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SCO Bankruptcy: the Very Merry MORs of May
Wednesday, July 21 2010 @ 06:10 PM EDT

SCO filed its monthly operating reports for May. They had the Yarro loan, so these were still relatively flush days. If you are like me, you are deep into the transcripts from the trial, or you are analyzing Mozilla's draft MPL license, or both, so it's hard to focus on this. But the MORs are filed, so those of you who are more accounting-oriented will want to take a look.

As I look quickly through them, it looks like at the end of May, SCO could have paid back the Yarro loan in full. I realize they had just got it in March, and that that wasn't the goal in May. And this is July, not May. They took the loan to be able to keep the litigation going. And going. And going.

Guess how much they've spent in professional fees since this bankruptcy started? $5,097,729 plus $321,753 in expenses, not counting May or bills outstanding. So, the Chapter 11 bankruptcy has pretty much wiped out what they had when they started it, all to lawyers and other professionals helping them. Helping them do what? No wonder they keep postponing meeting with the bankruptcy judge lately. And no wonder they can't pay any creditors. Anyone notice this Chapter 11 thingie doesn't seem to be pointing toward success?

Here are the filings:

07/19/2010 - 1134 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 5/31/10 (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: 07/19/2010)

07/19/2010 - 1135 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 5/31/10 (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: 07/19/2010)

07/19/2010 - 1136 - Certificate of No Objection Re: Monthly Application for Compensation of (Seventh) of Ocean Park Advisors, LLC for the period April 1, 2010 to April 30, 2010 (related document(s) 1124 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 07/19/2010)

07/19/2010 - 1137 - Certificate of No Objection Re: Monthly Application for Compensation of (Eighth) of Ocean Park Advisors, LLC for the period May 1, 2010 to May 31, 2010 (related document(s) 1130 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 07/19/2010)

07/19/2010 - 1138 - Certificate of No Objection Re: Third Application for Compensation of Blank Rome LLP for the period December 1, 2009 to December 31, 2009 (related document(s) 1128 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 07/19/2010)

07/19/2010 - 1139 - Certificate of No Objection Re: Monthly Application for Compensation of (Fourth) Blank Rome LLP for the period January 1, 2010 to February 28, 2010 (related document(s) 1129 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 07/19/2010)

Anyone figure out how the total prepetition liabilities as of the date of their filing for bankruptcy in 2007 was $1,745,258 and now it's $1,181,271? Maybe that's showing the amount Boies Schiller forgave? And what would "retained earnings (13,446)" be? Salaries? Why retained? The professionals get paid but not the employees? And, um, aren't debtors supposed to at least stay current, in order to stay in Chapter 11?

Meanwhile, SCO KK in Japan, their sub there, still has $685,794 book value, but that's down from petition date's $765,366. SCO China on filing date was $497,858 and now it's book value is zero. And SCO Group's book value as of May 31 is $748,863. So they say. SCO Operations had $2,325,902 in cash at the beginning of May, no doubt reflecting the Yarro loan that I see listed prior to May at $1,950,000. So they really squeaked by, and only because of the loan, I guess. I'm no accountant, but if my checkbook looked like that, I'd say, "Uh oh." In May they had total receipts of $742,052. But then SCO Operations had disbursements in May of $772,909. That includes professional fees of $144,878, which is what was paid, I think, not total owed, since the docket shows a bunch of bills still working their way through the process, and paying the subsidiaries $179,935, so net cash flow was ($30,857), and at the end of the month, they show cash at $2,295.045.

Why don't they just pay Yarro back posthaste, and get that threat resolved, and then sell off everything they can, pay creditors ... What, am I dreaming? This is SCO. They'll instead keep paying lawyers and accountants and advisors and appeal their triple-play loss to Novell.


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