Supplemental Information
Louis M. Dorsey
Assistant Chief Accountant
The internal control issues related to the general ledger were caused by
the lack of timely entry and complete description of each entry. The issue was
resolved by hiring a new Chief Financial Officer who implemented strict policies
as to the handling of all general ledger items, the method of determining sales
to be recorded and the cessation of all contingent or consignment sales. No
further contingent or consignment sales have or will be authorized and all such
sales for the period beginning March 1, 1999 have been adjusted in the proper
year and the unsold product returned from the customer to the company inventory.
We have been unable to determine why sales for fiscal 1999 and fiscal
2000, second quarter had been recorded in a fashion not in compliance with GAAP.
It appears that the prior Chief Financial Officer recorded all items shipped as
sales without any review of the terms and conditions of the sales agreements.
The independence issue of Bederson and Company L.L.P. relates directly to
the lack of payment on certain notes signed by the company. These notes required
payments on June 15, July 15 and a further payment on August 15, 2000 to fully
pay for the prior years audit. Bederson has stated that they will not reissue an
opinion for the fiscal 1999 audit until they are paid in full and have had an
opportunity to perform appropriate audit procedures regarding the accounting
errors.
