Wednesday, January 19, 2022, 5:48 pm
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The secret audit reports filed under seal by the Mississippi Department of Agriculture and Commerce have just been unsealed by the bankruptcy court.
MDAC claims that a falsified audit report was filed by Express Grain on May 27, 2021 to MDAC, just 7 days after Horne LLP turned in its audit to Express Grain for the fiscal year ending June 30, 2020.
But MDAC discovered last December that the audit report that Horne provided to EG, and the audit report that EG provided to MDAC, were substantially different.
The two versions of the audit report may be seen here:
Audit Report from Horne LLP
Audit Report from Express Grain to MDAC
Comparison of the two versions reveals dozens of differences between the two reports, with the EG version usually in EG's favor. For example:
The following critical paragraph on page 2 of the Horne version was entirely missing from the Express Grain version:
Emphasis of Matter Regarding Going Concern
The accompanying combined financial statements for the year ended June 30, 2020, have been prepared assuming that the Companies will continue as a going concern. As discussed in Note 1 to the combined financial statements, the Companies have accumulated losses of. approximately_ $21,600,000 since its inception and their total current liabilities exceed total current assets at June 30, 2020. The biodiesel facility was placed into service during fiscal 2019 but has not operated at full capacity. The Companies have a line-of-credit with a balance at June 30, 2020 of approximately $24.6 million that matures within the next twelve months. These conditions raise substantial doubt about the Companies' ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1 to the combined financial statements. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
The last two pages of the audit are missing, and the table of contents differs to reflect that.
The letterheads on page 1 are different.
The signing date on the Horne version is May 10, 2021, but on the EG version it is February 3, 2021.
On page 3, the "total assets" were increased from $102 million in the Horne version to $115 million in the EG version.
On page 4, the Operating Income was a loss of $21 million in the Horne version, but a profit of $162,846 in the EG version.
On page 7, the following critical statements in the "Plan of Operation" section in the Horne version are missing from the EG version:
The Companies have accumulated losses of approximately $21.6 million since its inception and their total current liabilities exceed total current assets at June 30, 2020. As described in Note 4, EGT has a $35 million revolving line-of-credit (the "LOC") and a $25.2 million term loan (the "Term Loan") as of June 30, 2020 that matured November 30, 2020. On December 17, 2020, the Company amended the LOC to a $40 million LOC maturing October 31, 2021 and the Term Loan to a $35 million loan maturing October 31, 2023. See Note 11 for more details.
There can be no assurances that the Companies will have sufficient cash flows from its biodiesel operations to meet their future commitments or that they will be able to renew or extend the line of credit under acceptable terms. These conditions raise substantial doubt about the Companies' ability to continue as a going concern.
On page 11, the "Fair Value Measurements at June 30, 2020" for EG's grain assets were increased from $7.5 million in the Horne version to $16 million in the EG version.
On page 12, the property and equipment value schedule was increased from $59 million in the Horne report to $72 million in the EG version.
On page 13, in Note 4, statements in the Horne version that warned that EG was not in compliance with the tangible net worth requirement imposed by UMB Bank for the $70 million in loans, do not appear in the EG version.
On page 15, the "Total long-term debt less maturities," which is $50.6 million in the Horne version, was reduced to $27.4 million in the EG version.
In fact, MDAC told the bankruptcy court on December 20, 2021:
The Department believes that the alterations made by Express Grain to Horne LLP's May 20, 2021 report were made with intent to deceive the Department concerning Express Grain's true financial condition and were willful, intentional, malicious, deliberate and were not the result of an honest mistake, inadvertance, or oversight.
MDAC is investigating whether EG fraudulently renewed its warehouse licenses by submitting the altered audit report. If it did so, MDAC may revoke EG's warehouse licenses.
See our original reporting on the MDAC investigation here: Mississippi Department of Agriculture investigating Express Grain for false filings
John Pittman Hey
The Taxpayers Channel
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