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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, of all things -- at -- 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.

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