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SCO Files October's Monthly Operating Reports
Wednesday, November 21 2007 @ 11:30 PM EST

SCO has now filed this month's operating reports for SCO Group and SCO Operations, and if these were my books, I'd be worried I was about to bleed to death. It's got me wondering if it's possible that the asset sale motion was withdrawn because SCO can't last long enough to actually do one. I am not an accountant however, and they could hide an elephant in there and I'd never know it, so I'll let you look over the filings. If they are making money by the bucket, sing out. No doubt you'll have more accurate impressions than I do. I see several things that don't seem to add up. If someone could explain how much goes to SCO Germany, for example, I'd be interested. SCO China too. And I see a change in accounting for where the money for the IBM and Novell litigation is going. And exactly how much is SCO now worth? All I know is if it were me, I'd be cutting back on Entertainment/Travel if I could.

I guess the worst thing about bankruptcy is that everyone gets to look at all your otherwise private stuff. Not that it isn't fascinating. But it feels a little like looking through someone's underwear drawer. It's actually not all the private stuff, as there are redactions and in some cases blanks where SCO tells the US Trustee that it's available to that office on request. I'm thinking there will likely be such requests.

Here are today's filings:

226 - Filed & Entered: 11/20/2007
Operating Report
Docket Text: Debtor-In-Possession Monthly Operating Report for Filing Period October 2007 for The SCO Group, Inc. Filed by The SCO Group, Inc.. (Werkheiser, Rachel)

227 - Filed & Entered: 11/20/2007
Operating Report
Docket Text: Debtor-In-Possession Monthly Operating Report for Filing Period October 2007 for SCO Operations, Inc. Filed by The SCO Group, Inc.. (Werkheiser, Rachel)

228 - Filed & Entered: 11/20/2007
Certificate of Service
Docket Text: Certificate of Service re: Notice of Withdrawal of Emergency Motion of the Debtors for An Order (A) Approving Asset Purchase Agreement, (B) Establishing Sale and Bidding Procedures, and (C) Approving the Form and Manner of Notice of Sale (related document(s)[225] ) Filed by The SCO Group, Inc.. (Werkheiser, Rachel)

229 - Filed & Entered: 11/21/2007
Certificate of Service
Docket Text: Certificate of Service re: Monthly Operating Report for Filing Period October 2007 for The SCO Group, Inc. (related document(s)[226] ) Filed by The SCO Group, Inc.. (Werkheiser, Rachel)

230 - Filed & Entered: 11/21/2007
Certificate of Service
Docket Text: Certificate of Service re: Debtor-In-Possession Monthly Operating Report for Filing Period October 2007 for SCO Operations, Inc. (related document(s)[227] ) Filed by The SCO Group, Inc.. (Werkheiser, Rachel)


  


SCO Files October's Monthly Operating Reports | 643 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Thread
Authored by: TheBlueSkyRanger on Wednesday, November 21 2007 @ 11:37 PM EST
Dobre utka,
The Blue Sky Ranger

[ Reply to This | # ]

OT Topic Here, Please
Authored by: TheBlueSkyRanger on Wednesday, November 21 2007 @ 11:38 PM EST
Dobre utka,
The Blue Sky Ranger

[ Reply to This | # ]

Newspick Discussion Here, Please
Authored by: TheBlueSkyRanger on Wednesday, November 21 2007 @ 11:39 PM EST
Dobre utka,
The Blue Sky Ranger

[ Reply to This | # ]

SCO Files October's Monthly Operating Reports
Authored by: Gerhard Mack on Wednesday, November 21 2007 @ 11:54 PM EST
Bankruptcy proceedings have a tendency to scare customers since it's a big slap
in the face of a wakeup call that the company probably won't be around much
longer and that can shock things out of the state of inertia that keeps existing
contracts in place. Customers making plans to leave will hurry up and loyal
customers will rethink their positions.

I wouldn't be overly surprised if things went from "slow downward
spiral" to "plummet" right after they filed those papers.

[ Reply to This | # ]

Income measured in many buckets.
Authored by: Anonymous on Wednesday, November 21 2007 @ 11:55 PM EST
Venezuela Centimos. OK so they no longer circulate one centimo pieces but you
get the idea. A bucket of scrap metal would probably be worth more.

[ Reply to This | # ]

October's Monthly Operating --as Spreadsheets
Authored by: Anonymous on Thursday, November 22 2007 @ 12:09 AM EST
I have prepared the Cash, Balance, and Operating tables as Google spreadsheets.

These can be inspected and copied for any purpose by anyone interested.
Not hyperlinked due to what may be a GL restriction, but freely available at the URL:
http://spreadsheets.google.com/pub?key=ps_PPl5BWLrda1cWyf4V2eg
My notes on the reports:
The "Legal Escrow" liablity has been reduced by 390,000, but was not drawn off the restricted cash fund that has been used for the legal escrow in the past.
It appears the Cattleback patent sale is credited in Gross Revenue (accrual on the operating tab) with a counterbalancing liability, "Equity in Affliates" in the Other liability sub schedule. I believe this has the effect of increasing the "net profit from operations" and "gross profit" lines in the operating results, as the Cattleback transfer is accounted for below the net profit line.
Legal Expenses in the Novell and IBM cases are backed out of the operating expenses category and moved to the "Cost of Goods Sold"
Legal Expenses for Bankruptcy is backed out of the operating expenses and moved to a "Reorganization" Category.
Travel and Entertainment expenses are $143,000 in October, yee haw!
sig: Stats_for_all

[ Reply to This | # ]

The quick answer
Authored by: Anonymous on Thursday, November 22 2007 @ 12:50 AM EST
Is on page 11 of filing 227. They have $15,471,884 in total assets (on paper),
$7,325,144 of liabilities they can not avoid (wages, taxes, post-petition
liabilities, etc.) and $2,390,656 of pre-petition liabilities that can be
negotiated in court. To the beginner, it looks like they are still worth
$5,756,084, but not really.

Their assets include $1,008,794 prepaid expenses, which only help the immediate
cash flow, which is still negative and will only get worse. I don't know what
had been paid in advance (BSF, perchance?), but they are really worth about $4.5
million now ands that million is not worth the cost of chasing in BK court.

The cash flow section of the document (page 3) indicates something important --
the balance sheet and cash flow does not yet reflect the professional services
costs they have incurred post-petition, which are estimated at about $275,000,
$270,000 of which happened from 1 to 31 October. And the only cash flow
disbursements (expenses) that came in significantly below estimates were payroll
and non-bankruptcy professional fees. receipts for the month were also about
$300,000 higher for the month than projected. I would hazard a guess the cash
burn rate is going to be about $750,000 per month for November and December.
That will take them down to $3 million of total recoverable assets by the
beginning of the new year.

And they have yet to offer a reorganization plan.

In the words of a great man upon whose wisdom I have patterned my life:
"Toast On A Stick!"

PS: I haven't looked at the cash flow back and forth between the subsidiaries,
but if insiders were looking to hide money, that is not the way to do it. It's
too easy to track through the banks. I'll look at that angle, but doubt it will
come to any fruition.

[ Reply to This | # ]

Notice of Withdrawal
Authored by: sproggit on Thursday, November 22 2007 @ 01:25 AM EST
So this one caught my attention and got me wondering.

Someone with authority within either SCO's remaining Executive Management, or their Bankruptcy Counsel (or even BSF for that matter) simply must have known that IBM, Novell and others would object to this somewhat crude attempt at now-you-see-it-now-you-don't sleight of hand.

So what on earth would prompt them to even try? The best we can do is speculate, no doubt. So here goes:

1. The Withdrawal Let's open with a side comment. Having come across some motions being denied with or without prejudice and with the understanding that the difference basically means that the filing party is either being denied or granted permission to re-file at a later date, is it possible that SCO chose to withdraw this motion now before it was rejected in a manner similar or equivalent to "denied with prejudice?" In this I'm speculating that the motion may have resulted in Judge Gross from ruling that SCO may not hold any further discussions with any further creditors without the direct involvement of the UST - or something similar... But back to reasons for the sequence of events we've seen so far. 1. SCO Out Of Control Well, I guess we've known or suspected this for a while. But they have new Counsel on board now - for the bankruptcy. That's a new law firm that perhaps don't know SCO as well as we do. Is it possible that SCO Management succeeded in persuading a new Lawyer to fall for this "Let's just sell some stuff quick to raise cash" ruse? 2. SCO are Desperate for Cash Well, we've known this for a while now. But what would SCO need cash for after a sale of the proposed assets. Once the assets are gone, any attempt at a case are gone. However, if they are now more worried about the legal counter-strike than they are about winning either case, then having a $10 million or more legal defense fund might start making a good bit of sense now. Maybe SCOs Directors are trying to strengthen their own defensive shields? 3. Puppet or Puppetmaster? So we have also widely speculated that perhaps SCO (and York for that matter) are merely front companies for other vested interests who prefer not to have their name in lights. Well, it's possible. If there are other parties in the background and if those parties would like to continue to use this entire story as part of an anti-Linux FUD campaign, then it might be important to them to see either the confusion continue, or at least to try and spirit some part of SCO's supposed "assets" away before they get awarded to the creditors. 4. Desperate for Cash (2) SCO has to produce these monthly accounting reports now, which are filed and become open to scrutiny. If the numbers start to look really bad for them, Judge Gross might revise his opinion and decide that SCO simply can't survive Chapter 11 and push them into Chapter 7. That would be a worst-case scenario for either SCO or any potential Puppetmaster, purely because both would lose any semblance of control over what is going on here. 5. Legal Action OK, up until now the theories have rather assumed that either SCO Management or a third party might be pulling the strings in Camp SCO. What if that's not the case? Suppose the strategy is set by Darl but the tactics are decided by a law firm? Suppose the strategy was "No cash for Novell or IBM - just make them hurt"... Well, motions like this make IBM and/or Novell hurt in 2 distinct ways. Firstly, directly, it costs these companies money to instruct lawyers to file and argue objections to motions such as this. So there's an immediate, direct cost, right there. Secondly, by instructing their own lawyers to file these motions, SCO is burning through yet more cash, in other words rubbing salt into the wound. OK, that's a small selection that I can come up with at short notice. I dare say they are all off the mark. Would anyone care to edit or extend the list?

[ Reply to This | # ]

Can it pull itself out of Chapter 11?
Authored by: kh on Thursday, November 22 2007 @ 04:25 AM EST
That's the critical thing isn't it. At what point will the court decide that
SCOG cannot possibly trade its way to solvency again and put it into Chapter 7?
What are the critical legal points here?


[ Reply to This | # ]

Looking Ahead
Authored by: DaveJakeman on Thursday, November 22 2007 @ 06:03 AM EST

Slightly off topic, but relevant to the outcome these accounting figures seem to predict.

On 9th August, 2006, Brobeck Phleger & Harrison's digital records were preserved by order of Bankruptcy Judge Dennis Montali, but were not made publicly available [article].

Groklaw, which performs an important public service and historical archive by way of illuminating all aspects of the SCO story, stands to lose significant digital records should SCO's Chapter 11 bankruptcy be converted to Chapter 7. There is much that is linked to on SCO's websites.

Preserving the data on SCO's websites would be less problematic than in the case of Brobeck, as it's already on public display, so shouldn't be considered confidential or privileged. The only issue is getting permission to reproduce that data before SCO switch off the lights. There's also the issue of wayback (web.archive.org), which is effectively blocked by demand of SCO, after they realised rewriting history isn't as simple as posting nonsense on their websites.

The possessed debtors would no doubt oppose such a motion vehemently, but if they went Chapter 7, there would be little reason for Judge Gross to refuse. It's not as if it would cost SCO anything, other than the lawyer time they would waste fighting it tooth and nail.

Should Groklaw put in a request for something similar to the Brobeck decision? It would be nice to have those records preserved, rather than quickly dissolve in a shark-infested puddle of debt. After all, Groklaw's currency is information and SCO's debt to Groklaw has yet to be paid. Do SCO themselves not use Groklaw extensively? Well, we know they do.

It would be a matter of getting the timing right. As Groklaw has been mentioned in BK court documents, does it have standing to request this?

Any thoughts?

---
Monopolistic Ignominious Corporation Requiring Office $tandard Only For Themselves

[ Reply to This | # ]

Am I missing something ?
Authored by: Anonymous on Thursday, November 22 2007 @ 06:24 AM EST
Did SCO file the same report twice ?

[ Reply to This | # ]

SCO UK valued at $4 ?
Authored by: Anonymous on Thursday, November 22 2007 @ 06:29 AM EST
Hey Darl,
I'll give you $5 for it. What do you say ?

[ Reply to This | # ]

SCOX, close to zero
Authored by: Anonymous on Thursday, November 22 2007 @ 08:15 AM EST
http://finance.yahoo.com/q/bc?s=SCOX&t=2y&l=on&z=m&q=l& c=

SCOX, very close to zero, and, since mid-August below 1 dollar.

[ Reply to This | # ]

I would like to undertake a verifyable spreadsheet - can you guys help me out?
Authored by: designerfx on Thursday, November 22 2007 @ 01:10 PM EST
I would like to do this spreadsheet, I have free time over the next two days.
Can someone go over which/where I should pull the information from? I'd like
maybe mathfox and and any other common users that PJ finds appropriate given
sharing access to the file to ensure its accuracy as well.

Thanks!

Matt (DFX) - I'm not sure how to collaborate this, maybe you guys can advise if
its safe to list my email address here or not?

[ Reply to This | # ]

SCO Files October's Monthly Operating Reports
Authored by: Anonymous on Thursday, November 22 2007 @ 01:52 PM EST
You have a lot of nerve telling me that asking that libel be removed is out of place.

You really ought to watch your hair trigger, PJ. He did nothing of the sort.

I seems to me that the admin informed of how your actions are likely to be judged by the world at large, as things now stand in the wiki world. In so doing, he gave you some darn good advice.

Attacking the messenger is really rather silly, and incredibly short sighted.

[ Reply to This | # ]

Nightly Business Report
Authored by: Anonymous on Thursday, November 22 2007 @ 06:53 PM EST
Sorry no URL for the old telly

The Nightly Business Report, US Public Brodcasting System,
has ( as it is still in process) a 30 minute half way
balanced program on copyright and pattents with views
presented by RIAA, MPAA, and a consumer group.

presentation was the consumer group the other being to
stuffy.

Sorry did not get names and vitals.

[ Reply to This | # ]

This is why I don't feel sorry for Darl
Authored by: Anonymous on Friday, November 23 2007 @ 01:20 AM EST
SCO is brought to this turn as a direct result of his inestimable leadership.

Digging through SCO's laundry may be unseemly, but it's been decidedly self
inflicted, Darl's crocodile tears aside.

So the next time you guys see him in court, and he laments about SCO's state of
affairs, and what a stressful time it is for him, just remember that SCO went
from being a going concern, to, well, here, because of his leadership.

bkd

[ Reply to This | # ]

sed Script for Reports.
Authored by: Anonymous on Friday, November 23 2007 @ 06:27 PM EST
I had a look at the reports, and they don't seem to be regular enough to parse out automatically. At least, they aren't regular enough without creating a special script for each page that is only usable on this report.

However, it is possible to write a very simple sed script to separate the data into columns that can be imported into a spreadsheet, provided you are willing to do a bit of manual fix-up on each page first. I tried out the following, and it seems quite workable. It is certainly a lot easier than re-typing everything.

  1. Cut and paste a page of relevant data from the PDF into a text file. I suggest doing one page at a time and only copying data that fits nicely into columns.
  2. Fix up the text file manually where needed. This involves making sure that all columns have numbers (put a 0 or a dash in where numbers are missing), and make sure there are at least two spaces between each set of numbers and only one space between words that you want to keep in the same column. (see below for the reason for this). It's easier to fix up the text file before it goes into the spreadsheet than moving columns of numbers around after.
  3. Save the text file.
  4. Run the sed script shown below on the file and pipe the output to another text file with a "csv" extension.
  5. Import the file into OpenOffice (or other spreadsheet) using semi-colons as separators (or whatever character you decide to use).
  6. Double-check the numbers, fix up the headings, etc.
  7. Watch out for some cases where the numbers get shifted up a line above the description during the copy-paste operation. This seems to happen particularly where there are superscripts in the original.
  8. This script should let anyone create their own spreadsheet if they wish. This doesn't convert everything automatically, but it's still easier and more accurate than re-typing everything. This should be usable on future reports as well. In this set of reports, most pages required little or no manual fix up. The bank accounts page required a fair bit though.


    sed Script

    cat SCOGBK-227a.txt | sed 's/[ ][ ][ ]*/;/g' > SCOGBK-227a.csv


    This script basically just substitutes multiple occurrences of spaces with semi-colons. The [ ][ ][ ]* in the script looks for at least two spaces plus also gobbles up any additional spaces (there is a space in the middle of each [ ]). If you want more spaces, just add more "[ ]". If you want a different separator character, just change the ";" to whatever you want (watch out for special characters like "^", "$", "", "*", etc.). You could use "[ ]" with two spaces in between in place of the first "[ ][ ]". I did it the way shown above because the html on this page keeps eating up the extra space, which could confuse someone just trying to copy and past the example.

    Just make sure there are at least two spaces in the source text file wherever you want a column separator, and only one space where you don't want a column separator.

    [ Reply to This | # ]

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