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Item 7. Management’s Discussion and Analysis

2025-08-04 compared with 2024-03-13 · 308 added, 154 removed, 4 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “our,” “us” or “we” refer to Monterey Capital Acquisition Corporation.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We have based these forward-looking statements on our current expectations and projections about future events.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of

such terms or other similar expressions.

Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-K.

The Company’s securities filings can be accessed on the EDGAR section of the U.S.

Securities and Exchange Commission’s (the “SEC’s”) website at www.sec.gov.

Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a blank check company incorporated in Delaware on September 23, 2021, for the purpose of acquiring, merging with, engaging in capital stock exchange with, purchasing all or substantially all of the assets of, engaging in contractual arrangements, or engaging in any other similar business combination with a single operating entity, or one or more related or unrelated operating entities operating in any sector.

We are an emerging growth company and, as such, are subject to all the risks associated with emerging growth companies.

Our sponsor is Monterrey Acquisition Sponsor, LLC (the “Sponsor”), a Delaware limited liability company.

The registration statement for the initial public offering (the “IPO” or “Initial Public Offering”) was declared effective on May 10, 2022.

On May 13, 2022, we consummated the Initial Public Offering of 9,200,000 units (the “Units” and, with respect to the Class A Common Stock included in the Units, the “Class A Common Stock”), inclusive of 1,200,000 Over-Allotment Units (defined below) resulting from the full exercise by the underwriters of their over-allotment option, at $10.00 per Unit, generating gross proceeds of $92 million, and incurring offering costs (inclusive of the full exercise of the underwriter’s over-allotment option on May 13, 2022) of approximately $8.7 million, consisting of approximately $0.9 million of underwriting fees, approximately $3.7 million of deferred underwriting fees that will be paid only if a business combination is entered into, approximately $0.6 million representing the fair value of the 138,000 shares of Class A Common Stock we issued to the underwriter of the Initial Public Offering (the “Representative Shares”), approximately $2.5 million representing the fair value of the 600,000 Founder Shares (the “Transferred Founder Shares”) the Sponsor sold to the group of ten qualified institutional buyers and institutional accredited investors, which are not affiliated with the Company (the “Anchor Investors”), and approximately $1.0 million of other offering costs.

At the IPO date, cash of approximately $0.9 million was held outside of the Trust Account (as defined below) and was available for the payment of the promissory note to the Sponsor, payment of accrued offering costs and for working capital purposes.

Each Unit consists of one share of common stock, one redeemable warrant (“Public Warrant”), with each Public Warrant exercisable into one share of common stock at an exercise price of $11.50 per share, and one right (“Rights”) to receive one-tenth of one share of common stock upon consummation of the Company’s initial business combination.

The underwriter was granted a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 1,200,000 additional Units (the “Over-Allotment Units”) to cover over-allotments, if any, at $10.00 per Unit.

On May 13, 2022, the underwriter exercised their over-allotment option in full to purchase an additional 1,200,000 Units, resulting in incremental gross proceeds of approximately $12 million.

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 3,040,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), which were purchased by our Sponsor, at a price of $1.00 per Private Placement Warrant, generating gross proceeds to us of $3.04 million.

Upon the closing of the Initial Public Offering and the Private Placement (including the additional Units sold in connection with the full exercise of the underwriter’s over-allotment option), $92,920,000 ($10.10 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in the Trust Account.

On May 9, 2023, the Company extended the period of time available to consummate its Business Combination to August 13, 2023, pursuant to Extension One.

On August 11, 2023, the Company further extended the period of time available to consummate its Business Combination to November 13, 2023, pursuant to Extension Two.

The Initial Extensions represented the two three-month extensions permitted under the Company’s governing documents.

On November 6, 2023, the stockholders of MCAC held a special meeting of stockholders where the MCAC stockholders approved the Amended Charter and IMTA Amendment.

The Amended Charter provides the board of directors of MCAC with the right to extend the date by which MCAC has to consummate its Business Combination up to an additional six (6) times for one (1) month each time from November 13, 2023 to May 13, 2024, by depositing into the Trust Account, for each one-month extension, the lesser of (a) $414,000 and (b) $0.045 for each then-outstanding share of Common Stock after giving effect to the redemption of shares of Common Stock (the “Current Extension”).

On November 9, 2023, the Company further extended the period of time to consummate its Business Combination by an additional one-month period from November 13, 2023 to December 13, 2023 pursuant to the Current Extension, by ConnectM’s deposit of approximately $325,715 into the Trust Account.

On December 11, 2023, the Company further extended the period of time to consummate its Business Combination by an additional one-month period from December 13, 2023 to January 13, 2024 pursuant to the Current Extension, by ConnectM’s deposit of approximately $325,716 into the Trust Account.

On January 8, 2024, the Company further extended the period of time to consummate its Business Combination by an additional one-month period from January 13, 2024 to February 13, 2024 pursuant to the Current Extension, by ConnectM’s deposit of approximately $325,716 into the Trust Account.

On February 9, 2024, the Company further extended the period of time to consummate its Business Combination by an additional one-month period from February 13, 2024 to March 13, 2024 pursuant to the Current Extension, by ConnectM’s deposit of approximately $325,716 into the Trust Account.

On March 11, 2024, the Company further extended the period of time to consummate its Business Combination by an additional one-month period from March 13, 2024 to April 13, 2024 pursuant to the Current Extension, by ConnectM’s deposit of approximately $325,716 into the Trust Account.

In connection with the special meeting of stockholders on November 6, 2023, stockholders holding 1,961,875 shares of Class A Common Stock issued in the Initial Public Offering exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account.

As a result, approximately $20,961,169 (approximately $10.68 per share after removal of interest to pay taxes) was removed from the Trust Account to pay such holders, resulting in approximately $77,333,961 remaining in the Trust Account immediately following the redemption payments.

If the Company is unable to complete an initial Business Combination before the deadline, currently May 13, 2024, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the shares of Class A Common stock subject to possible redemption, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less any income or franchise tax obligations and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding shares of common stock, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors of MCAC, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

Proposed Business Combination

On December 31, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, ConnectM Technology Solutions, Inc., a Delaware corporation (“ConnectM”), and Chronos Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”).

Pursuant to the terms and conditions of the Merger Agreement, a business combination between the Company and ConnectM will be effected through the merger of Merger Sub with and into ConnectM, with ConnectM surviving the merger as a wholly owned subsidiary of the Company.

On October 12, 2023, the Company, Merger Sub and ConnectM entered into a First Amendment to Agreement and Plan of Merger (the “Amendment”), which amended the Merger Agreement.

The Amendment extends the date after which either party may terminate the Merger Agreement for convenience (with limited exceptions) from November 13, 2023 to May 13, 2024.

The Amendment also provides that, subject to the Company obtaining the requisite stockholder approval to amend its amended and restated certificate of incorporation (the “Amended Charter”) and the Investment Management Trust Agreement by and between the Company and Continental Stock Transfer & Trust Company, dated May 10, 2022 (the “IMTA Amedment”), with such approval received on November 6, 2023 at MCAC’s special meeting of stockholders, the Company will be able to extend the date by which the Company has to consummate a business combination by up to six months and ConnectM will pay to the Company or the Trust Account the funds necessary to effect such extension (not to exceed $414,000 for each monthly extension or $2,484,000 in the aggregate for all six monthly extensions).

Liquidity and Capital Resources

At December 31, 2023, we had cash of $5,947 and a working capital deficit of $6,843,119.

We have neither engaged in any operations nor generated any revenues to date.

Our only activities from September 23, 2021 (inception) to December 31, 2023 were organizational activities and those necessary to consummate the Initial Public Offering, identify a target company and prepare for a potential business combination with ConnectM.

We do not expect to generate any operating revenues until at least after the completion of our business combination, if at all.

We have generated and expected to generate non-operating income in the form of dividend and interest income on marketable securities held in the Trust Account.

We have incurred and expect to incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the sale of the Founder Shares (Note 5), and a loan amounting to $354,100 as of the IPO date, which was repaid on May 16, 2022, under an unsecured and noninterest bearing promissory note from the Sponsor.

Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity needs have been satisfied through the net proceeds held outside of the Trust Account from the consummation of the Initial Public Offering and the Private Placement.

In addition, in order to finance the Company’s operations as well as transaction costs in connection with an initial business combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

The Working Capital Loans are to be repaid upon consummation of a business combination, without interest, or, at the lender’s option, up to $1.5 million of the outstanding Working Capital Loans are convertible into warrants at a price of $1.00 per warrant.

Through December 31, 2023, the Company has received $739,457 in Working Capital Loans (Note 5).

Further, during the year ended December 31, 2023, the Company received $445,000 in loans from ConnectM in the same form as the Working Capital Loans.

As of December 31, 2023, the Company had cash in the Trust Account of $78,702,824.

The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions of $3,680,000) to complete its initial business combination, to the extent that the Company’s capital stock or debt is used, in whole or in part, as consideration to complete its initial business combination.

Until the consummation of an initial business combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the business combination.

The Company is required to complete a Business Combination by May 13, 2024 pursuant to the Current Extension.

Considering that the Company’s ability to consummate its’ proposed Business Combination is uncertain, the Company may be required to dissolve as early as April 13, 2024, absent the payment of subsequent Additional Extension Payments, or May 13, 2024 pursuant to the requirements of the Additional Extension Options, should a Business Combination not be consummated within that timeframe.

We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties.

The Company’s Sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.

Accordingly, we may not be able to obtain additional financing.

We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board’s (“FASB”) ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that the factors discussed above raise substantial doubt about the Company’s ability to continue as a going concern until the earlier of the consummation of the business combination or the date the Company is required to liquidate, no later than 10 business days after May 13, 2024.

These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.

Dollar amounts in this discussion are expressed in whole-dollars, except as otherwise noted.

The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance.

The forward looking statements are dependent upon events, risks and uncertainties that may be outside of our control.

Our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Form 10-K, particularly in Part I, Item 1A, Risk Factors.

We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments or otherwise, except to the extent that such disclosure is required by applicable law.

Executive Overview

ConnectM is a Delaware corporation headquartered in Marlborough, Massachusetts.

On July 12, 2024 (the “Closing Date”), Monterey Capital Acquisition Corporation (“ MCAC ”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ConnectM Technology Solutions, Inc.

(“ Legacy ConnectM ”) in which MCAC acquired all of the issued and outstanding shares of common stock from Legacy ConnectM shareholders (the “Business Combination”) in exchange for 14,500,000 shares of MCAC’s common stock.

On the Closing Date, MCAC changed its name to ConnectM Technology Solutions, Inc (“ConnectM”) and we became a publicly listed company.

ConnectM is a constellation of companies connecting and powering next generation equipment, mobility and distributed energy—thus enabling a faster, smarter transition to a modern energy economy.

We deliver an advanced, proprietary Energy Intelligence Network (EIN) platform designed to empower residential and commercial service providers and original equipment manufacturers, to optimize energy efficiency, enhance operational performance, and support sustainable innovation.

Leveraging technology, data, artificial intelligence, and behavioral economics, ConnectM aims to lower energy costs and reduce carbon emissions globally.

Our Service Provider-facing technology platform encompasses marketing to life cycle management, customer care to claims processing, finance to rebates/incentives.

Our architecture combines artificial intelligence with human expertise, continuously learning from the data it generates.

This enables us to refine and improve our technology solutions for B2B customers while maximizing customer lifetime value.

In addition to digitizing electrification end-to-end, we also transform the underlying business model to minimize customer churn while maximizing trust and improving environmental impact.

Our OEM-facing technology platform provides essential hardware and software services for EV fleet management and battery diagnostics—helping to capture data, synthesize that data, and in turn monetizing that data on behalf of our enterprise customers.

By empowering OEMs and mobility companies with connected operations, our portfolio companies directly contribute to their continued explosive growth.

We believe that our cocktail of enhanced user experience, aligned values, and competitive cost enjoys broad appeal.

End user electrification consumption has grown over time to encompass higher value products such as heat pumps, highly efficient air conditioners, solar roof, battery storage, electric vehicles and weatherization.

These progressions can generate increases in customer lifetime value.

We anticipate sustained growth through predictable, recurring revenue streams and automation that reduces costs while meeting our B2B customer needs.

Our data-driven architecture further enhances precision in pricing and implementing electrification solutions, creating additional value for our customers.

We derive revenue through the sale of hardware, software, and services across four different business segments:

our Owned Service Network, Managed Solutions, Transportation, and Logistics.

The key elements of our products and services are discussed in Part I, Item 1.

“Business – Our Products and Services.” Our expenses consist primarily of payroll and benefit costs, facility costs, leasehold improvement amortization, utility costs, repair and maintenance, advertising, insurance, equipment depreciation and professional fees.

Recent Developments

On January 28, 2025, the Company entered into a settlement and stipulation agreement (the “Settlement Agreement”) with Last Horizon, LLC (“Last Horizon”), pursuant to which the Company agreed to issue shares of the Company’s common stock to Last Horizon in exchange for the settlement of an aggregate $8,908,000 (the “Claim”) to resolve outstanding overdue liabilities with one of our lenders and certain of our vendors.

The Company has issued 13,744,131 shares of the Company’s common stock to Last Horizon as Settlement Shares between January 28, 2025 and the date Form 10-K was issued.

The issuance of common stock to Last Horizon pursuant to the terms of the Settlement Agreement is exempt from the registration requirements of the Securities Act pursuant to Section 3(a)(10) thereof, as an issuance of securities in exchange for bona fide outstanding claims.

On March 26, 2025, we were awarded our first Home and Building Electrification (HBE) project in India through a strategic partnership with Zenith Energy Services Pvt.

During the quarter ended March 31, 2025, 2,737,168 shares of our common stock were issued in connection with the share reset derivative liabilities.

During the three months ended March 31, 2025, the Company entered into twelve convertible note agreements in exchange for aggregate gross proceeds of $2,530,000 to eleven lenders (the “Q1 2025 Convertible Notes”).

The Q1 2025 Convertible Notes bear interest at a rate of 20.0% per annum.

The Q1 2025 Convertible Notes have maturity dates that range from 40-days to one year from the convertible note issuance date, optional conversion period that ranges from thirty to ninety days, and a conversion price that ranges from $1.00 to $1.15.

The Company entered into convertible note agreements with two related-party investors holding beneficial ownership interests exceeding 5.0% of the Company's common stock.

The aggregate principal amount of these convertible notes was $500,000.

On April 2, 2025, the forward purchase agreement with Meteora was terminated.

There were 1,618,948 shares of our common stock held by Meteora which were deemed free and clear of obligations and $500,000 termination payment owed to us from Meteora.

On April 11, 2025, the Company held a special meeting of shareholders.

The shareholders voted to approve a reverse stock split and issuance of up to 25,000,000 shares via a standby equity purchase agreement.

The terms of the reverse stock split are not yet finalized as of the date of this filing.

In April 2025, we acquired all of the issued and outstanding equity securities of Air Temp Service Co, Inc.

("Air Temp") and Solar Energy Systems of Brevard, Inc ("SES") in exchange for the issuance of 4,900,000 shares of our common stock with a fair value of $3,200,000, as determined using the closing share price on the date of issuance in May 2025.

Air Temp Services is considered a related party due to its ownership by SriSid LLC and Arumilli LLC, which are related parties to the Company.

The Company had a Managed Services Agreement in place with Air Temp during the reporting period.

On May 5, 2025, the Company's board of directors designated 100,000 shares of preferred stock as Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Stock") and 100,000 shares of preferred stock as Series B Convertible Preferred Stock, par value $0.0001 per share (the "Series B Stock").

The Series A Stock and the Series B Stock have an initial stated value of $100.00 per share, subject to adjustment in the event of a stock split, combination or other similar recapitalization.

Further terms are detailed in the Subsequent Events section.

On May 6, 2025, the Company received a determination letter (the "Delisting Notification") from the Nasdaq Hearings Advisor stating that the Panel has determined to delist the Company's common stock, par value $0.0001 per share from the Nasdaq Capital Market, and Nasdaq suspended the trading of the Company's Common Stock on May 7, 2025 because the Company has not demonstrated compliance with the MVLS Rule, nor does it meet any of the alternative requirements under Nasdaq Listing Rule 5550 (b) and has failed to demonstrate that additional time to regain compliance is appropriate.

On May 15, 2025, the Company completed its acquisition of Cambridge Energy Resources Ltd.

("CER"), a privately held India - based Energy - Management - as - a - Service provider, following receipt of all necessary regulatory approvals.

Under the terms of the transaction, ConnectM paid INR 120 million (approximately $1.4 million).

CER brings an established operating presence in India's rooftop solar and telecommunication energy - management sectors, complementing the Company's Owned Service Network segment and Energy Intelligence Network.

Management expects the integration of CER to accelerate strategic growth across distributed energy and telecom infrastructure markets in India.

With the acquisition, the Company projects India - based operations to expand from approximately 5% to 15% of global revenue (approximately $10 million annualized) over the next twelve months.

During April 2025 and May 2025, the Company entered into twenty five note exchange agreements with twelve of its lenders under which sixteen secured promissory notes totaling $4,435,000, nine convertible notes totaling $1,840,000, and accrued interest and fees totaling $1,189,939 were exchanged for 15,290,930 shares of the Company's common stock with a fair value of $8,224,386, as determined on the issuance date using the reported closing share price.

Certain of these note exchanges involved related parties, including Arumilli LLC, SriSid LLC, Win - Light Global Co.

Ltd., and W4 Partners LLC.

The Company entered into six promissory note agreements in exchange for aggregate gross proceeds of $735,000 during April 2025 and May 2025.

Each of the notes bears interest at a rate of 20.0% per annum and matures 180 days from its respective issuance date.

Five of the promissory notes were held by W4 Partners LLC, a related party due to its equity ownership in the Company.

During May 2025, we amended three of our business loan and security agreements, extending the maturity dates through November 2026 and December 2026 and reducing monthly payments from approximately $23,000 to $8,000.

During May 2025 and June 2025, we issued 485,000 shares of our common stock to certain advisers with a fair value of approximately $108,000, as determined on the issuance date using the reported closing share price.

During May 2025 and June 2025, we issued 1,622,222 shares of our common stock to its directors and employees as consideration for past services performed with a fair value of approximately $372,000, as determined on the issuance date using the reported closing share price.

During May 2025 and June 2025, we sold 3,658,333 shares of our common stock for gross proceeds of approximately $805,000 with a fair value of approximately $948,000, as determined on the issuance date using the reported closing share price.

The Company entered into six convertible note agreements in exchange for aggregate gross proceeds of $1,026,000 to six lenders during April 2025, May 2025, and June 2025 (the "Q2 2025 Convertible Notes").

The Q2 2025 Convertible Notes bear interest at a rate of 20.0% per annum.

Five of the Q2 2025 Convertible Notes have maturity dates that range from 40 - days to one year, optional conversion periods that range from thirty to 180 days, and conversion prices that either range from $0.60 to $1.15 or is convertible at a conversion price equal to the quotient obtained by dividing (x) the sum of the principal and accrued by unpaid interest by (y) 90.0% of the VWAP on the primary trading market of the Company's common stock the three trading day period immediately preceding the measurement date.

One of the Q2 Convertible Notes bears interest at a rate of 20.0% per annum, matures 210 days from the agreement date, and is convertible any time before the maturity date at the option of the holder into shares of the Company's common stock at a conversion price equal to the lower of (i) $0.25 or (ii) the quotient obtained by dividing (x) the sum of the principal and accrued by unpaid interest by (y) 90.0% of the VWAP on the primary trading market of the Company's common stock the three trading day period immediately preceding the measurement date.

During July 2025, the Company entered into a convertible note agreement in exchange for aggregate gross proceeds of $500,000 to a lender (the "Q3 2025 Convertible Note").

The Q3 2025 Convertible Note bears interest at a rate of 20.0% per annum and matures 210 days from the agreement date.

The Q3 2025 Convertible Note is convertible any time before the maturity date at the option of the holder into shares of the Company's common stock at a conversion price equal to the lower of (i) $0.25 or (ii) the quotient obtained by dividing (x) the sum of the principal and accrued by unpaid interest by (y) 90.0% of the VWAP on the primary trading market of the Company's common stock the three trading day period immediately preceding the measurement date..

The number of shares issuable upon conversion is determined by dividing the sum of the outstanding principal and accrued interest by the conversion price.

As of the date of this filing, the Company has not made certain scheduled payments under the SEPA Convertible Note or made timely SEC filings and is therefore in default under the agreement.

However, Yorkville has not issued a formal notice of default, and the Company remains in ongoing discussions with Yorkville regarding a potential resolution and restructuring of the outstanding obligations.

The Company is required to maintain a minimum cash balance equal to the lesser of (a) $2,000,000 and (b) the sum of the next three Installment Payments, as defined in the promissory note, coming due.

As of December 31, 2024, the minimum cash balance required was approximately $833,000.

Comparability of Financial Information

Our historical operations and consolidated balance sheets may not be comparable to our operations and balance sheets as a result of the Business Combination and becoming a public company.

Business Combination and Public Company Costs

On July 12, 2024, we consummated the merger contemplated by the Merger Agreement with Legacy ConnectM surviving the merger as a wholly owned subsidiary of MCAC.

Immediately prior to the closing of the Business Combination,

● each outstanding share of Legacy ConnectM preferred stock was converted into Legacy ConnectM common stock based on a one-to-one ratio.

The Business Combination is accounted for with a retrospective application of the Business Combination that results in 2,427,791 shares of preferred stock converting into the same number of shares of Legacy ConnectM common stock

● convertible note payable totaling $2,250,000 were converted into shares of Legacy ConnectM common stock at $7.00 per share, resulting in the issuance of 321,428 shares of Legacy ConnectM common stock.

Upon consummation of the Business Combination, each share of Legacy ConnectM stock issued and outstanding was cancelled and converted into the right to receive 3.3214 shares of the Company’s common stock.

Upon the closing of the Business Combination, MCAC’s certificate of incorporation was amended and restated to, among other things, set the total number of authorized shares of capital to 110,000,000 shares, of which 100,000,000 were designated as common stock, $0.0001 par value per share, and of which 10,000,000 shares were designated as preferred stock, $0.0001 par value per share.

Legacy ConnectM was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”).

The determination was primarily based on Legacy ConnectM’s shareholders prior to the Business Combination having a majority of the voting interests in the combined company, Legacy ConnectM’s ability to exert control over the majority of the board of directors of the combined company, Legacy ConnectM’s ability to maintain control of the board of directors on a go-forward basis, Legacy ConnectM’s senior management comprising the senior management of the combined company;

and Legacy ConnectM’s operations prior to the Business Combination comprise the ongoing operations of the combined company.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy ConnectM issuing stock for the net assets of MCAC, accompanied by a recapitalization.

The net assets of MCAC were stated at fair value, with no goodwill or other intangible assets recorded.

As a result of the Business Combination, we became a publicly traded company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance and legal fees.

Key Factors Affecting Operating Results

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including but not limited to those discussed in Item 1A “Risk Factors”.

We expect to derive future revenue from (i) our existing high margin recurring revenue products, (ii) our expanded service offerings leveraging our existing customer and developer networks, (iii) expanding our existing software capabilities through development of additional software tools that are capable of analyzing prospective customer properties to assist in identifying attractive opportunities for us and our customers, and (iv) an expanded customer base through client referrals and our customized, relationship-focused sales process.

Reportable Segments

Our reportable operating segments include:

● Owned Service Network focuses on the decarbonization of homes and businesses by providing installation and maintenance services to residential and light commercial customers for heat and cooling solutions and advanced solar solutions.

The installed equipment is connected to the Company’s AI-driven energy intelligence platform to ensure peak performance and efficiency of the equipment as well as allow the Company to remotely monitor maintenance needs.

● Managed Solutions provides a selection of servicing offerings that customers can select that include human resources management, procurement services, omnichannel marketing and lead generation as well as access to short-term working capital loans.

● Logistics focuses on the facilitation of business-to-business transportation of heavy goods using the Company’s last mile delivery software.

● Transportation focuses on the management of connected operations using the Company’s IIoT platform to remotely monitor the performance of equipment for original equipment manufacturers (“OEMs”).

Key Components of Our Results of Operations

Our revenue is derived from customer contracts and consists of equipment and product sales, installation of equipment, service agreements associated with equipment sold to customers, provision of managed services, and delivery services.

We fulfill obligations and recognize revenue under a contract with a customer by transferring products and services in exchange for consideration from the customer.

Payments received or consideration billed in advance are recorded as deferred revenue.

For projects expected to be completed within one-year, we have elected to recognize revenue in the amount billable to the end-consumer.

Under our contracts in the managed solutions segment, working capital adjustments may be processed quarterly, if year-to-date costs incurred by the customer exceed the percentage of the customer’s revenue and are recorded as a reduction of selling, general and administrative expenses as it represents the customer’s reimbursement of costs incurred by us.

We exclude from revenue the taxes collected from customers and remitted to government authorities related to sales of our inventory.

Shipping and handling costs that are billed to customers are included in net sales.

Cost of Revenue

Cost of Revenue consists of personnel-related expenses, including salaries, benefits and stock-based compensation, and facility costs for our operations and manufacturing teams.

Cost of Revenue also includes expenses for costs of equipment and professional services related to the maintenance or installation of equipment.

ConnectM expects its operations costs to increase in the foreseeable future as it continues to invest in the expansion of its operations.

Selling, General and Administrative

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, depreciation and amortization, and allocated facility costs for our business development, marketing, corporate, executive, finance, legal, human resources, IT, and other administrative functions.

General and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, travel expenses and certain non-income taxes, insurance, and other administrative expenses.

We expect our selling, general and administrative expenses to increase for the foreseeable future as it scales headcount with the growth of its business, and because of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, increased insurance expenses, investor relations activities, and other administrative and professional services.

Other Expense, net

Other income (expense), net consists primarily of interest expense incurred on our debt obligations, remeasurement gains or losses associated with the change in the fair value on our convertible notes payable and forward purchase agreement derivative liabilities, gains and losses on the extinguishment of liabilities, a gain on the modification of our forward purchase agreement and other miscellaneous income or expenses incurred throughout the period.

Results of Operations

Our entire activity from inception through the IPO date was in preparation for our Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial business combination and preparation for a Business

We will not generate any operating revenues until the closing and completion of our initial business combination, at the earliest.

For the year ended December 31, 2023, we had a net loss of $14,943,203, which consists of $2,980,863 of general and administrative costs, $913,808 of income tax expense, and $15,600,000 loss on the change in fair value of the Forward Purchase Agreement liability, partially offset by $4,551,468 of dividend and interest income earned in the Trust Account.

For the year ended December 31, 2022, we had a net loss of $3,763,638, which consists of $2,098,401 of general and administrative costs, $240,507 of income tax expense, and $2,770,000 loss on the change in fair value of the Forward Purchase Agreement liability, partially offset by $1,289,804 of dividend and interest income earned in the Trust Account and $55,466 of other income.

The increase in dividend and interest income during the year ended December 31, 2023 compared to the year ended December 31, 2022 was due to increased interest rates and a higher average principal balance in the Trust Account, as the IPO was closed on May 13, 2022.

The increase in income tax expense during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to the increase in dividend and interest income earned in the Trust Account, combined with temporary tax differences related to certain expenses.

General and administrative costs increased during the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to the Company’s increased activities to prepare for the proposed Business Combination.

The increase in the loss on the change in fair value of the Forward Purchase Agreement is a result of the change in the fair value during the periods, which is primarily driven by the increase in the estimated probability of the closing of Business Combination with ConnectM, a significant input into the fair value calculation.

The following table summarizes our financial results for the period indicated:

Years Ended December 31,

Costs and expenses:

Cost of revenues

Selling, general and administrative expenses

Loss on impairment

Total Cost and Expenses

Loss from operations

Total other expense, net

Revenue increased $2,680,646, or 13.4%, to $22,652,885 for the year ended December 31, 2024 from approximately $19,972,000 for the year ended December 31, 2023.

This increase was primarily driven primarily by the Company’s new managed solutions offering, which yielded an increase in revenues of $ 3,812,088 for the year ended December 31, 2024, and increases in the Company’s transportation segment with an increase to revenue of $4,307,602 for the year ended December 31, 2024.

This increase was primarily offset by declines in the Company’s owned service network segment of $6,207,326.

These decreases in the electrification and decarbonization segments were mostly driven by inclement weather during the year ended December 31, 2024, which caused a decline in solar installations during this period.

Costs and Expenses

Cost of Revenues increased approximately $1,771,000, or 11.9%, to $16,706,177 for the year ended December 31, 2024 from approximately $14,935,000.

This increase was primarily driven by an increase in our managed solutions offering segments $4,002,916, which increased along with the revenues for this segment, as described above, and higher material costs for the year ended December 31, 2024.

This increase was primarily offset by the Company’s owned service network segments and transportation segments, which yielded a decrease in cost of revenues for the year ended December 31, 2024 of $5,520,576 and $158,565, respectively.

Selling, general and administrative expenses increased approximately $2,825,134, or 22.9% to $15,145,429 for the year ended December 31, 2024 from approximately $12,320,000 for the year ended December 31, 2023.

The increase was primarily due to the Company incurring approximately $2,859,000 of onetime costs associated with its initial public offering for the year ended December 31, 2024.

Loss on impairment increased approximately $2,222,000, or 1,221.7%, to $2,403,628 for the year ended December 31, 2024 from approximately $182,000 for the year ended December 31, 2023.

The increase was due to the Company recording impairment losses during the year ended December 31, 2024 attributed to recurring losses for two consecutive years at two subsidiaries and significantly declining sales at one of those subsidiaries.

Other Income (Expense)

Interest expense increased $1,282,694 to $2,714,048 for year ended December 31, 2024 from $1,431,354 for the year ended December 31, 2023.

This increase was primarily driven by the issuance of the Company’s secured promissory notes and convertible notes throughout the years ended December 31, 2024 and 2023.

During the year ended December 31, 2024, we amended certain of our debt agreements and concluded that the amended terms of the agreements were substantially different from the terms of the initial agreements.

As a result of this determination, we accounted for this amendment as extinguishments of the previous debt facility and recognized a loss of extinguishment of debt of $1,645,443.

We also recognized expenses attributable to the changes in fair value of our forward purchase agreement of $8, 254,390 and a change in the fair value of convertible notes of $1,707,747.

During the year ended December 31, 2024, we recognized a gain on extinguishment of certain of our debt agreements of $2,257,638 and a gain on our forward purchase agreement modification of $1,572,236 related to the conversion of the convertible notes in connection with the transaction with MCAC and further the new convertible notes.

Liquidity and Capital Resources

Our consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

As of December 31, 2024, the Company had cash of approximately $2,408,000.

The Company had a working capital deficit of approximately $26,247,000 at December 31, 2024 and incurred a net loss and generated negative cash flow from operating activities of approximately $22,508,000 and $5,959,000, respectively, for the year ended December 31, 2024.

These are indicators of substantial doubt as to our ability to continue as a going concern for at least one year from issuance of our consolidated financial statements.

Our ability to continue as a going concern is dependent upon the management of expenses and ability to obtain necessary financing to meet our obligations and pay our liabilities arising from normal business operations when they come due, and upon profitable operations.

If additional equity or debt financing is required from outside sources, we may not be able to raise it on terms acceptable to it or at all.

If we are unable to raise additional capital on acceptable terms when needed, its results of operations and financial condition would be materially and adversely affected.

Any such financing likely would be dilutive to our existing stockholders and could result in significant financial operating covenants that would negatively impact our business.

Based on the foregoing, our management has concluded there is substantial doubt as to our ability to continue as a going concern within one year after the date the consolidated financial statements are issued.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities should we be unable to continue as a going concern.

The following table summarizes ConnectM’s cash flows for the period indicated:

Year Ended December 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net used in operating activities

Net cash used in operating activities for the year ended December 31, 2024 was $5,959,133.

Net cash used in operating activities consisted primarily of net loss of approximately $22,508,000 offset by approximately $13,261,000 of noncash items, primarily related to the loss on extinguishment of debt of $1,645,443, loss on fair value measurement of debt of $1,707,747, change in fair value of forward purchase agreement put option liability resulting in a loss of $8,254,390 depreciation and amortization of long-lived assets and intangible assets of $745,741 offset by a gain on modification of forward purchase agreement of $1,572,236, impairment loss on goodwill and intangible assets of $2,403,628 and the gain on extinguishment of debt of $2,257,638.

In addition, for the year ended December 31, 2024, net changes in operating assets and liabilities resulted in cash provided by operating activities of $3,287,725.

Net cash used in operating activities for the year ended December 31, 2023 was $ 4,621,692.

Net cash used in operating activities consisted primarily of net loss of $9,198,854, offset by $2,174,197 of noncash items, primarily related to the depreciation and amortization of long-lived assets and intangible assets of $776,397, amortization of the Company’s debt discount recorded on its different debt facilities of $346,557, a write down of inventory due to obsolescence of $187,098, a loss on impairment of $181,853, and a loss on the extinguishment of debt of $370,320.

In addition, for the year ended December 31, 2023, net changes in operating assets and liabilities resulted in cash provided by operating activities of $2,402,965.

Net cash used in investing activities

Net cash used in investing activities for year ended December 31, 2024 was $107,665.

Investing activities primarily included the purchase of capitalized software development costs of $186,103 and purchases of property and equipment of $27,044, cash paid for a noncontrolling interest of $60,000 offset by proceeds received from acquisitions of businesses of $152,482.

Net cash used in investing activities for the year ended December 31, 2023 was $465,711.

Investing activities primarily included the issuance of convertible notes to MCAC for $445,000, with other immaterial investing activities primarily relating to the purchase of property and equipment and capitalized software.

Net cash provided by financing activities

Net cash provided by financing activities for the year ended December 31, 2024 was $7,286,542.

Financing activities consisted primarily of proceeds from the business acquisition of $35,770,959, proceeds advance from lenders of $1,057,275, the issuance of debt of $6,614,400 and the issuance of convertible debt of $4,940,000, and Reimbursement for Recycled Shares related to Forward Purchase Agreement of $1,000,000.

These financing activities were offset by cash transferred in connection with forward purchase agreement of $36,727,814 and payments on the Company’s debt facilities of $2,262,401, repayment of convertible debt of $50,000, cash paid for debt issuance costs of $1,015,114, advance to related party Monterey Capital Acquisition Corporation of $1,933,695 and payment on finance leases of $107,068.

Net cash provided by financing activities for the year ended December 31, 2023 was $4,227,160.

Financing activities consisted primarily of the issuance of different debt facilities of $9,047,344 offset by the payment of extension fees into MCAC’s trust account of $2,491,431, payments on the Company’s debt facilities of $2,153,487, payments of deferred offering costs of $984,857, and payments on finance leases of $90,409.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the SEC rules and regulations.

Commitments and Contractual Obligations

Registration Rights

The holders of Founder Shares (as defined below), Private Placement Warrants and the Private Placement Warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares), are entitled to certain registration rights pursuant to a registration rights agreement.

These holders will be entitled to certain demand and “piggyback” registration rights.

We will bear the expenses incurred in connection with the filing of any such registration statements.

See Note 1 for discussion of amendments to the registration rights agreement to take effect upon the closing of the Business Combination.

Underwriting Agreement

$3,680,000 in the aggregate (reflecting the full exercise by the underwriter of its over-allotment option), will be payable to the underwriter for deferred underwriting commissions.

The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement.

Administrative Support Agreement

In conjunction with the IPO closing, the Company entered into the administrative support agreement under which it pays the Sponsor a total of $10,000 per month, for office space, secretarial and administrative services.

The Company incurred $120,000 and $75,000 under the agreement during the years ended December 31, 2023 and 2022, respectively.

Upon completion of the initial business combination or the Company’s liquidation, the Company will cease paying these monthly fees.

As of December 31, 2023 and 2022, $63,600 and $5,100, respectively, was due under the administrative support agreement, included in Due to Sponsor - related party in the Company’s consolidated balance sheets.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

Critical accounting policies and estimates are identified below.

Share-Based Payment Arrangements

The Company accounts for stock awards in accordance with ASC 718, which requires that all equity awards be accounted for at their fair value.

Fair value is measured on the grant date and is equal to the underlying value of the stock.

Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have no future service condition.

For awards that vest over time, cumulative adjustments in later periods are recorded to the extent actual forfeitures differ from the Company’s initial estimates;

previously recognized compensation cost is reversed if the service or performance conditions are not satisfied, and the award is forfeited.

We are required to maintain a minimum cash balance equal to the lesser of (a) $2,000,000 and (b) the sum of the next three Installment Payments, as defined in the promissory note, coming due by our standby equity purchase agreement with YA II PN, LTD as described in Note 12 to our audited consolidated financial statements.

As of December 31, 2024, our minimum cash balance requirement was approximately $833,000.

Critical Accounting Policies and Significant Management Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods.

We base our estimates and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances.

Actual results may differ from these estimates under varying assumptions or conditions.

While our significant accounting policies are described in Note 3 to our audited consolidated financial statements, we believe that the following accounting estimates require a greater degree of judgment and complexity.

Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Derivative Financial Instruments

The Company issued warrants and Rights to its investors, the overallotment option to the underwriter, and the Working Capital Loans to the Sponsor.

The Company accounts for financial instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the instruments and applicable authoritative guidance in ASC 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own stock and whether the holders of the instruments could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

At the IPO date, the Public Warrants and Rights and Private Warrants were accounted for as equity instruments as they meet all of the requirements for equity classification under ASC 815 based on current expected terms, which are subject to change.

At the IPO date, the underwriter’s overallotment option met the definition of a liability under ASC 480.

The Forward Purchase Agreement with Meteora entered into on December 31, 2022 resulted in Meteora holding a put option on shares to be purchased pursuant to the agreement, up to the maximum of 6,600,000.

Pursuant to ASC 815, Derivatives and Hedging, this instrument meets the definition of a derivative and accordingly was recognized at fair value.

The fair value of this put option liability was estimated at $18,370,000 and $2,770,000 at December 31, 2023 and 2022, respectively, assuming Meteora will purchase the maximum number of shares at the consummation of the Business Combination.

The Company recognized a $15,600,000 and $2,770,000 loss on the change in fair value of the Forward Purchase Agreement liability in the Company’s consolidated statement of operations for the years ended December 31, 2023 and 2022, respectively.

Net Loss Per Share of Common Stock

The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share” (“ASC 260”).

Net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period.

The weighted average shares for the period from September 23, 2021 (inception) through May 13, 2022 were reduced for the effect of an aggregate of 300,000 Class B Common Stock that were subject to forfeiture until the initial public offering.

The Company’s consolidated statements of operations include a presentation of net loss per share subject to redemption in a manner similar to the two-class method of income per share.

With respect to the accretion of the Class A Common Stock subject to possible redemption and consistent with ASC 480-10-S99-3A, the Company deemed the fair value of the Class A Common Stock subject to possible redemption to approximate the contractual redemption value and the accretion has no impact on the calculation of net loss per share.

The Company’s Public Warrants, Private Warrants, and Rights, could, potentially, be exercised or converted into common stock and then share in the earnings of the Company.

Additionally, the Embedded Feature allows for conversion of the convertible notes into Private Warrants, which could, potentially, be exercised or converted into common stock and then share in the earnings of the Company.

However, these potentially dilutive instruments were excluded when calculating diluted loss per share because such inclusion would be anti-dilutive for the periods presented.

As a result, diluted loss per share is the same as basic loss per share for the periods presented.

Redeemable Share Classification

All of the 9,200,000 shares of Class A Common Stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the business combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation.

In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.

Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount of the redeemable Class A Common Stock, which approximates fair value.

The change in the carrying value of Class A Common Stock subject to possible redemption resulted in charges against additional paid-in capital (to the extent available) and then against accumulated deficit.

Subsequent to the Initial Public Offering date, the Company accretes dividend and interest income earned in the Trust Account in excess of income and franchise taxes.

Recent Accounting Standards

The Company does not expect any recently issued standards to have a material impact on the Company’s consolidated financial statements.

On April 5, 2012, the JOBS Act was signed into law.

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of independent registered public accounting firm providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officers’ compensation to median employee compensation.

These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Related Party Transactions

Founder Shares

In October 2021, the Sponsor paid $25,000, or approximately $0.009 per share, to cover certain offering costs in consideration for 2,875,000 shares of Class B common stock, par value $0.0001 (the “Founder Shares”).

On May 10, 2022, the Sponsor surrendered 575,000 Founder Shares, for no consideration, resulting in the Sponsor and directors continuing to hold 2,300,000 Founder Shares.

Up to 300,000 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised in full by the underwriter.

As the Underwriters exercised their overallotment option in full at the IPO date, the forfeiture provisions lapsed for 300,000 Founder Shares.

On October 28, 2021, the Sponsor transferred 25,000 Founder Shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid, the board of directors of MCAC nominees.

In addition, at the IPO date, the Sponsor sold 60,000 Founder Shares to each Anchor Investor, or the aggregate of 600,000 Founders Shares to the group of ten Anchor Investors.

The proceeds of $4,860 from the sale were collected by the Company on behalf of the Sponsor, and are included in Due to Sponsor – related party on the accompanying consolidated balance sheets as of December 31, 2023 and 2022, respectively.

Promissory Note — Related Party

The Sponsor had agreed to loan the Company an aggregate of up to $400,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”).

This loan was non-interest bearing and payable on the earlier of June 24, 2022 or the consummation of the Initial Public Offering.

The Note totaled $0 as of December 31, 2023 and 2022, respectively.

The Note balance of $354,100 as of the IPO date was repaid on May 16, 2022 from the proceeds of the Initial Public Offering not placed in the Trust Account.

Working Capital Loans

In order to fund working capital deficiencies and finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

The Company will repay the Working Capital Loans upon the completion of a Business Combination.

In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.

During the years ended December 31, 2023 and 2022, the Sponsor loaned the Company $582,457 and $157,000, respectively, in Working Capital Loans.

The Working Capital Loans are to be repaid upon consummation of a Business Combination, without interest, or, at the lender’s option, up to $1.5 million of the outstanding Working Capital Loans are convertible into Private Warrants at a price of $1.00 per warrant.

As of December 31, 2023 and 2022, the Company had $739,457 and $157,000, respectively, borrowed under the Working Capital Loans from the Sponsor included in Convertible note – related party in the accompanying consolidated balance sheets.

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, Derivatives and Hedging (“ASC 815”).

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met and depend on the nature of the host contract.

Derivative financial instruments are recognized at fair value on the grant date with changes in the fair value reported recognized in the consolidated statements of operations and comprehensive loss and each reporting date and are included in this Report under “Item 8.

Financial Statements”.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Bifurcated embedded derivatives are classified with the related host contract on the Company’s consolidated balance sheets.

Derivative assets and liabilities are classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Any change in one of the significant assumptions detailed below or the terms of the underlying agreements of our derivative financial instruments would likely have an impact on the concluded fair value of the derivative financial instruments.

See Note 14 - Derivatives and Note 15 - Fair Value Measurements to our audited consolidated financial statements for additional detail of the valuation methodologies and related assumptions utilized in determining the fair value or our derivative financial instruments

Forward Purchase Agreement (“FPA”)

Our FPA was initially recorded as a part of our Business Combination and was recorded at MCAC’s fair value on the Closing Date.

The FPA was amended in August 2024 (the “FPA Amendment”) and December 2024 (the “Second FPA Amendment”).

We re-measured the FPA to fair value at assumption and immediately prior to the FPA Amendment using a Black-Scholes pricing model which included certain subjective assumptions based on the term of the host contract including expected term, the estimated volatility of our stock price over the term.

The FPA Amendment and the Second FPA Amendment provided two separate settlement options.

We re-measured the FPA to fair value immediately prior to the December 2024 amendment, subsequent to the December 2024 amendment, and at December 31, 2024 using a Monte Carlo simulation model that applies a probability of occurrence to the present value of each settlement scenario.

Debt Conversion Adjustments and SEPA Derivative Liability

Our bifurcated embedded derivatives include the debt conversion adjustment provisions included in nine conversion agreements and the SEPA derivative liability.

The fair value of these derivatives was determined utilizing a Monte Carlo simulation model in order to incorporate subjective assumptions based on the terms of the specific host contracts and represent our best estimate at the valuation date.

The inputs to the model for each instrument include significant assumptions such as the drift term, volume-weighted average price (“VWAP”) based on a specified period of time as defined in the host contract and the estimated volatility of our stock price over the term which was determined by examining the historical volatilities of a group of industry peers, as the Company did not have significant trading history for our ConnectM common stock.

Convertible Debt

We evaluate convertible debt in accordance with ASC 470, “Debt with Conversion and Other Options” (“ASC 470”) to determine if embedded conversion features present in the convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.

Debt issuance costs are allocated proportionately to the debt host and conversion feature.

Convertible notes payable are reflected at fair value as the Company elected to measure these financial instruments with the fair value option.

Each period, the fair value of the convertible notes payable are calculated and the resulting gains and losses from the change in fair value of the convertible notes associated with non-credit components are recognized in income, while the change in fair value associated with credit components are recognized in accumulated other comprehensive income (“AOCI”), and subsequently released from AOCI upon maturity.

Significant assumptions used in the calculation of fair value for the Amended 2022 Convertible Notes, 2023 Convertible Notes and 2024 convertible notes include the probabilities of the various conversion scenarios based on the terms of the host contract which include the estimated probability of conversion at maturity, voluntary conversion and automatic conversion.

The Assumed 2024 Note is re-measured to fair value each reporting period with the most significant unobservable input used in the calculation of the is the expected average volume weighted average price for a share of our common stock for the five-business day period preceding the maturity date of the Company at the maturity date.

The fair value of the SEPA Convertible Note was determined using a Monte Carlo simulation model which incorporates subjective assumptions based on the terms of the specific host contract and represent our best estimate at the valuation date.

We included the estimated volatility of our stock price over the term of the note as of the measurement date, the remaining term of the host contract at the measurement date, the risk-free interest rate based upon United States Treasury interest rates appropriate for the expected term, and the estimated drift term.

Any change in one of the significant assumptions detailed above would likely have an impact on the concluded fair value of the SEPA Convertible Note.

See Notes 10 – Convertible Debt and Note 15 - Fair Value Measurements to our audited consolidated financial statements for additional detail.

Contingent Consideration Obligation

The fair value of the Contingent Consideration Obligation was determined using a Monte Carlo simulation model which incorporates subjective assumptions based on the terms of the specific host contract and represent our best estimate at the valuation date.

We included the estimated revenue and EBITDA volatility over the term, the term to payment of the host contract at the measurement date, the earnout and long-term risk-free interest rates based upon United States Treasury interest rates appropriate for the expected term.

Any change in one of the significant assumptions detailed above would likely have an impact on the concluded fair value of the Contingent Consideration Obligation.

Business Combinations

We account for business combinations using the acquisition method of accounting.

Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value.

Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities.

Determining the fair value of assets acquired, liabilities assumed, and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items.

Reverse Recapitalization

and Legacy ConnectM’s operations prior to the Business Combination comprise the ongoing operations of the combined company.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy ConnectM issuing stock for the net assets of MCAC, accompanied by a recapitalization.

The net assets of MCAC were stated at fair value with no goodwill or other intangible assets recorded.

See Note 5 – Reverse recapitalization to our audited consolidated financial statements for additional detail.

Long lived assets

We determined that long-lived assets, which include our goodwill and intangible assets, represent critical accounting estimates, as they involve significant judgment, estimates, and assumptions and to the extent that our estimates and assumptions materially change or if actual circumstances differ from those in the assumptions, our financial statements could be materially impacted.

Acquired intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset.

Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.

Intangible assets assessed as having indefinite lives are not amortized, but are assessed for indicators that the useful life is no longer indefinite or for indicators of impairment each period.

Indicators we review, as applicable, include whether there has been a significant adverse change in the extent or manner in which our assets are being used, a significant adverse change in legal factors affecting our assets, customer attrition, and/or a cash flow loss.

Each reporting period, we evaluate the estimated remaining useful life of our intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.

During the year ended December 31, 2024, we identified impairment indicators to our long lived assets attributed to recurring losses for two consecutive years at two subsidiaries and significantly declining sales at one of those subsidiaries.

During the year ended December 31, 2023, we identified impairment indicators attributed to our decision to wind down the operations of two subsidiaries and based upon the contractual terms of a noncompete agreement in connection with an acquisition.

We recognized an impairment loss of $1,567,812 and $157,103 on our goodwill for the years ended December 31, 2024 and 2023, respectively.

We recognized an impairment loss on our intangible assets of $835,816 and $24,750 for the years ended December 31, 2024 and 2023, respectively.

Share-based Compensation

We account for share-based payments that involve the issuance of shares of our common stock to employees and nonemployees and meet the criteria for share-based awards as stock-based compensation expense based on the grant-date fair value of the award.

We have elected to recognize the adjustment to stock-based compensation expense in the period in which forfeitures occur.

We recognize compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.

If factors change, and we utilize different assumptions including the probability of achieving performance conditions, share-based compensation cost on future award grants may differ significantly from share-based compensation cost recognized on past award grants.

If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost.

Share-based compensation cost affects our compensation and benefits expenses.

In addition to the below, see Note 13 – Stock Based Compensation to our audited consolidated financial statements for additional detail.

For periods prior to the Business Combination, we issued stock option awards to employees and nonemployees under the Legacy ConnectM 2019 Equity Incentive Plan (the “2019 Plan”).

Legacy Options converted into an option to purchase a number of shares of Company common stock equal to the product of the number of shares of Legacy ConnectM common stock and the Exchange Ratio at an exercise price per share equal to the exercise price of the Legacy Option divided by the Exchange Ratio.

Each exchanged option is governed by the same terms and conditions applicable to the Legacy Option prior to the Business Combination.

No further grants can be made under the 2019 Plan.

The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model in order to measure the compensation cost associated with the award.

This model incorporates the following assumptions for inputs:

the expected volatility in the market value of the underlying common stock, the expected term of the contractual option, the risk-

free interest rate based upon quoted market yields for United State Treasury instruments with terms that were consistent with the expected term of the stock options and the expected dividend yield of the underlying common stock.

For periods subsequent to the Business Combination share-based awards will be issued under the 2023 Equity Incentive Plan (the “2023 Plan”) which was approved on July 10, 2024 in connection with the Business Combination and will be administered by our Board.

As of December 31, 2024, no awards were issued under to date under the 2023 Plan.

We account for warrants as either equity- classified or liability classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing liabilities from equity (“ASC 480”), and ASC 815.

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance, modification, and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated fair value of the liability-classified warrants are recognized as a non-cash gain or loss on the accompanying consolidated statements of operations and comprehensive loss.

We assess the classification of our warrants at each reporting date to determine whether a change in classification between equity and liability is required.

We determined that income taxes involve critical accounting estimates because management makes significant estimates, assumptions, and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets, and to the extent that our estimates and assumptions materially change, or if actual circumstances differ materially from those in the assumptions, our financial statements could be materially impacted.

We utilize the asset and liability method for computing our income tax provision.

Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards, using enacted tax rates.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.

Assessing the need for a valuation allowance requires a great deal of judgement and we consider all available evidence, both positive and negative, to determine whether it is more likely than not that our deferred tax assets are recoverable.

We evaluate all available evidence including, but not limited to, history of earnings and losses, forecasts of future taxable income, and the weight of evidence that can be objectively verified.

See Note 17 - Income taxes of the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for details of changes in our valuation allowance for the years ended December 31, 2024 and 2023.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes.

federal tax purposes, digital asset transactions are treated on the same tax principles as property transactions.

We recognize a gain or loss when digital assets are exchanged for other property, in the amount of the difference between the fair market value of the property received and the tax basis of the exchanged digital assets.

Receipts of digital assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt.

Reportable Segments

Our operations are organized into four reporting segments:

owned service network, transportation, logistics, and managed solutions.

The structure is designed to allow us to evaluate the performance of our different solutions offerings, provide improved service and drive future growth in a cost efficient manner.

See Note 20 to the Consolidated Financial Statements for certain segment information about our business required by GAAP.

Recently Issued and Adopted Accounting Standards

See Note 3 for a discussion of any recent accounting pronouncements relevant to our Consolidated Financial Statements.

Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company, we are not required to make disclosures under this Item.

Financial Statements and Supplementary Data.

Our financial statements and the notes thereto begin on page F-1 of this Annual Report.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis