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| SCO Announces Restatement |
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Thursday, March 03 2005 @ 04:18 PM EST
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Bloomberg has the press release from SCO. SCO has announced that "due to certain accounting errors, the Company's financial statements for the quarters ending January 31, 2004, April 30, 2004 and July 31, 2004 should no longer be relied upon and should be restated." This doesn't appear to be the entire story, as to the failure to timely file the 10K earlier, considering the reasons given for the delay. Robert McMillan tells us this: "Last month, SCO claimed that the filing delay was due to a re-examination of stock grants made under the company's employee compensation plan. But in a statement today, the Lindon, Utah-based company said it also expects to reclassify dividends related to a $50 million October 2003 investment in the company made by BayStar Capital LP. SCO said it repurchased all shares of BayStar's A-1 Convertible Preferred stock last July.. . .
"The company may have to repurchase certain shares purchased under its employee stock purchase program that were not properly registered during the first three quarters of the company's fiscal year, which ended Oct. 31. SCO will also have to restate $233,000 in stock compensation recorded in the second quarter that actually occurred in the first quarter, the statement said." Here's the SEC filing. BusinessWeek says trading stopped: "Shares of the seller of UNIX operating systems and products were halted in extended trade ahead of the news. The stock closed earlier up 6 cents at $4.17 on the Nasdaq."
And Stephen Shankland has more details: "For the first, second and third quarters of the company's fiscal 2004 SCO issued stock as part of its compensation plans 'without complying with the registration requirements of federal and applicable state securities laws.' The company will reclassify that stock as temporary equity instead of permanent equity and may offer to reverse those share grants.
"The amounts reclassified are $272,000, $231,000 and $557,000 for the first, second and third quarters, respectively, SCO said. There could be a financial effect from the situation if SCO has to offer to buy back the stock, issued to employees through a purchase plan, and the market price of the stock is lower than the stock price when it was issued, spokesman Blake Stowell said.
"The second problem concerned incorrect classification of dividends related to the company's repurchase of preferred shares relating to a $50 million investment in the company. The company is reclassifying $879,000 from the first quarter and $1,619,000 from the second quarter as current liabilities instead of equity. . . .
"The third problem was that $233,000 in stock-based compensation was recorded in the second quarter but actually accrued in the first, SCO said." He adds that Blake Stowell says the second problem has to do with "dividends SCO had to allocate in relation to the preferred shares but that it never had to pay because it repurchased those shares."
Of course, the stock goes up on bad news. For an overview from more rational quarters, BusinessWeek has some News Analysis, headlined "A Linux Nemesis on the Rocks --
SCO's lawsuit is floundering -- and now the struggling software company faces regulators' scrutiny and questions about its management", which tell us this:
"Well, the mouse that roared is barely squeaking these days. A string of recent setbacks raises grave questions about SCO's finances, its court case, and its management. . . .
"While the restatements won't change its net loss or cash balance for that year, they are likely to reduce its cash position by $500,000 or more in fiscal year 2005, says an insider.
"SOME STAYING POWER. "What once looked like a mortal threat to Linux appears to be fading. As a result, the suit has become a nonfactor in corporate buying decisions. . . .
"Thomas C. Carey, a lawyer at Boston law firm Bromberg & Sunstein who is not involved in the suit, says SCO's case is on the ropes. 'The judge gave every indication that he is prepared to throw out the case unless SCO comes up with some surprising evidence,' he says." Here is the press release:
**********************************
The SCO(R) Group, Inc. Announces Restatement of Financial
Statements to Correct Certain Accounting Errors
No Impact to Net Loss or Earnings Per Share for the Fiscal Year Ended October 31, 2004
LINDON, Utah, March 3 /PRNewswire-FirstCall/ -- The SCO Group, Inc. (the "Company") (Nasdaq: SCOXE) announced today that on February 28, 2005, on management's recommendation, the Audit Committee of the Board of Directors concluded, and KPMG LLP, the Company's independent auditors agreed, that, due to certain accounting errors, the Company's financial statements for the quarters ending January 31, 2004, April 30, 2004 and July 31, 2004 should no longer be relied upon and should be restated.
The impact of the anticipated corrections does not impact the Company's previously reported net loss or its earnings per share for the fiscal year ended October 31, 2004 or its aggregate cash and available-for-sale securities balances as of October 31, 2004.
As of today, the Company currently intends to restate its previously issued financial statements for the above-mentioned quarters of fiscal year 2004 to correct the accounting for the following items:
* For the first, second and third quarters, the Company expects to
reclassify amounts related to certain shares of common stock that the
Company may have issued under its equity compensation plans without
complying with the registration requirements of federal and applicable
state securities laws from permanent equity to temporary equity in the
amounts of approximately $272,000, $231,000, and $557,000,
respectively. The Company may make a rescission offer to holders of
certain shares and expects an amount to be classified as temporary
equity until the completion of a rescission offer or until the Company
no longer has an obligation to the holders of such shares.
* For the first quarter and the second quarter, the Company expects to
reclassify accrued dividends related to the Company's previously
issued Series A and Series A-1 Convertible Preferred Stock from
equity to current liabilities in the amounts of approximately
$879,000 and $1,619,000, respectively. In October 2003, the Company
issued shares of Series A Convertible Preferred Stock in connection
with its $50,000,000 private placement, which shares were subsequently
exchanged for and replaced with shares of Series A-1 Convertible
Preferred Stock. When the Company repurchased all outstanding shares
of Series A-1 Convertible Preferred Stock in July 2004, the Company's
obligation to pay dividends on such shares terminated. The accrued
dividends were never paid and ultimately were recorded in equity upon
the completion of the repurchase transaction. In addition, the
dividends were properly captured in the calculation of earnings per
share in the periods above.
* For the first and second quarter, the Company expects to restate
approximately $233,000 of stock-based compensation expense which was
recorded in the second quarter, but incurred in the first quarter.
There will be no change to the total stock-based compensation expense
for the fiscal year ended October 31, 2004.
As soon as the Company completes its analysis and KPMG LLP completes its review procedures and audit work with respect to the Form 10-K, the Company will file amendments to its quarterly reports on Form 10-Q for the above-mentioned periods and will file its annual report on Form 10-K for the year ended October 31, 2004.
As previously announced, the Company submitted a request for a hearing with the Nasdaq Listing Qualifications Panel. The Company has received notice that its request has been accepted and the hearing is scheduled for March 17, 2005.
Forward-Looking Statements
This press release contains forward looking statements related to (i) the Company's intention to restate its financial statements for the quarters ending January 31, 2004, April 30, 2004 and July 31, 2004 and (ii) the nature and amounts of the anticipated financial statement adjustments for such periods. The Company wishes to advise readers that a number of important factors could cause actual results to differ materially from those anticipated in such forward-looking statements including the fact that the anticipated adjustments to the financial statements for such periods, as well as the amendment of the quarterly reports on Form 10-Q for such periods, are subject to on-going preparation and review by the Company, the Audit Committee and KPMG, and accordingly are subject to change.
About SCO
The SCO Group (Nasdaq: SCOXE) helps millions of customers in more than 82 countries to grow their businesses everyday. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 4,000 developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit http://www.sco.com .
SCO, and the associated SCO logo are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX is a registered trademark of The Open Group.
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| Authored by: feldegast on Thursday, March 03 2005 @ 04:28 PM EST |
Corrections Here so PJ can find them
---
IANAL
The above post is (C)Copyright 2005 and released under the Creative Commons
License Attribution-Noncommercial 2.0
P.J. has permission for commercial use[ Reply to This | # ]
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| Authored by: feldegast on Thursday, March 03 2005 @ 04:30 PM EST |
Off topic posts here
please make links clickable
---
IANAL
The above post is (C)Copyright 2005 and released under the Creative Commons
License Attribution-Noncommercial 2.0
P.J. has permission for commercial use[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:30 PM EST |
While these amounts look small, once you think of the tiny tiny amount of
revenue this company makes you realise what an error this is.
Strange goings on with the shares, potential de-listing; does SEC actually care
about any of these things at all?[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:31 PM EST |
Those assiduous corporate officers -- singlemindedly and doggedly badgering the
auditors into seeing the necessity for restating results: no matter how long it
took.
What a team. What ethics. What ... self-serving bilgewater.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:36 PM EST |
I wonder how many company officers will be forced ro resign over this one? A
new CFO would be the start I should expect.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:37 PM EST |
| the share price goes up... [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:42 PM EST |
This seems so sketchy. Is SCO doing things like this so its friends in the
investment community can short the stock? I wish the Sarbanes-Oxley deadline
for small companies hadn't been pushed back. I'm sure we'll see all kinds of
control deficiencies when SCOX makes their filing.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 04:46 PM EST |
So to fix the problem they will be buying back stock from employees? Isn't that
awfully convenient? I wonder what the buy-back price will be.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 05:21 PM EST |
Maybe the "About SCO" tagline is just a little out of date regarding
the number of programmers.[ Reply to This | # ]
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| Authored by: SilverWave on Thursday, March 03 2005 @ 05:27 PM EST |
"UNIX is a registered trademark of The Open
Group."
Much better..
About Time...
Meanwhile back
at the ranch...
Anyone smell sometime?
Oh thats what
Restatement smells like! ---
"They [each] put in one hour of
work,
but because they share the end results
they get nine hours... for free"
Firstmonday 98 interview with Linus Torvalds [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 05:30 PM EST |
If this turns out to be the entire story with all there really was about it, can
we expect a correction on the analysis you offered us before? Just like a real
journalist? Like Vaughan-Nichols ( eWEEK.com )for instance who also felt he had
to spend some articles and comments on the issue for the greater benefit of the
cause? [ Reply to This | # ]
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- Would you be disappointed , PJ? - Authored by: Anonymous on Thursday, March 03 2005 @ 05:50 PM EST
- Is it a duck? - Authored by: Anonymous on Thursday, March 03 2005 @ 05:54 PM EST
- That's okay. - Authored by: Asynchronous on Thursday, March 03 2005 @ 06:24 PM EST
- Would you be disappointed , PJ? - Authored by: PJ on Thursday, March 03 2005 @ 07:36 PM EST
- Would you be disappointed , PJ? - Authored by: dmscvc123 on Thursday, March 03 2005 @ 07:38 PM EST
- HI BIFFE! - Authored by: Anonymous on Thursday, March 03 2005 @ 08:17 PM EST
- it looks WORSE than before - Authored by: Anonymous on Friday, March 04 2005 @ 04:17 AM EST
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| Authored by: Anonymous on Thursday, March 03 2005 @ 05:35 PM EST |
Of course, ordinarily, a normal stock would drop rather sharply
on news like this. Since the announcement apparently didn't
happen until after the market close (the PR Newswire release
is timestamped at 4:05 p.m.) we'll just have to wait with bated
breath for tomorrow's opening.
Any bets that the stock will go up? It went up a nickel today.
Perhaps SCO just did a good job keeping the bad news from
leaking prematurely.
[ Reply to This | # ]
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| Authored by: RedBarchetta on Thursday, March 03 2005 @ 05:37 PM EST |
So the books take a big hit.
$2.5 million lopped off of equity (current assets?) CANNOT be good. This should
shorten SCO's corporate life by about a month, maybe less.
I don't remember my accounting too well, but doesn't this mean the books
actually take a $5 million hit? You lessen assets by $2.5 mil, and increase
liability $2.5 mil; aggregate of $5 mil. Whatever -- I may be talking steam
here.
Interestingly, they state that this will not affect the net income (income
statement), as if to minimize the error. But it will definitely affect the
balance sheet. Sometimes that can be just as bad as a red-ink-filled income
statement.
---
Collaborative efforts synergise.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 05:49 PM EST |
I think that it is interesting to note exactly what KPMG agreed to as being the
problem. KPMG agreed that the SCO financial staements for three quarters are
wrong and must be restated:
"On February 28, 2005, on management’s recommendation, the Audit
Committee of the Board of Directors of The SCO Group, Inc. (the “Company”)
concluded, and KPMG LLP, the Company’s independent auditors agreed, that, due to
certain accounting errors, the Company’s financial statements for the quarters
ending January 31, 2004, April 30, 2004 and July 31, 2004 should no longer be
relied upon and should be restated."
KPMG expressed no opinion on any of the rest of the statements in the 8-K.
Therefore the problems that SCO lists in the 8-K may not be the problems that
KPMG objects to. Or more likely, the problems that SCO lists in the 8-K are
trivial compared to the problems that SCO did not list in the 8-K.
------------------
Steve Stites[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, March 03 2005 @ 06:47 PM EST |
From the SEC filing
Rescission is a remedy that wipes out the existing contract and restores the
parties to their situation prior to entering into the contract. If money has
been paid by one party to another, that money is returned as part of the
rescission process.
Rescission can occur as a result of innocent or fraudulent representation,
mutual mistake, lack of legal capacity, an impossibility to perform a contract
not contemplated by the parties, or duress and undue influence. For example,
assume you agreed to sell and the buyer agreed to buy two acres of land that you
thought you owned. Later, it turns out that you did not have title to the
property. Rescission would be the proper remedy.
Sound likr the Baystar deal[ Reply to This | # ]
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| Authored by: garbage on Thursday, March 03 2005 @ 08:13 PM EST |
"...SCO has not offered any competent evidence to create a disputed
fact..."
judge Kimball, 2005
No other country's legal system would tolerate
this utter nonsense IMHO.
[ Reply to This | # ]
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| Authored by: greybeard on Thursday, March 03 2005 @ 09:24 PM EST |
Wonder whether anyone will think to "re-state" old Darl's bonus money
for the quarters in question?
---
-greybeard-[ Reply to This | # ]
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| Authored by: josmith42 on Thursday, March 03 2005 @ 11:01 PM EST |
Okay, it seems almost cartoonish to me how spectacularly SCO is. You've got
to admit it, they don't do things in half measures over there. They try to
subvert a beloved operating system into their control. They sue one of the
largest companies in the world, whose lawyers are known as the "Nazgul". They
try to paint Linus Torvalds, a beloved figure in the FOSS world, as a criminal.
Then they get many a news outlet to print whatever they say.
Now, it
seems like they're imploding like a super-giant does right before it goes
supernova. Their court cases are losing spectacularly. Media sources report
anything bad about SCO (because they lose credibility otherwise, and hence
revenue*). And now this SEC craziness.
So, here's my question: are all
companies like this and we just don't notice because of lack of publicity, or is
SCO a unique phenomenon? Is SCO a .com company dying a spectacular death, five
years too late?
*Unless you're a paid shrill of Microsoft and get
paid no matter how deeply down the sewage pipe your credibility is
:] ---
This comment was typed using the Dvorak keyboard layout. :-) [ Reply to This | # ]
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| Authored by: Anonymous on Friday, March 04 2005 @ 12:57 AM EST |
I fail to understand how these accounting errors occurred. During the time of
these errors, the people who are no longer with the company because of Mr.
Mustard in the boardroom with the NDA, were with the company. You know, the
ones that didn't compare notes but said almost the exact same things in their
depositions. The ones that expressed concern about filing certain pending
paperwork, since they were the only ones that knew what was going on and what
needed to be done. I guess things are really going to fall apart now.[ Reply to This | # ]
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| Authored by: chris_bloke on Friday, March 04 2005 @ 01:32 AM EST |
Interesting that the SCO press release hasn't yet appeared
on the
front page of their Investor Relations
site
with the rest of their press releases, even though
their 8K filing which
includes the press release is in the
SEC Filings Section...
SCO
would never try and play something like this down,
would they ? :-)
[ Reply to This | # ]
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| Authored by: fudisbad on Friday, March 04 2005 @ 01:34 AM EST |
I was just wondering if there could be any bagholder lawsuits as a result of
this restatement... Remember when Red Hat revised its earnings and got sued with
the stock price plunging at least a dollar in a day? Better keep an eye on the
courts.
Too bad trading is halted.
---
See my bio for copyright details re: this post.
This subliminal message has been brought to you by Microsoft.[ Reply to This | # ]
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| Authored by: Anonymous on Friday, March 04 2005 @ 02:10 AM EST |
"'The judge gave every indication that he is prepared to throw out
the
case unless SCO comes up with some surprising evidence,' he says."
Why
yes, actual evidence would be quite a surprise indeed.
[ Reply to This | # ]
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| Authored by: belzecue on Friday, March 04 2005 @ 02:19 AM EST |
| At this point, you may want to refresh yourself with SCO's Code of Conduct.
I remember when they first published this
doc -- it didn't take long to discover that they copied it from another document
on the web and just changed the names here and there, in typical SCO "just for
show" style. See
Groklaw comment. [ Reply to This | # ]
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| Authored by: Anonymous on Friday, March 04 2005 @ 03:15 AM EST |
From the BusinessWeek article:
"Canopy lawyers say they are not
trying to remove Yarro and Mott from the SCO board at this time, but some
analysts say the feud could lead to changes in SCO's management or strategy down
the road. If new directors are appointed at Canopy's request, they might
pressure SCO "to sell assets or force a settlement," says analyst Rob Enderle of
market researcher Enderle Group."
I didn't realize it was
Enderle's quote at first, and I wasn't able to figure out how SCOXE would be in
any position to force a settlement. Then I saw who said it, and applied the
appropriate accuracy filter.
bkd
[ Reply to This | # ]
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| Authored by: Sunny Penguin on Friday, March 04 2005 @ 07:50 AM EST |
"due to certain accounting errors"
Weasel-speak for:
"We are broke and don't want to tell our shareholders till we have a press
conference fom Brazil"
---
Just Say No to Caldera/SCO/USL/?
[ Reply to This | # ]
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| Authored by: ray08 on Friday, March 04 2005 @ 09:05 AM EST |
I was wondering why the volume of this worthless stock was really low for the
last couple of days. At first I thought it was just a general market slowdown
due to oil (again). Then I thought the world may be wising up to the junk stock
and not buying it. I figured the little volume that did trade must have been
Canopy trying to manipulate the stock (the stock gained .05 to .10, even with
really low volume)
Looks like this explains the situation...trading is halted!
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Caldera is toast! And Groklaw is the toaster! (with toast level set to BURN)[ Reply to This | # ]
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| Authored by: frk3 on Friday, March 04 2005 @ 09:37 AM EST |
TSG also has to re-file some reports and are already late on another and will
probably be late on at least one more.
This on top of what will come down
from the courts fairly soon, will just be the start of a lot of "bad news" for
TSG. Or, maybe I should say, what appears will be an acceleration of even more
bad news.
Couldn't have happened to a nicer company. [ Reply to This | # ]
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