Monterey Capital Acquisition (MCAC) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION (unaudited) Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including detailed notes on organization, accounting policies, acquisitions, and financial instruments Condensed Consolidated Balance Sheets The balance sheets show significant increases in total assets, accounts receivable, property and equipment, goodwill, and additional paid-in capital Key Balance Sheet Metrics (USD) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Total Assets | $21,837,977 | $12,756,542 | | Total Liabilities | $33,419,209 | $36,543,049 | | Total Stockholders' Deficit | $(11,581,232) | $(23,786,507) | | Cash | $2,658,044 | $2,407,843 | | Accounts Receivable | $5,480,311 | $1,897,471 | | Property and Equipment, net | $3,508,727 | $936,573 | | Goodwill | $5,157,376 | $1,728,108 | | Additional Paid-In Capital | $42,541,947 | $20,152,919 | | Accumulated Deficit | $(55,988,573) | $(45,426,099) | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported increased revenues and gross profit but a higher net loss due to increased selling, general and administrative expenses and other expenses Key Operating and Comprehensive Loss Metrics (USD) | Metric (USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $8,511,491 | $5,009,124 | $17,499,834 | $10,383,031 | | Cost of Revenues | $5,538,614 | $3,039,203 | $11,513,224 | $6,809,589 | | Gross Profit | $2,972,877 | $1,969,921 | $5,986,610 | $3,573,442 | | Selling, General and Administrative Expenses | $6,292,160 | $3,013,658 | $12,579,336 | $6,031,817 | | Loss from Operations | $(3,319,283) | $(1,449,395) | $(6,592,726) | $(2,864,033) | | Total Other Income (Expense), net | $(86,825) | $(767,891) | $(3,790,721) | $(1,956,626) | | Net Loss | $(3,406,108) | $(2,217,286) | $(10,383,447) | $(4,820,659) | | Basic and Diluted Net Loss Per Share | $(0.06) | $(0.17) | $(0.24) | $(0.36) | Condensed Consolidated Statements of Stockholders' Deficit The statements show a significant increase in common stock shares and additional paid-in capital, primarily from stock issuances for claims and acquisitions Key Stockholders' Deficit Metrics (USD) | Metric (USD) | December 31, 2024 | June 30, 2025 | | :--------------------------------------- | :------------------ | :-------------- | | Common Stock Shares | 29,093,289 | 71,631,073 | | Common Stock Amount | $2,910 | $7,163 | | Additional Paid-In Capital | $20,152,919 | $42,541,947 | | Accumulated Deficit | $(45,426,099) | $(55,988,573) | | Total Stockholders' Deficit | $(23,786,507) | $(11,581,232) | - Issuance of common stock to extinguish obligations to vendors and lenders under 3a10 plan: 10,069,573 shares with a fair value of $5,411,498[19] - Issuance of common stock in connection with the conversion of convertible debt and accrued interest under 3(a)(9) settlement: 15,290,930 shares with a fair value of $7,740,915[19] Condensed Consolidated Statements of Cash Flows Cash flows for the six months ended June 30, 2025, show increased cash used in operating activities, cash received from investing activities, and significantly increased cash from financing activities Key Cash Flow Metrics (USD) | Cash Flow Activity (USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,204,478) | $(2,424,368) | | Net cash received from (used in) investing activities | $285,822 | $(145,923) | | Net cash provided by financing activities | $4,204,866 | $2,219,157 | | Cash, beginning of the period | $2,407,843 | $1,160,368 | | Cash, end of the period | $2,658,044 | $819,575 | - Net cash used in operating activities increased by 73.4% to $4,204,478 for the six months ended June 30, 2025, primarily due to a net loss of $10,383,447, partially offset by non-cash items and changes in operating assets and liabilities[21][211] - Net cash provided by financing activities increased by 89.5% to $4,204,866 for the six months ended June 30, 2025, driven by proceeds from convertible debt ($3,556,000), issuance of debt ($735,000), and stock subscription agreements ($805,000)[21][215] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering business, accounting policies, and recent transactions Note 1: Organization and Operations ConnectM Technology Solutions, Inc. operates through subsidiaries, offering decarbonization, transportation, and IIoT solutions, with financial statements reflecting a July 2024 reverse recapitalization - ConnectM offers solutions for decarbonization (energy management, weatherization, HVAC, solar, battery, EV charging), business-to-business transportation (last mile delivery), and connected operations management (IIoT platform)[22] - The company's offerings include an AI-driven intelligent heat pump system and display clusters, digital control units, and vehicle control units[23] - On July 12, 2024, the company consummated a Business Combination accounted for as a reverse recapitalization, with Legacy ConnectM deemed the accounting acquirer[24] Note 2: Summary of Significant Accounting Policies The company's accounting policies emphasize estimates, segment reporting across four operating segments, and the treatment of business combinations and net loss per share - The company's four operating and reportable segments are: Owned Service Network, Managed Solutions, Logistics, and Transportation[32][33][34][42] - Potentially dilutive securities totaling 19,870,608 (options, warrants, convertible notes) were excluded from diluted EPS computation due to their anti-dilutive effect given the net loss position[43][44] - The company is evaluating the potential impact of recently issued accounting pronouncements, including ASU 2023-06 (Disclosure Improvements), ASU 2024-02 (Codification Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures)[45][46][47][48] Note 3: Going Concern The company's ability to continue as a going concern is in substantial doubt due to a significant working capital deficit, ongoing net losses, and Nasdaq delisting - As of June 30, 2025, the company had a working capital deficit of approximately $20,634,015[50] - The company incurred a net loss of approximately $10,383,447 and generated negative cash flow from operating activities of approximately $4,204,478 for the six months ended June 30, 2025[50] - The company's common stock was delisted from the Nasdaq Capital Market on May 7, 2025, due to non-compliance with listing rules[51][52] - The company is in technical default under the SEPA Convertible Note and four secured promissory notes due to missed scheduled payments[53][54] Note 4: Acquisitions In April 2025, ConnectM acquired ATS and SESB for $3.141 million in common stock and CER for a capital infusion, resulting in a bargain purchase gain and expanding services - On April 28, 2025, the company acquired Air Temp Service Co, Inc. (ATS) and Solar Energy Systems of Brevard, Inc (SESB) for approximately $3,141,000 in common stock (4,900,000 shares)[58] - On April 25, 2025, ConnectM India acquired 100% of Cambridge Energy Resources Pvt. Ltd. (CER) under a court-supervised insolvency resolution plan, resulting in a bargain purchase gain of approximately $2,487,000[60][61] - CER expands the company's operating presence in India's rooftop solar distributed energy and telecommunications enterprise energy-management sectors, contributing approximately $28,000 in revenue from acquisition date to June 30, 2025[64][77] Acquired Entity Financial Summary (USD) | Acquired Entity | Acquisition Date | Total Assets Acquired | Total Liabilities Assumed | Net Assets Acquired | Goodwill | Non-controlling Interest | | :---------------- | :--------------- | :-------------------- | :------------------------ | :------------------ | :------- | :----------------------- | | ATS | April 28, 2025 | $847,645 | $861,647 | $(14,002) | $2,612,975 | — | | SESB | April 28, 2025 | $228,171 | $56,010 | $172,161 | $817,705 | — | | CER | April 25, 2025 | $5,051,773 | $2,335,748 | $2,716,025 | — | $228,520 | Note 5: Accounts Payable Accounts payable, including trade payables, accrued vendor obligations, and credit card balances, increased from December 31, 2024, to June 30, 2025 Accounts Payable and Credit Card Balances (USD) | Metric (USD) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Accounts Payable | $7,540,595 | $10,497,488 | | Credit Card Payable Balances | $733,000 | $612,000 | Note 6: Other Payable In January 2025, the company settled $8.908 million in liabilities by issuing common stock, recognizing a loss on extinguishment and triggering default events in April and May 2025 - The company entered into a 3(a)(10) Settlement Agreement in January 2025 to settle approximately $8,908,000 in overdue liabilities by issuing common stock to Last Horizon, LLC[73] - A loss on extinguishment of approximately $2,716,000 was recognized on January 29, 2025, and an additional $1,323,000 and $1,128,000 loss for the three and six months ended June 30, 2025, respectively, from debt-to-equity conversion[75][80] 3(a)(10) Settlement Agreement Details (USD) | Metric (USD) | January 29, 2025 (Issuance) | June 30, 2025 | | :--------------------------------------- | :-------------------------- | :------------ | | Fair Value of 3(a)(10) Settlement Agreement | $11,624,000 | $3,645,042 | | Shares Issued to Settle Obligation (6 months) | — | 13,744,131 | - The company triggered an event of default in April 2025 for not filing its Form 10-K timely and in May 2025 for being delisted from NASDAQ[76] Note 7: Convertible Debt The company issued $3.556 million in 2025 Convertible Notes, modified 2024 notes due to stock price volatility, and extinguished $1.84 million of notes through conversion - The company entered into eighteen 2025 Convertible Note agreements for aggregate gross proceeds of $3,556,000, bearing 20.0% interest per annum[81][82] - The fair value of the 2025 Convertible Notes was approximately $3,556,000 at issuance and $3,728,000 at June 30, 2025[84] - The 2024 Convertible Notes were modified to extend maturity and conversion option periods due to stock price volatility[87] - The company extinguished $1,840,000 of outstanding 2024 Convertible Notes through conversion into common stock during the six months ended June 30, 2025[88] Note 8: Debt The company settled two SFR agreements, assumed $187,000 in debt from acquisitions, amended the January 2025 Seller Note, and converted $7.465 million in notes into common stock - Settled September 2024 SFR Agreement for $25,000 cash payment, extinguishing $69,000 balance and recording a $12,000 gain[89] - Settled November 2024 SFR Agreement for $30,000, extinguishing $53,000 balance and recording a $2,000 gain[90] - Assumed approximately $187,000 in debt from ATS and SESB acquisitions, classified as current[91] - Converted $7,464,939 of 2024 convertible notes and promissory notes into 15,290,930 shares of common stock under Section 3(a)(9), resulting in a total loss of approximately $690,000[95][96] Note 9: Derivative Financial Instruments The company settled Share Reset Derivative Liabilities by issuing common stock and mutually terminated a Forward Purchase Agreement with Meteora for $500,000 consideration - 2,737,168 shares were issued on February 24, 2025, with a fair value of $1,712,005, to settle Share Reset Derivative Liabilities[98] - The Amended 2024 FPA with Meteora was mutually terminated on April 2, 2025, in exchange for $500,000 termination consideration received by the company[99] Note 10: Fair Value Measurements The company measures certain liabilities at fair value using Level 3 inputs, with significant changes observed for convertible debt and the 3(a)(10) Settlement Agreement Liabilities Measured at Fair Value (USD) | Liability (USD) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Derivative Liabilities | $3,061,948 | $4,229,478 | | 3(a)(10) Settlement Agreement | $3,645,042 | — | | Contingent Consideration | $434,174 | $434,174 | | Convertible Debt | $7,195,476 | $8,542,323 | | Total Liabilities at Fair Value | $14,336,640 | $13,205,975 | - The change in fair value on convertible debt resulted in a loss of approximately $733,783 for the three months and $1,053,478 for the six months ended June 30, 2025[105] - The fair value of the 3(a)(10) Settlement Agreement was determined using a Monte Carlo simulation, resulting in a loss of $1,115,594 for the three months and $617,966 for the six months ended June 30, 2025[111][112] - The fair value of derivative liabilities decreased from $4,229,478 at December 31, 2024, to $3,061,948 at June 30, 2025, with a change in fair value resulting in a loss of $544,209 for the six months ended June 30, 2025[100][101][114] Note 11: Related Party Transactions The company engaged in various transactions with related parties, including converting liabilities into common stock, settling share reset adjustments, and generating revenue from managed solutions customers - The Sponsor of MCAC converted approximately $555,000 of unsecured promissory notes and $132,000 of accounts payable into 343,248 shares of common stock in September 2024[118] - Related Party Investors received one-time share reset adjustments, settled during Q1 2025 through the issuance of 1,460,130 and 795,675 shares of common stock[121] Related Party Managed Solutions Revenue and Expenses (USD) | Metric (USD) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------------- | :------------------------------- | :----------------------------- | | Revenue from Related Party Managed Solutions Customers | $131,000 | $346,000 | | Cost of Revenues from Related Party Managed Solutions Customers | $66,000 | $266,000 | | SG&A from Related Party Managed Solutions Customers | $47,000 | $66,000 | - The company's CEO holds promissory notes with principal balances of approximately $83,000 (2016 note) and $93,000 (2024 note), incurring interest expense of $10,300 for the six months ended June 30, 2025[124][125][126] Note 12: Commitments and Contingencies The company is involved in routine legal proceedings and a specific litigation related to the Florida Solar acquisition, asserting counterclaims, and has an employment agreement settlement pending - The company is a defendant in a lawsuit (Zrallack and RJZ Holdings LLC v. Aurai LLC, ConnectM Florida RE LLC, and Florida Solar Products, Inc.) alleging breach of stock purchase agreement, promissory notes, and a services agreement related to the 2022 acquisition of Florida Solar[132][133] - In January 2025, the company entered into a settlement agreement for an employment dispute, requiring the issuance of 26,087 shares of common stock, subject to certain conditions[135] Note 13: Employee Retention Credit (ERC) In March 2025, the company received IRS approval for Employee Retention Credit claims totaling $279,524, recognized as other income for the six months ended June 30, 2025 - The company received IRS approval for ERC claims totaling $279,524 in March 2025[136] - The full amount of $279,524 (net of service fees) was recognized within Other income (expense), net for the six months ended June 30, 2025[136][137] Note 14: Revenues The company's revenue increased significantly for both the three and six months ended June 30, 2025, primarily from the United States and India, with a slight decrease in contract assets Revenues by Geographic Area (USD) | Geographic Area | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $7,734,601 | $4,580,577 | $15,988,957 | $9,673,721 | | India | $776,890 | $428,547 | $1,510,877 | $709,310 | | Total Revenues | $8,511,491 | $5,009,124 | $17,499,834 | $10,383,031 | Contract Asset Activity (USD) | Contract Asset Activity (USD) | Amount | | :---------------------------- | :----- | | Balance as of December 31, 2024 | $206,750 | | Net change during the six months ended June 30, 2025 | $(22,227) | | Balance as of June 30, 2025 | $184,523 | Note 15: Income Taxes The company recorded no income tax expense or benefit due to net operating losses and maintains a full valuation allowance against its net deferred tax assets - The company's tax rate for the three and six months ended June 30, 2025, was 21%, in line with the federal statutory rate[141] - No income tax expense (benefit) was recorded for the three and six months ended June 30, 2025 and 2024, due to net operating losses[143] - A full valuation allowance is maintained against net deferred tax assets as of December 31, 2024, and June 30, 2025, due to a history of cumulative net losses[144] Note 16: Inventory The company's inventory, comprising parts and finished goods, increased from December 31, 2024, to June 30, 2025 Inventory Components (USD) | Inventory Component (USD) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Parts | $257,994 | $164,131 | | Finished Goods | $631,183 | $386,564 | | Total | $889,177 | $550,695 | Note 17: Reportable Segments The company operates four reportable segments, with Owned Service Network and Logistics driving revenue growth, while Corporate expenses contributed significantly to the overall loss from operations Segment Performance and Assets (USD) | Segment (USD) | Revenues (3M Q2 2025) | Revenues (6M Q2 2025) | Loss from Operations (3M Q2 2025) | Loss from Operations (6M Q2 2025) | Total Assets (June 30, 2025) | | :-------------------- | :-------------------- | :-------------------- | :-------------------------------- | :-------------------------------- | :--------------------------- | | Owned Service Network | $4,445,226 | $8,692,767 | $(1,079,549) | $(2,131,955) | $9,422,417 | | Managed Solutions | $608,951 | $2,365,319 | $(92,996) | $(110,586) | $1,803,751 | | Logistics | $2,874,783 | $5,412,213 | $172,475 | $347,354 | $3,380,374 | | Transportation | $582,531 | $1,029,535 | $(7,710) | $(96,627) | $6,331,671 | | Corporate | — | — | $(2,311,503) | $(4,600,912) | $899,764 | | Total | $8,511,491 | $17,499,834 | $(3,319,283) | $(6,592,726) | $21,837,977 | - Total assets located outside the United States increased significantly from approximately $1,260,000 at December 31, 2024, to $6,332,000 at June 30, 2025[147] - For the three and six months ended June 30, 2025, one customer represented more than 10% of total company revenue[147] Note 18: Stock-Based Compensation During May and June 2025, the company issued 585,000 shares of common stock to advisors (fair value $133,000) and 1,622,222 shares to directors and employees (fair value $372,000) as one-time grants for past services - Issued 585,000 shares of common stock to advisors with a fair value of approximately $133,000[149] - Issued 1,622,222 shares of common stock to directors and employees with a fair value of approximately $372,000 for past services[149] Note 19: Subsequent Events Subsequent events include the issuance of $1.9 million in Q3 2025 Convertible Notes, shareholder approval for a reverse stock split (terms not finalized), ongoing technical default under the SEPA Convertible Note, and further amendments to the January 2025 Seller Note extending its maturity - From July 1, 2025, to the filing date, the company issued five convertible note agreements (Q3 2025 Convertible Notes) for aggregate gross proceeds of $1,900,000[151] - Shareholders approved a reverse stock split and issuance of up to 25,000,000 shares via a standby equity purchase agreement on April 11, 2025, with terms not yet finalized[152] - The company remains in technical default under the SEPA Convertible Note due to missed payments and untimely SEC filings, with ongoing discussions for resolution[154] - The January 2025 Seller Note was amended twice in July and August 2025, extending its maturity date to September 30, 2025, and increasing the interest rate[155][156] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including its business model, recent developments, and liquidity Executive Overview ConnectM Technology Solutions, Inc. is a public company focused on connecting and powering next-generation equipment, mobility, and distributed energy through its AI-driven Energy Intelligence Network platform - ConnectM became a publicly listed company on July 12, 2024, following a Business Combination with Monterey Capital Acquisition Corporation (MCAC)[159] - The company delivers an AI-driven Energy Intelligence Network (EIN) platform for residential and commercial service providers and OEMs to optimize energy efficiency and operational performance[160] - Revenue is derived from the sale of hardware, software, and services across four business segments: Owned Service Network, Managed Solutions, Transportation, and Logistics[163] Recent Developments Recent developments include settling $8.908 million in liabilities, acquiring CER, ATS, and SESB, Nasdaq delisting, and various debt and equity financing activities - The company settled $8,908,000 in overdue liabilities with Last Horizon, LLC, by issuing 13,744,131 shares of common stock under a 3(a)(10) Settlement Agreement[164] - Acquired Cambridge Energy Resources Pvt. Ltd. (CER) on April 25, 2025, expanding India operations and projecting an increase from 5% to 15% of global revenue (approximately $10,000,000 annualized) over the next twelve months[170] - Acquired Air Temp Service Co, Inc. (ATS) and Solar Energy Systems of Brevard, Inc (SESB) on April 28, 2025, for 4,900,000 shares of common stock valued at approximately $3,141,000[171] - The company's common stock was delisted from the Nasdaq Capital Market on May 7, 2025[173] - Issued 15,290,930 shares of common stock with a fair value of $8,224,386 in exchange for $7,464,939 of secured promissory notes and convertible notes during April and May 2025[174] Comparability of Financial Information The company's historical financial results may not be comparable to current results due to the July 2024 Business Combination and the transition to a public company - Historical financial statements may not be comparable due to the Business Combination on July 12, 2024, and becoming a public company[184] - Expects to incur additional annual expenses as a public company for directors' and officers' liability insurance, director fees, and increased accounting, legal, and administrative resources[184] Key Factors Affecting Operating Results Future success depends on expanding high-margin recurring revenue products, leveraging existing networks, enhancing software and AI capabilities, and continuing international expansion - Future revenue is expected from existing high-margin recurring revenue products and expanded service offerings[187] - Growth drivers include expanding existing software and AI capabilities to solve pain points and increase profitability for B2B customers[187] - An expanded customer base through client referrals and a customized sales process, along with continued international expansion, are key to future success[187] Reportable Segments The company operates four reportable segments: Owned Service Network, Managed Solutions, Logistics, and Transportation, each with distinct offerings for electrification, services, and connected operations - Owned Service Network: Provides installation and maintenance for electrified heating/cooling and distributed energy solutions, connected to an AI-driven energy intelligence platform[193] - Managed Solutions: Offers third-party service providers access to HR management, procurement, omnichannel marketing, lead generation, and short-term working capital loans[193] - Logistics: Facilitates business-to-business transportation of heavy goods using a last-mile delivery platform and software[193] - Transportation: Manages connected operations using an IIoT platform to remotely monitor and control equipment performance for OEMs and enterprise customers[193] Key Components of Our Results of Operations Revenue is recognized from equipment/product sales, installation, and services, while Cost of Revenue and Selling, General and Administrative expenses cover personnel, facilities, and public company operating costs - Revenue sources include equipment and product sales, installation, service agreements, managed services, and delivery services[188] - Cost of Revenue comprises personnel-related expenses, facility costs, and expenses for equipment and professional services[191] - Selling, General and Administrative expenses include personnel, depreciation, amortization, allocated facility costs, professional services (legal, audit, accounting), and public company compliance costs, which are expected to increase[192][193][194] - Other income (expense), net, includes interest expense, fair value changes of convertible debt and derivatives, gains/losses on debt extinguishment, bargain purchase gains, and miscellaneous income/expenses[195] Results of Operations The company experienced significant revenue growth but also substantial increases in Cost of Revenues and Selling, General and Administrative expenses, leading to higher operating and net losses Revenues Revenues increased by 69.9% to $8.551 million for the three months and by 68.5% to $17.499 million for the six months ended June 30, 2025, primarily due to the new Logistics segment and expansion of the Owned Service Network Revenue Growth Analysis (USD) | Period | Revenues (2025) | Revenues (2024) | Change ($) | Change (%) | | :----------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Three Months Ended June 30 | $8,511,491 | $5,009,124 | $3,502,367 | 69.9% | | Six Months Ended June 30 | $17,499,834 | $10,383,031 | $7,116,803 | 68.5% | - The increase in revenues was primarily driven by the new Logistics segment (approximately $2,875,000 for three months, $5,412,000 for six months) and expanding Owned Service Network[196][197] Expenses Cost of Revenues and Selling, General and Administrative expenses surged for both periods, mainly due to the Logistics segment, public company operating costs, and Owned Service Network expansion Expense Analysis (USD) | Expense Category | Period | 2025 Amount | 2024 Amount | Change ($) | Change (%) | | :----------------------- | :----------------------------- | :---------- | :---------- | :--------- | :--------- | | Cost of Revenues | Three Months Ended June 30 | $5,538,614 | $3,039,203 | $2,499,411 | 82.2% | | | Six Months Ended June 30 | $11,513,224 | $6,809,589 | $4,703,635 | 69.1% | | Selling, General and Administrative Expenses | Three Months Ended June 30 | $6,292,160 | $3,013,658 | $3,278,502 | 108.8% | | | Six Months Ended June 30 | $12,579,336 | $6,031,817 | $6,547,519 | 108.5% | - Cost of Revenues increase was primarily driven by the new Logistics segment, adding approximately $2,162,000 for the three months and $4,172,000 for the six months ended June 30, 2025[198][201] - SG&A increase was primarily due to increased operating costs associated with becoming a public company (approximately $1,737,000 for three months, $3,020,000 for six months), Logistics segment expenses (approximately $589,000 for three months, $942,000 for six months), and increased marketing in the Owned Service Network segment[202][203] Other Income (Expense) Other income (expense) for the three and six months ended June 30, 2025, was significantly impacted by a $1.599 million and $4.106 million loss on extinguishment of debt, fair value changes in derivatives and convertible debt, and a $2.487 million bargain purchase gain. Interest expense decreased, and the company recognized $279,524 from Employee Retention Credit claims - Loss on extinguishment of debt was approximately $1,599,000 for the three months and $4,106,000 for the six months ended June 30, 2025[204] - Recognized a bargain purchase gain of approximately $2,487,000 during the three and six months ended June 30, 2025[205] - Interest expense decreased by approximately $539,000 (three months) and $557,000 (six months) due to a decrease in debt from conversions[206] - Recognized $279,524 from Employee Retention Credit (ERC) claims for the six months ended June 30, 2025[207] Liquidity and Capital Resources The company's ability to continue as a going concern is in substantial doubt due to its working capital deficit, net losses, and negative operating cash flow - Substantial doubt exists about the company's ability to continue as a going concern for twelve months from the report's issuance date[208] - As of June 30, 2025, the company was required to maintain a minimum cash balance of approximately $1,666,000[209] Cash Flows Cash flows for the six months ended June 30, 2025, show increased cash used in operating activities, a shift to cash received from investing activities, and a significant increase in cash from financing activities Net cash used in operating activities Net cash used in operating activities increased to approximately $4.204 million for the six months ended June 30, 2025, primarily due to a higher net loss and increased operating expenses, partially offset by non-cash adjustments and cash provided by changes in operating assets and liabilities Net Cash Used in Operating Activities (USD) | Metric (USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(4,204,478) | $(2,424,368) | $(1,780,110) | 73.4% | - Primary drivers for cash used in operating activities in 2025 included a net loss of approximately $10,383,000 and increased operating expenses, partially offset by $4,350,000 of non-cash items (e.g., loss on extinguishment of debt, fair value changes) and $1,829,000 from changes in operating assets and liabilities[211] Net cash used in investing activities Net cash received from investing activities was approximately $286,000 for the six months ended June 30, 2025, a significant change from the $146,000 used in the prior year, driven by cash receipts from non-controlling interest offsetting capitalized software and property/equipment purchases Net Cash Received From (Used In) Investing Activities (USD) | Metric (USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash received from (used in) investing activities | $285,822 | $(145,923) | $431,745 | (295.9)% | - Investing activities in 2025 included capitalized software development costs of approximately $292,000 and property and equipment purchases of approximately $24,000, offset by cash receipt of non-controlling interest of $560,000[213] Net cash provided by financing activities Net cash provided by financing activities increased to approximately $4.205 million for the six months ended June 30, 2025, primarily from proceeds of convertible debt, debt issuance, and stock subscription agreements, partially offset by debt and lease repayments Net Cash Provided by Financing Activities (USD) | Metric (USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by financing activities | $4,204,866 | $2,219,157 | $1,985,709 | 89.5% | - Financing activities in 2025 included proceeds from convertible debt ($3,556,000), debt issuance ($735,000), and stock subscription agreements ($805,000), offset by debt repayments ($1,267,000) and payments on convertible notes and finance leases ($124,000)[215] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented and currently has none - The company did not have any off-balance sheet arrangements during the periods presented and currently has none[217] Commitments and Contractual Obligations The company incurs contractual obligations and financial commitments in the normal course of operations and financing activities, with details provided in the accompanying financial statement notes - Future contractual obligations and commitments are based on relevant agreements and U.S. GAAP classification, with details available in Notes 5, 6, 7, and 8 of the financial statements[218][219] Critical Accounting Policies and Significant Management Estimates No material changes to critical accounting policies occurred, except for the valuation of the 3(a)(10) Settlement Agreement, a variable share settled obligation measured at fair value - No material changes to critical accounting policies since the 2024 Annual Report on Form 10-K, except as disclosed[220] - The 3(a)(10) Settlement Agreement is a variable share settled obligation measured at fair value each period using a Monte Carlo simulation model, with changes recognized in income[221][222] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is omitted as it is not required for a smaller reporting company - This item is omitted as it is not required for a smaller reporting company[223] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses, with a remediation plan initiated and no material changes during the quarter Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[224] - Management has initiated a remediation plan to address these material weaknesses, including strengthening financial reporting resources and enhancing documentation[225] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[226] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings and a specific lawsuit concerning the 2022 Florida Solar acquisition, where plaintiffs allege contract breaches - The company is subject to various routine litigation and regulatory matters in the ordinary course of business[228] - A lawsuit was filed on February 26, 2024, by Robert Zrallack and RJZ Holdings LLC against the company's subsidiaries (Aurai LLC, ConnectM Florida RE LLC, and Florida Solar Products, Inc.) alleging contract claims related to the 2022 Florida Solar acquisition[229][230] - The company believes the plaintiffs' claims have no merit and plans to assert counterclaims; the case is currently in arbitration[133][230] Item 1A. Risk Factors This section refers to the comprehensive risk factors detailed in the company's Form 10-K for the year ended December 31, 2024, with no material changes noted - Readers should carefully consider the risk factors discussed in Part I, Item 1A of the Form 10-K for the year ended December 31, 2024[232] - No material changes to the risk factors have occurred, except for updates provided elsewhere in this Quarterly Report on Form 10-Q[232] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds Between January 1, 2025, and the filing date, the company issued 42,537,784 shares of common stock in unregistered transactions for equity compensation, debt-to-equity exchanges, and acquisitions - The company issued an aggregate of 42,537,784 shares of common stock in unregistered transactions between January 1, 2025, and the filing date[233] - Issuances included 2,207,222 shares for equity compensation, 18,028,098 shares for debt-to-equity exchanges/conversions, 4,900,000 shares for an acquisition, and 3,658,333 shares for common stock subscription agreements[233] - Exemptions from registration used include Section 4(a)(2), Rule 701, Section 3(a)(9), Section 3(a)(10), and Rule 506(b) of Regulation D[234][235][236] Item 3. Defaults Upon Senior Securities There are no defaults upon senior securities to report - None[237] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[238] Item 5. Other Information There is no other information to report in this section - None[239] Item 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including certificates of designations, various note agreements, certifications, and XBRL documents - Exhibits include Certificates of Designations for Series A and B Convertible Preferred Stock, forms for Q1, Q2, and Q3 2025 Convertible Notes, Note Exchange Agreement, Promissory Note Agreement, Amendment of Business Loan and Security Agreement, and certifications from executive officers[240] - Also included are Inline XBRL Instance Document and related Taxonomy Extension documents[240] Signatures This section contains the required signatures of the company's principal executive officer, principal financial officer, and directors, certifying the filing of the report - The report is signed by Bhaskar Panigrahi (Chief Executive Officer and Chairman), Mahesh Choudhury (Principal Financial Officer), Bala Padmakumar (Vice Chairman), Kathy Cuocolo (Director), Stephen Markscheid (Director), and Gautam Barua (Director)[243][245] - All signatures are dated September 16, 2025[243][245]