8-K: C2 Blockchain Dismisses BF Borgers, Appoints New Auditor Amid SEC Scrutiny

C2 Blockchain has dismissed its auditor, BF Borgers, and appointed Michael Gillespie & Associates as its new independent auditor following an SEC order against BF Borgers.

Summary

• C2 Blockchain, Inc. has dismissed BF Borgers CPA PC as their independent registered public accounting firm, effective May 3, 2024.
• The dismissal was approved by the Board of Directors.
• BF Borgers' reports on the company's financial statements for the fiscal years ended June 30, 2023 and 2022 did not contain any adverse opinions or disclaimers, except for an explanatory paragraph about the company's ability to continue as a going concern.
• There were no disagreements with BF Borgers on accounting principles, financial statement disclosure, or auditing scope.
• The company disclosed material weaknesses in its internal control over financial reporting in its Annual Report.
• The SEC issued a Staff Statement on May 3, 2024, noting that BF Borgers is not permitted to appear or practice before the Commission.
• On May 9, 2024, the Board of Directors approved the engagement of Michael Gillespie & Associates, PLLC as the new independent registered public accounting firm.
• Michael Gillespie & Associates will review the interim quarterly financial report for the period ended March 31, 2024, and the fiscal years ended June 30, 2023 and June 30, 2024.

Sentiment

Score: 3

Explanation: The document indicates a negative situation due to the dismissal of the auditor following an SEC order and the going concern note in the previous audit report. This suggests potential financial and regulatory issues.

Positives

• The company has promptly appointed a new auditor, Michael Gillespie & Associates, following the dismissal of BF Borgers.
• The company has disclosed that there were no disagreements with the previous auditor on accounting principles or practices.

Negatives

• The dismissal of BF Borgers was due to an SEC order, which indicates potential issues with the previous auditor's practices.
• The previous auditor's reports included an explanatory paragraph about the company's ability to continue as a going concern, which is a negative indicator.

Risks

• The SEC order against BF Borgers could raise concerns about the reliability of past financial statements.
• The company's previously disclosed material weaknesses in internal control over financial reporting could pose ongoing risks.
• The going concern paragraph in the previous auditor's report indicates potential financial instability.

Future Outlook

The company will be working with Michael Gillespie & Associates to complete the review of the interim quarterly financial report for the period ended March 31, 2024, and the fiscal years ended June 30, 2023 and June 30, 2024.

Management Comments

• The Board of Directors approved the dismissal of BF Borgers and the engagement of Michael Gillespie & Associates.

Industry Context

The change in auditors is significant due to the SEC order against BF Borgers, which is likely to impact other companies that used BF Borgers as their auditor. This situation highlights the importance of auditor independence and regulatory oversight in the financial reporting process.

Comparison to Industry Standards

• The dismissal of an auditor due to regulatory issues is not a common occurrence, and it raises concerns about the company's previous financial reporting.
• Companies typically change auditors due to disagreements or strategic reasons, not because of an SEC order against the auditor.
• The appointment of a new auditor is a standard practice, but the circumstances surrounding this change are unusual and may require additional scrutiny.

Stakeholder Impact

• Shareholders may be concerned about the reliability of past financial statements and the company's financial stability.
• Creditors may reassess the company's creditworthiness due to the going concern note and the auditor change.
• Employees may be concerned about the company's future prospects.

Next Steps

• Michael Gillespie & Associates will review the interim quarterly financial report for the period ended March 31, 2024.
• Michael Gillespie & Associates will review the fiscal years ended June 30, 2023 and June 30, 2024.

Key Dates

Keywords

auditor, BF Borgers, Michael Gillespie & Associates, SEC, accounting, financial statements, internal control, going concern