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

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 26,087 shares of the Company’s common stock to an individual promptly within seven-days of the execution of the agreement unless the individual has revoked the agreement as permitted. As per the terms of the existing settlement agreement, the individual is provided a one-time adjustment payable in case on the reset date if the reset price is less than $1.15, then the Company owes the individual an amount equal to the product of (a) $1.15 less than VWAP of the Company’s common stock for the five trading days preceding the reset date and (b) the 26,087 shares of the Company’s common stock. The reset date is the later of (a) ninety days from the date of the agreement or (b) the date that the registration statement is declared effective. As of the date these consolidated financial statements were issued, the shares of the Company’s common stock have not yet been issued as the individual’s legal counsel’s opinion is pending.

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 $279,523.84. As a result, management was not aware of their eligibility during 2020- and 2021, as such when they applied for the credit in 2023 management did not believe the likelihood of recovery was realizable as such the Company did not record a receivable. The Company accounted for the ERC in accordance with FASB ASC 410-30-35-8, which indicates that a claim for recovery should be recognized only when the claim is probable as it is defined in FASB ASC 450, Contingencies, more specifically in FASB ASC 450-20-25-1. Accordingly, if an entity feels that it is probable that it is entitled to recover amounts.

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 $279,523.84. As the Company believes it has realized the gain and thus will recognize the credit as income in the quarter ended March 31, 2025, when the conditions were met, and the credit was realized. the service provider fee was structured as 20% of the credit earned as such the invoice was finalized and issued on March 24, 2024 for a total of $55,904.77, as noted above the expense is separate from the ERC and will not be reflected net of the ERC. The credit is included in Other income/(expense) net of service fee.