The SCO Group Closes $50 Million Equity Financing
LINDON, Utah, Oct 16, 2003 -- The SCO® Group (SCO) (Nasdaq: SCOX), the owner of the UNIX operating system, today announced it has received a $50 million private investment led by BayStar Capital, an investment fund that is a leader in providing negotiated private equity placements in publicly traded companies. The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of $16.93 per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing. Upon conversion, BayStar will own an aggregate of approximately 2,953,000 shares of SCO common stock representing 17.5% of the company's outstanding shares.
The net proceeds from the private placement, combined with the Company's cash balance reported for its third quarter ended July 31, 2003, will provide the Company with a cash position of approximately $61.0 million. The increase in cash will significantly enhance the overall financial strength of SCO while providing substantial additional funding for business objectives including future UNIX and SCOx Web Services software development, new strategic partnerships, and protection of the Company's UNIX intellectual property and related programs.
"The momentum in the marketplace continues to shift in SCO's direction," said Darl McBride, president and CEO, The SCO Group. "Over recent months, we have made significant strides forward in our on-going effort to protect and enforce the Company's intellectual property rights through SCOsource. During the same period, we have been steadily strengthening our core operating business, and in the coming weeks, we look forward to providing the industry and Wall Street with additional details on our plans and initiatives. Now, with a $50 million investment from BayStar, we believe we have secured the capital necessary to fund all aspects of the long term growth of this Company."
"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, General Partner, BayStar Capital. "SCO owns the most predominant UNIX software assets in the I.T. industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth."
SCO will hold a teleconference to address this investment on Friday, October 17 at 12:00 p.m. Eastern time. Participants should dial in 10 minutes prior to the start of the call and dial toll-free 1-800-811-8824 and use the confirmation code 690025. International callers should use the toll number +1-913-981-4903.
The securities sold in this private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United State in the absence of an effective registration statement or exemption from registration requirements. The Company has agreed to file a resale registration statement on Form S-3 within 30 days after the closing of the transaction for the purposes of registering the shares of common stock underlying the shares of Series A preferred stock acquired by BayStar.
Forward Looking Statements
This press release contains forward looking statements related to our business plans and objectives and specifically to our plans for future UNIX and SCOx Web Services Software development, protection of our UNIX intellectual property, current and future licensing programs and strategic initiatives, future product and service offerings, our intent to provide further details on our plans and initiatives and our belief that the additional funding we received will fund all aspects of the long term growth of the Company. These statements involve risks and uncertainties. The Company wishes to advise readers that a number of important factors could cause actual results to differ materially from those anticipated in such forward-looking statements. The Company has a history of unprofitability and has only realized revenue from its SCOsource licensing initiative during the last two quarters and the intellectual property rights that it is asserting in seeking to enter into licensing agreements are subject to pending litigation, making it difficult to predict the extent of future revenues from this source. Other factors that may affect such forward looking statements include the ability of the Company to successfully roll out its new services and solutions to service providers in its existing channels; the acceptance of such offerings by existing service providers and customers; the ability of the Company to grow its core UNIX business and the continued acceptance in the marketplace of the Company's core products; the Company's ability to compete effectively with other solutions providers; new and changing technologies and customer acceptance of those technologies; and claims of infringement of third-party intellectual property rights. These and other factors that could cause actual results to differ materially from those anticipated, are discussed in more detail in the Company's filings with the Securities and Exchange Commission.
The SCO Group (Nasdaq: SCOX) helps millions of customers in more than 82 countries to grow their businesses everyday. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 4,000 developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit http://www.sco.com.
About BayStar Capital
BayStar Capital is a private equity crossover fund that makes direct investments in late stage privately held companies and small to medium capitalization publicly traded companies across all sectors. The firm is a leader in arranging Private Investment in Public Equity (PIPE) transactions that provide capital to companies seeking to reduce time to market, less stock dilution and lower market risk.
UNIX is used pursuant to an exclusive license with The Open Group and is a registered trademark of The Open Group in the United States and other countries. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.
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