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SCO Files Financial Statements
Tuesday, October 16 2007 @ 11:05 AM EDT

Those of you who are accountants can help the rest of us with SCO's latest filings. There are a lot of them. The main event is its Financial Statement. Schedules and exhibits galore. I've just gotten them myself, so we can read them together.

I do notice immediately that SCO lists a payment [pdf] of $13,500 to Maureen O'Gara's G2 on August 29, 2007 (on page 2). That's a lot of subs. Kidding. I have no idea what it's for. G2 is also listed as a creditor, so whatever it's for, it's not payment in full. SCO expert Gary Pisano got $90,400, for which he is probably thanking his lucky timing stars. Sage Forensic got $47,781, and if that was money spent on detectives, I hope they have to cough it all back up. What a waste of corporate assets, in my book anyway. Darl just got $410,818.76, which I gather includes a bonus of $116,866.00.

Stop. You don't think he deserves that money more than Novell?

And we find out, I think, the mystery "management employee" being terminated. On the last page of that same PDF, we read that Bert Young and Michael Olson are leaving in October. Olson was paid in the year prior to filing bankruptcy $218,381.82, which includes an independent contractor fee of $60,000 (he isn't off the payroll until October 24), T & E reimbursement of $4,931.86, and a bonus of $15,950.00, and of course we don't know yet what his severance package will be, but it could be up to a year's salary, which in his case is $137,499.96.

Young was paid in the same time frame $319,981.76, which includes $47,311.80 for T & E reimbursement. That's a whole lot of pizza. He also got $60,000 in an independent contractor fee, although he is also not yet off the payroll according to this filing, and $47,670.00 as a bonus. His severance package is unknown, but his salary is $169,999.96, which means he's made more this year -- the year of the bankruptcy -- than he would normally make in a nonbankruptcy year. I didn't know you got bonuses for bankruptcy. Wait. I don't know that, do I, how much they made in earlier years? Heaven only knows what they've been making in "T&E reimbursements" and the like. I can't imagine the creditors not challenging all this largesse.

Incidentally, Olson and Young are the only names on the lists [PDF] of "all firms or individuals who at the time of the commencement of this case were in possession of the books of account and records of the debtor" and the list of "all bookkeepers and accountants who within two years immediately preceding the filing of the bankruptcy case kept or supervised the keeping of books of account and records of the debtor".

Here are the docket entries:

128 - Filed & Entered: 10/15/2007
Notice of Hearing (B)
Docket Text: Notice of Hearing Notice of Debtors' Motion for Authorization to (I) Pay Severance and Accrued Benefits to Terminated Employees and (II) Continue Pre-Petition Severance Policy Applicable to All Employees (related document(s)[116], [117], [125] ) Filed by The SCO Group, Inc.. Hearing scheduled for 10/25/2007 at 04:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 10/22/2007. (Attachments: # (1) Exhibit A # (2) Certificate of Service and Service List) (O'Neill, James)

129 - Filed & Entered: 10/15/2007
Notice of Hearing (B)
Docket Text: Notice of Hearing Notice of Debtors' Motion to File Under Seal Documents and Data Subject to Debtors' Motion for Authorization to (I) Continue Prepetition Severance Policy Applicable to All Employees and (II) Pay Severance and Accrued Benefits to Employees Terminated Postpetition (related document(s)[118], [119], [126] ) Filed by The SCO Group, Inc.. Hearing scheduled for 10/25/2007 at 04:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 10/22/2007. (Attachments: # (1) Exhibit A # (2) Certificate of Service and Service List) (O'Neill, James)

130 - Filed & Entered: 10/15/2007
Schedules/Statements
Docket Text: Schedules/Statements filed: Sch A, Sch B, Sch D, Sch E, Sch F, Sch G, Sch H, Sum of Schs, Decl Concerning Debtors Schs,. of SCO Operations, Inc. Filed by The SCO Group, Inc.. (Attachments: # (1) Schedule part 2 of 2) (O'Neill, James)

131 - Filed & Entered: 10/15/2007
Schedules/Statements
Docket Text: Schedules/Statements filed: Stmt of Financial Affairs,. For SCO Operations, Inc. Filed by The SCO Group, Inc.. (Attachments: # (1) SOFA Part 2 of 2) (O'Neill, James)

132 - Filed & Entered: 10/15/2007
Schedules/Statements
Docket Text: Schedules/Statements filed: Sch A, Sch B, Sch D, Sch E, Sch F, Sch G, Sch H, Sum of Schs, Decl Concerning Debtors Schs,. for The SCO Group, Inc. Filed by The SCO Group, Inc.. (Attachments: # (1) Schedule Part 2 of 3# (2) Schedule Part 3 of 3) (O'Neill, James)

133 - Filed & Entered: 10/15/2007
Schedules/Statements Docket Text: Schedules/Statements filed: Stmt of Financial Affairs,. for The SCO Group, Inc. Filed by The SCO Group, Inc.. (O'Neill, James)

Speaking of pizza, you'll notice on this Schedule Part 3 [PDF] that Dominos Pizza is a SCO customer, not the other way around, which is pretty much what you all were guessing. And I see there is a SCO Benelux, in the Netherlands. I wonder what ISP they use. And the insurance covering the executive officers and directors is from XL Specialty Insurance of Stamford, CT.

SCO supplies a list of all the products where the copyrights are in question between SCO and Novell on Schedule Part 2. But they say that SCO owns otherwise "all right, title and interest" but we know they didn't get any of the patents under the APA either, so I don't think that is accurate. Maybe there are no patents in any product on the list, and then I guess it would be accurate. Well. Except that X/Open owns the trademark on UNIX and UnixWare too I think. So, what's left to own? Trade secrets? See our Unix Books project if you think there are any left unrevealed from this list. Maybe you can find some, but I think they'd need to be pointed out with specificity to be an asset, when there seems at least a reasonable doubt that any exist. It was SCO's own lawyer who said in open court that there are no trade secrets in Unix. And who am I to contradict?

SCO does have patents though. They are listed on page 10 of this filing [PDF], but they are for things unrelated to the Unix materials. There's one for "Systems and Mothods for Providing Distributed Applications and Services for Intelligent Mobile Devices" and another for "Method of Developing, Delivering and Rendering Network Applications" and that kind of thing. I'm sure we can all trust that SCO will responsibly shepherd its patents without disruption to the market. Hardy har. Don't you love patents? They list trademarks they claim on page 11, like trademarks on "SCO" and "OpenLinux" and "Caldera". They do claim Unixware overseas and in the US in Class 9, fewer goods. They have, they say, a trademark in SHOUT and VOTE and ACTION. They list their registered copyrights on page 16, like the ones on documentation, and on page 17 they claim copyrights in Unix System V Release 3.0 - 4.2 and on UnixWare 7 1.3.

By the way, MTI is filing for bankruptcy now too. Here's some of the press release:

MTI Technology Corporation announced today that it has reached a definitive agreement with Zinc Holdings, LLC, a private equity sponsored investment group, pursuant to which, subject to bankruptcy court approval, Zinc Holdings will acquire MTI's European operating subsidiaries for approximately $5.5 million cash at closing. MTI also announced today that, due primarily to continued operational and financial difficulties experienced by its U.S. operations, it has filed for bankruptcy protection pursuant to Chapter 11 of the U.S. Bankruptcy Code. Since the bankruptcy filing covers MTI only, and not its subsidiaries, MTI expects its European operating subsidiaries to continue to operate in the ordinary course of business pending court approval of their sale to Zinc Holdings. The sale of the European operating subsidiaries is expected to close, pending court approval and other customary closing conditions, in the fourth quarter of 2007.

Thomas P. Raimondi, MTI's CEO and President, stated "After evaluating alternatives, we ultimately determined that seeking protection for MTI in bankruptcy will provide us with the best path to effect the sale of our corporate assets, including the sale of our European operations, and the wind down of our operations in an orderly fashion."

MTI also announced that it had entered into a definitive agreement with Zinc Holdings to provide debtor in possession financing to MTI for a limited period of time in connection with its bankruptcy proceeding. The proposed financing is also subject to court approval and customary conditions. All borrowings by MTI under the financing arrangement will require the prior approval of The Canopy Group, Inc., MTI's primary pre-petition secured creditor and a significant stockholder.

In connection with its bankruptcy filing, MTI intends to continue to cut costs in the United States, including the completion of layoffs of the majority of its U.S. workforce while seeking a possible buyer or buyers for all or portions of its remaining assets. Following the completion of any such sales, MTI intends to liquidate the remainder of its assets in appropriate bankruptcy proceedings.

MTI does not believe that sufficient funds will be available following the applicable bankruptcy sales and liquidation to fully satisfy the claims of its secured and unsecured creditors. As a result, MTI's equity holders would not receive any funds from the bankruptcy estate. MTI intends to dissolve following the completion of the applicable bankruptcy proceedings.

I'm sure old timers will remember Mr. Raimondi. He resigned from the SCO Board in November of 2004. The famous Forbes story about SCO getting what it wanted included this about MTI:

SCO is basically owned and run by The Canopy Group, a Utah firm with investments in dozens of companies. Canopy's chief executive, Ralph J. Yarro III, is chairman of SCO's board of directors and engineered the suit against Microsoft in 1996. Darcy Mott, Canopy's chief financial officer, is another SCO director, along with Thomas Raimondi, chief executive of a Canopy company called MTI Technology. . . .

Canopy companies sometimes share more than a common parent. They form joint ventures and buy and sell one another's stock. Last November SCO formed a joint venture called Volution with Center 7, a Canopy company. In 2000, Caldera sold off part of its business to EBIZ Enterprises, a Texas company in which Canopy holds a controlling interest and whose board boasts three Canopy execs, including Mott, according to SEC filings. Previously, Caldera bought shares in two other Canopy companies, Troll Tech and Lineo, and later wrote off the Troll Tech investment but sold the Lineo shares at a profit, according to SEC filings. In 1999, Caldera sold its own shares to MTI, then bought those shares back last year, according to SEC filings.

What's the point of all this horse trading? McBride says he has no idea, since those deals happened before he joined Caldera. "I wasn't involved in those transactions," he says.

Back in the early days, I tracked the insider trading, and you'll find Mr. Raimondi here and MTI's most recent 10K/A here.

Update:

A reader has done Schedule F [PDF] for us as text, "creditors holding unsecured nonpriority claims", sorted by dollar value. It differs somewhat from the list of top 20 creditors filed on Sept 14, 2007 as SCO_CH11-1-B. In particular, BS&F is now owed $515,690, up from $287,256.

515,690.86 Boies, Schiller & Flexner
500,650.73 AMICI LLC
273,978.00 Fringe benefits
158,973.75 Microsoft Licensing, Inc.
156,466.30 SCO Software (UK), LTD
125,371.24 SCO Group (Germany) GMBH
121,734.40 SCO Group (France) SARL
61,375.91 Novell, Inc. - Royalties
37,881.33 Veritas Software
34,961.52 Hatch James & Dodge
31,389.14 Mirage
30,505.00 Keven McBride
25,788.55 Fujitsu Services
25,302.11 Unisys Corporation
25,302.11 Intel Corporation
25,302.11 HP-Nonstop Royalty Acccounting
24,136.47 SCO Group Canada
21,781.25 KSJ Consulting
20,000.00 E-Trade Financial Corp Services
17,952.50 Boetticher, Hasse, Lohman
15,000.00 Edison Design Group, Inc.
14,902.29 American Express
13,842.00 Hyperion Consulting, Inc.
12,206.79 Strhold Spa
11,664.50 Sun Microsystems, Inc.
11,400.00 Profile Consulting, Inc.
11,400.00 LynnSoft
11,364.82 Shenyang Neusoft Co LTD
10,417.50 4 Front Technologies
10,352.35 Silverman Heller Associates
9,959.00 Tanner & Co.
9,198.72 G. Gervaise Davis, Esq.
8,693.32 Madson & Austin
7,026.79 RandD Strategic Solutions, LLC
6,529.00 Yi Jia
6,529.00 Eric Lee
6,377.89 Jersey Central Power & Light
6,221.00 Sage Forensic Accounting
5,709.54 Sales Synergy Canada
5,696.35 Global Crossing Conferencing
5,496.10 Jeff Hunsaker - Commissions
5,399.67 AMLAW Discovery
5,209.58 Bynari, Inc.
5,000.00 T.C.X. Data
5,000.00 Kent Derricott
5,000.00 IDC West
4,948.83 Landman Corsi Ballain & Ford
4,800.00 Plum Hall
4,706.25 Sykes Global Services Ltd.
4,512.68 Graphik
4,496.10 Richy Anderson - Commissions
4,056.67 Verizon
3,771.33 John Maloy - Commissions
3,000.00 Tech Marketing Ink
2,765.37 Cornerstar
2,665.34 Kelly Services
2,645.00 Nasdaq Stock Market
2,419.46 Insight
2,110.00 Bowne of Los Angeles, Inc.
2,000.00 Main 10
1,946.39 Rochkind, Marc J.
1,850.87 UCN
1,744.40 AT&T
1,622.39 Dorsey & Whitney LLP
1,600.00 Parr Waddoups
1,462.07 UPS
1,445.50 Fillmore Spencer, LLC
1,283.80 PR Newswire
1,223.79 Computershare Trust Company
1,134.09 CCI Network Services
1,090.62 Felix Eisenberg - Commissions
850.70 PREMIER SYSTEMS (PVT) LTD
750.88 Sprint
629.10 Express One
599.40 Darl McBride
500.55 Stealth Insight
500.00 Zenez
438.00 Lexis Nexis
361.19 Qwest
337.50 Mypaperless Office
288.00 World EX
280.00 J. Harrison Colter
250.00 Timpanogos High School
230.04 XO Communications LLC
213.00 Canon Business Solutions
210.00 Computer Associates Intl
198.00 The Canopy Properties
185.50 Kirton & McConkie
185.45 OfficeMax
185.00 Novell Inc.
145.00 Cybersource
130.00 Goodwin Procter LLP
125.12 INFO-QUEST SA
125.00 The Depository Trust Co.
122.15 Filterfresh
113.60 GES
100.00 CUSIP Service Bureau
98.05 Orem City
71.17 T-Mobile
71.16 DHL Express
69.95 Cintas Document Management
61.47 McHugh Milk Co
39.99 Pitney Bowes Purchase Power
28.27 Rocky Mountain Power
21.98 Maxine McCarthy
18.50 The Print Network
1.20 Arch Wireless

Total: $2,533,975.36

Excluding the $427,708.41 owed to SCO subsidiaries in France, Germany, Canada, and UK, the total is $2,106,266.95.


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