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Psystar Files Motion to Leave Chapter 11
Friday, July 03 2009 @ 01:13 PM EDT

Psystar has filed a Debtor's Motion to Voluntarily Dismiss Case [PDF]. They would like to leave Chapter 11, and of course that means they have to have a viable plan to present to the bankruptcy court.

They claim they have a new product that will dazzle the world and be more profitable. But they kind of had to say something like that, I think, because they already told the court in their bankruptcy petition back on May 21 that they don't make "a significant profit" on each sale of their prior products. So they couldn't just say, "Oops. This didn't work. We thought we could stay in business while in Chapter 11 without Apple being able to sue us, so we could make money while they could only grit their teeth in frustration. But they got the judge to lift the stay. So get me out of here."

They have to show the judge instead that if they leave Chapter 11, they will be able to make a profit and pay off creditors. So they have to show the court a plan for survival after they leave Chapter 11. What can they show? Something had to be different. The old business plan wasn't enough. Hence a new product announcement.

In short, bankruptcy didn't protect them from Apple the way they hoped, I surmise. Apple on June 17 prevailed on its motion to lift the bankruptcy stay on the litigation, and Psystar says it can't afford to do both the litigation and the bankruptcy. So it wants to be relieved of the bankruptcy expense. They can't get out of bankruptcy now unless the court believes they can be viable. So they announce a new product. I expect Apple will oppose and instead ask for Chapter 7. A plan based on a hope for future profits? Sounds like SCO to me.

Here's the docket:

06/26/2009 - 43 - BNC Certificate of Mailing (Re: 42 Notice Regarding Filing of Transcript and Deadline for Filing Notice of Intent or Motions to Request Redaction of Transcript.) Service Date 06/26/2009. (Admin.) (Entered: 06/27/2009)

07/01/2009 - 44 - Motion to Dismiss Case Voluntary Filed by Debtor Psystar Corporation. (Lopez, Lazaro) Modified on 7/2/2009 to rotate image.(Gutierrez, Susan). (Entered: 07/01/2009)

07/02/2009 - 45 - Notice of Hearing (Re: 44 Motion to Dismiss Case Voluntary Filed by Debtor Psystar Corporation.) Hearing scheduled for 08/04/2009 at 02:00:00 PM at 51 SW First Ave Room 1406, Miami. (Howlan, Elaine) (Entered: 07/02/2009)

As you saw in the SCO bankruptcy, when it's time to leave Chapter 11, there are several choices. One is Chapter 7 instead, meaning shutting the company down if it can't be viable. Psystar says in the Motion that their chief creditor is their law firm. Chapter 7, they say, isn't the right choice, because creditors, meaning primarily their law firm, would lose all hope of ever being paid, and Psystar wouldn't be able to proceed with its counterclaims.

Again, this is an argument they have to make to persuade the judge that this motion should be granted instead of just shutting the company down in Chapter 7, with a trustee appointed to take over for the current management, who could settle the litigation, maybe tell Apple who was behind all this, and turn out the lights. Leaving Chapter 11 is their best option, they argue. Maybe their one and only, others might be thinking. Or, it's all just chess. If Psystar has secret backers, then they maybe could afford to do both, but they'd prefer not to continue with a strategy that didn't pan out.

If you are curious, here's an article about the new product, but I'd read it with a grain of salt, or at least in the context of what they need to do to get out of bankruptcy and stay in control of the litigation, as I analyze Psystar's latest chess move. To me, that is what this is all about, staying in control of the litigation and the company's records.

Here's a description of the new product, from TG Daily:

The Open (7) system comes with an Intel Core i7 processor and costs at least $1500 and more than $4600 if you choose Intelís Extreme processor, the maximum amount of memory (12 GB), three hard drives, and upgraded graphics card and a Blu-ray burner.

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