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SCO Files MORs for September in the Bankruptcy
Monday, November 08 2010 @ 08:12 PM EST

SCO is apparently almost out of money, according to the MORs they just filed for September in the bankruptcy. Maybe that's the explanation for SCO's sudden desire to expedite the appeal after initially asking for more time to even file its brief. Unless they have a buyer, I wonder if they can even last until January, when the appeal is scheduled to be heard.

SCO Operations shows a negative cash flow, and only $738,090 in the bank. Total disbursements for the month were more than that, $886,656 of which $409,902 was for professional fees. At the end of August, SCO showed cash at the end of the month in the amount of $1,369,642, with a positive cash flow, and only $397,344 in disbursements. I gather they were behind, perchance, on paying professionals?

Here they are, the filings:

11/08/2010 - 1195 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 9/30/10 (The SCO Group, Inc.; 07-11337) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Fatell, Bonnie) (Entered: 11/08/2010)

11/08/2010 - 1196 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 9/30/10 (SCO Operations, Inc.; 07-11338) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Fatell, Bonnie) (Entered: 11/08/2010)

The other big payment was almost $200,000 to the subsidiaries not in bankruptcy.

Page 20 shows a "Summary of Unpaid Post Petition Debts". Yarro's loan is listed, of course, at $2,110,299, but so are taxes, wages, and accounts payable, and "other post petition liabilities ($2,855,732), total $6,651,161. This footnote explains the "other" liabilities:

(A) Other post petition liabilities is comprised of Intercompany payables, deferred revenues under GAAP to be recognized into income over future periods, and general accruals under GAAP such as coop advertising, royalties expense. The Deferred revenues are amortized monthly into revenue. The Intercompany payables represents cash transactions between the company and its affiliates for collection of revenues, offset by payment of operating expenses and payroll and other transactions under the Agency Agreements. General accruals are accruals based upon estimates to which specific identified vendors are not known. Intercompany payables represent 47% of Other Post petition liabilities with Deferred revenues representing 25%, Accrued Chapter 11 Fees representing 15% and general accruals representing 3% of Other Post petition liabilities. For a detail listing of the make up of theses amounts see " FORM MOR-3 (CONT'D) in the MOR package.
Yes, it says "theses".

I really don't understand the court allowing this to go on and on, leaving the creditors with no hope that I can see, while the "professionals" clean up. SCO could have paid everybody on the creditor list when it first filed for bankruptcy protection in September of 2007. So what exactly is the protection? All the money went to pay professionals instead of creditors. Or so it looks to this observer. Why? To what end?


SCO Files MORs for September in the Bankruptcy | 84 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Thread
Authored by: bugstomper on Monday, November 08 2010 @ 08:18 PM EST
Please summarize the correction in the Title box for easy scanning:
error->correction or s/error/correction/

[ Reply to This | # ]

Off Topic threads
Authored by: bugstomper on Monday, November 08 2010 @ 08:20 PM EST
Please stay off topic in these threads, Use HTML Formatted mode to make your
links clickable - That's why they call it the World Wide Web!

[ Reply to This | # ]

News Picks Thread
Authored by: bugstomper on Monday, November 08 2010 @ 08:22 PM EST
Pick your News here. Remember to include the title of the article you are
commenting on in the Title box of your comment and also to include a clickable
HTML link to the article inside your comment, for when it scrolls off the

[ Reply to This | # ]

COMES goes here
Authored by: bugstomper on Monday, November 08 2010 @ 08:25 PM EST
Comes transcripts here if you have any to contribute. Please include HTML markup
but post it in Plain Old Text mode to make it easy for PJ to copy and paste

[ Reply to This | # ]

How can they last until January?
Authored by: tiger99 on Monday, November 08 2010 @ 08:41 PM EST
It would seem that they will be in Chapter 7 before the appeal, unless I am misunderstanding the figures. Or, another PIPE Fairy needs to appear within the next few weeks.

It almost looks as if Cahn has planned for the money to run out before the appeal, but I think the truth is more complex than that, based on past history of SCO.

Three years in Chapter 11, with no reorganisation and seemingly no sale. Just delay and more delay, and a jury trial that Cahn must have known was not winnable. It is all very suspicious, even more so as the money runs out....

[ Reply to This | # ]

Creditors sue who?
Authored by: tinkerghost on Monday, November 08 2010 @ 08:46 PM EST
Given that the creditors have been scammed out of their payments, who exactly do
they sue over this fiasco? It certainly seems like Cahn & the entire
Delaware court system has failed in their duties to deal fairly.

You patented WHAT?!?!?!

[ Reply to This | # ]

Notes on the MOR's
Authored by: stats_for_all on Monday, November 08 2010 @ 08:53 PM EST
Cash should be further reduced by: the current Novell royalty liability ($184K) and the $88K payroll account.

SCO has transfered the Novell liability from Japan accounts to Utah. It does this in preparation for its payment to Novell historically (with a 1 month lag), so the payment was likely made at SCO end of fiscal year in October.

Oct. 1 fell on a Friday, and payroll was likely paid on that day. In most months, the payroll account is held at 0 or a negative 3,000 balance, the 88K in the September payroll bank is strictly transitory.

The three-month aggregate for receipts has dropped to 1,149. This put the annualized income below 5 Million/year for the first time. At the time of the original BK filing, income was about 17 M/year.

SCO paid OPA a round 90K on its outstanding invoices. This does not correspond to the invoices with CNO filings (made July 21st), so SCO is paying on the invoice in installments.

SCO is now up-to-date on Blank Rome invoices. The Jan-Feb 2010 invoice had a CNO filing July 21. NO further billing has been made by Blank Rome. The have filed NO bills for March, April, May, June, July, August, September, or October. The Blank Rome bills for 2010 will render SCO insolvent when they are finally released.

Blank Rome's reluctance to file it bills in a timely fashion has allowed SCO to survive. Obviously Blank Rome believes it can recoup its "investment" through a quick sale of SCO assets. This is proving difficult, as it appears there is a distinct dearth of qualified buyers.

[ Reply to This | # ]

GM, AIG and others have more than "almost" out of money ...
Authored by: UncleJosh on Monday, November 08 2010 @ 09:43 PM EST
Notably various Airlines that have gone bankrupt giving their stock holders and creditors nothing and throwing their retirees on the mercies of the Pension Guaranty Corporation, which typically means a significant reduction in benefits. The US Airways pilot of the "miracle on the Hudson" to Congress: "my pay has been cut 40 percent in recent years, my pension terminated".

[ Reply to This | # ]

Awards Ceremony time?
Authored by: AntiFUD on Monday, November 08 2010 @ 10:18 PM EST
Isn't it about time PST that we get a report from San Francisco? It is still
November 8th after all!

IANAL - Free to Fight FUD - "to this very day"

[ Reply to This | # ]

SCO is an exception
Authored by: kawabago on Monday, November 08 2010 @ 11:01 PM EST
If other companies behaved as SCO does the system would collapse. SCO has been
abusing the system from the start so it should not be surprising that it is
abusing the bankruptcy process. It is surprising that the trustee is continuing
the abuse of process but maybe Darl damaged the company so severely he had no
other choice but keep the pipe dream alive. If you're a train, all you can do is
follow the tracks till you derail.

[ Reply to This | # ]

Something ODD about SCO MORs
Authored by: nsomos on Monday, November 08 2010 @ 11:30 PM EST
I believe there is something ODD going on with the Accounts payable aging for SCO. I noticed that the 61-90 day column seems to always be zero.

Any given unpaid bill is either current, or is overdue by some amount. Unpaid bills either get paid, or if they remain unpaid, the bills age. So for any given MOR, an unpaid bill should be in one of the columns. For a subsequent months MOR, if this bill remains unpaid, it would typically be reflected in the total for next column over.

So here is the inconsistency I noted. How can from one month to the next, the over 90 column increase, when there has never been anything reflected in the 61-90 day column. Bills don't magically become over 90 days past due, without first progressing through 0-30, 31-60, and 61-90.

Accounts Payable aging for SCO MORS over time
current __0-30 __ 31-60 61-90 _ over 90 ?? total __ period end
_52,772 _34,257 _12,447 __-__ 1,082,287 _ 1,181,763 12-31-09
598,588 _32,409 __5,066 __-__ __719,958 _ 1,356,021 1-31-10
234,250 525,896 __6,164 __-__ __674,987 _ 1,441,297 2-28-10
169,384 _60,897 118,527 __-__ __630,386 _ __979,194 3-31-10
327,576 _75,830 _25,683 __-__ __685,842 * 1,114,931 4-30-10
214,127 _60,002 152,714 __-__ __729,461 * 1,156,304 5-31-10
_17,550 127,185 104,955 __-__ __998,849 * 1,248,539 6-30-10
100,098 _13,881 _87,263 __-__ 1,364,692 * 1,565,934 7-31-10
_54,760 _98,713 __3,890 __-__ 1,364,078 _ 1,521,441 8-31-10
_44,174 _41,033 __8,713 __-__ 1,022,732 _ 1,116,652 9-30-10

sources ... for 12-31-09 for 1-31-10 for 2-28-10 for 3-31-10 for 4-30-10 for 5-31-10 for 6-30-10 for 7-31-10 for 8-31-10 for 9-30-10

There is a period of four months, where the over 90 day column has increased compared to the previous month. I have noted the second of these month pairs with an asterisk in the chart. (somehow the tt tag does not seem to work as I would expect, so I have used underbars _ to make the chart at least line up if not look ok)

Would any of those with accounting skills care to comment?

[ Reply to This | # ]

So what exactly is the protection?
Authored by: SpaceLifeForm on Tuesday, November 09 2010 @ 12:30 AM EST
Delay from Lanham Act counterclaims.


You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

Makes sense to me
Authored by: Anonymous on Tuesday, November 09 2010 @ 05:58 AM EST
I really don't understand the court allowing this to go on and on, leaving the creditors with no hope that I can see, while the "professionals" clean up.

It makes perfect sense to me. The "professionals" are just that - they do this for a living - extracting money from companies in bankruptcy. Of course, the more the professionals extract for themselves, the less there is for the original creditors. It looks like in this case, the professionals are doing a very efficient job - they get all the money and the creditors get none. A perfect score, unless you're a creditor in which case you're not important anyway.

SCO could have paid everybody on the creditor list when it first filed for bankruptcy protection in September of 2007

But then the professionals would not have got much. It's hardly a good result for them, is it?

So what exactly is the protection?

It's the justification the professionals use for retaining the legal power to do this kind of work.

[ Reply to This | # ]

Yes, it says "theses". ; It also says make up rather than makeup
Authored by: Anonymous on Tuesday, November 09 2010 @ 02:44 PM EST
So, just like the junior league quarterback who casually
walked right through the opposing defense with the ball in
hand this week and then ran once he was out of reach, this may
be a bald faced statement of fact: We made up some theses as
to what these amounts are that make up post petition
liabilities and we present those theses to you in "form FORM
MOR-3 (CONT'D) in the MOR package" for your consideration and
hopefully, bafflement, so that we can then pull something that
you weren't expecting if you let us get away with this.

While we have frequently wondered why they do things the way
they do it has very often turned out that it had a motive and
resultant effect that was as juicy and black as a rotten berry
that had yet to fall off the vine, taking us by surprise when
we found out what was rally there.

We can't even trust them to be reliably stupid because they
pull stunts like this so often along with the actual mistakes
they have made along the way.

YMMV (Yes, "misstatements" mask villainy)

[ Reply to This | # ]

No, proper MORs have NOT been filed
Authored by: Anonymous on Wednesday, November 10 2010 @ 01:19 AM EST

These MORs should not be accepted by the Court because they still contain, on the second page headed DISCLAIMER, the following disclaimer:

As the Trustee and its financial advisors have not had sufficient time to review all of the historical information previously reported by the Debtors, the Trustee reserves the right to amend these Monthly Operating Reports

In other words, these reports don't really mean anything. Cahn can come back and replace any or all of them, going back as far as he likes. The excuse, that more than a year is not sufficient time to review SCO's finances, is ridiculous.

[ Reply to This | # ]

SCO made a profit in September
Authored by: hopethishelps on Wednesday, November 10 2010 @ 01:41 AM EST

PJ, please either stop commenting on SCO's financial condition, or get an accountant to review what you write. If we can believe these MORs, SCO was profitable in September. Not only can they "last until January", they appear to be earning money - which, if continued, would enable them to pay of creditors (very, very slowly) and emerge from bankruptcy.

The relevant information is the Statement of Operations which is near the end of document 1195. To assess whether a business is profitable, you have to look at an income statement prepared on an accrual basis. The cash flows which you always focus on are important but they tell you nothing about the profitability of the underlying business.

I have to say I am astonished that SCO still has customers. And the unusual amount of receivables more than 90 days old (i.e. more than 2 months past due) makes me wonder whether sufficient allowance has been made for "doubtful accounts" (i.e. customers who will never pay). But if you believe these MORs, SCO has a viable business as of now.

[ Reply to This | # ]

Has shady business happened before?
Authored by: Anonymous on Wednesday, November 10 2010 @ 03:46 AM EST
The real question from my point of view is the division of funds between SCO in
US and the rest of the world.

Suppose you are involved in court cases when there is a real possibility that
you could end up paying rediculous amounts of money. What would you answer when
you must decide if a certain object belong to you or a foreign part of the
company. The honest way of doing is of course follow the spent money and not
start doing "good-will" transfers of objects...if you are not so
honest then there are possibilities to hid values from upcoming chapter 7.

I think that Cahn include the disclamer because he honestly does know if SCO of
the past has been involved in such shady affairs, but he want to keep his back
clear in case there turn out to be criminal conduct done.

[ Reply to This | # ]

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