SCO has admitted that "certain accounting errors" have obliged the company to restate its financial accounts.

The Linux firm said that its management and independent auditor, KPMG, has been forced to reveal that financial statements for the quarters ending 31 January 2004, 30 April 2004 and 31 July 2004 "should no longer be relied upon and should be restated".

As part of this restatement, the company expects to reclassify funds for the first, second and third quarters amounting to almost $1m.

The funds relate to certain shares of common stock that SCO "may have issued under its equity compensation plans without complying with the registration requirements of federal and applicable state securities laws".

The financial restatement will also see the firm reclassifying accrued dividends for the first and second quarters related to 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.

For the first and second quarters, SCO expects to restate approximately $233,000 of stock-based compensation expense recorded in the second quarter, but incurred in the first quarter.

SCO stated that as soon as it has completed it accounting review with KPMG it will file amendments to its quarterly reports with the US Securities and Exchange Commission and will file its annual report for the year ended 31 October 2004.

As previously reported, SCO has submitted a request for a hearing with the Nasdaq Listing Qualifications Panel after facing possible suspension from the Nasdaq exchange over these accounting issues.

The company has received notice that its request has been accepted and the hearing is scheduled for 17 March 2005.

SCO stressed that the impact of any anticipated corrections does not affect its previously reported net loss or its earnings per share for the fiscal year ended 31 October 2004.