decoration decoration
Stories

GROKLAW
When you want to know more...
decoration
For layout only
Home
Archives
Site Map
Search
About Groklaw
Awards
Legal Research
Timelines
ApplevSamsung
ApplevSamsung p.2
ArchiveExplorer
Autozone
Bilski
Cases
Cast: Lawyers
Comes v. MS
Contracts/Documents
Courts
DRM
Gordon v MS
GPL
Grokdoc
HTML How To
IPI v RH
IV v. Google
Legal Docs
Lodsys
MS Litigations
MSvB&N
News Picks
Novell v. MS
Novell-MS Deal
ODF/OOXML
OOXML Appeals
OraclevGoogle
Patents
ProjectMonterey
Psystar
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v IBM
SCO v Novell
SCO:Soup2Nuts
SCOsource
Sean Daly
Software Patents
Switch to Linux
Transcripts
Unix Books

Gear

Groklaw Gear

Click here to send an email to the editor of this weblog.


You won't find me on Facebook


Donate

Donate Paypal


No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

Here's Groklaw's comments policy.


What's New

STORIES
No new stories

COMMENTS last 48 hrs
No new comments


Sponsors

Hosting:
hosted by ibiblio

On servers donated to ibiblio by AMD.

Webmaster
SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt.
Tuesday, April 26 2011 @ 07:48 PM EDT

SCO's Chapter 11 Trustee, Edward Cahn of Blank Rome, finally has filed SCO's monthly operating reports for February. Yes. February. Didn't they do that already? No. In February, they filed for November of 2010.

And what do you know? He finally shows us his handiwork as trustee. The company has basically no money. In fact, it's deeply in debt. So SCO, which was solvent when it filed for bankruptcy protection in September of 2007, has managed to not only lose everything it had back then -- it is in debt. What oversight! What skills! It's precisely all the professional advice SCO has been favored with that put it into this debt.

Here are the filings:

04/26/2011 - 1265 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 2/28/11 (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) (Tarr, Stanley) (Entered: 04/26/2011)

04/26/2011 - 1266 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 2/28/11 (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) (Tarr, Stanley) (Entered: 04/26/2011)

Don't forget the usual warnings, that "The Company cautions readers not to place undue reliance upon the Monthly Operating Reports. There can be no assurance that the information in the Monthly Operating Reports is complete."

Which leads me to check out Japan. Yup. It had a book value of $765,366 when this all began; as of Feb. 28, 2011, its value is listed as $685,794.

Now, about those professional fees. Where are they? If you notice, the dates stop in January 2011. So, does that mean SCO's helpers worked for free in February. hahaha. They didn't file any bills? There are no bills to come?

Guess how much SCO has paid in professional fees since it filed for bankruptcy. $5,786,314, plus $474,498 in expenses. Down the drain.

"Net Profit (Loss) - $(57,914)." Cumulative to date - $(17,163,172). Of course, this doesn't include the pre-petition debt. And the book value includes "2,042,600" in good will. Heh heh. Oh, here's a hint: "Accrued Expense - Chapter 11 Fees - $573,714."

Here are my favorite footnotes:

(1) Total Pre-Petition Liabilities does not reconcile to the amount stated on the Schedules of Assets and Liabilities filed on October 15, 2007 due to timing differences allocation of accruals.

(2) Due to the allocation of accruals and adjustments booked at month end, the net loss for the 9/15 to 9/30 period does not reconcile to the change in retained earnin
There will not be an unreconciled difference in future periods as Company reporting periods will correspond with the Monthly Operating Report periods.

So, I'm not an accountant. Does this mean we'll get the true financials some day, all at the same time?

Meanwhile, here's the unpaid post-petition debts: $7,143,357, and this includes the $2,235,621 loan from the Yarro guys, $172,212 in taxes and $296,564 in wages and $24,869 in accounts payable, and 2,944,551 in "Other Post petition Liabilities", which the footnote explains thusly:

(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 these amounts see " FORM MOR-3 (CONT'D) in the MOR package.
Quaintly, the form asks, "Explain how and when the Debtor intends to pay any past-due post petition debts." Um. How about nevah?

The Debtor Questionnaire asks, "3. Have all post petition tax returns been timely filed?" And SCO says, Yes.

Well, they have lawyers. There is a difference between filing and paying, I guess. In short, once again, nobody can possibly know what is happening. At least I can't. Well, I could probably create a lovely PowerPoint, if I used Microsoft PowerPoint. At least I know which way the arrow would be pointing. And I know the Yarro folks are first in line to own the "assets", which by now appear to be absolutely nothing but a mountain of debt. Oh, and the litigation against IBM, in SCO's dreams.

Update: The happy new owners of SCO's UNIX software assets tell the world, on a website domain name unxisco.com, of all things -- at www.unxisco.com/asset-sale/ -- that this is what they got:

This asset transfer ends, for all time, the long period of uncertainty stemming from litigation and bankruptcy; indemnifies UnXis, our customers and channel partners from the risk of any future litigation associated with the SCO Group. More importantly, however, this transaction provides SCO with the necessary capital required to modernize the SCO product line, expand customer and channel support and strengthen strategic alliances, in order meet customer and partner need far into the future.

The assets acquired by UnXis under the terms of this agreement include, all applicable licenses and sublicenses, intellectual property, real property, lease hold improvements and other fixed and intangible assets as are necessary to continue to operate the business as a going concern. This includes the assets of all subsidiaries of the SCO Group including: SCO Global, Inc; SCO Software (UK) Ltd.; SCO Group France SARL.; The SCO Group GmbH; SCO Japan, Ltd.; SCO Software

Um. Who gets the capital? It clearly says that "this transaction provides *SCO*", not unXis. And please let me guess. They keep mentioning getting IP assets, because they want to call themselves SCO again, later, now that they have immunized themselves from any payback for the prior litigation follies? What a clever bunch.

They did forget one itty bitty thing: karma.


  


SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt. | 70 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections are now too late to help
Authored by: entre on Tuesday, April 26 2011 @ 08:01 PM EDT
Here though anyway, if you see some.

[ Reply to This | # ]

Have the monthly bills actually been paid?
Authored by: mexaly on Tuesday, April 26 2011 @ 08:01 PM EDT
IANAA either, but did the money that was due these past many months actually
make it from SCO coffers to attorneys' coffers?

If so, I'd think the attorneys will walk away now. If not, they're going to
have to stick around for the feeding frenzy.

---
IANAL, but I watch actors play lawyers on high-definition television.
My thanks go out to PJ and the legal experts that make Groklaw great.

[ Reply to This | # ]

Off-topic topics here, please
Authored by: neutro511 on Tuesday, April 26 2011 @ 08:19 PM EDT

[ Reply to This | # ]

How would tSCOg pay wages when ...
Authored by: dmarker on Tuesday, April 26 2011 @ 08:25 PM EDT

it doesn't have the money to pay them ???

Is some bank blindly allowing them to run on credit ???

DSM

[ Reply to This | # ]

When Cahn was appointed I dared to hope
Authored by: Anonymous on Tuesday, April 26 2011 @ 08:26 PM EDT
When Cahn was appointed I was optimistic that he would rein in the stupidity.
Mostly I guess because I expected someone who had been a judge to be fair and
reasoning. I can't imagine how he was persuaded that crashing and burning the
company was a good plan. All I can think is that he was out of his depth, and
this too doesn't look great.

As someone outside of the USA, I'm sad to say that I've mostly had my prejudices
about the US legal system reinforced.

[ Reply to This | # ]

SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt.
Authored by: TeflonPenguin on Tuesday, April 26 2011 @ 08:57 PM EDT
How about another restructuring plan?

---
-------------
TeflonPenguin

[ Reply to This | # ]

The solution is trivial
Authored by: jbb on Tuesday, April 26 2011 @ 08:58 PM EDT
When a company is in debt like this the obvious solution is to declare bankruptcy ...

---
[ ] Obey DRM Restrictions
[X] Ignore DRM Restrictions

[ Reply to This | # ]

Balance Sheet Summary
Authored by: Laomedon on Tuesday, April 26 2011 @ 09:33 PM EDT
Retained Earnings - Pre-Petition (255,202,167)
Retained Earnings - Post-Petition (17,163,172)
In other words, since it was started, Caldera (SCO) has lost a staggering amount of more than a quarter billion dollars of investor money ($ 272,365,339)!
So long, suckers!

[ Reply to This | # ]

SCO's will exist as long as they are useful...
Authored by: SilverWave on Tuesday, April 26 2011 @ 09:35 PM EDT
We all know useful to who.

---
RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

These accounts are in error
Authored by: Anonymous on Tuesday, April 26 2011 @ 09:58 PM EDT
They've counted goodwill as an asset. For SCO, the "most hated company in
tech" it should of course be counted as a liability.

[ Reply to This | # ]

I think I get it
Authored by: Anonymous on Tuesday, April 26 2011 @ 10:02 PM EDT
Since Yarro gets everything except what was sold to UnXis, the plan is to sell it all back! They'll be restored to their former glory. Like Phoenix from the ashes Caldera, they shall rise again!

[ Reply to This | # ]

  • I think I get it - Authored by: Anonymous on Tuesday, April 26 2011 @ 10:15 PM EDT
    • Nah! - Authored by: Anonymous on Tuesday, April 26 2011 @ 10:17 PM EDT
      • Darl's out - Authored by: Anonymous on Friday, April 29 2011 @ 10:43 AM EDT
  • I think I get it - Authored by: Anonymous on Wednesday, April 27 2011 @ 01:55 PM EDT
It's amazing
Authored by: kawabago on Tuesday, April 26 2011 @ 10:37 PM EDT
It's amazing a desert state can produce so many fishy people.

[ Reply to This | # ]

Organized crime couldn't have done it better
Authored by: Anonymous on Wednesday, April 27 2011 @ 03:31 AM EDT
Organized crime couldn't have done it better than all these upstanding members
of the society with the help of judges, politicians, and the law, initially
funded by the black ops department of Microsoft.

I think this is a textbook example of how a group of people can still milk the
half dead body from a failed black ops - the assault on Linux - for years for
various gains. You need to pocket a judge, have contacts to a senator, have no
fear nor shame and Bob is your uncle.

Now they are about to step down and handle the torch to the next generation.
That next generation is ready to milk the now 9/10 dead body some more. Maybe
they already have lined up their financier, their judge and one or two
politicians. Or maybe they are still shopping around their idea of a giant milk
machine.

[ Reply to This | # ]

SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt.
Authored by: Anonymous on Wednesday, April 27 2011 @ 08:32 AM EDT
This whole scandal reminds me of that scene from 'Goodfellas' when the mob take
over the restaurant, use the company credit to buy stuff all over town, sell the
same goods for a song out the back, and then when there's no more credit left
they torch the building for the insurance. These restructuring firms are really
good at what they do, i.e., restructure the money into their own accounts. I
can't believe this sort of thing is legal, but then this isn't the first time
I've been astounded by the bankrupcy system in this case. *rolls eyes*

[ Reply to This | # ]

SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt.
Authored by: Anonymous on Wednesday, April 27 2011 @ 10:07 AM EDT
If I was the bankruptcy judge I'd be major league pissed off
right now.

I'd completely gut the unixs sale and chapter 7 the entire
thing piecemeal to the highest bidder.

[ Reply to This | # ]

SCO is the business
Authored by: Anonymous on Wednesday, April 27 2011 @ 12:41 PM EDT
"Um. Who gets the capital? It clearly says that "this transaction
provides *SCO*", not unXis."

Right. It said SCO, not the SCO Group. The people who will get the assets are
the same people who they said would get the assets all along.

[ Reply to This | # ]

Asset sale...
Authored by: ghost on Wednesday, April 27 2011 @ 12:48 PM EDT
So where did the IBM MCVS server end up?
Who has it now?

[ Reply to This | # ]

SCO's Ch. 11 Finally Files Feb. MORs - Oops. In Debt.
Authored by: Anonymous on Wednesday, April 27 2011 @ 05:33 PM EDT
But why? As far as I see, he's been complicit in the destruction. It appeared as
if he had the leeway to do pretty much anything he thought was right (what were
they going to do, take him out the back and shoot him?) and he let the whole
sorry show carry on. He could have stepped in at any point.

[ Reply to This | # ]

Karma
Authored by: DaveJakeman on Thursday, April 28 2011 @ 09:31 AM EDT
More importantly, however, this transaction provides SCO with the necessary capital required to modernize the SCO product line, expand customer and channel support and strengthen strategic alliances, in order meet customer and partner need far into the future.
Where have we seen this before? This company confused over its identity? By mentioning the product line, the [shrunken] customer and channel support, they are clearly talking about themselves, but they are trying to re-use the already recycled "SCO" moniker, which they clearly are not.

Oh no, not again...

[ Reply to This | # ]

  • Karma - Authored by: jvillain on Thursday, April 28 2011 @ 02:23 PM EDT
    • Karma - Authored by: GriffMG on Sunday, May 01 2011 @ 08:58 PM EDT
Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )