Ideanomics Inc.
01/23/2025 | Press release | Distributed by Public on 01/23/2025 15:32
Change in Certifying Accountants (Form 8-K)
Item 4.01 Changes in Registrant's Certifying Accountant.
On January 16, 2025, Ideanomics, Inc. (the "Company", "we", "us" or "our") received a letter from Grassi & Co. CPAs, P.C. ("Grassi"), stating that Grassi was resigning from serving as the Company's independent registered accounting firm.
The Company has not issued, and does not expect to issue, consolidated financial statements for the fiscal year ended December 31, 2024. As such, Grassi has not audited such consolidated financial statements.
Grassi's report on the Company's consolidated financial statements for the fiscal year ended December 31, 2023, did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except that Grassi's report stated:
The Company has suffered recurring losses from operations, has an accumulated deficit and does not believe that its current level of cash and cash equivalents is sufficient to fund continuing operations. These factors raise substantial doubt about its ability to continue as a going concern . . . The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
During each of the fiscal years ended December 31, 2023 and December 31, 2024, and the subsequent interim periods through the date of resignation, there were no "disagreements," as that term is defined in Item 304(a)(1)(iv) of Security Exchange Commission ("SEC") Regulation S-K, between the Company and Grassi on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grassi, would have caused Grassi to make reference to the subject matter of the disagreement in its reports on the Company's consolidated financial statements for such years.
There were no "reportable events", as that term is defined in Item 304(a)(1)(v) of SEC Regulation S-K, during either of the fiscal years ended December 31, 2024 or December 31, 2023, and the subsequent interim periods through the date of dismissal, except that the Company identified material weaknesses in its internal control over financial reporting as disclosed in Item 9A, Controls and Procedures, of the Company's Annual Report on Form 10-K for each of the fiscal year ended December 31, 2023, as described below.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on our assessment, we have concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to the material weaknesses described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that the Company had the following material weaknesses in its internal control over financial reporting as of December 31, 2023:
•The design and implementation of internal controls over the review of management's inputs into valuation models and associated valuation outputs from third party valuation specialists.
•The design and implementation of internal controls over the revenue recognition process, specifically the failure to properly evaluate whether the Company was to be considered the principal or the agent in contracts with customers.
•There was a lack of sufficient personnel in accounting and financial reporting functions with sufficient experience and expertise with respect to the application of U.S. GAAP and SEC disclosure requirements.
•Operating effectiveness of internal controls to identify and evaluate the accounting implications of non-routine transactions.
•There was a lack of controls designed to address risk of material misstatement for various financial statement areas and related assertions.
•There was a lack of validation of completeness and accuracy of internally prepared data, including key reports generated from systems, utilized in the operations of controls.
•There was a lack of evidence to support the effective review in the operations of controls.
•There was a lack of controls at the entity level, particularly over the review of subsidiary financial information, including analysis of balance sheet data, operating results, non-routine transactions, litigation accruals and income tax matters.
•Controls were not designed with a sufficient level of precision to prevent or detect a material misstatement.
•An inventory of service organizations utilized to process transactions was not maintained throughout the reporting period. There was a lack of review over service organization reports. In instances in which service organization reports were not available, the Company did not have adequate complementary controls.
•There was a lack of segregation of duties that exists in the information technology environments and payroll and procure to pay cycles at the Company.
•There was a lack of documented compliance related to controls to evaluate potential risk of dealing with inappropriate vendors and/or customers.
•The Company's information technology general controls over certain information technology systems were not designed properly and therefore did not operate effectively.
A copy of a letter from Grassi to the Securities and Exchange Commission ("SEC") stating that it agrees with the statements regarding Grassi in this report is filed as Exhibit 16.1 to this Current Report on Form 8-K.