Lindon (UT) – SCO today said that it has received a letter from Nasdaq informing the company that its shares will be delisted on September 27. SCO also informed its investors that there is a chance that the company will have to fold.
According to a press release, the “Nasdaq Staff Determination Letter” wa s received by SCO on September as a result of SCO’s decision to file for protection under Chapter 11 of the U.S. Bankruptcy Code. According the listing rules of Nasdaq, the company’s common stock will be suspended unless the SCO requests a hearing to review the determination. SCO said that it will request such a hearing, while it conceded that “there can be no assurance that the panel will grant the Company’s request for continued listing.”
SCO’s stock gained 4 cents or 26% following the announcement and ended Wednesday trading at $0.20. The firm’s current market cap is about $4.3 million.
On September 14, SCO said that it filed a voluntary petition for reorganization under Chapter 11 in order to be able to protect its assets. In a press release, the firm stated that the “Board of Directors of The SCO Group have unanimously determined that Chapter 11 reorganization is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders, and employees.”
“We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business critical operations,” said Darl McBride, president and CEO of SCO in a prepared statement. “Chapter 11 reorganization provides the Company with an opportunity to protect its assets during this time while focusing on building our future plans.”
According to SCO’s most recent 10Q document filed with the Securities Exchange Commission yesterday, the company had about $7.4 million in cash at the end of July. Revenue for the three months ended on July 31, 2007 was about $4.7 million; the company recorded a net loss of about $2.4 million for the quarter.
In the 10Q document, the company indicated that the Chapter 11 filing has been a strategic move reacting to a August 10 court decision, which not only put an end to SCO’s litigation against Novell, but also provided Novell with the ability to charge SCO for SVRx license fees which the firm had collected in 2003 from Microsoft and Sun. It remains unclear at this time how much SCO will have to pay, but the amount could exceed $30 million, according to SCO – which translates into a threat that could put SCO out of business in a snap.
Accordingly, SCO told its investors that there is a real chance that the company may fold because of the court ruling: “As a result of both the Court’s August 10, 2007 ruling and the company’s entry into Chapter 11, there is substantial doubt about the Company’s ability to continue as a going concern. Absent a significant cash payment to Novell for this matter, management believes it is remote that the undiscounted future cash flows generated by the company would not be sufficient to recover the carrying values of the long-lived assets over their expected remaining useful lives,” the 10Q filing reads.