The Accountants Have Spoken!
As promised, my son (an accountant) and my neighbour (a seasoned CPA) got back to me with some observations regarding the Bergamo financial statements posted on OTC markets. I sort of get this stuff and others are beyond me. Rather than trying to reword things, I have copied what they told me almost word for word. I even had my son check what I wrote down to be sure.
So, here goes.
Reporting Style:
• There are three different reporting styles used by BGMO over the past 6 years.
• In the garments period, the financials appear to be generated using a recognized accounting software package. The detail is very generous and descriptive. The numerical data is precise.
• There are no accompanying notes.
• There is no evidence that the financials are audited, reviewed or compiled by a CPA but there may be a likelihood that the documents were prepared by a third party trained bookkeeper.
• In the early financial services business period, the financial appear to be generated using a spreadsheet and not a recognized software package. Detail is skimpy and vague.
• There is no evidence that the financial are audited, reviewed or compiled by a CPA and without further inquiry the financials were likely prepared internally by a person or persons who are not trained bookkeepers.
• There are no accompanying notes.
• In the late financial services business period, the financial statements were prepared by a CPA but only done to the compilation standard. Under this standard, a CPA does not attest to the validity of the numbers.
• The financial details are more generous than in the early financial business period.
• There are ample notes to the financial statements.
Reporting Integrity Issues:
• Bergamo had adopted a January 31st year end.
• Only in one year (January 2008) did Bergamo submit financial data for an entire fiscal year.
• Every other document given to OTC markets has been a part period.
• In fact, the recent CPA prepared financials used a January 1st, 2012 start point which is part of the preceding fiscal year! My comment – Oops!
• In none of the reporting did Bergamo ever issue comparative statements (the current period to the previous period) which are universally done by licensed practitioners.
• The income statement results issued for the periods ended January 2008, September 2008 and January 2009 are identical yet the balance sheets show material differences.
• The aforementioned statements are clearly marked that they are “subject to audit to be inconformity to Finra Regulations”.
• A review of the FINRA website states that they are the regulator of the investment dealers and their brokers but not the issuer.
• We are at a loss to explain why the statement was added as it is not relevant nor does it attest to the accuracy of the management prepared documents.
• In the September 2009, the statements are clearly marked that they at “subject to SEC audit regulations”.
• The statements for the periods ended June 2010, December 2010 and June 2011, the financial statements are clearly marked that they are “subject to SEC audit” – a minor change from the previous wording.
• Under SEC rules governing disclosure, Section 5100 is the most relevant as it governs smaller issuers that are reporting issuers.
• Since BGMO is gave up it reporting issuer status, the SEC does not govern BGMO except for section 5130.
• Section 5130 addresses the issue of former reporting issuers that meet a specific revenue threshold.
• Based on the data reported to OTC markets at September 2009 and December 2010, the reported gross revenue exceed $ 50 million which would require that BGMO report to the SEC
• We are at a loss to explain why BGMO has not filed its statements that far back.
• With the CPA prepared compilation statements to September 17, 2012, the firm of L L Bradford and Company made an error with the inclusion of January 2012 in its numbers.
• The disclosure statement of December 7, 2012 mentioned that the document has not been filed or reviewed by FINRA or any other regulatory agency.
• It is interesting that the FINRA agency name reappears after using the SEC audit tag for a few years.
• Since BGMO is neither an investment dealer nor a broker, BGMO does not need to file its statements with FINRA.
• The only exception to the above is if BGMO is deemed to be the owner or controlling mind of an investment dealer.
• If so, there is no clear disclosure of the business owned other than they are marketable securities.
• There are no financial statements for the year ended January 31, 2012.
• It would be reasonable that the financial statements for the year ended January 31, 2013 be issued by now.
Other Comments:
• There are material inconsistencies in the reporting style and content through the periods on question
• None of the financial statements (with the exception of one) use the fiscal year in its reporting.
• None of the financial statements has accompanying MD & A reporting
• None of the financial statements has comparative data to a prior period
• None of the financial statements have been signed by the directors of BGMO
• Within the body of the recent CPA statement, there is reference to subsidiaries but in no case are the names disclosed.
The number crunchers (I shouldn't call them that but I could not resist) ended their note by saying that the impact of previously announced funding agreements and company acquisitions appears not to be included in the reported financial statements.
With the exception of one statement not issued by the company, does there appear to be a repudiation of a transaction. There are no press releases by BGMO regarding any aborted or cancelled funding or company acquisitions. In many of the acquisitions, BGMO was becoming the majority owner which would give rise to the disclosure of minority interests in the financial statements. In no case does BGMO report minority interests.
There were a few other comments which I chose not to print.
I did not want my post to be removed.
I had asked what should I do with my holdings in BGMO, the response was not helpful.
"Due to the inconsistency in the reporting style and content along with the use of random financial periods, the BGMO supplied documents to OTC should not be relied upon. When you consider the abundance of BGMO press releases announcing funding agreements and company acquisitions without the reporting by the Company of them not closing, they have either closed which gives rise to the failure to report their financials within the BGMO consolidated financial documents or they have not closed for which the Company would have repeatedly misreported and misrepresented material events".
We can only hope for a miracle.
