10-K/A: Born Inc. Files Amended 10-K/A2 Report Following Auditor Change and Financial Restatements

Born Inc. amends its 2020 annual report to reflect a change in auditors and restated financials, including a significant gain on debt extinguishment.

Summary

• Born Inc. has filed an amendment to its annual report on Form 10-K/A for the fiscal year ended April 30, 2020.
• The amendment was made to replace the report of the previous auditor, BF Borgers CPA PC, with a report from Beckles & Co. Inc.
• This change was prompted by a cease-and-desist order issued by the SEC against BF Borgers.
• The company has restated its financial statements for the year ended April 30, 2019, reporting a net income of $1,482,735, compared to $-0in the prior audit.
• The restatement primarily reflects a gain on the extinguishment of $1,492,855 in debt due to the expiration of the statute of limitations.
• The company's Principal Executive Officer and Principal Financial Officer have provided new certifications in connection with this amendment.
• The company was dormant from March 22, 2013, through December 26, 2019.
• On December 27, 2019, David Lazar was appointed as the custodian of Born Inc.
• On April 5, 2020, the company granted Mr. Lazar 10,000,000 preferred shares with super voting rights of 21,000,000,000 common shares.
• As of July 1, 2020, there were approximately 187 stockholders of record and an aggregate of 2,486,076,963 shares of common stock issued and outstanding.
• The company does not anticipate paying dividends on its common stock in the foreseeable future.
• The company's management concluded that its disclosure controls and procedures were not effective as of the Evaluation Date.
• The company's management did not conduct an evaluation of the effectiveness of its internal control over financial reporting as of April 30, 2020, and April 30, 2019.
• The company has identified material weaknesses in its internal controls, including the lack of a functioning audit committee and inadequate segregation of duties.
• The company has no employees.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the restatement of financials, change of auditors, material weaknesses in internal controls, and a going concern note from the auditor. The company's dormant status and lack of revenue also contribute to the negative sentiment.

Positives

• The company has restated its financial statements for the year ended April 30, 2019, reporting a net income of $1,482,735, compared to $-0in the prior audit.
• The company is actively seeking investment opportunities under new management.

Negatives

• The company's management concluded that its disclosure controls and procedures were not effective as of the Evaluation Date.
• The company's management did not conduct an evaluation of the effectiveness of its internal control over financial reporting as of April 30, 2020, and April 30, 2019.
• The company has identified material weaknesses in its internal controls, including the lack of a functioning audit committee and inadequate segregation of duties.
• The company has a minimal operating history and minimal revenues or earnings from operations.
• The company has no significant assets or financial resources.
• The company has been dormant since March 2013.
• The company has no employees.

Risks

• The company has a minimal operating history and minimal revenues or earnings from operations.
• The company has no significant assets or financial resources.
• The company will, in all likelihood, sustain operating expenses without corresponding revenues for the immediate future.
• There are no assurances the company will be able to consummate any acquisitions using its securities as consideration, or at all.
• The company's management identified material weaknesses in internal controls, including the lack of a functioning audit committee.
• The company's management concluded that its disclosure controls and procedures were not effective as of the Evaluation Date.
• The company's management did not conduct an evaluation of the effectiveness of its internal control over financial reporting as of April 30, 2020, and April 30, 2019.
• The company's auditor included a going concern note.

Future Outlook

The company intends to engage in synergistic acquisitions or joint ventures to enhance its business plan, but there are no assurances that any acquisitions will occur.

Management Comments

• Management believes that the material weaknesses set forth above did not have an effect on our financial results because the activity during this period was nominal.
• Management believes that the lack of a functioning audit committee and the lack of a majority of outside Directors on our Board of Directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Industry Context

The company is seeking investment opportunities after being a dormant shell company, which is a common strategy for companies looking to revitalize their operations through acquisitions or mergers.

Comparison to Industry Standards

• It is difficult to compare Born Inc.'s results to industry standards due to its dormant status and lack of revenue generation.
• The company's internal control weaknesses are significant and would be considered below industry standards for publicly traded companies.
• The restatement of financials and change of auditors are unusual events that require careful scrutiny and may raise concerns among investors.

Management Changes

Legal Proceedings

• The company's previous auditor, BF Borgers, was subject to a cease-and-desist order by the SEC, prompting the change in auditors.

Related Party Transactions

• Mr. Lazar, the company's Court-appointed custodian, extended $42,560 in interest-free demand loans to the company during the year ended April 30, 2020.
• The company granted Mr. Lazar 10,000,000 preferred shares with super voting rights of 21,000,000,000 common shares on April 5, 2020.

Stakeholder Impact

• Shareholders face uncertainty due to the company's financial condition, internal control weaknesses, and going concern status.
• The company's ability to attract investors and partners may be hindered by its dormant status and lack of revenue.

Next Steps

• The company intends to engage in synergistic acquisitions or joint ventures to enhance its business plan.
• The company intends to appoint audit, compensation and other applicable committee members as it identifies individuals with pertinent expertise.

Key Dates

Keywords

financial restatement, auditor change, internal controls, going concern, debt extinguishment, preferred shares, custodian, Born Inc., Quture International, financial reporting