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VIA
EDGAR ELECTRONIC TRANSMISSION
AND
BY FAX TO 202-772-9210
November
30, 2007
Securities
and Exchange Commission
Division
of Corporation Finance
450
Fifth
Street, N.W.
Washington,
DC 20549
Attention: Mr.
William Demarest
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Re:
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Bimini
Capital Management, Inc. (formerly known as Opteum
Inc.)
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Form 10-K
for the period ended December 31,
2006
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Filed March
14, 2007
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File
No. 1-32171
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Dear
Mr.
Demarest:
Set
forth
below is our response to the comments of the Staff of the Division of
Corporation Finance (the “Staff”) of the Securities and Exchange
Commission (the “Commission”), as set forth in the Staff’s comment letter
dated November 15, 2007 (the “Comment Letter”) in respect of our Annual
Report on Form 10-K for the period ended December 31, 2006 (the “2006 Form
10-K”), which was filed on March 14, 2007. The numbered paragraphs
below correspond to the numbered paragraphs in the Comment
Letter. For convenience of reference, we first set forth the Staffs’
comment in full, followed by our response. As used herein, references
to “us,” “we” or “our” mean the registrant, Bimini Capital Management, Inc.,
which was known as Opteum Inc. from February 10, 2006, to September 28, 2007,
and Bimini Mortgage Management, Inc. prior to February 10, 2006.
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1.
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We
note that the audit report of Deloitte & Touche LLP does not comply
with AS-1 which requires reference to the standards of the Public
Company
Accounting Oversight Board. Please revise your Form 10-K to
include a report of the other independent registered public accounting
firm that conforms to AS-1 or tell us why this is not
necessary.
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In
response to the Staff’s comment, we have reviewed Auditing Standard No. 1
(“AS-1”) of the Public Company Accounting Oversight Board (the “PCAOB”) and Rule
2-02 of Regulation S-X. We have also reviewed certain definitional
terms, discussed more fully below, defined in Section 2 of the Sarbanes-Oxley
Act of 2002 (the “Act”) and Rule 1001 of the PCAOB.
Based
upon our review, we agree with the Staff’s comment that the report of Deloitte
& Touche LLP does not comply with AS-1. However, we respectfully
disagree with the Staff’s assertion that the report of Deloitte & Touche LLP
is required to comply with AS-1 for the reasons discussed below.
Statement
of the Facts:
Bimini
Capital Management, Inc. (“Bimini Capital”) was formed in 2003 as Bimini
Mortgage Management, Inc. (“Bimini Mortgage”). On November 3, 2005,
Opteum Financial Services, LLC (“OFS”) was acquired by, and became a
wholly-owned subsidiary of, Bimini Mortgage. On February 10, 2006,
Bimini Mortgage changed its name to Opteum
Inc. (“Opteum”). On December 21, 2006, Opteum sold a 7.5%
Class B non-voting limited liability company membership interest in OFS to
a
third-party, resulting in OFS being a 92.5% majority-owned subsidiary of Opteum
as of December 31, 2006.1
As
required by U.S. generally accepted accounting principles, we consolidated
the
financial statements of OFS for the twelve month period ended December 31,
2006,
and for the period November 3, 2005, to December 31, 2005, and our consolidated
financial statements were included in our Annual Report on Form 10-K for
the period ended December 31, 2006. Further, as required by
Regulation S-X and the rules of the PCAOB, we included the audit report of
Ernst
& Young LLP, our independent registered public accounting firm (“E&Y”),
concerning our consolidated balance sheets as of December 31, 2006 and 2005,
and
the related consolidated statements of operations, stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2006
(the “E&Y Report”). The E&Y Report fully complies with AS-1
and Rule 2-02.
Lastly,
because the E&Y Report made reference to the report of Deloitte & Touche
LLP (“Deloitte”) concerning Deloitte’s audit of the consolidated balance sheet
of OFS and its subsidiaries as of December 31, 2005, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for
the period November 3, 2005 (Date of Acquisition) to December 31, 2005 (the
“D&T Report”), we also included the D&T Report as required by Rule 2-05
of Regulation S-X. Although the D&T Report does not comply
with AS-1 or Rule 2-02, we believe that the requirements of AS-1 and Rule 2-02
are inapplicable to the D&T Report for the reasons set forth
below.
1
On July 3, 2007,
OFS changed its name to Orchid Island TRS, LLC, and on September 28, 2007,
Opteum changed its name to Bimini Capital Management,
Inc.
Mr.
William Demarest
Securities
and Exchange
Commission
November
29,
2007
Page
2
AS-1
is inapplicable to the D&T Report because the D&T Report (i) is not an
“audit report” as defined in Section 2(a)(4) of the Act and (ii) is not an
“audit report” as defined in Rule 1001(a)(vi) of the
PCAOB.
Statement
of the Applicable Law:
The
term
“audit report” is defined in Section 2(a)(4) of the Act and Rule 1001(a)(vi) of
the PCAOB as “a document or other record (A) prepared following an
audit performed for purposes of compliance by an
issuer with the requirements
of the securities laws;
and (B) in which a public accounting firm either (i) sets forth the opinion
of
that firm regarding a financial statement, report or other document; or (ii)
asserts that no such opinion can be expressed.” Emphasis
added.
The
term
“audit” is defined in Section 2(a)(2) of the Act and Rule 1001(a)(v) of the
PCAOB as “an examination of the financial statements of any
issuer by an independent public accounting firm in
accordance with the rules of the [PCAOB] or the Commission…for the purpose of
expressing an opinion on such statements.” Emphasis
added.
The
term “issuer”
is defined in Section 2(a)(7) of the Act and Rule 1001(i)(iii) of the
PCAOB as
“an
issuer
(as
defined in section 3 of the [Securities Exchange Act of 1934], the securities
of
which are registered under section 12 of that Act…, or that is required
to
file reports under section 15(d)…, or that files or has filed a registration
statement that has not yet become effective under the Securities Act of 1933…,
and that it has not withdrawn.”
Section
101(c)(2) of the Act confers jurisdictional authority on the PCAOB to, among
other things, “establish or adopt, or both, by rule, auditing, quality control,
ethics, independence, and other standards relating to the preparation of
audit reports for issuers,
in accordance
with section 103….” Emphasis
added.
Section
103(a)(1) of the Act further provides in relevant part that “[t]he [PCAOB]
shall, by rule, establish…such auditing and related attestation standards, such
quality control standards, and such ethics standards to be used by registered
public accounting firms in the preparation and issuance of audit
reports, as required by this Act or the rules of the
Commission…” Emphasis added.
Analysis:
Bimini
Capital (formerly known as Opteum and formerly known as Bimini Mortgage) is,
and
as of December 31, 2006, was, an “issuer” within the meaning of the Act and Rule
1001 of the PCAOB. The E&Y Report included in our 2006 Form 10-K
is an “audit report” within the meaning of the Act and Rule 1001 of the PCAOB
because (i) it was prepared following an audit of the financial statements
of an
“issuer” by an independent public
accounting
firm in accordance with the rules of the [PCAOB] or the Commission…for the
purpose of expressing an opinion on such statements, (ii) the audit was
performed for purposes of compliance by an “issuer” with the requirements of the
securities laws and (iii) it sets forth
the
opinion of E&Y regarding a financial statement, report or other
document. As noted above, the E&Y Report fully complies
with AS-1 and Rule 2-02 of Regulation S-X.
In
contrast, the D&T Report relates solely to the consolidated financial
statements of OFS for the period November 3, 2005, to December 31,
2005. OFS is not now, and has never been, an “issuer” within the
meaning of the Act and Rule 1001 of the PCAOB. Because (i) OFS is not
an “issuer” within the meaning of the Act and Rule 1001 of the PCAOB and (ii)
“audit” is defined in the Act and Rule 1001 of the PCAOB as “an examination of
the financial statements” of an “issuer…for the
purpose of expressing an opinion on such statements,” D&T’s audit of the
consolidated financial statements of OFS is clearly not an “audit” within the
meaning of the Act and Rule 1001 of the PCAOB. Consequently, the
D&T Report is not an “audit report” within the meaning of the Act and Rule
1001 of the PCAOB because “audit report” is defined in the Act and Rule 1001 of
the PCAOB by reference to the terms “audit” and “issuer” as defined in the Act
and Rule 1001 of the PCAOB. Therefore, AS-1 does not apply to the
D&T Report.
Conclusion:
We
respectfully disagree with the Staff’s assertion that the D&T Report is
required to comply with AS-1 because (i) OFS is not, and has never been an
“issuer,” within the meaning of the Act and Rule 1001 of the PCAOB, (ii)
D&T’s audit of the consolidated financial statements of OFS was not an
“audit” within the meaning of the Act and Rule 1001 of the PCAOB, and (iii) the
D&T Report is not an “audit report” within the meaning of the Act and Rule
1001 of the PCAOB.
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2.
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We
also note that the audit report of Deloitte & Touche LLP does not
comply with Rule 2-02 of Regulation S-X, which requires that [the]
audit
report indicate the city and State where issued. Please revise
your Form 10-K to include a report of the other independent registered
public accounting firm that conforms to Rule 2-02 of Regulation S-X
or
tell us why this is not
necessary.
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In
response to the Staff’s comment, we have reviewed Rule 2-02 of Regulation
S-X. We have also reviewed Rules 1-01 and 1-02 of Regulation
S-X.
Based
upon our review, we agree with the Staff’s comment that the D&T Report does
not comply with Rule 2-02 of Regulation S-X. However, we respectfully
disagree with the Staff’s assertion that the D&T Report is required to
comply with Rule 2-02 of Regulation S-X for the reasons discussed
below.
Mr.
William
Demarest
Securities
and Exchange
Commission
November
29,
2007
Page
3
Rule
2-02 is inapplicable to the D&T Report because the D&T Report is not an
“accountant’s report” as defined in Rule 2-01 of Regulation
S-X.
Statement
of the Applicable Law:
Rule
2-02(a) of Regulation S-X sets forth certain technical requirements pertaining
to “accountant’s reports” and reads as follows:
“(a)
Technical Requirements for Accountants’
Reports. The accountant’s
report: (1) shall be dated; (2) shall be signed
manually; (3) shall indicate the city and state where issued; and (4) shall
identify without detailed enumeration the financial statements covered by the
report.”
Emphasis
added.
Rule
1-02(a)(1) of Regulation S-X defines “accountant’s report” as
follows:
“The
term
accountant’s report, when used in regard to financial
statements, means a document in which an independent public or
certified public accountant indicates the scope of the audit (or examination)
which he has made and sets forth his opinion regarding the financial
statements taken as a whole, or an assertion to the effect that an
overall opinion cannot be expressed. When an overall opinion cannot be
expressed, the reasons therefor shall be stated.”
Emphasis
added.
Regulation
S-X “sets forth the form and content of and requirements for financial
statements required to be filed” under the U.S.
securities laws.2 Emphasis
added. The term “financial statements” as used in Regulation S-X is
“deemed to include all notes to the statements and all related
schedules.”3
Analysis:
Rule
2-02(a) of Regulation S-X, when read in conjunction with Rules 1-02(a)(1),
1-01(a) and 1-01(b) of Regulation S-X, contemplates a single accountant’s
report “in which an independent public or certified public
accountant…sets forth his opinion regarding the financial statements
taken as a whole” in respect of financial statements
“required to be filed” under the U.S. securities
laws. As previously noted, the E&Y Report included in our 2006
Form 10-K satisfies the requirements of Rule 2-02(a) and is an “accountant’s
report” on the “financial statements” required to be filed with our 2006 Form
10-K.
In
contrast, the D&T Report is a report on D&T’s audit of the consolidated
financial statements of OFS, a privately-owned company that is not separately
subject to the reporting requirements under the Securities Exchange Act of
1934
(the “Exchange Act”). As a privately-owned company not subject to the
reporting requirements of the Exchange Act, the consolidated financial
statements of OFS are not, in and of themselves, “financial statements required
to be filed” under the U.S. securities laws. Further, the D&T
Report is not a report on “the financial statements taken as a whole” of a
registrant required to file such financial statements. Therefore,
because (i) the stand-alone consolidated financial statements of OFS are not
“financial statements required to be filed” under the U.S. securities laws, and
(ii) the D&T Report does not set forth an opinion on “the financial
statements taken as a whole” in respect of financial statements “required to be
filed” under the U.S. securities laws, the D&T Report is not an
“accountant’s report” within the meaning of Rule 1-02(a)(1) of Regulation
S-X. Consequently, Rule 2-02(a) of Regulation S-X is inapplicable to
the D&T Report.
Conclusion:
We
respectfully disagree with the Staff’s assertion that the D&T Report is
required to comply with Rule 2-02 of Regulation S-X because (i) the stand-alone
consolidated financial statements of OFS are not “financial statements required
to be filed” under the U.S. securities laws, and (ii) the D&T Report does
not set forth an opinion on “the financial statements taken as a whole” in
respect of financial statements “required to be filed” under the U.S. securities
laws.
If
the
Staff disagrees with the foregoing conclusions, we would respectfully submit
that, because that the D&T Report relates only to the consolidated financial
statements of OFS for the period November 3, 2005, to December 31, 2005, and
is,
in our view, immaterial to our consolidated financial statements included in
our
Annual Report on Form 10-K for the period ended December 31, 2006, the failure
to file the amendment to our 2006 Form 10-K requested by the Staff would not
result in a material misstatement or omission in our 2006 Form10-K and such
an
amendment is not necessary or appropriate in the public interest or for the
protection of investors. We would also respectfully submit that the
time, effort and expense of engaging D&T and E&Y to perform the
requisite additional audit procedures necessary solely for the purpose of filing
the amendment requested by the Staff would pose an undue burden, would far
outweigh any benefit to investors of filing such an amendment, and may confuse
investors as to the reason for the amendment.
In
closing, we acknowledge that:
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we
are responsible for the adequacy and accuracy of the disclosure in
our
filings with the Commission;
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Staff
comments or changes to disclosure in response to Staff comments do
not
foreclose the Commission from taking any action with respect to our
filings with the Commission; and
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it
is the Staff’s position that we may not assert Staff comments as a defense
in any proceeding initiated by the Commission or any person under
the
federal securities laws of the United
States.
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We
appreciate the opportunity to respond to the Staff’s Comment
Letter. If you have any questions regarding the contents of this
letter, please feel free to contact me at (772) 231-1400.
Very
truly yours,
/s/
Robert E. Cauley
Robert
E.
Cauley
cc: Jeffrey
J. Zimmer
J.
Christopher Clifton,
Esq.