As it considers $62M sale, ConnectM reports errors in its 3Q financial statements
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ConnectM Technology Solutions is located at 2 Mount Royal Ave. in Marlborough.
As ConnectM Technology Solutions continues to navigate possible delisting from Nasdaq and $62-million potential buyout, the Marlborough-based green energy technology company has said its third quarter report of 2024 cannot be relied upon due to material errors.
Three inaccuracies were identified in ConnectM’s unaudited interim consolidated financial statements for its quarterly period ending on Sept. 30, according to a Tuesday filing with the U.S. Securities and Exchange Commission.
Firstly, shares of ConnectM’s common stocks that were entered into note conversion agreements that were not property accounted for or disclosed as debt extinguishments while embedded derivatives within each note conversion agreement were not properly identified, recorded at fair value at issuance, or re-measured to fair value. Thus, the filing overstated net loss while understating common stock, additional paid-in capital, debt, and derivative liabilities.
Secondly, a reduction in operating expenses was incorrectly reported as revenue, leading to an overstatement of the company’s revenue and selling, general, and administrative expenses.
Thirdly, fees paid on ConnectM's forward purchase agreement were misclassified as gain as opposed to expense, resulting in an understatement of the company’s selling, general, and administrative expenses, yet overstatement of its total other expenses; and understatement of its loss from operations and gain on forward purchase agreement modification.
ConnectM did not return WBJ’s request for comment.
The company will file an amended quarterly report with updated financials as soon as the information becomes available, according to the SEC filing.
Additionally, ConnectM has terminated a forward purchase agreement with a group of three investors originally entered into on Dec. 31, 2022. As a result, instead of purchasing 1.62 million company shares, the group will pay ConnectM $500,000, according to a Friday SEC filing.
ConnectM’s financial reporting missteps come as the company is at risk of being removed from the Nasdaq stock market after failing to meet the $50-million market value required of listed securities. While the company reported it would appeal its delisting notice, ConnectM is considering a $62-million buyout from a group of its three largest institutional investors.
Mica Kanner-Mascolo is a staff writer at Worcester Business Journal, who primarily covers the healthcare and diversity, equity, and inclusion industries.
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