ConnectM Technology Solutions Inc.
04/15/2025 | Press release | Distributed by Public on 04/15/2025 04:00
Non-Reliance of Financial Report (Form 8-K)
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On April 8, 2025, Bhaskar Panigrahi, the Chief Executive Officer of ConnectM Technology Solutions, Inc. (the "Company"), after discussion with the Audit Committee of the Company and in consultation with the Company's independent registered public accounting firm, concluded that the unaudited interim consolidated financial statements for the quarterly period ended September 30, 2024 (the "Restated Period"), as included in the Company's Quarterly Report on Form 10-Q for such period (the "Prior Filing"), should no longer be relied upon due to material errors in those financial statements.
During preparation of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2024, it was discovered that:
| · | There were note conversion agreements entered into during September 2024 where the shares of Company common stock to be issued upon conversion are considered issued and outstanding for accounting purposes (though not considered issued or outstanding for legal purposes) because the conversion agreements were determined to be debt restructurings and required recognition as extinguishments at the time the conversion agreements were entered into, irrespective of the timing of when the shares were issued. Accordingly, the shares underlying those agreements were not properly accounted for or disclosed as debt extinguishments and share issuances in the Prior Filing. Additionally, there were embedded derivatives contained within each note conversion agreement that were not properly identified, recorded at fair value at issuance, re-measured to fair value at the end of the reporting period, or disclosed in the Prior Filing. This has led to the overstatement of net loss, understatement of common stock, understatement of additional paid-in capital, overstatement of debt, and understatement of derivative liabilities in the Prior Filing. |
| · | The true-up adjustments in our master service agreements were improperly classified as revenue instead of as a reduction to operating expenses in the Prior Filing. This mis-classification has led to an overstatement of the Company's revenue and selling, general, and administrative expenses in the Prior Filing. |
| · | Fees paid on our Forward Purchase Agreement were improperly classified as gain on forward purchase modification, a component of other income (expense), instead of as selling, general and administrative expenses in the Prior Filing. The mis-classification has led to an understatement of the Company's selling, general and administrative expenses, loss from operations, and gain on forward purchase agreement modification and an overstatement of the Company's total other expense. |
The Company will file an amended Quarterly Report on Form 10-Q for the Restated Period, which will restate the unaudited financial statements for the Restated Period. The restatement is expected to materially impact the previously reported financial results for the Restated Period. Investors are cautioned not to rely on the Company's previously issued financial statements for the Restated Period. The Company will provide updated financial information as soon as it becomes available.
The Audit Committee and management of the Company have discussed the matters disclosed in this Item 4.02(a) with its independent registered public accounting firm, Adeptus Partners LLC.