The SCO Group, Inc. announced today that on February 28, 2005,
on management’s recommendation, the Audit Committee of the Board of
Directors concluded, and KPMG LLP, the Company’s independent
auditors agreed, that, due to certain accounting errors, the
Company’s financial statements for the quarters ending January 31,
2004, April 30, 2004 and July 31, 2004 should no longer be relied
upon and should be restated.
The impact of the anticipated corrections does not impact the
Company’s previously reported net loss or its earnings per share
for the fiscal year ended October 31, 2004 or its aggregate cash
and available-for-sale securities balances as of October 31,
2004.
As of today, the Company currently intends to restate its
previously issued financial statements for the above-mentioned
quarters of fiscal year 2004 to correct the accounting for the
following items:
- For the first, second and third quarters, the Company expects
to reclassify amounts related to certain shares of common stock
that the Company may have issued under its equity compensation
plans without complying with the registration requirements of
federal and applicable state securities laws from permanent equity
to temporary equity in the amounts of approximately $272,000,
$231,000, and $557,000, respectively. The Company may make a
rescission offer to holders of certain shares and expects an amount
to be classified as temporary equity until the completion of a
rescission offer or until the Company no longer has an obligation
to the holders of such shares. - For the first quarter and the second quarter, the Company
expects to reclassify accrued dividends related to the Company’s
previously issued Series A and Series A-1 Convertible Preferred
Stock from equity to current liabilities in the amounts of
approximately $879,000 and $1,619,000, respectively. In October
2003, the Company issued shares of Series A Convertible Preferred
Stock in connection with its $50,000,000 private placement, which
shares were subsequently exchanged for and replaced with shares of
Series A-1 Convertible Preferred Stock. When the Company
repurchased all outstanding shares of Series A-1 Convertible
Preferred Stock in July 2004, the Company’s obligation to pay
dividends on such shares terminated. The accrued dividends were
never paid and ultimately were recorded in equity upon the
completion of the repurchase transaction. In addition, the
dividends were properly captured in the calculation of earnings per
share in the periods above. - For the first and second quarter, the Company expects to
restate approximately $233,000 of stock-based compensation expense
which was recorded in the second quarter, but incurred in the first
quarter. There will be no change to the total stock-based
compensation expense for the fiscal year ended October 31,
2004.
As soon as the Company completes its analysis and KPMG LLP
completes its review procedures and audit work with respect to the
Form 10-K, the Company will file amendments to its quarterly
reports on Form 10-Q for the above-mentioned periods and will file
its annual report on Form 10-K for the year ended October 31,
2004.
As previously announced, the Company submitted a request for a
hearing with the Nasdaq Listing Qualifications Panel. The Company
has received notice that its request has been accepted and the
hearing is scheduled for March 17, 2005.