Now you have me thinking. Why release a draft of a final audit and not release the final? Possibly absolving you of any liability that the numbers are not correct and reference it was only a draft. Hmmmmm....
In the Draft Audit, there is a liability in the amount of $10,500,000 listed as “Due to Related Party”. The note associated with that debt reads that it is non-interest bearing and due on demand. This liability seems related to the acquisition of United Mortgage Bankers (i.e., Saleem). From Michelex’ press release of July 1, 2010 (yes, the typo error of ‘Bakers’ instead of ‘Bankers’ is in the release):
Thus, it appears that United Mortgage Bankers had $10.5MM dollars that was made available to Michelex. There is a $13.5MM 'Certificate of Deposit' listed as a current asset in the Draft Report. This raises some questions:
1) Did United Mortgage Bankers, or Saleem, actually have $10.5MM or did they 'borrow' that money from some other entity?
2) Assuming that the audit was legit (has anyone verified that Paritz and Company actually performed the audit?), is the $10.5MM still an asset of Michelex or has that money been returned to Saleem (or the entity that may have provided that money)?
Yes, it has always been worrisome, but that is the risk one takes when investing in pinks, especially non-transparent pinks. As of right now, Michelex looks like a house of cards that is about to fall down. If Lacle returns from his trip with tales of great contracts, we will have to try to verify that the contracts are actually valid. As I'm sure you know, a typical pinky-management play is to produce 'contracts' that cannot be verified.
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