the Legal Cap. Several
others players can elect to sue SCO for numerous reasons. Furthermore, SCO
is ill-placed to threathen current or prospective customers with Legal Action,
because SCO's war chest is nearly empty.
Any new lawsuit will fall outside the Legal Cap.
5) Even the current lawsuits can cause sizeable expenses to SCO. For
exemple, Daimler can still ask to be reimbursed for its legal fees, that's
easily a $2M penalty for SCO. If SCO was, G-d forbid, to obtain a
temporary injunction against AutoZone, SCO would have to post a multi-
million $$$ bond.
In short, any unexpected event can raise doubts on the ability for SCO to
remain a going concern, an may provoke a Bankrupcy before the Trial.
_Arthur[ Reply to This | # ]
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Authored by: Anonymous on Sunday, November 14 2004 @ 09:57 PM EST |
allows Boies to capture one-third of remaining value, even if he loses.
If he looses, that would assume IBM wins. What is left? A failing
business, money owed to IBM, money owed to IBM lawyers, etc. Who gets paid
first? (generally speaking that is...) Shouldn't IBM and it's law firm be paid
first? I dont wish to be stupid,... and I think this was covered before, but I
am not sure if we really answered that question. [ Reply to This | # ]
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Authored by: codswallop on Sunday, November 14 2004 @ 11:31 PM EST |
Of the $8 million. $5 million is deferred revenue - that is, money received for
work not yet complete. This would include payments in advance for contracts with
cancellation terms. It also assumes that no additional money was lost net the
legal expenses in the latest quarter, and that there will be no future losses
net the legal expenses.
Also not included would be any new lawsuits.
They would also be delisted before six quarters, probably before 4 quarters.
---
IANAL This is not a legal opinion.
SCO is not a party to the APA.
Discovery relevance is to claims, not to sanity.[ Reply to This | # ]
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Authored by: ChubbyTiger on Monday, November 15 2004 @ 11:38 AM EST |
Anybody else see the news that our buddy Davey has agreed to represent AmEx in a
new antitrust lawsuit against Visa and MasterCard? This guy must have lots of
free time, what with the SCO lawsuit going *poof*.
:)
http://news.yahoo.com/news?tmpl=story&u=/ap/20041115/ap_on_bi_ge/c
redit_cards_1
CT [ Reply to This | # ]
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Authored by: Anonymous on Monday, November 15 2004 @ 05:08 PM EST |
I am pretty sure that the $88,523 of the first row for 2003 should read $68,523
(see Oct-03 column).[ Reply to This | # ]
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Authored by: Anonymous on Tuesday, November 16 2004 @ 08:10 AM EST |
What this analysis says to me, is that if a well funded
person/company/organization launches another legal action against SCO, then SCO
is very vulnerable to bankruptcy. As we have have seen, legal costs chew through
the cash very quickly.[ Reply to This | # ]
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Authored by: Basset## on Tuesday, November 16 2004 @ 09:26 PM EST |
PJ something does not add up here. The accounting rule is Assets equals
Liabilities plus Equity. This is not the case for Jul-04, Apr-04, Jul-03. Also,
just looking at Jul-04 assets should it be $64,503? Is something missing? [ Reply to This | # ]
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