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To read comments to this article, go here
SCO Files July MORs - Updated
Saturday, September 25 2010 @ 01:22 AM EDT

Finally, SCO filed its MORs for July. Is anybody noticing they don't seem to be reorganizing?

I need to lighten up, yo. This is *bankruptcy* court, and your checkbook isn't supposed to balance out. Just spend, spend, spend, and who's to check your hand? You want 4 hotels on Park Place and 6 houses on Baltic Avenue? Why not? No one will ever hold you accountable. It's not like us little people, who have to, you know, pay our debts and all.

Page 16 says that professional fees for July were $340,960. For one month. That is more than SCO paid its employees and more than it made in net profit from the business that month, but who's counting? Obviously not the US Bankruptcy Court in Delaware.

Guess how much the professional fees total since bankruptcy began? $5,738,877. It means, as I read it, that instead of paying Novell what SCO owes in damages, it paid professionals to help them try to avoid it.

Then there's the millions for the IBM and Novell litigation, if I've read these MORs right.

Here you go:

09/24/2010 - 1174 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 7/31/10 (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: 09/24/2010)

09/24/2010 - 1175 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 7/31/10 (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: 09/24/2010)

They made $0 from royalties in Japan and China. But they disbursed $182,697, "payments to subsidiaries under intercompany agency agreements & arrangements." Since the bankruptcy began, SCO has made $9,537,122 in such payments. Page 15 indicates that SCO is keeping Novell restricted cash in Japan. A lot. Can someone tell us why they don't just hand it over to Novell? Bankruptcy court is a Byzantine maze to me. Are they waiting for the appeal?

There is a footnote 1 explaining "Other":

(1) Adjustment to allocate legal expenses surrounding the IBM and Novell litigation to Cost of Goods Sold at Fiscal Quarter Closes (October,January, April & July).
Here's the breakdown of the other category:


BREAKDOWN OF "OTHER" CATEGORY07/01/2010 through 07/31/2010 Cumulative Filing to Date
Other Costs of Goods Sold --
Cost Overhead 25,492 $462,107
Cost Royalty 8,381 3,255,786
Cost Technology 184,054
Cost Other 1,498 2,166,400
TOTAL OTHER COST OF GOODS SOLD $35,371 $6,068,347
Other Operational Expenses --
Cost of Goods Sold Reclassification(1) $(206,797) $(5,376,672)
(1) Adjustment to allocate departmental expenses, including services, manufacturing and the legal expenses surrounding the IBM and Novell litigation, to Cost of Goods Sold at Fiscal Quarter Closes (October, January, April & July).


Does that makes sense to you? If so, please explain it to the rest of us. Exactly how much have they spent on lawyers? Any way to know? Which pea am I supposed to be looking at? I mean is this just IBM and Novell cases? Since IBM has been on hold except for one hearing, did SCO actually spend 5,376,672, more or less, on the Novell case since SCO filed for bankruptcy three years ago, even after SCO allegedly paid in full for both the IBM and the Novell cases? Whazzupwidat?

How is SCO doing otherwise? The total receipts for SCO Operations in July was $390,592. But page 16, Statement of Operations, shows $660,310 as Gross Revenues, $654,070 Net Revenue and $214,859 Net Profit in the Operating Expenses category. "The Statement of Operations is to be prepared on an accrual basis," it says at the top of that section. "The accrual basis of accounting recognizes revenue when it is realized and expenses when they are incurred, regardless of when cash is actually received or paid." I don't understand any of that. It's Monopoly money to me. Did you know that the first game that later became Monopoly was created to illustrate the disadvantages of allowing land to be monopolized. I think it applies to software too. Somebody should do a game to teach kids that.

The same page says there were $158,583 in intercompany transfers that month, and since the bankruptcy began the figure is $10,429,634, with a total loss since the bankruptcy began of $10,691,888. The net loss in July was $279,752, and since bankruptcy began, $16,497,749.

Who is going to buy this turkey?

Update: A comment phrases my question that I couldn't find the right words for:

Didn't Darl McBride tell the Judge, the Court, and the SEC (not to mention his shareholders) that they didn't need the copyrights to sell their UNIX product line? If that's so, then how in the world can litigation surrounding those same copyrights be considered as a cost of selling those products?
Someone else contributes this link to a definition of accrual basis accounting, with links to more detailed information.

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