SCO Announces Restatement - Bloomberg has the press release from SCO. SCO has announced 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." This doesn't appear to be the entire story, as to the failure to timely file the 10K earlier, considering the reasons given for the delay. Robert McMillan tells us this: "Last month, SCO claimed that the filing delay was due to a re-examination of stock grants made under the company's employee compensation plan. But in a statement today, the Lindon, Utah-based company said it also expects to reclassify dividends related to a $50 million October 2003 investment in the company made by BayStar Capital LP. SCO said it repurchased all shares of BayStar's A-1 Convertible Preferred stock last July.. . . "The company may have to repurchase certain shares purchased under its employee stock purchase program that were not properly registered during the first three quarters of the company's fiscal year, which ended Oct. 31. SCO will also have to restate $233,000 in stock compensation recorded in the second quarter that actually occurred in the first quarter, the statement said."Here's the SEC filing. BusinessWeek says trading stopped: "Shares of the seller of UNIX operating systems and products were halted in extended trade ahead of the news. The stock closed earlier up 6 cents at $4.17 on the Nasdaq." And Stephen Shankland has more details: "For the first, second and third quarters of the company's fiscal 2004 SCO issued stock as part of its compensation plans 'without complying with the registration requirements of federal and applicable state securities laws.' The company will reclassify that stock as temporary equity instead of permanent equity and may offer to reverse those share grants."The amounts reclassified are $272,000, $231,000 and $557,000 for the first, second and third quarters, respectively, SCO said. There could be a financial effect from the situation if SCO has to offer to buy back the stock, issued to employees through a purchase plan, and the market price of the stock is lower than the stock price when it was issued, spokesman Blake Stowell said."The second problem concerned incorrect classification of dividends related to the company's repurchase of preferred shares relating to a $50 million investment in the company. The company is reclassifying $879,000 from the first quarter and $1,619,000 from the second quarter as current liabilities instead of equity. . . . "The third problem was that $233,000 in stock-based compensation was recorded in the second quarter but actually accrued in the first, SCO said." He adds that Blake Stowell says the second problem has to do with "dividends SCO had to allocate in relation to the preferred shares but that it never had to pay because it repurchased those shares."Of course, the stock goes up on bad news. For an overview from more rational quarters, BusinessWeek has some News Analysis, headlined "A Linux Nemesis on the Rocks --SCO's lawsuit is floundering -- and now the struggling software company faces regulators' scrutiny and questions about its management", which tell us this: "Well, the mouse that roared is barely squeaking these days. A string of recent setbacks raises grave questions about SCO's finances, its court case, and its management. . . . "While the restatements won't change its net loss or cash balance for that year, they are likely to reduce its cash position by $500,000 or more in fiscal year 2005, says an insider. "SOME STAYING POWER. "What once looked like a mortal threat to Linux appears to be fading. As a result, the suit has become a nonfactor in corporate buying decisions. . . . "Thomas C. Carey, a lawyer at Boston law firm Bromberg & Sunstein who is not involved in the suit, says SCO's case is on the ropes. 'The judge gave every indication that he is prepared to throw out the case unless SCO comes up with some surprising evidence,' he says."Here is the press release: (GrokLaw)