NOTE 11: 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 these 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 estimates involve significant judgment, 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.

Obligations assumed from HKA

In connection with the Company’s acquisition of Harry Kahn Associates, Inc. (“HKA”) on April 3, 2026, the Company assumed certain obligations and contingencies of HKA, including a matter involving a former subcontractor of HKA (“ASES”).

HKA previously performed services under a government contract that was terminated for convenience in December 2023. HKA engaged ASES on a purchase order basis to perform a portion of the work under the contract. In November 2025, HKA entered into a settlement with its prime contractor in connection with the termination and executed a mutual release of claims. ASES subsequently asserted that it was entitled to approximately $628,000 from the prime contractor for work it claimed to have performed under the contract and delivered a demand letter in February 2026. The prime contractor disputes the amount asserted by ASES based, among other things, on the absence of supporting documentation as required by the government contract. HKA’s position that ASES did not complete the work required under the applicable purchase orders. Prior to the acquisition, HKA offered approximately $47,000 to ASES in settlement of the matter, which ASES did not accept. As of June 30, 2026, no legal proceeding had been commenced against HKA or the Company in connection with this matter.

The Company has recorded a liability of approximately $47,000 related to this matter. Based on the information currently available, including the nature of the claim from the prime without adequate supporting documentation by ASES and the indemnification provisions contained in the acquisition agreement, management believes that a loss in excess of the amount accrued is remote. Accordingly, no additional loss contingency has been accrued.

Settlement of DeliveryCircle, LLC Earn-Out

On April 23, 2026, the Company entered into a settlement and termination agreement with the seller and former chief executive officer of the Company’s DeliveryCircle, LLC subsidiary to fully and finally resolve all obligations under the contingent earn-out arrangement for the measurement year of 2024 and 2025 entered into in connection with the Company’s prior acquisition of DeliveryCircle, LLC. The agreement extinguished the Company’s accrued earn-out obligations for the 2024 and 2025 measurement periods in full, resulting in a gain on extinguishment of approximately $167,162 in accordance with ASC 405-20, Liabilities—Extinguishments of Liabilities. As of June 30, 2026, $206,000 is outstanding payable to Seller.

Florida Solar acquisition litigation (Zrallack and RJZ Holdings LLC v. Aurai LLC, ConnectM Florida RE LLC, and Florida Solar Products, Inc.; Florida 19th Judicial Circuit—St. Lucie County)

On February 26, 2024, Robert J. 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”) (collectively, the “Subsidiaries”), each wholly owned subsidiaries of ConnectM Technology Solutions, Inc. (“ConnectM” or the “Company”), in connection with the Company’s 2022 acquisition of Florida Solar and related real estate transactions.

The matter was compelled to arbitration pursuant to the Stock Purchase Agreement. Following evidentiary hearings conducted in June and July 2025, the arbitrator issued an Interim Arbitration Award on September 11, 2025. Subsequent orders were entered addressing modification and attorneys’ fees and costs. On December 25, 2025, the arbitrator issued a Final Award incorporating prior rulings.

The Final Award includes:

In aggregate, Plaintiffs’ motion to confirm seeks entry of judgment totaling approximately $2,500,000 plus continuing interest.

On December 30, 2025, Plaintiffs filed a motion to confirm the arbitration award in the Circuit Court for the 19th Judicial Circuit (St. Lucie County, Florida), later amended on January 7, 2026. On January 7, 2026, Plaintiffs also served post-award discovery requests styled as “discovery in aid of execution.” The Subsidiaries filed a motion to strike such discovery and for a protective order on the basis that no final judgment has been entered and discovery in aid of execution is premature.

As of the date of this filing:

Following a hearing held on April 30, 2026, the court denied the Company’s motion to vacate and granted Plaintiffs’ motion to confirm the arbitration award. Plaintiffs’ counsel subsequently circulated a proposed final judgment which, if entered substantially in its current form, would include aggregate damages, attorneys’ fees, costs, foreclosure-related relief, statutory interest, and other payment obligations totaling in excess of $2.5 million. The Company is evaluating its remaining legal options, including a potential appeal of the order confirming the arbitration award.

The Company has recorded a litigation reserve of approximately $1,024,000 in connection with this matter, representing management’s best estimate of the probable loss in accordance with ASC 450, Contingencies. This reserve is included within the contingent consideration liability, and the remaining balance totaling to approximately $1.5 million associated with this matter is reflected within debt and accrued expenses and other current liabilities. Accordingly, the Company believes the aggregate amount is fully recorded in the Company’s condensed consolidated financial statements and does not believe there is a material unrecorded exposure with respect to this matter. The ultimate outcome of the confirmation proceedings, any motion to vacate, and related enforcement proceedings cannot be predicted with certainty. The final resolution of this matter could result in adjustments to the amount reserved, which could be material to the Company’s consolidated financial statements in the period such adjustment is determined.

Retirement plan:

The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code and a defined contribution plan for employee’s individual retirement arrangements (IRA’s). Employees may contribute between 1% and 100% of their wages, subject to the IRS limitations. During the three and six months ended June 30, 2026 and 2025 there were no employer contributions to the plan.