[10-Q] Monterey Capital Acquisition Corporation Unit Quarterly Earnings Report
ConnectM Technology Solutions (MCAC) reported significant liquidity and governance challenges in its Form 10-Q. The company had a working capital deficit of approximately $28.6 million at March 31, 2025, recorded a net loss of about $7.0 million and negative operating cash flow of approximately $2.8 million for the three months ended March 31, 2025. Nasdaq suspended trading of the common stock on May 7, 2025 for failure to meet minimum bid/market value listing standards.
The filing describes a prior reverse recapitalization making Legacy ConnectM the accounting acquirer and retroactively adjusting 2024 share data. The company completed acquisitions and equity issuances, issued convertible notes with high interest and conversion features, transacted with related parties including convertible note holders and managed-services customers, and settled obligations via share issuances and derivative adjustments. Management disclosed material weaknesses in internal control over financial reporting.
ConnectM Technology Solutions (MCAC) ha segnalato rilevanti problemi di liquidità e di governance nel suo Modulo 10-Q. Al 31 marzo 2025 la società mostrava un deficit di capitale circolante di circa $28,6 milioni, ha registrato una perdita netta di circa $7,0 milioni e un flusso di cassa operativo negativo di circa $2,8 milioni nel trimestre chiuso il 31 marzo 2025. Il trading delle azioni ordinarie è stato sospeso da Nasdaq il 7 maggio 2025 per il mancato rispetto dei requisiti minimi di prezzo/valore di mercato.
La relazione descrive una precedente ricapitalizzazione inversa che ha reso Legacy ConnectM l'entità contabile dominante e ha ricalcolato retroattivamente i dati azionari del 2024. La società ha portato a termine acquisizioni ed emissioni di capitale, emesso note convertibili con tassi di interesse elevati e clausole di conversione, intrattenuto operazioni con parti correlate tra cui detentori di note convertibili e clienti di servizi gestiti, e soddisfatto obbligazioni mediante emissione di azioni e rettifiche su strumenti derivati. La direzione ha rilevato debolezze significative nel controllo interno sulla rendicontazione finanziaria.
ConnectM Technology Solutions (MCAC) informó importantes problemas de liquidez y de gobernanza en su Formulario 10-Q. Al 31 de marzo de 2025 la compañía presentaba un déficit de capital de trabajo de aproximadamente $28,6 millones, registró una pérdida neta de alrededor de $7,0 millones y un flujo de caja operativo negativo de aproximadamente $2,8 millones en el trimestre terminado el 31 de marzo de 2025. Nasdaq suspendió la negociación de las acciones ordinarias el 7 de mayo de 2025 por no cumplir los estándares mínimos de precio/valor de mercado para cotización.
La presentación describe una recapitalización inversa previa que convirtió a Legacy ConnectM en el adquirente contable y ajustó retroactivamente los datos de acciones de 2024. La compañía completó adquisiciones y emisiones de capital, emitió pagarés convertibles con altos intereses y características de conversión, realizó transacciones con partes relacionadas, incluidos tenedores de pagarés convertibles y clientes de servicios gestionados, y saldó obligaciones mediante emisiones de acciones y ajustes de derivados. La dirección reveló debilidades materiales en el control interno sobre la información financiera.
ConnectM Technology Solutions (MCAC)는 10-Q 보고서에서 유동성 및 지배구조 관련 중대한 문제를 보고했습니다. 2025년 3월 31일 기준 회사의 운전자본 부족액은 약 $28.6 million였고, 2025년 3월 31일로 끝나는 분기 동안 순손실은 약 $7.0 million, 영업활동 현금흐름은 약 $2.8 million의 마이너스를 기록했습니다. Nasdaq는 2025년 5월 7일 최저 입찰가/시가총액 상장 기준 미충족으로 보통주 거래를 정지했습니다.
보고서는 이전의 역 리캐피탈라이제이션(역자본재편)을 설명하며, 이로 인해 Legacy ConnectM이 회계상 인수기업이 되었고 2024년 주식수 데이터를 소급 조정했다고 밝힙니다. 회사는 인수 및 주식 발행을 완료했고, 높은 이자와 전환 조항을 가진 전환사채를 발행했으며, 전환사채 보유자 및 매니지드 서비스 고객 등 관련 당사자와 거래를 했고, 주식 발행 및 파생상품 조정을 통해 채무를 정리했습니다. 경영진은 재무보고에 대한 내부통제에서 중요 약점을 공시했습니다.
ConnectM Technology Solutions (MCAC) a signalé d'importants problèmes de liquidité et de gouvernance dans son formulaire 10‑Q. Au 31 mars 2025, la société présentait un déficit de fonds de roulement d'environ 28,6 M$, a enregistré une perte nette d'environ 7,0 M$ et un flux de trésorerie d'exploitation négatif d'environ 2,8 M$ pour le trimestre clos le 31 mars 2025. Le Nasdaq a suspendu la négociation des actions ordinaires le 7 mai 2025 en raison du non‑respect des seuils minimaux de cours/valeur de marché pour la cotation.
Le dépôt décrit une recapitalisation inversée antérieure ayant fait de Legacy ConnectM l'acquéreur comptable et entraîné un ajustement rétroactif des données d'actions de 2024. La société a réalisé des acquisitions et des émissions de capital, émis des billets convertibles à taux élevé et dotés de caractéristiques de conversion, effectué des opérations avec des parties liées, y compris des détenteurs de billets convertibles et des clients de services gérés, et réglé des obligations par émission d'actions et ajustements de dérivés. La direction a déclaré des faiblesses importantes du contrôle interne sur l'information financière.
ConnectM Technology Solutions (MCAC) meldete in seinem Form 10‑Q erhebliche Liquiditäts‑ und Governance‑Probleme. Zum 31. März 2025 wies das Unternehmen ein Working‑Capital‑Defizit von rund $28,6 Millionen aus, verzeichnete einen Nettoverlust von etwa $7,0 Millionen und einen negativen operativen Cashflow von rund $2,8 Millionen für das zum 31. März 2025 endende Quartal. Die Nasdaq setzte den Handel mit den Stammaktien am 7. Mai 2025 wegen Nichterfüllung der Mindestgebots-/Marktwert‑Listingstandards aus.
Die Einreichung beschreibt eine frühere Reverse‑Recapitalization, durch die Legacy ConnectM zum bilanziellen Erwerber wurde und die Aktienzahlen für 2024 rückwirkend angepasst wurden. Das Unternehmen schloss Übernahmen und Kapitalneuausgaben ab, gab wandelbare Schuldverschreibungen mit hohen Zinsen und Umwandlungsmerkmalen aus, tätigte Geschäfte mit nahe stehenden Parteien einschließlich Inhabern wandelbarer Schuldverschreibungen und Managed‑Service‑Kunden und beglich Verbindlichkeiten durch Aktienausgaben und Anpassungen von Derivaten. Das Management gab wesentliche Schwächen in der internen Kontrolle der Finanzberichterstattung zu.
- Strategic acquisition: Acquired CER to expand rooftop solar and telecom energy-management presence in India, projecting India revenue to grow from ~5% to ~15% (approx. $10M annualized).
- Completed business combination: Reverse recapitalization closed and the company is a publicly listed entity (accounting treatment clarified).
- Liquidity shortfall: Working capital deficit of approximately $28.6M and negative operating cash flow of ~$2.8M for Q1 2025.
- Net loss: Reported net loss of approximately $7.0M for the three months ended March 31, 2025.
- Nasdaq suspension: Trading suspended May 7, 2025 for failure to meet minimum bid/market value standards.
- Material weaknesses: Management identified material weaknesses in internal control over financial reporting.
- High-cost financing and dilution: Multiple convertible notes with interest rates up to 20%+, numerous share issuances and derivative liabilities that increased dilution and complexity.
- Related-party concentrations: Significant transactions and receivables/payables with related-party investors and customers, increasing counterparty and governance risk.
Insights
TL;DR: Severe liquidity shortfall, recurring losses, and governance weaknesses create high near-term financing and compliance risk.
The company shows a working capital deficit of $28.6M, a quarterly net loss of $7.0M, and negative operating cash flow of $2.8M, pointing to immediate funding needs. Nasdaq suspension increases refinancing pressure and may trigger covenant events and dilution through heavily structured convertible financings and share issuances. Related-party transactions and multiple derivative instruments add complexity to capital structure and raise potential governance concerns. Material weaknesses in internal control reduce confidence in reported figures until remediated.
TL;DR: Strategic acquisition expands India exposure, but integration and financing risks are material amid weak liquidity.
The acquisition of CER and expected India revenue expansion from ~5% to ~15% (projected ~$10M annualized) aligns strategically with distributed energy goals. However, the company funded operations via stock issuances, convertible notes with 14–20%+ interest and low conversion prices, and settlement share issuances that dilute equity. The reverse recapitalization clarified reporting history but does not mitigate present cash runway and recapitalization-related dilution risks. Any value from M&A hinges on successful integration and restoration of listing compliance.
ConnectM Technology Solutions (MCAC) ha segnalato rilevanti problemi di liquidità e di governance nel suo Modulo 10-Q. Al 31 marzo 2025 la società mostrava un deficit di capitale circolante di circa $28,6 milioni, ha registrato una perdita netta di circa $7,0 milioni e un flusso di cassa operativo negativo di circa $2,8 milioni nel trimestre chiuso il 31 marzo 2025. Il trading delle azioni ordinarie è stato sospeso da Nasdaq il 7 maggio 2025 per il mancato rispetto dei requisiti minimi di prezzo/valore di mercato.
La relazione descrive una precedente ricapitalizzazione inversa che ha reso Legacy ConnectM l'entità contabile dominante e ha ricalcolato retroattivamente i dati azionari del 2024. La società ha portato a termine acquisizioni ed emissioni di capitale, emesso note convertibili con tassi di interesse elevati e clausole di conversione, intrattenuto operazioni con parti correlate tra cui detentori di note convertibili e clienti di servizi gestiti, e soddisfatto obbligazioni mediante emissione di azioni e rettifiche su strumenti derivati. La direzione ha rilevato debolezze significative nel controllo interno sulla rendicontazione finanziaria.
ConnectM Technology Solutions (MCAC) informó importantes problemas de liquidez y de gobernanza en su Formulario 10-Q. Al 31 de marzo de 2025 la compañía presentaba un déficit de capital de trabajo de aproximadamente $28,6 millones, registró una pérdida neta de alrededor de $7,0 millones y un flujo de caja operativo negativo de aproximadamente $2,8 millones en el trimestre terminado el 31 de marzo de 2025. Nasdaq suspendió la negociación de las acciones ordinarias el 7 de mayo de 2025 por no cumplir los estándares mínimos de precio/valor de mercado para cotización.
La presentación describe una recapitalización inversa previa que convirtió a Legacy ConnectM en el adquirente contable y ajustó retroactivamente los datos de acciones de 2024. La compañía completó adquisiciones y emisiones de capital, emitió pagarés convertibles con altos intereses y características de conversión, realizó transacciones con partes relacionadas, incluidos tenedores de pagarés convertibles y clientes de servicios gestionados, y saldó obligaciones mediante emisiones de acciones y ajustes de derivados. La dirección reveló debilidades materiales en el control interno sobre la información financiera.
ConnectM Technology Solutions (MCAC)는 10-Q 보고서에서 유동성 및 지배구조 관련 중대한 문제를 보고했습니다. 2025년 3월 31일 기준 회사의 운전자본 부족액은 약 $28.6 million였고, 2025년 3월 31일로 끝나는 분기 동안 순손실은 약 $7.0 million, 영업활동 현금흐름은 약 $2.8 million의 마이너스를 기록했습니다. Nasdaq는 2025년 5월 7일 최저 입찰가/시가총액 상장 기준 미충족으로 보통주 거래를 정지했습니다.
보고서는 이전의 역 리캐피탈라이제이션(역자본재편)을 설명하며, 이로 인해 Legacy ConnectM이 회계상 인수기업이 되었고 2024년 주식수 데이터를 소급 조정했다고 밝힙니다. 회사는 인수 및 주식 발행을 완료했고, 높은 이자와 전환 조항을 가진 전환사채를 발행했으며, 전환사채 보유자 및 매니지드 서비스 고객 등 관련 당사자와 거래를 했고, 주식 발행 및 파생상품 조정을 통해 채무를 정리했습니다. 경영진은 재무보고에 대한 내부통제에서 중요 약점을 공시했습니다.
ConnectM Technology Solutions (MCAC) a signalé d'importants problèmes de liquidité et de gouvernance dans son formulaire 10‑Q. Au 31 mars 2025, la société présentait un déficit de fonds de roulement d'environ 28,6 M$, a enregistré une perte nette d'environ 7,0 M$ et un flux de trésorerie d'exploitation négatif d'environ 2,8 M$ pour le trimestre clos le 31 mars 2025. Le Nasdaq a suspendu la négociation des actions ordinaires le 7 mai 2025 en raison du non‑respect des seuils minimaux de cours/valeur de marché pour la cotation.
Le dépôt décrit une recapitalisation inversée antérieure ayant fait de Legacy ConnectM l'acquéreur comptable et entraîné un ajustement rétroactif des données d'actions de 2024. La société a réalisé des acquisitions et des émissions de capital, émis des billets convertibles à taux élevé et dotés de caractéristiques de conversion, effectué des opérations avec des parties liées, y compris des détenteurs de billets convertibles et des clients de services gérés, et réglé des obligations par émission d'actions et ajustements de dérivés. La direction a déclaré des faiblesses importantes du contrôle interne sur l'information financière.
ConnectM Technology Solutions (MCAC) meldete in seinem Form 10‑Q erhebliche Liquiditäts‑ und Governance‑Probleme. Zum 31. März 2025 wies das Unternehmen ein Working‑Capital‑Defizit von rund $28,6 Millionen aus, verzeichnete einen Nettoverlust von etwa $7,0 Millionen und einen negativen operativen Cashflow von rund $2,8 Millionen für das zum 31. März 2025 endende Quartal. Die Nasdaq setzte den Handel mit den Stammaktien am 7. Mai 2025 wegen Nichterfüllung der Mindestgebots-/Marktwert‑Listingstandards aus.
Die Einreichung beschreibt eine frühere Reverse‑Recapitalization, durch die Legacy ConnectM zum bilanziellen Erwerber wurde und die Aktienzahlen für 2024 rückwirkend angepasst wurden. Das Unternehmen schloss Übernahmen und Kapitalneuausgaben ab, gab wandelbare Schuldverschreibungen mit hohen Zinsen und Umwandlungsmerkmalen aus, tätigte Geschäfte mit nahe stehenden Parteien einschließlich Inhabern wandelbarer Schuldverschreibungen und Managed‑Service‑Kunden und beglich Verbindlichkeiten durch Aktienausgaben und Anpassungen von Derivaten. Das Management gab wesentliche Schwächen in der internen Kontrolle der Finanzberichterstattung zu.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
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(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code:
Not applicable
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted and pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act: none.
As of August 22, 2025, there were
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Report”) contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and releases issued by the SEC and within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Forward-looking statements include, among others, information concerning our strategy, future operations, future financial position, future revenue, projected expenses, business prospects, and plans and objectives of management. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict, “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
Forward-looking statements contained in this prospectus include, but are not limited to, statements about the following:
| ● | the Company operates in the early-stage market of modern energy economy (“MEE”) adoption (which includes AI-powered electrification and distributed energy) has a history of losses and expects to incur significant ongoing expenses; |
| ● | the Company’s management has limited experience in operating a public company; |
| ● | the Company has identified material weaknesses in its internal control over financial reporting and if it is unable to remediate these material weaknesses, or if the Company identifies additional material weaknesses in the future or otherwise fails to maintain an effective internal control over financial reporting, this may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations; |
| ● | the Company’s growth strategy depends on the widespread adoption of MEE Services; |
| ● | if the Company cannot compete successfully against other MEE Service Providers, it may not be successful in developing its operations and its business may suffer; |
| ● | with respect to providing electricity on a price-competitive basis, solar systems face competition from traditional regulated electric utilities, from less-regulated third party energy service providers and from new renewable energy companies; |
| ● | the Company’s market is characterized by rapid technological change, which requires it to continue to develop new products and product innovations. Any delays in such development could adversely affect market adoption of its products and its financial results; |
| ● | developments in alternative technologies may materially adversely affect demand for the Company’s offerings; and |
| ● | the possibility that we may be adversely affected by other economic, business or competitive factors and may not be able to manage other risks and uncertainties set forth in the section titled “Risk Factors,” which is incorporated herein by reference. |
We caution you that the foregoing list does not contain all of the risks or uncertainties that could affect the Company.
Forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report and the documents that we have filed as exhibits hereto, completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
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TABLE OF CONTENTS
Page | |||
PART I – FINANCIAL INFORMATION (unaudited) | 3 | ||
Item 1. |
| Unaudited Condensed Consolidated Financial Statements | 3 |
| | Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024 | 3 |
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2025 and 2024 (unaudited) | 4 | ||
Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2025 and 2024 (unaudited) | 5 | ||
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (unaudited) | 6 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | 7 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 32 | |
Item 4. | Controls and Procedures | 32 | |
PART II – OTHER INFORMATION | 33 | ||
Item 1. | Legal Proceedings | 33 | |
Item 1A. | | Risk Factors | 33 |
Item 2. | | Unregistered Sale of Equity Securities and Use of Proceeds | 33 |
Item 3. | | Defaults Upon Senior Securities | 34 |
Item 4. | | Mine Safety Disclosures | 34 |
Item 5. | | Other Information | 34 |
Item 6. | Exhibits | 34 | |
Signatures | 35 | ||
2
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
CONNECTM TECHNOLOGY SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(all amounts in USD, except number of shares)
| | | | | | |
| | March 31, |
| December 31, | ||
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| 2025 |
| 2024 | ||
| | (unaudited) | | | | |
Assets | | |
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Current assets | | |
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|
Cash | | $ | | | $ | |
Accounts receivable | | | | | | |
Contract asset | | | | | | |
Other receivable | | | | | | — |
Inventories, net | | | | | | |
Forward purchase agreement derivative asset | | | | | | |
Working capital advances | | | | | | |
Prepaid expenses and other current assets | | | | | | |
Total current assets | | | | | | |
Right-of-use asset – operating lease | | | | | | |
Right-of-use asset – finance lease | | | | | | |
Property and equipment, net | | | | | | |
Goodwill | | | | | | |
Intangible assets, net | | | | | | |
Other assets | | | | | | — |
Total Assets | | $ | | | $ | |
Liabilities and Stockholders’ Deficit | | |
| | |
|
Current liabilities | | |
| | |
|
Accounts payable | | $ | | | $ | |
Accrued expenses and other current liabilities | | | | | | |
Contingent consideration liability | | | | | | |
Debt, net of debt discount | | | | | | |
Convertible debt, at fair value | | | | | | |
Derivative liabilities | | | | | | |
Operating lease liability | | | | | | |
Finance lease liability | | | | | | |
Contract liabilities | | | | | | |
Other payable | | | | | | — |
Total current liabilities | | | | | | |
Debt, net of current portion | | | | | | |
Operating lease liabilities, net of current portion | | | | | | |
Finance lease liabilities, net of current portion | | | | | | |
Contingent consideration liability, net of current portion | | | | | | |
Total liabilities | | | | | | |
Commitments and Contingencies | | |
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|
Stockholders’ Deficit: | | |
| | |
|
Preferred stock Series A, $ | | | | | | |
Common stock, $ | | | | | | |
Additional paid-in-capital | | | | | | |
Accumulated deficit | | | ( | | | ( |
Accumulated other comprehensive income | | | | | | |
Total ConnectM Technology Solutions, Inc.'s stockholders’ deficit | | | ( | | | ( |
Noncontrolling interest | | | | | | |
Total stockholders’ deficit | | | ( | | | ( |
Total liabilities and stockholders’ deficit | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONNECTM TECHNOLOGY SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(all amounts in USD, except number of shares)
| | | | | | |
| | Three Months Ended March 31, | ||||
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| 2025 |
| 2024 | ||
| | | | | | |
Revenues | | $ | | | $ | |
Costs and expenses: | | | | | | |
Cost of revenues | | | | | | |
Gross profit | | | | | | |
Selling, general and administrative expenses | | | | | | |
Loss from operations | | | ( | | | ( |
| | | | | | |
Other income (expense): | | | | | | |
Interest expense | | | ( | | | ( |
Gain on extinguishment of debt | | | | | | — |
Loss on extinguishment of debt and vendor payable | | | ( | | | ( |
Change in fair value of convertible debt | | | ( | | | — |
Change in fair value of forward purchase agreement | | | ( | | | — |
Change in fair value of derivative liabilities | | | ( | | | — |
Change in fair value on 3(a)(10) Settlement Agreement (Note 5) | | | | | | — |
Other income (expense), net | | | | | | ( |
Total other expense, net | | | ( | | | ( |
Net loss | | | ( | | | ( |
Less: net income (loss) attributable to noncontrolling interests | | | | | | |
Net loss attributable to ConnectM Technology Solutions, Inc. | | $ | ( | | $ | ( |
Other comprehensive income (loss): | | | | | | |
Foreign currency translation adjustments | | | | | | |
Comprehensive loss before noncontrolling interests | | | ( | | | ( |
Less: comprehensive loss (income) attributable to noncontrolling interests | | | | | | |
Comprehensive loss attributable to ConnectM Technology Solutions, Inc. | | $ | ( | | $ | ( |
| | | | | | |
Weighted average shares outstanding of common stock | | | | | | |
Basic and diluted net loss per share, common stock | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONNECTM TECHNOLOGY SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(all amounts in USD, except number of shares)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended March 31, 2025 | ||||||||||||||||||||||
| | | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | | | | | Additional | | | | | Other | | | | | | | Total | |||||
| | Common Stock | | Paid-In | | Accumulated | | Comprehensive | | Stockholders’ | | Noncontrolling | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Income (Loss) |
| Deficit |
| interests |
| Deficit | ||||||||
Balances, as of January 1, 2025 | | | | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | | | $ | ( |
Issuance of common stock to settle claim under 3(a)(10) Settlement Agreement (Note 5) | | | | | | | | | | | | — | | | — | | | | | | — | | | |
Issuance of common stock to settle share reset derivative liabilities | | | | | | | | | | | | — | | | — | | | | | | — | | | |
Other comprehensive income | | | — | | | — | | | — | | | — | | | | | | | | | — | | | |
Net loss | | | — | | | — | | | — | | | ( | | | — | | | ( | | | | | | ( |
Balances, as of March 31, 2025 | | | | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | | | $ | (25,963,808) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended March 31, 2024 | ||||||||||||||||||||||
| | | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | | | | | Additional | | | | | Other | | | | | | | Total | |||||
| | Common Stock | | Paid-In | | Accumulated | | Comprehensive | | Stockholders’ | | Noncontrolling | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Income (Loss) |
| Deficit |
| interests |
| Deficit | ||||||||
Balances, as of - December 31, 2023 | | | 1,588,141 | | | 159 | | | 1,307,065 | | | (22,860,351) | | | 114,624 | | | (21,438,503) | | | (26,345) | | | (21,464,848) |
Retroactive application of recapitalization | | | 11,750,296 | | | 1,175 | | | 11,981,109 | | | — | | | — | | | 11,982,284 | | | — | | | 11,982,284 |
Balances, as of - December 31, 2023 | | | | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | ( |
Stock-based compensation expense | | | — | | | — | | | | | | — | | | — | | | | | | — | | | |
Other comprehensive income | | | — | | | — | | | — | | | — | | | | | | | | | — | | | |
Net loss | | | — | | | — | | | — | | | ( | | | — | | | ( | | | | | | ( |
Balances, as of March 31, 2024 | | | | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONNECTM TECHNOLOGY SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in USD, except number of shares)
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| | |
|
Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
|
Depreciation and amortization expense | | | | | | |
Amortization of debt discount | | | | | | |
Stock-based compensation expense | | | — | | | |
ROU amortization on finance leases | | | | | | |
ROU amortization on operating leases | | | | | | |
Loss on extinguishment of debt | | | | | | |
Gain on extinguishment of debt | | | ( | | | — |
Loss on termination of lease | | | | | | — |
Change in fair value of convertible debt | | | | | | |
Change in fair value of derivative liabilities | | | | | | — |
Change in fair value of forward purchase agreement | | | | | | — |
Change in fair value of 3(a)(10) Settlement Agreement (Note 4) | | | ( | | | — |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | | | ( | | | ( |
Other receivable | | | ( | | | — |
Contract asset | | | | | | |
Inventory | | | ( | | | ( |
Prepaid expenses and other current assets | | | | | | |
Other assets | | | ( | | | — |
Accounts payable | | | | | | |
Accrued expenses | | | | | | |
Operating lease liabilities | | | ( | | | ( |
Working capital advances | | | | | | — |
Contract liabilities | | | | | | ( |
Net cash used in operating activities | | | ( | | | ( |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
| | |
|
Purchase of property and equipment | | | ( | | | ( |
Cash paid for capitalized software development costs | | | ( | | | — |
Net cash used in investing activities | | | ( | | | ( |
CASH FLOWS FROM FINANCING ACTIVITIES: | | |
| | |
|
Proceeds from the issuance of debt | | | — | | | |
Proceeds from the issuance of convertible notes | | | | | | — |
Payments of deferred offering costs | | | — | | | ( |
Repayments of debt | | | ( | | | ( |
Payments of financing fees | | | — | | | ( |
Receipt of funds from Libertas | | | — | | | |
Advance to Monterey Capital Acquisition Corporation | | | — | | | ( |
Payment on finance leases | | | ( | | | ( |
Net cash provided by financing activities | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | | | | |
Increase (decrease) in cash and cash equivalents | | | ( | | | ( |
Cash, beginning of year | | | | | | |
Cash, end of year | | $ | | | $ | |
Supplemental disclosures of cash flow information: | | |
| | |
|
Cash paid for interest | | $ | | | $ | |
Cash paid for taxes | | $ | | | $ | |
Supplemental disclosures of noncash financing information: | | |
| | |
|
Carrying value of accounts payable extinguished with 3(a)(10) Settlement Agreement | | $ | | | $ | — |
Carrying value of debt extinguished with 3(a)(10) Settlement Agreement | | $ | | | $ | — |
Financed insurance premium included in prepaid expense | | $ | | | $ | — |
Fair value of shares issued to settle Claim under 3(a)(10) Settlement Agreement | | $ | | | $ | — |
Fair value of shares issued to settle the share reset derivative liabilities | | $ | | | $ | — |
Extinguishment of accounts payable through issuance of debt | | $ | | | $ | — |
Exchange of operating lease liability for accounts payable on terminated lease | | $ | | | $ | — |
De-recognition of right-of-use asset, operating on terminated lease | | $ | | | $ | — |
Extinguishment of operating lease liability on terminated lease | | $ | | | $ | — |
Deferred offering costs included in accounts payable | | $ | — | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONNECTM TECHNOLOGY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2025
AND 2024 (UNAUDITED)
NOTE 1: ORGANIZATION AND OPERATIONS
ConnectM Technology Solutions, Inc. (the “Company”), a Delaware corporation, who conducts its operations through its subsidiaries, is a constellation of companies offering solutions to its customers for the (i) decarbonization of homes and businesses through the deployment of weatherization, HVAC, solar, battery, and EV charging hardware working in tandem with the home energy specialists to ensure optimal roll out - all powered by our proprietary AI-driven energy intelligence platform, (ii) facilitation of business-to-business transportation for products using contracted drivers through its online and mobile last mile local delivery platform, and (iii) management of connected operations using its industrial internet of things (“IIoT”) platform. The Company also provides a managed solutions service offering that includes human resources management, procurement services, omnichannel marketing and lead generation services and access to working capital loans to improve operating efficiencies and enhance profitability. The platforms and software that are used to deliver the solutions harvest data that is transformed into insights that its customers are able to access and use for analysis and action. The Company earns revenue outside the United States from its Owned Service Network, Managed Solutions, and Transportation segments.
The Company also offers physical products as part of its solutions offerings, including an AI-driven intelligent heat pump system for use in the decarbonization of homes and businesses solution and display clusters, digital control units and vehicle control units used in the management of connected operations solution.
Basis of presentation and principles of consolidation: On July 12, 2024, the Company consummated the Business Combination which was accounted for as a reverse recapitalization with Legacy ConnectM being 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”). 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. While MCAC was the legal acquirer in the Business Combination, because Legacy ConnectM was deemed the accounting acquirer, the historical financial statements of Legacy ConnectM became the historical financial statements of the combined company, upon consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy ConnectM prior to the Business Combination; (ii) the combined results of MCAC and Legacy ConnectM following the closing of the Business Combination; (iii) the assets and liabilities of Legacy ConnectM at their historical cost; and (iv) the Company’s equity structure for all periods presented. For more details on the reverse recapitalization, see Note 5 to the Company’s Consolidated Financial Statements as presented in its Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on August 4, 2025. As a result of the reverse recapitalization, all references to numbers of common shares and per common share data for 2024 in these unaudited condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the reverse recapitalization.
These condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its controlled subsidiaries over which the Company exercises majority board control. Intercompany accounts, transactions, profits and losses have been eliminated in consolidation. Investments in entities where the Company holds at least a 20% ownership interest and have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. These interim consolidated statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosure for interim periods. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, changes in stockholders’ deficit, operating results and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2024 and 2023, as filed with the SEC on August 4, 2025. The consolidated balance sheet as at December 31, 2024, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The interim results for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025, or for any future periods. Certain reclassifications have been made to the amounts in prior periods to conform to the current period’s presentation.
Any reference in these footnotes to the applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the ASC and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
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Revision of Prior Period Financial Statements
During the audit for the year ended December 31, 2024, the Company identified an immaterial error in the Statements of operations and comprehensive loss for the period ended March 31, 2024 relating to Company’s master service agreements which were improperly classified as revenue instead of as a reduction to operating expenses in the Prior Filing. The Company determined the error was not material to the previously issued financial statements; however, the Company decided to revise the prior periods impacted. The prior period revisions had no impact on our previously reported net loss; however, the revision decreased our revenue and our selling, general and administrative expenses by an amount of $
Noncontrolling Interest: The portion of equity not owned by the Company in entities controlled and consolidated by the Company are presented as noncontrolling interest and classified as a component of consolidated stockholders’ deficit, separate from total stockholders’ deficit on the Company’s consolidated balance sheets. The amount recorded is based on the noncontrolling interest holders’ initial investment, adjusted to reflect the noncontrolling interest holder’s share of earnings or losses from the Company controlled entity, and any distributions received or additional contributions made by the noncontrolling interest holder. The earnings or losses from the entity attributable to noncontrolling interests are reflected in net income attributable to noncontrolling interests on the accompanying consolidated statements of operations and comprehensive loss. All significant intercompany accounts, transactions, and profits and losses were eliminated in consolidation. These unaudited condensed consolidated interim financial statements are presented in United States Dollars ("USD"or $), which is the functional currency of the Company.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the accounting policies during the three months period ended March 31, 2025, as compared to the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s audited consolidated financial statements included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2024 and 2023, as filed with the SEC on August 4, 2025.
Use of estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts financial assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. The Company’s most significant estimates and judgments involve the identification of intangible assets in business combination, valuation of acquired assets and assumed liabilities in a business combinations, classification of financial instruments as equity or liability, valuation of equity-classified and liability-classified financial instruments, the useful lives of long-lived assets, assumptions used in assessing impairment of long-lived assets, valuation of contingent consideration obligations, and the valuation of convertible debt reported at fair value.
Segment reporting: ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM focuses on operating (loss) income from operations as the primary measure to manage the business. Segment operating (loss) income from operations is (loss) income before interest expense, other expense, other income, unallocated corporate costs, and income taxes. There are
| (1) | Owned service network segment consists of our owned service providers who serve as a single point solution provider for homeowners and light commercial building owners for their electrification and decarbonization needs, including system design, installation, monitoring, maintenance and repair. The owned service providers use the Company’s technology platform, which provides maintenance, repair, and installation guidance and optimization (the “Technology Platform”), in servicing the homeowners and light commercial building owners. |
| (2) | Managed solutions segment provides third party residential and light commercial service providers with access to the Technology Platform as well as a selection of servicing offerings that the managed solutions customer can select from, including human resources management, procurement services, omnichannel marketing and lead generation as well as access to short-term working capital loans. |
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| (3) | Logistics segment focuses on the facilitation of business-to-business transportation of heavy goods using the Company’s last mile delivery software. |
| (4) | Transportation segment focuses on the sale of hardware, software and technical services to original equipment manufacturers (“OEMs”). OEMs have the option to buy access to the Technology Platform to remotely monitor the performance of the hardware. |
Impairment of long-lived assets and concentration of risk: The Company assessed its long-lived assets for impairment and concluded that there were no indicators of impairment during the three months ended March 31, 2025 and 2024. Management has evaluated potential concentrations of risk related to its long-lived assets, including dependencies on major customers, vendors, or geographic markets, and does not believe that any such concentrations exist that would subject the Company to material risk.
Net loss per share: Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, excluding the effects of any potential dilutive securities. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common share equivalents had been issued and if the additional common shares were dilutive. Loss per share excludes all potential dilutive shares of common shares if their effect is anti-dilutive.
For the three months ended March 31, 2025 and 2024, potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options and warrants (using the treasury stock method) and the conversion of convertible notes payable. Conversion features of notes payable may have a variable conversion feature, amending the number of conversion shares based on the market price of the stock. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
Diluted net loss per share includes the potential dilutive effect of common stock equivalents as if such securities were converted or exercised during the period, when the effect is dilutive. Given the Company is in a net loss position for the three months ended March 31, 2025 and 2024, there is no difference between basic and diluted net loss per share.
The following table summarizes the potentially dilutive securities excluded from the computation of diluted shares outstanding because the effect of including these potential shares was anti-dilutive:
| | |
Options | | |
Warrants | | |
Convertible notes payable that convert into common stock | | 4,914,845 |
Total | | |
Recently issued accounting pronouncements, not yet adopted
ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”) incorporates several disclosure and presentation requirements currently residing in SEC Regulation S-X and S-K into the ASC. The amendments are applied prospectively and are effective when the SEC removes the related requirements from Regulation S-X and S-K. Any amendments the SEC does not remove by June 30, 2027 will not be effective. Early adoption is prohibited. The Company is currently evaluating the potential impact of this guidance on its disclosures.
ASU 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements (“ASU 2024-02”) updates accounting standards for revenue recognition (ASC 606), lease accounting (ASC 842), and impairment of long-lived assets (ASC 360). ASU 2024-02 provides enhanced guidance for estimating variable consideration, accounting for contract modifications, determining lease terms, and simplifying impairment testing for long-lived assets. It also introduces increased disclosure requirements for financial instruments and derivatives. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023 - 09, Improvements to Income Tax Disclosures, which amends Income Taxes (Topic 740). The FASB issued this update to improve annual basis income tax disclosures related to (1) rate reconciliation, (2) income taxes paid, and (3) other disclosures related to pretax income (or loss) and income tax expense (or benefit) from continuing operations. The effective date for this amendment is January 1, 2025, with early adoption permitted. These amendments are to be applied on a prospective basis; however, retrospective application is permitted. We plan to adopt the standard when it becomes effective for us beginning in our fiscal year 2025 annual financial statements, and we expect the adoption of the standard will impact certain areas of our income tax disclosures.
In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40) Disaggregation of Income Statement Expenses. The new guidance is intended to enhance
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transparency and disclosures by requiring public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025 - 01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40): Clarifying the Effective Date. The ASU is effective for our annual report as of December 31, 2027, and for interim reporting periods beginning in the first quarter of 2028, with early adoption permitted. We are in the process of evaluating the impact that the adoption of this ASU will have on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024 - 04, Debt - Debt with Conversion and Other Options (Subtopic 470 - 20) Induced Conversions of Convertible Debt Instruments. The new guidance clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. The ASU is effective beginning in 2026, with early adoption permitted. We will utilize this guidance for any future induced conversions or extinguishments of our convertible notes.
NOTE 3: GOING CONCERN
The Company’s unaudited condensed 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 March 31, 2025, the Company had cash of $
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 $
As of the date of this filing, the Company has not made certain scheduled payments under the SEPA Convertible Note and is therefore in technical 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) $
As of March 31, 2025, the Company has not made certain scheduled payments and is therefore in technical default under four of the secured promissory notes entered into in June 2024. The total outstanding principal and accrued interest under these notes was approximately $
These are indicators of substantial doubt as to the Company’s ability to continue as a going concern for at least one year from issuance of these unaudited consolidated financial statements. The Company’s ability to continue as a going concern is dependent upon the management of expenses and ability to obtain necessary financing to meet its obligations and pay its 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, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is 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 existing stockholders and could result in significant financial operating covenants that would negatively impact the Company business.
Based on the foregoing, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the unaudited consolidated financial statements are issued. The unaudited condensed 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 the Company be unable to continue as a going concern.
NOTE 4: ACCOUNTS PAYABLE
Accounts payable includes trade payables and accrued vendor obligations. In addition, accounts payable includes credit card payable balances of about $
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NOTE 5: OTHER PAYABLE
In January 2025, the Company entered into a settlement agreement and stipulation (the “3(a)(10) 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 approximately $
Per the terms of the 3(a)(10) Settlement Agreement, the Company is required to issue freely trading securities pursuant to Section 3(a)(10) of the Securities Act equal to the total amount of the Claim divided by the lower of (i) the closing share price on the date of issuance or (ii)
The Company accounted for the 3(a)(10) Settlement Agreement as an extinguishment of the outstanding obligations and realized a loss on extinguishment of approximately $
In the event of a default event pursuant to (i) the trading of the Company’s shares of common stock shall have been halted, limited or suspended, (ii) minimum prices have been established for securities trading on the NASDAQ, (iii) any portion of the Company’s common stock is not eligible or is unable to be deposited or cleared through Last Horizon’s broker, brokerage account and/or clearing agent, the Company’s common stock is no longer eligible for book transfer delivery, or the Company has not made its required filings with the SEC, the multiplier to the VWAP used to determine the Purchase Price decreases from
Per the terms of the 3(a)(10) Settlement Agreement, the Company is required to reserve at least
During the three months ended March 31, 2025, the Company issued
NOTE 6: CONVERTIBLE DEBT
2025 Convertible Notes
The Company entered into
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A summary of the individual convertible notes was:
| | | | | | | | | | |
Issuance Date |
| Gross Proceeds |
| Conversion |
| Conversion Option Period |
| Maturity Date | ||
1/25/2025 | | $ | | | $ | | | |||
1/22/2025 | | | | | $ | | | |||
1/23/2025 | | | | | $ | | | |||
1/25/2025 | | | | | $ | | | |||
1/26/2025 | | | | | $ | | | |||
1/29/2025 | | | | | $ | | | |||
2/4/2025 | | | | | $ | | | |||
2/11/2025 | | | | | $ | | | |||
3/5/2025 | | | | | $ | | | |||
3/17/2025 | | | | | $ | | | |||
3/17/2025 | | | | | $ | | | |||
3/24/2025 | | | | | $ | | | |||
| | $ | | | | | | | | |
The 2025 Convertible Notes are convertible at the option of the holder into shares of the Company’s common stock at a conversion price. The number of shares issuable upon conversion is determined by dividing the sum of the outstanding principal and accrued interest by the conversion price. The 2025 Convertible Notes may be prepaid in full or in part by the Company at any time without penalty.
The Company elected the fair value option for the 2025 Convertible Notes and therefore measured the 2025 Convertible Notes at fair value at issuance and each subsequent reporting period, with changes in fair value recognized in earnings. As of issuance and at March 31, 2025, the fair value of the 2025 Convertible Notes was determined to be $
The 2025 Convertible Notes were convertible into
Assumed 2024 Note
In January 2025, the Assumed 2024 Note was extinguished as part of the 3(a)(10) Settlement Agreement (see Note 5).
2024 Convertible Notes
During the three months ended March 31, 2025, the Company extended the maturity dates and the period the conversion option was exercisable because of the volatility the Company's common stock price was experiencing. The extensions to the conversion periods were accounted for as modifications. The 2024 Convertible Notes may be prepaid in full or in part by the Company at any time without penalty.
The 2024 Convertible Notes were convertible into
NOTE 7: DEBT
Sale of future receipts
In March 2025, the Company entered into a payment agreement to extinguish the balance owed on the September 2024 SFR Agreement of approximately $
In March 2025, the Company was issued a stipulation of settlement from the Supreme Court of the State of New York, County of Sullivan, under which it was required to pay $
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Seller Note
In January 2025, the Company entered into a promissory note (the “January 2025 Note”) with the individual from whom the Company acquired a business from in August 2024 which converts the unpaid cash consideration of $
In July 2025, the Company entered into the first amendment to the January 2025 Note (the “Amended January 2025 Note”), under which the Company is required to pay the lender approximately $
NOTE 8: STOCKHOLDERS’ DEFICIT
Common stock issuances:
During the three months ended March 31, 2025, the Company issued shares of the Company’s common stock to extinguish obligations to certain vendors and lenders (see Note 5 and Note 9) as follows:
| | | |
Shares Issued | | Fair Value | |
| | $ | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | $ | |
The Company determined the fair value of its common stock for each issuance using the closing share price on the date of issuance.
NOTE 9: DERIVATIVE FINANCIAL INSTRUMENTS
Debt conversion share adjustment obligations
Share Reset Derivative Liabilities: On February 24, 2025,
Forward purchase agreement
On April 2, 2025, the Company entered into a mutual termination agreement with Meteora to terminate the Amended 2024 FPA (the “FPA Termination Agreement”) in exchange for termination consideration of $
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NOTE 10: FAIR VALUE MEASUREMENTS
The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities, including financial liabilities measured and recorded at fair value on a recurring basis as of March 31, 2025:
| | | | | | | | | | | | |
|
| Level I |
| Level II |
| Level III |
| Total | ||||
Assets | | | | | | | | | | | | |
Forward purchase agreement | | $ | — | | $ | — | | $ | 500,000 | | $ | 500,000 |
Total assets | | $ | — | | $ | — | | $ | 500,000 | | $ | 500,000 |
Liabilities | | | | | | | | | | | | |
Derivative liabilities | | $ | — | | $ | — | | $ | 2,551,287 | | $ | 2,551,287 |
3(a)(10) Settlement Agreement | | | — | | | — | | | 7,940,946 | | | 7,940,946 |
Contingent consideration | | | — | | | — | | | 434,174 | | | 434,174 |
Convertible debt | | | — | | | — | | | 7,762,018 | | | 7,762,018 |
Total liabilities | | $ | — | | $ | — | | $ | 18,688,425 | | $ | 18,688,425 |
The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2024:
| | | | | | | | | | | | |
|
| Level I |
| Level II |
| Level III |
| Total | ||||
Assets | | | | | | | | | | | | |
Forward purchase agreement | | $ | — | | $ | — | | $ | | | $ | |
Total assets | | $ | — | | $ | — | | $ | | | $ | |
Liabilities | | | | | | | | | | | | |
Derivative liabilities | | $ | — | | $ | — | | $ | | | $ | |
Contingent consideration | | | — | | | — | | | | | | |
Convertible debt | | | — | | | — | | | | | | |
Total liabilities | | $ | — | | $ | — | | $ | | | $ | |
The Company did
The following table provides a reconciliation of our assets and liabilities measured at fair value using Level 3 inputs:
| | | | | | | | | | | | | | | |
|
| Forward Purchase Agreement |
| Derivative liabilities |
| 3(a)(10) Settlement Agreement |
| Contingent consideration |
| Convertible debt | |||||
Balance, December 31, 2024 | | $ | | | $ | ( | | $ | — | | $ | ( | | $ | ( |
Issuances | | | — | | | — | | | ( | | | — | | | ( |
Settlement through issuance of Company's common stock | | | — | | | | | | | | | — | | | |
Change in fair value | | | ( | | | ( | | | | | | — | | | ( |
Ending balance, March 31, 2025 | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Convertible Notes Payable
The Company’s carrying value and fair value for the convertible notes payable for which the Company elected the fair value option is as follows
| | | | | | | | | | | | |
| | March 31, 2025 | | December 31, 2024 | ||||||||
|
| Carrying Value |
| Fair Value |
| Carrying Value |
| Fair Value | ||||
2024 Convertible Notes | | $ | | | $ | | | $ | | | $ | |
2025 Convertible Notes | | | | | | | | | — | | | — |
Assumed 2024 Note | | | — | | | — | | | | | | |
SEPA Convertible Note | | | | | | | | | | | | |
| | $ | | | $ | | | $ | | | $ | |
The change in fair value on convertible debt resulted in a loss of approximately $
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2024 Convertible Notes and 2025 Convertible Notes: The 2024 Convertible Notes and 2025 Convertible Notes are re-measured to fair value each reporting period using the following relevant assumptions:
| | | | | | | |
|
| March 31, 2025 |
| December 31, 2024 | | ||
Discount rate | | | % | | % | ||
Probability of conversion at maturity scenario | | | % | | % | ||
Probability of voluntary conversion scenario | | | % | | % | ||
Remaining term for conversion at maturity scenario | | | | | | ||
Remaining term for voluntary conversion scenario | | | | | | ||
SEPA Convertible Note: The fair value of the SEPA Convertible Note was determined utilizing a Monte Carlo simulation considering the following relevant assumptions:
| | | | | | | |
| | March 31, 2025 | | December 31, 2024 | | ||
Remaining term | | | | | | ||
Volatility | | | % | | % | ||
Risk-free rate | | | % | | % | ||
Drift term | | | % | | % | ||
Conversion price for payments to be made through issuance of Company's common stock | | $ | | $ | | ||
Payments to be made through issuance of shares of Company's common stock | | | % | | % | ||
Payments to be made in cash | | | % | | % | ||
Forward Purchase Agreement
The change in fair value on the forward purchase agreement resulted in a loss of approximately $
As at December 31, 2024, the FPA Amendment provide
| | | | |
|
| December 31, 2024 | | |
Probability of maturity settlement scenario | | | % | |
Probability of prepayment shortfall settlement scenario | | | % | |
Recycled Shares held by Meteora | | | | |
Price per share of Company's common stock | | $ | | |
Remaining term | | | | |
Risk-free interest rate | | | % | |
Drift term | | | % | |
Volatility | | | % | |
Forecasted price per share of Company's common stock at maturity | | $ | | |
Expected margin from Meteora's sale of Recycled Shares | | | % | |
3(a)(10) Settlement Agreement
The change in fair value on the remaining obligation owed under the 3(a)(10) Settlement Agreement (see Note 4) resulted in a gain of approximately $
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The fair value of the 3(a)(10) Settlement Agreement was determined using a base case and a default scenario utilizing a Monte Carlo simulation to forecast the Company’s share price through the last share issuance date, considering the following relevant assumptions at the date of issuance and each subsequent reporting period:
| | | | | | | |
| | March 31, 2025 | | January 28, 2025 | | ||
Price per share of Company’s common stock | | $ | | $ | | ||
Equity volatility | | | % | | % | ||
Remaining term | | | | | | ||
Risk-fee rate | | | % | | % | ||
Drift term | | | % | | % | ||
Contingent consideration obligation
During the three months ended March 31, 2025 there was
The fair value of the contingent consideration obligation was measured to fair value at inception and re-measured each reporting period utilizing a Monte Carlo simulation considering the following relevant assumptions:
| | | | | | | |
|
| March 31, 2025 |
| December 31, 2024 | | ||
Operating leverage | | | % | | % | ||
Revenue volatility | | | % | | % | ||
EBITDA volatility | | | % | | % | ||
Earnout risk free rate | | | % | | % | ||
Long-term risk-free rate | | | % | | % | ||
Weighted average cost of capital | | | % | | % | ||
Correlation between revenue and EBITDA | | | | | | ||
Discount rate | | | % | | % | ||
Term to payment | | | | | | ||
Derivative Liabilities
The change in fair value on derivative liabilities resulted in a loss of approximately $
Debt conversion share adjustment obligations: The fair value of the derivative liabilities issued in connection with the September 2024 debt conversion agreements were determined using Monte Carlo simulations considering the following relevant assumptions at the date of issuance and each subsequent reporting period:
| | | | | | | |
|
| March 31, 2025 |
| December 31, 2024 | | ||
Price per share of Company's common stock | | $ | | $ | | ||
Equity volatility | | | % | | % | ||
Reset price floor | | $ | | $ | | ||
Reset price ceiling | | $ | | $ | | ||
Remaining term - First Reset Date | | | | | | ||
Forecasted per share of Company's common stock - Reset Date | | $ | | $ | | ||
Risk-fee rate - Reset Date | | | % | | % | ||
Drift term - Reset Date | | | % | | % | ||
Forecasted five day VWAP per share of Company's common stock - First Reset Date | | $ | | $ | | ||
Risk-fee rate - First Reset Date | | | % | | % | ||
Drift term - First Reset Date | | | % | | | ||
Remaining term - Second Reset Date | | | | | | ||
Forecasted five day VWAP per share of Company's common stock - Second Reset Date | | $ | | $ | | ||
Risk-fee rate - Second Reset Date | | | % | | | ||
Drift term - Second Reset Date | | | % | | | ||
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SEPA Derivative Liability: The fair value of the SEPA Derivative Liability was determined using a Monte Carlo simulation considering the following relevant assumptions at the date of issuance and each subsequent reporting period:
| | | | | | | |
|
| March 31, 2025 |
| December 31, 2024 | | ||
Remaining term | | | | | | ||
Volatility | | | % | | % | ||
Risk-free rate | | | % | | % | ||
Drift term | | | % | | % | ||
Conversion price for payments to be made through issuance of Company's common stock | | $ | | $ | | ||
Payments to be made through issuance of shares of Company's common stock | | | % | | % | ||
Payments to be made in cash | | | % | | % | ||
Prepayment premium | | | % | | % | ||
Shares to be issued at settlement of derivative liabilities
The shares of the Company’s common stock to be issued in settlement of the above derivative liabilities are dependent on the share price at a future date and, as such, cannot be exactly determined as of March 31, 2025. Accordingly, an estimate has been made using the option pricing model to determine the liability value.
NOTE 11: RELATED PARTY TRANSACTIONS
Certain Relationships and Related Person Transactions
The following is a description of certain relationships and transactions that exist or have existed or that the Company has entered into, in each case since January 1, 2023, with its directors, executive officers, or stockholders who are known to the Company to beneficially own more than five percent of its voting securities and their respective affiliates and immediate family members.
Sponsor of MCAC
In connection with the closing of the Business Combination, the Company assumed unsecured promissory notes totaling approximately $
In connection with the conversion agreement, the Sponsor of MCAC received a one-time share reset adjustment that was settled during the quarter ended March 31, 2025 through the issuance of
Related Party Investors
Immediately following the note conversion agreements in September 2024 with secured promissory note holders in which the Company converted the outstanding principal on the secured promissory notes, including accrued and unpaid interest, and certain other liabilities owed to the note holders into shares of the Company’s common stock, the ownership percentage of the Company’s common stock of
In connection with the conversion agreements, each Related Party Investor received a one-time share reset adjustment that were settled during the quarter ended March 31, 2025 through the issuance of
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the three months ended March 31, 2025, the Company recorded a change in fair value on these derivative liabilities of $
The Related Party Investors collectively own
Avanti Notes
In September 2016, the Company entered into an unsecured promissory note with a company owned by the Company’s Chief Executive Officer (the “Related Party Lender”) for an original principal sum of INR
In July 2024, the Company borrowed an additional INR
Total interest expense recognized on the promissory notes with the Related Party Lender totaled INR
Related Party Lender
Following the closing of the Business Combination on July 12, 2024 which triggered the conversion of certain convertible notes, a noteholder’s ownership percentage of the Company’s common stock exceeded
On October 10, 2024, the Company issued this related party a convertible note with a principal amount of $
On December 3, 2024, the Company issued this related party a convertible note with a principal amount of $
NOTE 12: COMMITMENTS AND CONTINGENCIES
Legal and regulatory proceedings: The Company is subject to various routine litigation, legal proceedings, and regulatory matters, that arise in the ordinary course of its business. The Company reviews its lawsuits, regulatory matters, and other legal proceedings on an ongoing basis and provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the consolidated financial statements.
The Company accrues for potential liability arising from legal proceedings and regulatory matters when it is probable that such liability has been incurred and the amount of the loss can be reasonably estimated. This determination is based upon currently available information for those proceedings in which the Company is involved, taking into account its best estimate of such losses for those cases
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for which such estimates can be made. The Company’s estimate involves significant judgement, given the varying stages of proceedings (including issues regarding class certification and the scope of many of the claims), and the related uncertainty of the potential outcomes of these proceedings.
In making determinations of the likely outcome of pending litigation, the Company considers many factors, including, but not limited to, the nature of the claims, the Company’s experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative mechanisms, the matter’s current status and the damages sought or demands made. Accordingly, the Company’s estimate will change from time to time, and actual losses could be more or less than the current estimate. As of March 31, 2025 and December 31, 2024, there are no matters for which a reserve is required to be established. On February 26, 2024, Robert Zrallack and RJZ Holdings LLC (the “Plaintiffs”) filed suit against Aurai LLC (“Aurai”), ConnectM Florida RE LLC (“ConnectM Florida RE”), and Florida Solar Products, Inc. (“Florida Solar”), each a wholly owned subsidiary of the Company, in the circuit court for the 19th judicial circuit (St. Lucie County, Florida). In this suit, the Plaintiffs allege various contract claims arising out of a transaction under which Aurai acquired Florida Solar from Mr. Zrallack in 2022 and ConnectM Florida RE acquired certain real estate from RJZ Holdings LLC in 2022 from which Florida Solar operates.
Specifically, the Plaintiffs allege breach of the stock purchase agreement and certain promissory notes in connection with the purchase of Florida Solar and the related real estate, as well as breach of a services agreement with Mr. Zrallack.
The Company believes the Plaintiffs’ claims have no merit and has asserted counterclaims against the Plaintiffs in connection with the underlying transactions. As of March 31, 2025 and to date, the case is in arbitration.
Regardless of the final outcome, defending lawsuits, claims, government investigations, and proceedings in which the Company is involved is costly and can impose a significant burden on management and employees, and there can be no assurances that favorable final outcomes will be obtained.
In January 2025, the Company entered into a settlement agreement related to a dispute on an employment agreement under which the Company is required to issue
Employee Retention Tax Credit: ConnectM BabioneLLC (“CMB” or the “Company”) was informed by the IRS during 2023 of its eligibility for the Employee Retention Tax Credit (“ERC”). As such the Company filed a request for the ERC credit in 2023. In March 24, 2025, the IRS provided the Company with a letter applying the credit and thereby amended its Form 941 for December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021, resulting in credit and interest income earned on the credit for a total of $
In March 2025 the company received a letter from the IRS confirming the acceptance of the tax credit and issued four checks for a total of $
NOTE 13: REVENUES
The following table summarizes disaggregated revenue information by geographic area based upon the customer’s country of domicile:
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2025 |
| 2024 | ||
United States | | $ | 8,254,356 | | $ | 5,093,144 |
India | | $ | 733,987 | |
| 280,763 |
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As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.
Contract Assets
Contract assets consist of work in process for unrecognized revenue. The following table summarizes the contract asset activity for the three months ended March 31, 2025
| | | |
Balance as of December 31, 2024 |
| $ | |
Net change during the three months ended March 31, 2025 | |
| ( |
Balance as of March 31, 2025 | | $ | |
NOTE 14: INCOME TAXES
We determine the interim tax benefit (provision) by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusting for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized, as well as significant unusual or infrequently occurring items that are separately reported, are excluded from the annual effective tax rate.
Our tax rate for the three months ended March 31, 2025 of
While our tax rate for the three months ended March 31, 2024 of
For the three months ended March 31, 2025, and March 31, 2024, the Company recorded
The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of net operating loss carry forwards. The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, as of December 31, 2024 and March 31, 2025, the Company has maintained a full valuation allowance against its net deferred tax assets.
NOTE 15: INVENTORY
Inventories: Inventories consist of parts and finished goods. Parts primarily consist of manufacturing hardware, wiring, and piping. Inventories consisted of the following:
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2025 | | 2024 | ||
Parts | | $ | | | $ | |
Finished Goods | |
| | |
| |
Total | | $ | | | $ | |
NOTE 16: REPORTABLE SEGMENTS
The Company’s operations are organized into
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Selected information by reportable segment is presented in the following tables:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2025 | ||||||||||||||||
| | Owned | | Managed | | Logistics | | Transportation | | Corporate | | Total | ||||||
Revenues |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | — |
| $ | |
Cost of revenue | |
| | |
| | |
| | |
| | |
| — | |
| |
Selling, general and administrative expenses | |
| | | | | | | | | | | | | | | | |
Facility costs | | | | | | | | | — | | | | | | — | | | |
Insurance expenses | | | | | | | | | | | | | | | | | | |
Marketing expenses | | | | | | | | | — | | | | | | | | | |
Operational expenses | | | | | | ( | | | | | | | | | | | | |
Compensation and related benefits | | | | | | | | | — | | | | | | | | | |
Travel & entertainment | | | | | | | | | | | | | | | | | | |
Vehicle expenses | | | | | | | | | — | | | — | | | — | | | |
Depreciation | | | | | | — | | | — | | | | | | — | | | |
Amortization | | | | | | — | | | | | | | | | | | | |
Total selling, general and administrative expenses | | | | | | | | | | | | | | | | | | |
(Loss) income from operations | | | ( | | | ( | | | | | | ( | | | ( | | | ( |
Other expense, net | | $ | ( | | $ | — | | $ | — | | $ | — | | $ | ( | | $ | ( |
Net loss | | $ | ( | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | ( |
Total assets | | $ | | | $ | — | | $ | | | $ | | | $ | | | $ | |
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| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2024 | ||||||||||||||||
| | Owned | | Managed | | Logistics | | Transportation | | Corporate | | Total | ||||||
Revenues |
| $ | |
| $ | |
| $ | — |
| $ | |
| $ | — |
| $ | |
Cost of revenue | |
| | |
| | |
| — | |
| | |
| — | |
| |
Selling, general and administrative expenses | |
| | | | | |
| | |
| | |
| | |
| |
Facility costs | | | | | | | | | — | | | | | | ( | | | |
Insurance expenses | | | | | | | | | — | | | | | | | | | |
Marketing expenses | | | | | | | | | — | | | | | | | | | |
Operational expenses | | | | | | | | | — | | | | | | | | | |
Compensation and related benefits | | | | | | | | | — | | | | | | | | | |
Travel & entertainment | | | | | | | | | — | | | | | | | | | |
Vehicle expenses | | | | | | | | | — | | | — | | | | | | |
Depreciation | | | | | | | | | — | | | | | | — | | | |
Amortization | | | | | | — | | | — | | | | | | | | | |
Total selling, general and administrative expenses | |
| | | | | | | — | | | | | | | | | |
Loss from operations | | | ( | | | ( | | | — | | | ( | | | ( | | | ( |
Other expense, net | | | — | | | — | | | — | | | — | | | ( | | | ( |
Net loss | | $ | ( | | $ | ( | | $ | — | | $ | ( | | $ | ( | | $ | ( |
Total assets | | $ | | | $ | | | $ | — | | $ | | | $ | | | $ | |
Capital expenditures | | $ | | | $ | — | | $ | — | | $ | — | | $ | — | | $ | |
As of March 31, 2025 and December 31, 2024 the Company’s total assets located outside the United States were approximately $
The following tables summarize disaggregated revenue information by geographic area based upon the customer’s country of domicile:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2025 | ||||||||||||||||
| | Owned | | Managed | | Logistics | | Transportation | | Corporate | | Total | ||||||
United States | | $ | | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Other | | | | | | — | | | — | | $ | | | | — | | $ | |
Total | | $ | | | $ | | | $ | | | $ | | | $ | — | | $ | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2024 | ||||||||||||||||
| | Owned | | Managed | | Logistics | | Transportation | | Corporate | | Total | ||||||
United States | | $ | | | $ | | | $ | — | | $ | | | $ | — | | $ | |
Other | | | — | | | — | | | — | | | | | | — | | | |
Total | | $ | | | $ | | | $ | — | | $ | | | | — | | $ | |
NOTE 17: SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 31, 2025, the date these interim financial statements were issued, in accordance with ASC 855, Subsequent Events. No events were identified that require adjustment to the accompanying financial statements. All subsequent events identified are non-recognized subsequent events.
Issuances of shares of Company’s common stock
Consideration paid to vendors: During May 2025, the Company entered into a services agreement with a vendor under which the Company issued
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on the issuance date using the reported closing share price, as consideration for services to be performed over a
Nonemployee grants: During May 2025 and June 2025, the Company issued
Director and employee grants: During May 2025 and June 2025, the Company issued
Sale of Company’s common stock: Pursuant to
Note exchange agreements: During April 2025 and May 2025, the Company entered into twenty five note exchange agreements with
The conversion price of the convertible notes was modified from the stated rate in the respective convertible notes agreements to the
Business combination: In April 2025, the Company entered into a stock purchase agreement with an entity (the “Seller”), for the purposes of acquiring from the Seller 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
Air Temp is engaged in the business of the maintenance, repair, installation and sale of residential and commercial heating and cooling systems and other products and related services, and SES is engaged in the business of the maintenance, repair, installation and sale of solar heating systems and related services. Prior to the closing of this acquisition, both Air Temp and SES were customers in the Company’s managed solutions reporting segment.
The acquisitions will be accounted for using the acquisition method of accounting whereby the acquired assets and liabilities of the acquired companies will be recorded at their respective fair values and added to those of the Company, including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. The Company is currently evaluating the financial effects of the acquisitions.
Convertible note agreement issuances
The Company entered into
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During July 2025, the Company entered into a convertible note agreement in exchange for aggregate gross proceeds of $
Promissory note agreement issuances
The Company entered into
Designation of Convertible Preferred Stock Classes
On May 5, 2025, the Company’s board of directors designated
Voting: The Series A Stock and the Series B Stock do not have voting rights.
Dividends: The Series A Stock and the Series B Stock will accrued dividends at the rate of
Conversion: The Series A Stock and the Series B Stock is convertible into shares of common stock, par value $
The Company will reserve from its authorized and unissued common stock a number of shares of common stock equal to at least
In no event shall any holder of Series A Stock or Series B Stock be entitled to elect to complete any conversion to the extent that the number of conversion shares, to be issued to such holder exceed the sum of (1) the number of shares of common stock beneficially owned by such holder and its affiliates, except as permitted by the terms of the preferred stock, and (2) the number of shares of common stock issuable upon the conversion of the portion of the Series A Stock or Series B Stock with respect to which the determination of this provision is being made, would result in beneficial ownership by such holder and its affiliates of more than
Liquidation: The Series A Stock and the Series B Stock are entitled to receive distributions prior to payment to holders of common stock an amount per share equal to the Preferred Liquidation Amount, which ranks pari passu with and payable to the same extent of any other class of Preferred Stock currently designated or that may be designated in the future.
Redemption: The Company may elect at any time, at the sole discretion of the board of directors to redeem all, but not less than all of the Series A Stock or the Series B Stock by paying an amount in cash equal to
Forward Purchase Agreement termination
On April 2, 2025, the Company entered into a mutual termination agreement with Meteora to terminate the Amended 2024 FPA (the “FPA Termination Agreement”) in exchange for termination consideration of $
Reverse stock split
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
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Nasdaq delisting
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 $
SEPA Convertible Note technical default
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) $
Acquisition of Cambridge Energy Resources
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, the Company shall pay a total of INR
This acquisition further strengthens the Company’s international expansion strategy and aligns with government initiatives in India to reach
The Company is in the process of evaluating the accounting implications of this subsequent event.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 (the “Company”) 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, the Company 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 of our Annual Report on Form 10-K for the year ended December 31, 2024, under the section titled “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 this 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.
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On March 26, 2025, the Company was awarded its first Home and Building Electrification (HBE) project in India through a strategic partnership with Zenith Energy Services Pvt. Ltd.
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 and Solar Energy Systems of Brevard 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 Services and Solar Energy Systems of Brevard 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, the Company 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.
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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 March 31, 2025, the minimum cash balance required was approximately $833,000.
Comparability of Financial Information
Our historical results operations and consolidated statements of assets and liabilities may not be comparable to our current results operations and statements of assets and liabilities as a result of the Business Combination and becoming a public company on July 12, 2024, 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 and AI capabilities through development of additional software tools aimed at solving pain points and increasing profitability for service providers, OEMs and other enterprise customers, (iv) an expanded customer base through client referrals and our customized, relationship-focused sales process, and (v) a continued focus on internation expansion for sales and distribution of our products and services.
Reportable Segments
Our reportable operating segments include:
| ● | Owned Service Network focuses on the deployment of modern energy economy solutions into homes and businesses by providing installation and maintenance services to residential and light commercial customers for electrified heating and cooling solutions and distributed energy solutions. The installed equipment is connected to the Company’s AI-driven energy |
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| intelligence platform to ensure peak performance and efficiency of the equipment as well as allowing 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 commercial and other heavy goods using the Company’s last mile delivery platform and software. |
| ● | Transportation focuses on the management of connected operations using the Company’s IIoT platform to remotely monitor and control the performance of equipment for original equipment manufacturers (“OEMs”) and other enterprise customers. |
Key Components of Our Results of Operations
Revenue
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, service agreement associated with technology development for 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. The Company 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.
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Results of Operations
The following table summarizes our financial results for the period indicated:
| | | | | | | | | | | | |
|
| Three Months Ended March 31, | | Change |
| |||||||
|
| 2025 |
| 2024 |
| $ |
| % |
| |||
|
| | | | ||||||||
Revenues | | $ | 8,988,343 | | $ | 5,373,907 | | $ | 3,614,436 |
| 67.3 | % |
Costs and expenses: | |
| | |
| | |
| |
| | |
Cost of revenues | |
| 5,974,610 | |
| 3,770,386 | |
| 2,204,224 |
| 58.5 | % |
Gross profit | | | 3,013,733 | | | 1,603,521 | | | 1,410,212 | | 87.9 | % |
Selling, general and administrative expenses | |
| 6,287,176 | |
| 3,018,159 | |
| 3,269,017 |
| 108.3 | % |
Loss from operations | |
| (3,273,443) | |
| (1,414,638) | |
| (1,858,805) |
| 131.4 | % |
Total other expense, net | |
| (3,703,896) | |
| (1,188,735) | |
| (2,515,161) |
| 211.6 | % |
Net loss | | $ | (6,977,339) | | $ | (2,603,373) | | $ | (4,373,966) |
| 168.0 | % |
Revenues
Revenue increased approximately $3,614,000, or 67.3%, to approximately $8,988,000 for the three months ended March 31, 2025 from approximately $5,374,000 for the three months ended March 31, 2024. This increase was primarily driven by the Company’s new Logistics segment, which yielded an increase in revenues of approximately $2,537,000 for the three months ended March 31, 2025.
Expenses
Cost of Revenues increased approximately $2,204,000, or 58.5%, to approximately $5,975,000 for the three months ended March 31, 2025 from approximately $3,770,000 for the three months ended March 31, 2024. This increase was primarily driven by the introduction of our new Logistics segment which added approximately $2,010,000 in cost of revenue, which was driven by the increase in revenues for this segment, as described above, for the three months ended March 31, 2025. This increase was primarily offset by a decrease in cost of revenues of approximately $506,000 in our Owned Service Network segment for the three months ended March 31, 2025.
Selling, general and administrative expenses increased approximately $3,269,000 or 108.3% to approximately $6,287,000 for the three months ended March 31, 2025 from approximately $3,018,000 for the three months ended March 31, 2024. The increase was primarily driven by approximately $1,813,000 of increased costs associated with becoming a public company in July 2024, approximately $353,000 of selling, general and administrative expenses from our new Logistics segment, and increased marketing costs in our Owned Service Network segment of approximately $1,452,000 for the three months ended March 31, 2025.
Other Income (Expense)
During the three months ended March 31, 2025, we entered into a settlement agreement whereby we extinguished certain outstanding overdue liabilities with certain of our creditors. We accounted for this agreement as extinguishments of the original outstanding obligations and recognized a loss of extinguishment of approximately $2,716,000, an increase of $2,124,000 from the loss on extinguishment that we recognized during the three months ended March 31, 2024.
We also recognized expenses attributable to the changes in fair value of our forward purchase agreement of approximately $971,000, changes in the fair value of convertible notes of approximately $320,000, and changes in fair value of our derivative liabilities of approximately $34,000, offset by income attributable to the change in fair value of our other payable of approximately $606,000 during the three months ended March 31, 2025 that did not occur during the three months ended March 31, 2024.
Interest expense decreased approximately $19,000 to approximately $493,000 for the three months ended March 31, 2025 from approximately $512,000 for the three months ended March 31, 2024. This decrease was primarily driven by decrease in debt of approximately $842,000 from March 31, 2024 to March 31, 2025 as a result of the conversion of certain secured promissory notes and during the second half of 2024 outstanding that were outstanding as of March 31, 2024.
Liquidity and Capital Resources
Our consolidated financial statements for the three months ended March 31, 2025 and for the year ended December 31, 2024 identifies the existence of certain conditions that raise substantial doubt about our ability to continue as a going concern for twelve months from the issuance of this report. Refer to Footnote 3 of the accompanying financial statements for more information.
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. As of March 31, 2025, our minimum cash balance requirement was $833,334.
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Cash Flows
The following table summarizes the Company’s cash flows for the period indicated:
| | | | | | | | | | | | |
|
| Three Months Ended March 31, | | Change | | |||||||
|
| 2025 |
| 2024 |
| $ |
| % | | |||
Net cash used in operating activities |
| $ | (2,825,807) |
| $ | (1,230,749) | | $ | (1,595,058) | | 129.6 | % |
Net cash used in investing activities |
| $ | (152,672) |
| $ | (6,569) | | $ | (146,103) | | 2,224.1 | % |
Net cash provided by financing activities |
| $ | 2,178,470 |
| $ | 925,938 | | $ | 1,252,532 | | 135.3 | % |
Net cash used in operating activities
Net cash used in operating activities for the three months ended March 31, 2025 was approximately $2,864,000. Net cash used in operating activities consisted primarily of net loss of approximately $7,015,000 which stem from the increased operating expenses such as heightened legal and administrative costs due to ongoing debt restructuring efforts, alongside inflationary pressures on overhead, which have notably impacted our cash flow despite efforts to streamline operations. This was offset by approximately $3,650,000 of noncash items, primarily related to the loss on extinguishment of debt of approximately $2,716,000, change in fair value measurement of convertible debt of approximately $320,000, change in fair value of forward purchase agreement resulting in a loss of approximately $971,000, depreciation and amortization of long-lived assets and intangible assets of approximately $81,000, amortization of the Company’s debt discount recorded on its different debt facilities of approximately $78,000 offset by a change in fair value of our 3(a)(10) Settlement Agreement of approximately $606,000 and the gain on extinguishment of debt of approximately $15,000. In addition, for the three months ended March 31, 2025, net changes in operating assets and liabilities resulted in cash provided by operating activities of approximately $501,000.
Net cash used in operating activities for the three months ended March 31, 2024 was approximately $1,231,000. Net cash used in operating activities consisted primarily of net loss of approximately $2,603,000, offset by approximately $964,000 of noncash items, primarily related to the loss on extinguishment of debt of approximately $592,000 the change in fair value measurement of convertible debt of approximately $123,000, the depreciation and amortization of long-lived assets and intangible assets of approximately $177,000, amortization of the Company’s debt discount recorded on its different debt facilities of approximately $7,000. In addition, for the three months ended March 31, 2024, net changes in operating assets and liabilities resulted in cash provided by operating activities of $409,000.
Net cash used in investing activities
Net cash used in investing activities for the three months ended March 31, 2025 was approximately $153,000. Investing activities primarily included the purchase of capitalized software development costs of approximately $150,000 and purchases of property and equipment of approximately $3,000.
Net cash used in investing activities for the three months ended March 31, 2024 was approximately $7,000. Investing activities primarily included the immaterial investing activities primarily relating to the purchase of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities for the three months ended March 31, 2025 was approximately $2,178,000. Financing activities consisted primarily of proceeds from the issuance of convertible debt of $2,530,000, offset by repayment of debt of approximately $321,000 and payments on our finance leases of approximately $30,000.
Net cash provided by financing activities for the three months ended March 31, 2024 was approximately $926,000. Financing activities consisted primarily of the proceeds from the issuance of debt facilities of $3,505,000, offset by the payment of extension fees into MCAC’s trust account of approximately $977,000, payments on the Company’s debt facilities of $867,000, payments of deferred offering costs of $80,000, payments of debt financing fees of approximately $631,000 and payments on finance leases of $24,000.
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
Refer to Note 4, Note 5, Note 6, and Note 7 in the accompanying notes to the financial statements for future contractual obligations and commitments. Future contractual obligations and commitments are based on the terms of the relevant agreements and appropriate classification of items under GAAP as currently in effect. Future events could cause actual payments to differ from these amounts.
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We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities.
Critical Accounting Policies and Significant Management Estimates
In the notes to our consolidated financial statements and in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report on Form 10-K, we have disclosed those accounting policies that we consider to be most significant in determining our results of operations and financial condition and involve a higher degree of judgment and complexity. There have been no changes to those policies that we consider to be material since the filing of our 2024 Annual Report on Form 10-K, except as disclosed below. The accounting principles used in preparing our condensed consolidated financial statements conform in all material respects to GAAP.
3(a)(10) Settlement Agreement
Our 3(a)(10) Settlement Agreement is variable share settled obligations evaluated under ASC 480, “Distinguishing Liabilites from Equity” (“ASC 480”). Each period, the fair value of the 3(a)(10) Settlement Agreement is calculated and the resulting gains and losses from the change in fair value is recognized in income.
The fair value of the other payable was determined using a Monte Carlo simulation model which incorporates subjective assumptions based on the terms of the agreement and represent our best estimate at the valuation date. The 3(a)(10) Settlement Agreement is re-measured to fair value each reporting period with the most significant unobservable input used in the calculation the expected average volume weighted average price for a share of our common stock for the five-business day period preceding each settlement date for a tranche of the settlement shares. Any change in one of the significant assumptions detailed above would likely have an impact on the concluded fair value of the other payable. See Note 4 – Other Payable and Note 9 - Fair Value Measurements to our unaudited condensed consolidated financial statements for additional detail.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
This item is omitted as it is not required for a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of our fiscal quarter ended March 31, 2025. Based on this evaluation, our Chief Executive Officer has concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings.
From time to time, we may be party to or otherwise involved in legal proceedings arising in the ordinary course of business. We recognize provisions for legal proceedings in our financial statements, in accordance with accounting rules, when we are advised by independent outside counsel that (i) it is probable that an outflow of resources will be required to settle the obligation and (ii) a reliable estimate can be made of the amount of the obligation. The assessment of the likelihood of loss includes analysis by outside counsel of available evidence, the hierarchy of laws, available case law, recent court rulings and their relevance in the legal system. Our provisions for probable losses arising from these matters are estimated and periodically adjusted by management. In making these adjustments our management relies on the opinions of our external legal advisors. Management does not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material adverse effect on our business, results of operations or financial condition, except as described below.
On February 26, 2024, Robert Zrallack and RJZ Holdings LLC (the “Plaintiffs”) filed suit against Aurai LLC (“Aurai”), ConnectM Florida RE LLC (“ConnectM Florida RE”), and Florida Solar Products, Inc. (“Florida Solar”), each a wholly owned subsidiary of ConnectM, in the circuit court for the 19th judicial circuit (St. Lucie County, Florida). In this suit, the Plaintiffs allege various contract claims arising out of a transaction under which Aurai acquired Florida Solar from Mr. Zrallack in 2022 and ConnectM Florida RE acquired certain real estate from RJZ Holdings LLC in 2022 from which Florida Solar operates.
Specifically, the Plaintiffs allege breach of the stock purchase agreement and certain promissory notes in connection with the purchase of Florida Solar and the related real estate, as well as breach of a services agreement with Mr. Zrallack.
The Company believes the Plaintiffs’ claims have no merit and plans to assert counterclaims against the Plaintiffs in connection with the underlying transactions. The Company is defending itself in this matter.
Regardless of the final outcome, defending lawsuits, claims, government investigations, and proceedings in which the Company is involved is costly and can impose a significant burden on management and employees, and there can be no assurances that favorable final outcomes will be obtained.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition, and future results. The risks described in our Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. Except to the extent previously updated or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to the risk factors set forth on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
Between January 1, 2025 and the date of this filing, the Company issued an aggregate of 42,537,784 shares of its common stock in transactions not registered under the Securities Act of 1933, as amended (the “Securities Act”). These issuances included: (i) shares issued to certain directors, officers, advisors, and employees of the Company as equity compensation for services rendered; (ii) shares issued to debtholders in connection with debt-to-equity exchanges, whereby outstanding obligations were converted into common stock; (iii) shares issued as consideration for an acquisition completed during the period; and (iv) shares issued pursuant to common stock subscription agreements.
The unregistered shares details 2,207,222 unregistered shares were issued to BOD/Employees/Advisors/Vendors, 3,333,333 unregistered shares were issued for common stock subscriptions, 15,290,930 unregistered shares were issued towards debt-to-equity and convertible-note-exchange conversions, and 4,900,000 unregistered shares issued for acquisition. There were 10,069,573 shares issued that were exempt from registration under Section 3(a)(10) of the Securities Act.
The issuances to directors, officers, advisors, and employees were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and/or Rule 701 promulgated thereunder, as transactions not involving a public offering and/or under compensatory benefit plans and contracts relating to compensation.
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The issuances to debtholders were made pursuant to the exemption from registration under Section 4(a)(2) as transaction not involving a public offering, Section 3(a)(9) and/or Section 3(a)(10) of the Securities Act, as exchanges with existing security holders or transactions approved by a court or authorized governmental entity, without payment of any commission or other remuneration.
The shares issued in connection with the acquisition were made pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D, as private placements to accredited investors.
The shares issued pursuant to common stock subscription agreements were issued in reliance on Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D, as private placements without general solicitation or advertising, to accredited investors.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibit.
The following Exhibits are filed as part of this Quarterly Report on Form 10-Q:
No. |
| Description of Exhibit |
3.1 |
| Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock filed on May 5, 2025 (incorporated by reference to Exhibit 3.1 to the Current report on Form 8-K filed by the registrant on May 15, 2025) |
3.2 |
| Certificate of Designations of Preferences and Rights of Series B Convertible Preferred Stock filed on May 5, 2025 (incorporated by reference to Exhibit 3.2 to the Current report on Form 8-K filed by the registrant on May 15, 2025) |
10.1 |
| Settlement Agreement and Stipulation dated January 28, 2025, by and between the Company and Last Horizon, LLC (incorporated by reference to Exhibit 10.1 to the Current report on Form 8-K filed by the registrant on January 31, 2025) |
10.2 |
| Termination Agreement dated as of April 2, 2025, by and among (i) Meteora Special Opportunity Fund I, LP, (ii) Meteora Capital Partners, LP, (iii) Meteora Select Trading Opportunities Master, LP, and (iv) ConnectM (incorporated by reference to Exhibit 10.1 to the Current report on Form 8-K filed by the registrant on April 18, 2025) |
31.1* |
| Certification of Principal Executive Officer Pursuant to Rules 13a14(a) and 15d14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
| Certification of Principal Financial Officer Pursuant to Rules 13a14(a) and 15d14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* |
| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
(Registrant) | ConnectM Technology Solutions, Inc |
By (Signature and Title) Bhaskar Panigrahi, Chief Executive Officer and Chairman
Date August 22, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature |
| Capacity |
| Date |
| | | | |
/s/ Bhaskar Panigrahi | | Chief Executive Officer; Chairman | | August 22, 2025 |
Bhaskar Panigrahi | | (Principal Executive Officer) | | |
| | | | |
/s/ Mahesh Choudhury | | | August 22, 2025 | |
Mahesh Choudhury | | (Principal Financial Officer) | | |
| | | | |
/s/ Bala Padmakumar | | Vice Chairman | | August 22, 2025 |
Bala Padmakumar | | | | |
| | | | |
/s/ Kathy Cuocolo | | Director | | August 22, 2025 |
Kathy Cuocolo | | | | |
| | | | |
/s/ Stephen Markscheid | | Director | | August 22, 2025 |
Stephen Markscheid | | | | |
| | | | |
/s/ Gautam Barua | | Director | | August 22, 2025 |
Gautam Barua | | | | |
35
FAQ
What was ConnectM's working capital position at March 31, 2025 (MCACU)?
Did ConnectM report a profit or loss for the quarter ended March 31, 2025?
Why was ConnectM suspended from Nasdaq?
What financing instruments has ConnectM issued recently?
Are there related-party transactions disclosed in the 10-Q for MCACU?
What impact does the CER acquisition have on ConnectM's geographic revenue mix?
