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| SCO's 10Q - Where's the Money? Where's the Plan? |
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Monday, June 16 2008 @ 10:42 PM EDT
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SCO has filed its 10Q and all the certifications, for the quarterly period ending April 30, 2008, and here's a snip: It is the Company’s intent to appeal the adverse August 10, 2007 summary judgment ruling as soon as that opportunity is available to the Company. However, the Company must complete further legal proceedings before it can take such an appeal. In the event that any substantial amount of the Company’s assets are frozen or if its assets or resources are further depleted, the Company may not be able to appeal the August 10, 2007 ruling.
The Company’s management and Board of Directors determined that filing for relief under Chapter 11 of the United States Bankruptcy Code was appropriate and necessary. As a result of both the Court’s August 10, 2007 order and the Company’s entry into Chapter 11, among other factors, there is substantial doubt about the Company’s ability to continue as a going concern including continuing the SCO Litigation or appealing the adverse ruling of August 10, 2007.
The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Absent a significant cash payment to Novell being required by the final resolution for this matter, management believes that the undiscounted future cash flows generated by the Company will be sufficient to recover the carrying values of the Company’s long-lived assets over their expected remaining useful lives. However, if a significant cash payment is required, or significant assets are put under a constructive trust, the carrying amount of the Company’s long-lived assets may not be recovered. What about the reorganization plan? Where's all the money they told us was flowing their way from the Middle East?
Here's what they say about that: On May 12, 2008, the Debtors filed a motion seeking an extension of their exclusive periods to submit and solicit acceptances of a plan of reorganization to August 11 and October 13, 2008, respectively. A hearing to consider that motion is scheduled for June 17, 2008. If our motion is denied, creditors may file their own proposed plans of reorganization, which might not provide for as favorable treatment to the Company’s equity securities as the Company plan.
Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, post-petition liabilities and prepetition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or stockholders, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 cases to each of these constituencies or what types or amounts of distributions, if any, they would receive, or as to the timing of such distributions if any. A plan of reorganization could result in holders of the Company’s stock receiving no distribution on account of their interests and cancellation of their existing stock. If certain requirements of the Bankruptcy Code are met, a plan of reorganization can be confirmed notwithstanding its rejection by the class comprising the interests of the Company’s equity security holders.
Under the supervision of the Bankruptcy Court, management may decide to pursue various strategic alternatives as deemed appropriate by the Company’s Board of Directors to serve the best interests of the Company and its stakeholders, including asset sales or strategic partnerships.
So where's all that Middle Eastern money they were telling us about? Here's what SCO says about that: On February 13, 2008, the Company entered into a Memorandum of Understanding (the “MOU”) with Stephen Norris Capital Partners, LLC, a Delaware limited liability company (“SNCP”), whereby, SNCP agreed to provide financing to fund the Company’s plan of reorganization filed on February 29, 2008 in the Company’s Chapter 11 bankruptcy case presently pending in the United States Bankruptcy Court for the District of Delaware, In re: The SCO Group, Inc, Case No. 07-11337(KG). The Company on the same day filed its disclosure statement in connection with the plan of reorganization, under the terms contemplated by the MOU.
The MOU is not a definitive agreement. It is a non-binding summary of the intentions of the parties and is subject to change. As such, the MOU, the plan of reorganization and the transactions they contemplate are subject to various changes and conditions precedent, including: (1) SNCP’s due diligence and (2) the Bankruptcy Court’s approval. A hearing to approve the adequacy of the Disclosure Statement was scheduled before the Bankruptcy Court on April 2, 2008. The April 2, 2008 hearing proceeded as a status conference regarding the Company’s progress towards a new MOU with SNCP. Therefore, the Company indicated that it was not presently seeking approval of the adequacy of the Disclosure Statement, which would need to be amended to reflect the changes to the MOU. On May 12, 2008, the Company filed a motion seeking an extension of its exclusive periods to submit and solicit acceptances of a plan of reorganization to August 11 and October 13, 2008, respectively. A hearing to consider that motion is scheduled for June 17, 2008. So the bottom line is there is no firm agreement, and there is no plan, and SCO wants more time to come up with one. When you consider the headlines SCO got from its announcement of beellions and gazillions, it's a bit of a let down, wouldn't you say? Here's Novell's objection to SCO's motion to extend its exclusivity time period. Why would they want to avoid having creditors file a plan? The plans of reorganization proposed by creditors may be less favorable to our stockholders.
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| Authored by: Anonymous on Monday, June 16 2008 @ 10:50 PM EDT |
| What Money? [ Reply to This | # ]
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| Authored by: Aladdin Sane on Monday, June 16 2008 @ 10:54 PM EDT |
| Please place corrections to the story here.
Thanks.
---
Form
follows function. [ Reply to This | # ]
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| Authored by: ankylosaurus on Monday, June 16 2008 @ 10:56 PM EDT |
Please discuss matters tangential to the main article here. Please post
clickable links in HTML format when appropriate.
---
The Dinosaur with a Club at the End of its Tail[ Reply to This | # ]
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| Authored by: Aladdin Sane on Monday, June 16 2008 @ 10:56 PM EDT |
| Discuss Groklaw News Picks here.
Please reference the title of the News
Pick, so we know which news story you are commenting
on.
Thanks.
---
Form follows function. [ Reply to This | # ]
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| Authored by: mvs_tomm on Monday, June 16 2008 @ 11:16 PM EDT |
Let us know if you see anything interesting over at
http://lists.oasis-open.org/archives/oiic-formation-discuss/[ Reply to This | # ]
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| Authored by: Anonymous on Monday, June 16 2008 @ 11:17 PM EDT |
| Oh my! I can't stop laughing. [ Reply to This | # ]
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| Authored by: Anonymous on Monday, June 16 2008 @ 11:21 PM EDT |
SCO lost $3.5M in the last 6 months.
At the end of April, now 2 months ago, SCO had slightly more than $3M left for
operating.
How many more months of operating capital does SCO have left?
How important is the hearing tomorrow?
--
The Company incurred a net loss of $3,558,000 for the six months ended April 30,
2008, and during that same period used cash of $2,459,000 in its operating
activities. As of April 30, 2008, the Company had a total of $3,162,000 in cash
and $3,131,000 in restricted cash, of which $1,739,000 is designated to pay for
experts, consultants and other expenses in connection with the litigation
between the Company and IBM, Novell and Red Hat (the “SCO Litigation”), and the
remaining $1,392,000 of restricted cash is payable to Novell for its retained
binary royalty stream.
--[ Reply to This | # ]
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| Authored by: Anonymous on Monday, June 16 2008 @ 11:47 PM EDT |
| And what might those "other factors" be one wonders. [ Reply to This | # ]
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| Authored by: kawabago on Monday, June 16 2008 @ 11:51 PM EDT |
| I've seen cheerier suicide notes. [ Reply to This | # ]
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- Eureka! - Authored by: Anonymous on Tuesday, June 17 2008 @ 08:32 AM EDT
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| Authored by: groklaw_fan on Monday, June 16 2008 @ 11:54 PM EDT |
By my calculations, SCO stock should be worth zero by this Wednesday, June 18,
2008, under optimistic assumptions.
Here is how I came to that date:
For the latest quarter, SCO reported an operating loss of $1,469,000. If you
assume that they kept losing money at the same rate that they did last quarter,
but were somehow able to stop all expenses for SCOsource from April 30th on, we
should expect them to lose about $1,136,000 ($1,469,000 - $333,000) per quarter.
That is about $12,622 per day.
SCO's stockholders' equity was $622,000 as of April 30, 2008. Losing $12,622
per day means that they have only about 49.28 days of equity left. That means
that they should be about zero as on June 18, 2008.
Please also note that I am not taking into consideration all of the money that I
believe that SCO owes Novel, IBM,
Red Hat, Autozone, etc., etc., etc.[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 12:22 AM EDT |
Because this whole litigation mess with IBM and Novell has been so favorable to
the stockholders. Or at least those that held short positions.[ Reply to This | # ]
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| Authored by: sproggit on Tuesday, June 17 2008 @ 01:44 AM EDT |
This may be unfair, but the one obvious conclusion we could draw from an
observation of SCO's reorganisation plans to date is that they all seek to sell
of 'The UNIX Assets' to a third party.
As Groklawrians, we might collectively add just a snippet of cynicism to that
observations, pointing out that if SCO were able to achieve this, then they
would succeed in perpetuating FUD that somewhere in the UNIX code base could be
found something that could be used to attack the Linux Community. But in a sense
this suspicion is secondary to the issue here.
The SCO Group have a business that consists primarily of two revenue streams. [I
am discount SCOsource, since it's been discontinued, was a sham, and doesn't
deserve the bandwidth it would take you to download any comments on it].
The first income stream is derived from the UNIX code base. This includes
provision of new licenses to existing customers, plus of course maintenance and
support, education and training and related specialist skills to that customer
base. By SCO's own 10Q statements, this revenue stream is declining, but
presently provides the majority of their income.
The second income stream can be derived from their Me, Inc, business, a platform
that provides mobile services to the burgeoning 3G and related markets for users
of the more advanced mobile phone handsets. Although Me, Inc does not seem to
generate the same revenue as the UNIX licensing, it's a new business. Darl seems
to talk it up, but I haven't examined the numbers to establish whether this is a
valid opinion or not. [ Track record being what it is...]
That's it.
There are no other income streams for this business. Everything else is expense.
See, I don't have an MBA, but even *I* can figure out this much...
The Board and Management of the SCO Group have now spent something like 9 months
or so "working on a reorganization plan" that really needs to consist
of :-
1. We will adjust the size of our Unix Support and Development Teams such that
the income from this business unit covers our operating expenses and leaves us
sufficient capital to fund a limited amount of R&D.
2. We will adjust the size of our Me, Inc business such that it is self-funding
and poised for steady, organic growth as it's target market matures.
3. We will adjust the size and remuneration of the Company's remaining senior
management and salaried directors to a level that is commensurate with a
technology business of this size.
4. We will formulate and commence execution on a business plan that reduces the
Company's office space footprint to a location that is appropriate for the size
of the business that remains at the conclusion of the above stated
reorganisation steps.
5. We will engage in a series of discussions with our major clients to refresh
our forward-looking technology strategy and ensure that we have in place a
business plan that is best placed to accommodate the strategic goals of our
clients while maximising the revenue opportunities of our bisiness.
See, that took me about 5 minutes to type into the comment box here on Groklaw.
I've never written a reorganization plan in my life, but I'd take the Pepsi
Challenge against anything SCO have produced thus far....
If I recall correctly, Novell have gone on record as saying that if they get
back the UNIX business as a result of SCO's mis-management, they will Open
Source it or otherwise put it beyond use as a threat to Open Source software. So
I can understand why Pipe Fairies and other parties might want the Unix part of
the business to remain away from Novell if at all possible.
But the problem that this causes SCO is that they have been telling the Utah
Court that the Unix business is worthless, so they owe Novell nothing there, all
the while trying to tell the Bankruptcy Court, with a straight face, that
someone wanted to pay $100Million for it. Yeah, right.
It is nothing short of amazing that Judge Gross, the Bankruptcy Court, and/or
the US Trustee have not demanded that SCO be held in contempt of the Court and
to insist on Court-Appointed Administrators.
I'm not a US citizen; if I were I'd be demanding the return of my tax dollars on
the grounds that I would have been paying for something [a justice system] that
has not been provided...[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 01:52 AM EDT |
| The following is a very rough view of SCO's income and expenses, leaving out a
lot of the detail. SCO lists the following figures on page 4 for the three
months ending on the 30th of April 2008 (all figures in
thousands):
REVENUES:
- Product: $3,048
- SCOsource:
$0
- Services: $613
COST OF
REVENUES:
- Products: $186
- SCOsource:
$333
- Services: $283
OPERATING
EXPENSES:
- Sales and marketing: $2,124
- General and
administrative: $1,273
- Research and development:
$931
Net Result: ($1,469). Or nearly $1.5 million
in the hole.
Assume we do the following:
- Eliminate SCOSource:
$333
- Leave R&D as is ($931)
- Cut general and
administrative by 50% $636
- Cut Sales and marketing by 25%:
$531
The end result is:
- Revenue:
$3,661
- Expenses: $3,630
Net Result: $31.
Or just above break even.
To make SCO Unix a viable business, someone is
going to have to figure out how to keep revenue from falling while making deep
cuts in expenses. This might be a viable strategy for someone like
Novell. They could cut overheads by putting the Unix business under the same
administrative umbrella as the rest of their business. They could merge the
sales channels to cut sales costs (that would take some time though). They could
put the product on life support to cut R&D costs. They could slow the
revenue collapse by offering the customers a migration path to Linux. I think
this would actually slow the migration away from Unix for a few years,
because customers would no longer be worried about support, and could put off a
move to Linux until they do a major application software or hardware update.
SCO Unix doesn't look very attractive however as a stand alone business.
There just isn't enough revenue there to operate a company even if you make deep
cuts in expenses. With revenue collapsing at the current rate (about 40% per
year), cutting expenses is not a long term solution. I don't see how SNCP or
anyone who isn't in a closely related software business could hope to do
anything with it. [ Reply to This | # ]
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- A cheaper way.... - Authored by: tiger99 on Tuesday, June 17 2008 @ 12:54 PM EDT
- Why Bother? - Authored by: Anonymous on Tuesday, June 17 2008 @ 03:54 PM EDT
- Why Bother? - Authored by: Anonymous on Tuesday, June 17 2008 @ 09:52 PM EDT
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 02:29 AM EDT |
Once again this term is used in the same manner as SCO's other product lines. So
this is in part a marketing ploy.
I am beginning to believe that this is also about retaliation for perceived
wrongs. SCO is out to punish Novell for not supporting it in pursuing its' other
goals. There is more to this picture. SCO has claimed ownership rights to many
others' copyrighted material in hopes to achieve something more than money
(although financial gain is a big part).
The only group that ever made any real money from unix is the legal community.
_____________________________________________
- KT enlisted the legal community in his diabolical plan to control the world.
Under the guise of POSIX, virtually every digital device is now infected with
one form or another. Concerning the early development: "... we felt
prepared to fulfill our charter by offering to supply a text-processing service
to the Patent department for preparing patent applications ..." from 'The
Evolution of the Unix Time-sharing System*' Dennis M. Ritchie 1979
[ Reply to This | # ]
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| Authored by: SirHumphrey on Tuesday, June 17 2008 @ 02:45 AM EDT |
Darl McGollum has to keep the preciousssssssss away from nasty IBM and their
hordes of GobLinuxsssesss. They need to keep it protected by the mountains of
Moria$oft, such as Boiseranzinbar 'the Redmond', and their constantly changing
Orcfficessesssss.
[ Reply to This | # ]
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| Authored by: Baud on Tuesday, June 17 2008 @ 03:37 AM EDT |
Page 31:
SCOsource revenue
Six
Months Ended April 30,
2008
Change 2007
(Dollars in thousands)
$-
n/a
$23
I
disagree. It should read (100) instead of n/a.
Of course, the
trick was to enter $- instead of $0 in the spreadsheet...[ Reply to This | # ]
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| Authored by: Ian Al on Tuesday, June 17 2008 @ 05:57 AM EDT |
A complete idiot could solve this one and I'm here to prove it!
BS&F were told that they had no case against Novell or IBM by SCOG's General
Counsel who knew that Santa Cruz did not transfer the copyrights to SCOG and
that IBM had a perpetual and irrevocable license.
Just disgorge the $30M capped fees and also insist that they have a choice of
adding in the expenses or, in the alternative, disbarrment.
That gives $20M to pay off Novell and $10M+ to settle with IBM and restructuring
capital for the Unix business. If more dosh is needed, just sue the pipefairy
for inciting SCOG to pursue frivolous litigation for the purposes of a
fraudulent Pump&Dump scheme and inciting restraint of trade.
There! I don't want to hear any more about problems with capital.
---
Regards
Ian Al
If you are not using Linux, you may be beyond help.[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 10:12 AM EDT |
> management believes that [...] will be sufficient to recover
> the carrying values [...] over their expected remaining
> useful lives
Am I the only one or is this hilariously funny if you imagine "their
expected remaining useful lives" was referring to the management? *lol*
[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 11:00 AM EDT |
Stephen
L. Norris was appointed vice-chairman of Stratos Renewables on June
4th. Stratos is a Beverly Hills-based startup (stock ticker: SNRW.ob) that has an ambitious 600 million
dollar plan to plant sugar cane on the Peruvian desert coast. It is
paying a Peruvian company to dismantle a sugar mill and move it to the
plantation it has optioned.
The chairman, Stephen Magami, resigned
the presidency in early June. Tom Snyder replaced him as an operating
executive. Magami's investment company, ARC, had made a
preferred stock investment in the company in Fall 2007 when it was formed in a
reverse merger. In April a Cayman island investment fund made a 1 million
dollar private placement in Stratos.
Edgar SEC also shows a Scottsdale Arizona individual who reports a 10% stake in the company in
return for a 10,000 dollar investment, this is the former owner of the
reverse merged shell.
Norris is also newly reporting a relationship
with a First Wall Street Capital International (FWSCI)
, an investment banking firm with a rather funky website.
The
president and chief executive at First Wall Street says he formerly was a
shareholder in "Hulk Hogan Vitamins"
None of the names in Stratos, ARC, or
First Wall Street Capital can be previously associated with Norris or Mark
Robbins. This appears to be new departures for him.[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 12:22 PM EDT |
They have to bankrupt the company so that there are no assets 'worth' going
after in a court of law. They, DMB and Company, will try to silently slip into
the night.
All under the adage 'nothing ventured, nothing gained.'
THE RATS![ Reply to This | # ]
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| Authored by: tiger99 on Tuesday, June 17 2008 @ 01:10 PM EDT |
| Again today, up 20% to $0.12! The behaviour of investors is quite
inexplicable, however it may be those with short positions trying to buy their
shares while they can, assuming Chapter 7 is very imminent. Hopefully, as this
is being a very good week in many ways, Judge Kimball will soon have his ruling.
Should be enough to ensure immediate liquidation, I would imagine. [ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, June 17 2008 @ 02:01 PM EDT |
I mean, really. What does it take to kill them (I'm not dead yet).
They're the black night (it's only a flesh wound), the bride's family at swamp
castle (he's not dead yet...he's getting better), and other characters.
Tell me I'm wrong.[ Reply to This | # ]
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