NOTE 14: DERIVATIVE FINANCIAL INSTRUMENTS

Forward Purchase Agreement:

On December 31, 2022, MCAC, Meteora Special Opportunity Fund (“Meteora”), and Legacy ConnectM entered into a forward purchase agreement (the “FPA”) providing for an over-the counter prepaid equity forward transaction relating to MCAC’s Class A common stock. Pursuant to the terms of the FPA, at the closing of the Business Combination, Meteora purchased directly from the stockholders of MCAC 3,248,466  shares of Class A common stock (the “Recycled Shares”) at a price of $11.36301754 per share (the “Initial Price”), which is the price equal to the redemption price at which holders of Class A common stock were permitted to redeem their shares in connection with the Business Combination. The FPA liability was recorded as part of the Business Combination, and as such was recorded at MCAC’s historical cost on the Closing Date. The FPA was accounted for as a derivative financial instrument that was re-measured to fair value in each reporting period, with changes in fair value recognized in the consolidated statements of operations and comprehensive loss (see Note 14).

In accordance with the terms of the FPA, immediately subsequent to the closing of the Business Combination, the Company paid to Meteora an aggregate cash amount of approximately $36,543,000 (the “Prepayment Amount”), which was equal to (i) the product of (a) the Recycled Shares and (b) the Initial Price, (ii) less 1.0% of the product of (a) the Recycled Shares and (b) the Initial Price (the “Prepayment Shortfall”). In addition to the Prepayment amount, the Company paid one-half of 1.0% of the Prepayment Shortfall, approximately $185,000, to Meteora that is due back to the Company on the earlier of (a) the effective date of the registration statement or (b) the OET Date (as defined in the FPA). The Company also paid to Meteora a cash amount equal to (a) the product of 40,000 and the Initial Price (the “Additional Consideration”), approximately $455,000, to reimburse Meteora for additional shares Meteora acquired from third parties prior to the Closing Date, (b) the product of the Prepayment Amount and 0.75%, approximately $277,000, and (c) brokerage expenses of approximately $164,000.

In August 2024, the Company and Meteora amended the FPA (the FPA as amended, the “2024 FPA” and the amendment to the FPA, the “FPA Amendment”), primarily changing the

In addition the FPA Amendment added terms around the Settlement Amount and the Settlement Amount Adjustment, both defined in the 2024 FPA. There were no shares sold pursuant to the FPA between the Closing Date and the date the FPA Amendment was executed.

The FPA Amendment was deemed to be a modification and the Company recognized a gain of $1,547,236 on the modification of the FPA, which is net of the amount due from Meteora for one-half of the 1.0% of the Prepayment Shortfall, and is included as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

In December 2024, the Company and Meteora amended the 2024 FPA (the 2024 FPA as amended, the “Amended 2024 FPA” and the amendment to the 2024 FPA, the “Second FPA Amendment”), whereby Meteora waived the requirement to adjust the Reset Price for a dilutive offering and the VWAP Trigger Event through December 31, 2025 that may occur in connection with the Company entering into the SEPA (see Note 12). In exchange for the entering into the Second FPA Amendment, the Company released 500,000 shares of the Company’s common stock held by Meteora from their designation as Recycled Shares. The Second FPA Amendment’s most significant changes deleted the definitions of Reset Price and Prepayment Shortfall from the FPA Amendment and replaced these as follows:

During the year ended December 31, 2024, Meteora sold 1,044,576 shares pursuant to the 2024 FPA and the Company received cash proceeds of $1,000,000.

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 $500,000. Pursuant to the FPA Termination Agreement, the 1,618,948 shares of the Company’s common stock that Meteora held as of the termination date of April 2, 2025 were deemed free and clear of all obligations, the number of Recycled Shares was equal to zero, and the Prepayment Shortfall was deemed to be zero. The Company received the termination consideration from Meteora in April 2025.

Debt conversion adjustment obligations

Share Reset Derivative Liabilities: In connection with five conversion agreements entered into during September 2024 (see Note 11, Note 18  and Note 19), the Company provided vendors and lenders with a one-time share reset adjustment (the “Share Reset”) such that the vendors and lenders would receive additional shares equal to the difference between the number of shares of the Company’s common stock that would be issued at the reset price on the reset date less the number of Conversion Shares. Three of these conversion agreements were with related parties (see Note 18).

The reset price was set to be the greater of the VWAP of the Company’s common stock for the five trading days preceding the reset date or $1.25. The reset day was defined as the earlier of (i) six months from the date of the conversion agreement and (ii) the date that

a registration statement registering the conversion shares is declared effective. If the reset price is less than $2.00 per share, additional shares shall be issued to the vendors and lenders equal to the quotient obtained by dividing the (i) product of (A) the conversion price of $2.00 less the reset price and (b) the number of Conversion Shares by (ii) the reset price.

The Share Reset feature was analyzed in accordance with ASC 815 and determined to be a financial instrument that was required to be bifurcated and accounted for as a derivative liability that was recorded at fair value at inception and re-measured to fair value each reporting period (see Note 15).

In March 31, 2025, 2,737,168 shares were issued in accordance with the terms of the Share Reset on five of the related conversion agreements extinguishing the Company’s obligations under those agreements.

November 2024 Consideration Adjustment Derivative Liabilities: In connection with two conversion agreements entered into during November 2024 (see Note 11 and Note 19), the Company provided a vendor and a lender with a one-time consideration adjustment (the “November 2024 Consideration Adjustment”) such that the vendor and lender would receive a payment equal to the product of (i) the conversion price of $1.25 less the reset price and (ii) the number of the Conversion Shares held by the vendor and lender on the reset date in cash, or other immediately available funds, if the reset price is less than $1.25 per share. The reset price was set to be the greater of the VWAP of the Company’s common stock for the five trading days preceding the reset date or $1.25. The reset date was defined as the later of (i) ninety days from the date of the conversion agreement and (ii) the date that a registration statement registering the conversion shares is declared effective.

The November 2024 Consideration Adjustment feature was analyzed in accordance with ASC 815 and determined to be a financial instrument that was required to be bifurcated and accounted for as a derivative liability that was recorded at fair value at inception and re-measured to fair value each reporting period (see Note 15).

December 2024 Consideration Adjustment Derivative Liability: In connection with one conversion agreement entered into during December 2024 (see Note 19), the Company provided a vendor with a one-time consideration adjustment (the “December 2024 Consideration Adjustment”) after the reset date such that the vendor is required to sell the Conversion Shares after the reset date over a twenty day period (with no more than 5.0% of shares sold per trading day) (collectively, the “Sale Dates”). The vendor is entitled to receive a payment in cash, or other immediately available funds, equal to the amount the proceeds from the Sale Dates is less than the difference of the carrying value of the associated converted outstanding obligations. The reset date was defined as the later of (i) ninety days from the date of the conversion agreement and (ii) the date that a registration statement registering the conversion shares is declared effective.

The December 2024 Consideration Adjustment feature was analyzed in accordance with ASC 815 and determined to be a financial instrument that was required to be bifurcated and accounted for as a derivative liability that was recorded at fair value at inception and re-measured to fair value each reporting period (see Note 15).

First Reset Shares, Second Reset Shares and Make-Whole Payment Derivative Liabilities: In connection with one conversion agreement entered into September 2024 in connection with the Amended January 2024 SFR Agreement (see Note 18), the Company provided a lender with two share reset adjustments and a make-whole payment provision such that the lender would receive additional shares as follows:

The First Reset Shares, the Second Reset Shares, and the Make-Whole Payment were analyzed in accordance with ASC 815 and determined to be financial instruments that was required to be bifurcated and accounted for as a single derivative liability that was recorded at fair value at inception and re-measured to fair value each reporting period (see Note 15).

SEPA Derivative Liability

The SEPA (see Note 12) was determined to be a freestanding financial instrument which did not meet the criteria to be accounted for as a derivative instrument or to be recognized within equity. Pursuant to ASC 815, the Company will therefore recognize the SEPA Option as an asset or liability, measured at fair value at the date of issuance and in subsequent reporting periods, with changes in fair value recognized in earnings. The SEPA Option was determined to have a fair value of $65,114 on the date of issuance and at December 31, 2024 (see Note 15).

Shares to be issued at settlement of derivative liabilities

The shares of the Company’s common stock to be issued to settle the above derivative liabilities is dependent on the share price at a future date, and as such, it is not an amount that can be estimated as of December 31, 2024. There is no limit to the number of shares that can be issued to settle the agreements in the respective arrangements.