Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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 condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q, particularly in Part I, Item 1A, Risk Factors, as well as in our other filings with the SEC. 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 "Merger Closing Date" or the "Merger Closing"), Monterey Capital Acquisition Corporation ("MCAC") consummated 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 Merger Closing Date, MCAC changed its name to ConnectM Technology Solutions, Inc. ("ConnectM") and it became a publicly listed company. ConnectM is a U.S.-based technology company that develops, sells, and operates hardware and software to power the physical layer of the AI economy. The Company's strategy is organized around two high-growth, U.S.-centered platforms: DeliveryCircle, asset-light logistics-technology subsidiary, and Keen Labs, the Company's wholly owned AI and technology subsidiary. Over the past year, the Company has simplified its portfolio to concentrate on these two platforms, divesting or winding down its legacy Owned Service Network, Managed Solutions, and India-based operations, as described further below.

DeliveryCircle's Decios platform uses AI to optimize business-to-business last-mile delivery, matching shipments to a network of independent, contracted drivers in real time to enable same-day movement of freight from warehouses and distribution centers to retail points of sale. Keen Labs designs, sources, and distributes AI-enabled distributed-energy and electrification hardware, including smart heat pumps and smart controls, the Hi-C™ and Hi-E™ families of battery energy storage systems, and virtual power plant software, alongside solar, battery storage, and EV charging offerings; including business-to-business sales to multi-billion dollar national distribution partners. Both platforms are supported by a common data and intelligence layer built and continuously enhanced by Keen Labs, which accesses more than 30 gigabytes of operating and performance data per day across the Company's portfolio and partner network, and applies AI and machine-learning models intended to deliver customer outcomes such as predictive maintenance, energy optimization, and route efficiency.

The Company's OSN segment provides energy solutions directly to residential, commercial and enterprise customers. OSN's operations primarily include the installation, maintenance and servicing of electrified heating and cooling systems and distributed energy solutions, including solar and battery systems. The installed equipment is supported by the Company's AI-driven energy intelligence platform, which enables monitoring of equipment performance and efficiency and facilitates the identification of maintenance requirements.

The Company also offers physical products as part of its solutions offerings, including AI-enabled heat pump systems for use in the decarbonization of homes and businesses, and solar panels, inverters, battery storage systems, and related balance-of-system components procured and distributed through its Keen Labs Operations, Inc. subsidiary to installation partners including Sun Solar, LLC.

The Company previously provided managed solutions offerings, including human resources management, procurement services, omnichannel marketing and lead generation services, and access to working capital solutions designed to improve operating efficiency and enhance profitability for service providers. In April 2026, the Company terminated its last remaining managed service agreement and is exploring options with respect to its Managed Solutions offerings. No formal plans are currently in place.

The Company's platform and associated software continuously collect and analyze operational data, generating actionable insights that customers use for monitoring, optimization and decision-making, and enabling applications such as predictive maintenance and virtual power plant integration.

The Company is actively rationalizing its segment portfolio to focus on its highest-quality, U.S. based verticals that contribute positively to operating results. During the three and six months ended June 30, 2026, the Company continued to streamline certain HVAC, solar, and other home service operations within the Owned Service Network segment as the Company shifted its decarbonization strategy toward product-led and technology-enabled offerings. The Keen Labs segment which conducts the Company's technology platform operations and U.S. wholesale procurement and distribution of solar, energy storage, and related balance-of-system components through Keen Labs Operations, Inc., which contributed approximately $3,855,000 and $5,705,000 of product sales revenue during the three and six months ended June 30, 2026, respectively under VPP kit supply arrangements with installation partners. The remaining Owned Service Network operations are subject to ongoing strategic review. As discussed above, the Company terminated its last remaining Managed Solutions service agreement in April 2026.

On April 3, 2026, the Company completed its previously announced acquisition of HKA, a defense-focused technical data development company headquartered in Hagerstown, Maryland, acquiring 100% of HKA's issued and outstanding capital stock in exchange for 12,500 shares of the Company's common stock. HKA has maintained an uninterrupted contracting relationship with the U.S. Naval Air Systems Command since 1976 and provides logistics support analysis databases, technical manuals, and training materials to the U.S. Department of Defense, the U.S. Coast Guard, and major defense original equipment manufacturers, including Boeing, Northrop Grumman, and Lockheed Martin. The acquisition expands the Company's technology platform into the defense and government infrastructure market and is expected to enable the application of Keen Labs' AI and data analytics capabilities to predictive maintenance, lifecycle sustainment, and logistics intelligence use cases. The Company accounted for the acquisition as a business combination under ASC 805 effective April 3, 2026, the closing date, and has allocated HKA to its Other segment for segment reporting purposes, as HKA does not meet the quantitative thresholds to qualify as a separately reportable segment under ASC 280.

On June 17, 2026, the Company completed the previously announced Share Swap Agreement with Blue Cloud Softech Solutions Limited ("Blue Cloud") (BSE: 539607), transferring 94.12% of the issued and outstanding equity of Global Impx Inc. ("GIX"), which held the Company's India-based operations, to Blue Cloud in exchange for 160,000,000 newly issued equity shares of Blue Cloud, representing approximately 17.33% of Blue Cloud's post-issue share capital. Upon closing, the Company deconsolidated GIX and its subsidiaries and recorded its Blue Cloud shares as an equity security at fair value under ASC 321, resulting in a non-cash gain of approximately $14,154,000, net of tax. As a result of the transaction, the Distributed Energy & Renewables and Transportation segments were substantially eliminated during the quarter.

The Company earns revenue across five operating segments:

Recent Developments

On January 5, 2026, the Company entered into an acquisition agreement to acquire a 40% equity interest in Sun Solar LLC ("Sun Solar"), a U.S.-based residential and small-commercial solar developer and installer, in exchange for 468,750 shares of the Company's common stock. The investment is accounted for under the equity method of accounting in accordance with ASC 323, as the Company has the ability to exercise significant influence over Sun Solar's operating and financial policies but does not hold a controlling financial interest. Concurrently, the Company, through its wholly-owned subsidiary Keen Labs Operations, Inc. ("Keen Labs"), entered into a Supply and Services Master Agreement (the "Keen Labs MSA") with Sun Solar, effective January 6, 2026, pursuant to which Keen Labs procures and supplies solar panels, inverters, batteries, and related balance-of-system components to Sun Solar at actual invoiced product cost (including procurement and logistics fee) plus marketing and other professional services after adding a mark-up of 10%. The Keen Labs MSA is non-exclusive, terminable by either party upon 30 days' written notice. Additional services, including marketing, supply chain consulting, and working capital support, may be provided under separate statements of work. Sun Solar is also expected to serve as a strategic installation and distribution channel for the Company's Keen Labs segment, including solar-plus-storage systems designed to participate in virtual power plant programs. The Company intends to align its solar operations with Sun Solar under the "Sun Solar Northeast" banner and deploy additional capital to support the expansion of cutting-edge energy storage and VPP installations.

On January 1, 2026, the Company transferred all HVAC business assets and operations conducted under the Air Temp Service Co. trade name to A.T.S. Heating & Cooling LLC ("ATS LLC"), a New Jersey limited liability company, pursuant to a Non-Cash Business Asset Transfer Agreement. The transaction involved no cash consideration, and ATS LLC did not assume any pre-existing liabilities of the Company, with all obligations arising prior to the effective date retained by the Company. The Company retained a 1% non-voting, non-distributing equity interest in ATS LLC solely for participation in a shared health benefits arrangement and is entitled to 2% of net proceeds in the event ATS LLC is sold within 24 months of the effective date. The Company is also subject to a five-year non-compete covenant within ATS LLC's service territories. Management does not expect the transaction to have a material adverse effect on ongoing operations.

In January 2026, Greentech Renewables placed a follow-on order of approximately $865,000, and in February 2026, an additional order of approximately $1,000,000, increasing cumulative purchase commitments under the arrangement to approximately $1,865,000.

On March 10, 2026, the Company entered into an Exchange Agreement to acquire Harry Kahn Associates, Inc., a defense-focused technical data development company. The transaction closed on April 3, 2026 upon satisfaction of the share transfer closing condition.

During the six months ended June 30, 2026, the Company issued convertible promissory notes with aggregate gross proceeds of approximately $3,540,000.

The notes bear interest and are convertible into shares of the Company's common stock at the option of the holders in accordance with their respective terms. In certain instances, the Company issued shares of common stock as additional consideration in connection with these financings, and the notes may be issued at a discount to face value. The notes were issued in private placements exempt from registration under the Securities Act of 1933 pursuant to Section 4(a)(2) and/or Regulation D, and the proceeds were used for working capital and general corporate purposes.

During the six months ended June 30, 2026, the Company issued promissory notes and entered into term loan agreements with third-party lenders with aggregate principal amounts of $1,700,000. The promissory notes generally bear interest and mature in accordance with their contractual terms, and the term loans are repayable pursuant to scheduled principal and interest payments. During the period, the Company also amended one of its existing promissory note agreements to modify certain terms. Proceeds from these financings were used for working capital and general corporate purposes.

On March 9, 2026, the Company expanded its financing arrangements through an addendum to its existing factoring and security agreement with a lender. The arrangement provides working capital through the sale of receivables and purchase order financing, including supplier payments made directly by the lender.

Pursuant to the addendum, Keen Labs Operations, Inc. was added as an additional obligor and is jointly and severally liable with affiliated entities. The facility is secured by substantially all assets of the applicable entities and includes cross-collateralization and cross-default provisions.

The arrangement includes enforcement mechanisms customary for facilities of this type, including the ability to accelerate obligations and pursue collection remedies upon an event of default.

On March 16, 2026, the Company refinanced and replaced the foregoing facility by entering into a new business loan and security agreement with a lender for $650,000. After deducting an origination fee of approximately $32,800, the payoff of the remaining balance on the prior facility and other applicable fees, net proceeds of approximately $428,400 were disbursed to the Company. The new facility requires 36 weekly payments of approximately $25,639 for a total repayment amount of $923,000 and matures in November 2026. The facility is secured by substantially all assets of the Company and certain of its subsidiaries, includes a personal guarantee from an officer of the Company, and contains customary covenants, including restrictions on additional indebtedness. Early repayment is permitted without penalty.

On March 20, 2026, the Company entered into an Asset Purchase Agreement to sell certain assets of its Green Energy Gains ("GEG") business to Forge Team, Inc. The transaction is part of the Company's continued focus on optimizing its operating structure and reallocating resources toward higher-margin and technology-enabled solutions.

The transaction includes the transfer of customer relationships, backlog, and certain operating assets, while the Company retains historical liabilities associated with pre-closing operations. The Company will provide limited transition support to facilitate continuity of operations following closing.

On March 24, 2026, the Company entered into an additional business loan and security agreement with a lender for $350,000. After deducting applicable fees, net proceeds were disbursed to the Company. The facility requires periodic payments of future receivables consistent with prior agreements with this lender and is secured by substantially all assets of the Company and certain of its subsidiaries, and includes a personal guarantee from an officer of the Company.

Divestiture of India Operations - Blue Cloud Share Swap Transaction

On April 6, 2026, the Company entered into a definitive Share Swap Agreement with Blue Cloud Softech Solutions Limited ("Blue Cloud") (BSE: 539607), a publicly listed Indian technology and infrastructure company, pursuant to which Blue Cloud acquired 94.12% of the issued and outstanding equity shares of Global Impx Inc. ("GIX"), a Delaware corporation and subsidiary of the Company, in exchange for newly issued equity shares of Blue Cloud on a preferential basis. GIX holds, directly and through its subsidiaries, the Company's India-based operating platform, including ConnectM Technology Solutions Private Limited, Cambridge Energy Resources Private Limited, CER Microgrids Private Limited, CER Rooftop Private Limited, and Geo Impex & Logistics Private Limited. The operations held through GIX were reported within the Distributed Energy & Renewables, Transportation and Other segments. The Share Swap Agreement is governed by the laws of India and is subject to the exclusive jurisdiction of the courts at Hyderabad, Telangana.

Under the terms of the agreement, Blue Cloud agreed to issue an aggregate of 170,000,000 equity shares of face value ₹1 each at a price of not less than the floor price of ₹21.93 per share (the "Blue Cloud Consideration Shares") to the shareholders of GIX in exchange for 212,500,000 equity shares of GIX, reflecting a swap ratio of 100 Blue Cloud shares for every 125 GIX shares. Of the total consideration shares, ConnectM received 160,000,000 shares in exchange for the 200,000,000 GIX shares held by it, representing approximately 94.1% of GIX, and AstraBridge Inc., a minority shareholder of GIX, received 10,000,000 shares in exchange for the 12,500,000 GIX shares held by it, representing approximately 5.9% of GIX. The implied aggregate transaction value is approximately ₹372.81 crores (approximately $39.6 million based on prevailing exchange rates). The floor price was determined by an independent IBBI-registered valuer, in a report dated April 06, 2026, as the higher of the 90-trading-day and 10-trading-day volume weighted average prices of Blue Cloud's equity shares preceding the relevant date of April 02, 2026, in accordance with the Companies Act, 2013 and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (the "SEBI ICDR Regulations").

Upon closing, ConnectM's 160,000,000 Blue Cloud shares represented approximately 17.33% of Blue Cloud's post-issue equity share capital of 923,081,600 shares, comprising 753,081,600 shares outstanding immediately prior to the preferential allotment and the 170,000,000 Blue Cloud Consideration Shares. The Company held no Blue Cloud shares prior to the allotment. AstraBridge Inc.'s 10,000,000 shares represent approximately 1.08% of post-issue capital, and the Blue Cloud Consideration Shares represent approximately 18.42% in the aggregate. The Blue Cloud Consideration Shares will rank pari passu with existing Blue Cloud equity shares and will be subject to a lock-in period of six months from the date of trading approval, in accordance with Regulation 167 of the SEBI ICDR Regulations. The Company had an unconditional right to receive the shares as of June 17, 2026, however the actual delivery of shares happened post June 30, 2026.

On May 4, 2026, Blue Cloud's shareholders approved the transaction at an Extraordinary General Meeting, including the increase in authorized share capital, the preferential issuance of equity shares for consideration other than cash, and all related resolutions required under Indian corporate and securities law. The remaining conditions precedent, consisting of receipt of in-principle approval from BSE Limited for the preferential allotment and execution and delivery of all transfer instruments and board resolutions required to effect the transfer of the GIX shares, were satisfied, and the transaction closed on June 17, 2026. Because the transaction falls under the 100% automatic route, no approval of the Reserve Bank of India under the Foreign Exchange Management Act, 1999 was required.

The India operations held through GIX contributed approximately $2.0 million in revenue during fiscal year 2025, or approximately 5.8% of the Company's consolidated annual revenue of $35.8 million. The Company has reviewed its existing merchant cash advance agreements and convertible note instruments and has confirmed that no financial covenants or cross-default provisions are triggered by, or tied to, the India-based assets or operations being divested.

Upon closing, the Company's Blue Cloud shareholding accounting evaluation is under consideration, with final classification and measurement under U.S. GAAP to be determined based on then-applicable facts and circumstances, including the availability of quoted market prices, the existence of transfer restrictions during the lock-in period, the Company's level of influence over Blue Cloud, and other relevant considerations. The Share Swap Agreement provides that no transferor acquires any special management, control, veto, nomination or affirmative rights beyond those available to any public shareholder of Blue Cloud, and that no transferor is entitled to appoint any director or nominee to Blue Cloud's board of directors by virtue of the agreement. The Company expects the transaction to result in a non-cash gain, subject to finalization of its technical accounting analysis.

Acquisition of Harry Kahn Associates, Inc.

On April 3, 2026, the Company acquired 100% of the issued and outstanding capital stock of Harry Kahn Associates, Inc. ("HKA"), a defense-focused technical data development company headquartered in Hagerstown, Maryland. The acquisition was completed pursuant to an Exchange Agreement (the "HKA Exchange Agreement") with the stockholders of HKA, under which the Company acquired 100% of the issued and outstanding capital stock of HKA in exchange for 12,500 shares of the Company's common stock. Accordingly, the Company accounted for the acquisition of HKA as a business combination under ASC 805 effective April 3, 2026, the closing date.

HKA is a provider of logistics support analysis databases, technical manuals, and training materials for the U.S. Department of Defense, the U.S. Coast Guard, and major defense original equipment manufacturers including Boeing, Northrop Grumman, and Lockheed Martin. HKA has maintained an uninterrupted contracting relationship with the Naval Air Systems Command since 1976 and holds ISO 9001:2015 certification for technical data development. The acquisition expands the Company's technology platform into the defense and government infrastructure market and is expected to enable the application of Keen Labs' AI and data analytics capabilities to predictive maintenance, lifecycle sustainment, and logistics intelligence use cases.

The initial accounting for the business combination is incomplete as of the date of issuance of these condensed consolidated financial statements. The Company is in the process of identifying and measuring the fair values of assets acquired and liabilities assumed, including identifiable intangible assets such as customer relationships, technical data libraries, and government contract backlog, and expects to finalize the purchase price allocation within the measurement period prescribed by ASC 805, not to exceed one year from the acquisition date.

In connection with the acquisition, the Company will assume a contingent liability arising from a dispute between HKA and a former subcontractor. HKA previously performed work under a U.S. government contract that was terminated for convenience by the prime contractor in December 2023. HKA negotiated a termination settlement with the prime contractor over a period of approximately 20 months, accepted the settlement in November 2025, and executed a mutual release of claims. A former subcontractor of HKA, who performed work under purchase orders related to the terminated contract, has asserted that it is owed approximately $628,000 for work allegedly completed prior to the termination. HKA offered the subcontractor its proportionate share of the termination settlement proceeds of approximately $47,000, which the subcontractor rejected. In February 2026, the subcontractor's attorney sent a letter to HKA rejecting the settlement amount and proposing an alternative arrangement. As of the date of this filing, no lawsuit or formal legal proceeding has been initiated by the subcontractor against HKA or the Company, and no further communications have been received from the subcontractor or its counsel.

Reverse Stock Split

On April 17, 2026, the Company filed a certificate of amendment to its Second Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation") to effectuate a 1-for-32 reverse stock split of its common stock. The certificate of amendment became effective for state law purposes at 4:01 p.m. (Eastern Time) on that date, such that the Company's common stock began trading at market open on April 20, 2026 on a post-reverse stock split basis. The reverse stock split was previously authorized by the Company's stockholders at a special meeting held on January 15, 2026 (which approved a ratio range between 1-for-5 and 1-for-50), with the final ratio of 1-for-32 subsequently set by the Board of Directors. As a result of the reverse stock split, each 32 shares of common stock outstanding immediately prior to the effective time were combined into one share of common stock, with any resulting fractional shares rounded up to the nearest whole share. The reverse stock split did not change the par value of the common stock or the number of authorized shares.

The reverse stock split was undertaken principally to increase the per-share trading price of the Company's common stock to a level intended to facilitate a future listing of the common stock on a national securities exchange. Initial listing standards on national securities exchanges, including the NYSE American and the Nasdaq Capital Market, generally require, among other criteria, a minimum per-share bid price of at least $4.00 (subject to certain alternative qualification standards). The Company's pursuit of a national exchange listing remains subject to satisfaction of all applicable initial listing standards and to acceptance by the relevant exchange, and no assurance can be given that the Company will satisfy such standards or that any such listing will be achieved.

All share and per-share amounts presented in the accompanying condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented. Outstanding options, warrants, and other equity-linked securities, and the per-share exercise and conversion prices thereof, have been correspondingly adjusted in accordance with their respective terms.

Short-Term Bridge Loans

Between April 14, 2026 and May 13, 2026, the Company and its wholly owned subsidiary, Global Impx, Inc., issued three short-term promissory notes (collectively, the "Bridge Notes") in an aggregate principal amount of $600,000, each to the same lender (the "Bridge Lender"), which is also a minority shareholder of Global Impx, Inc. The material terms of the individual Bridge Notes are summarized below.

On April 14, 2026, Global Impx, Inc., a wholly owned subsidiary of the Company, issued a short-term promissory note (the "First Bridge Note") to the Bridge Lender in the principal amount of $150,000. The First Bridge Note bears interest at a rate of 14% per annum, computed on a simple interest basis on a 360-day year (actual days elapsed), and matures 90 days from the date of disbursement, on or about July 13, 2026. In addition, the Company agreed to pay the lender a one-time processing fee of $1,500 (representing 1% of the principal amount), payable upfront or, at the lender's option, deducted from the disbursement proceeds. The First Bridge Note does not contain conversion or other equity-linked features and may be prepaid, in whole or in part, at any time without penalty. Upon an Event of Default, outstanding amounts bear interest at an accelerated default rate of 20% per annum, representing a 6% per annum increase over the contractual rate. The First Bridge Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On April 19, 2026, the Company issued a short-term promissory note (the "Second Bridge Note") to the bridge Lender in the principal amount of $250,000. The Second Bridge Note bears interest at a rate of 20% per annum, computed on a simple interest basis on a 360-day year. The Second Bridge Note was originally scheduled to mature 30 days from the date of disbursement, on or about May 19, 2026; pursuant to a subsequent extension agreement between the Company and the lender, the maturity date was, on or about August 31, 2026. In addition, the Company agreed to pay the lender a facilitation fee of $5,000 (representing 2% of the principal amount), which is fully earned on the date of disbursement and payable in full at maturity together with the principal and accrued interest. The Second Bridge Note does not contain conversion or other equity-linked features. Upon an Event of Default, outstanding amounts bear interest at an accelerated default rate of 26% per annum, and a late payment charge equal to 2% of the then-outstanding balance becomes payable. The Second Bridge Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On May 13, 2026, the Company issued a short-term promissory note (the "Third Bridge Note") to the Bridge Lender in the principal amount of $200,000. The Third Bridge Note bears interest at a rate of 20% per annum, computed on a simple interest basis on a 360-day year, and matures 30 days from the date of disbursement, which was further extended to increase the maturity date to August 31, 2026. In addition, the Company agreed to pay the lender a facilitation fee of $4,000 (representing 2% of the principal amount), which is fully earned on the date of disbursement and payable in full at maturity together with the principal and accrued interest. The Third Bridge Note does not contain conversion or other equity-linked features. Upon an Event of Default, outstanding amounts bear interest at an accelerated default rate of 26% per annum, and a late payment charge equal to 2% of the then-outstanding balance becomes payable. The Third Bridge Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

Bridge Loan Facility

On May 15, 2026, the Company entered into a bridge loan agreement with the Bridge Lender providing for a short-term loan facility in an aggregate principal amount of up to $1,500,000 (the "Facility"). The Facility may be drawn in one or more advances (each, a "Tranche") upon the Company's request, subject to the lender's approval of each drawdown request. Each Tranche, together with the applicable fee described below, is payable in full on the date falling 60 calendar days after such Tranche is funded. No interest accrues on any Tranche; in lieu of interest, the Company is obligated to pay a fee equal to 10% of the principal amount of each Tranche, which is fully earned upon funding of that Tranche and payable upon its repayment. The Company may prepay any Tranche at any time without penalty, provided that any such prepayment includes the full outstanding principal amount and the full applicable fee for that Tranche. Repayment of a Tranche does not create a right to redraw absent the lender's separate agreement.

The Facility is secured by a security interest in substantially all assets of the Company, including accounts receivable, cash, deposit accounts, investment property, inventory, equipment, intellectual property and general intangibles, which security interest is subordinate to the interests of the Company's existing senior secured creditors. Upon an Event of Default, the lender may declare all outstanding Tranches and accrued fees immediately due and payable, and outstanding amounts bear default interest at 20% per annum. The Facility contains affirmative covenants requiring the Company to furnish copies of its filings with the Securities and Exchange Commission, to provide periodic updates regarding its pursuit of a listing on a national securities exchange, and to provide prompt written notice upon obtaining commitments for alternative financing that would be used to repay the Facility.

During the three months ended June 30, 2026, the Company drew Tranches in principal amounts of $200,000, $300,000, $150,000, $100,000 and $100,000, funded on May 18, 2026, May 27, 2026, June 5, 2026, June 9, 2026 and June 25, 2026, respectively, with corresponding fees of $20,000, $15,000, $10,000 and $10,000 and stated maturities of July 17, 2026, July 27, 2026, August 4, 2026, August 8, 2026 and August 25, 2026, respectively. Aggregate principal drawn under the Facility through June 30, 2026 was $850,000, together with aggregate fees of $85,000. Subsequent to June 30, 2026, the Company and the Bridge Lender agreed to extend the maturity date of each outstanding Tranche to August 31, 2026. For the reasons described under "Short-Term Bridge Loans" above, borrowings under the Facility constitute transactions with a related party. Proceeds were applied to working capital and general corporate purposes.

Subsequent to June 30, 2026, the Company drew two additional Tranches under the Facility, in principal amounts of $110,000 and $150,000, funded on July 17, 2026 and July 21, 2026, respectively, with corresponding fees of $11,000 and $15,000 and stated maturities of September 15, 2026 and September 19, 2026, respectively. Each such Tranche was drawn on the same terms as the Tranches described above, bearing no interest and carrying a fee equal to 10% of the principal amount of that Tranche, fully earned upon funding and payable upon repayment. After giving effect to these draws, $910,000 in principal and $91,000 in fees had been drawn under the Facility, leaving $590,000 of the $1,500,000 commitment available. As of the date of this filing, the full $910,000 principal amount drawn remained outstanding.

Convertible Promissory Note Issuances

On April 2, 2026, the Company closed three separate convertible note financings with three unaffiliated accredited investors, with aggregate face principal of $350,000, aggregate gross purchase proceeds of $326,000, and an aggregate of 4,852 restricted shares of the Company's common stock issued as commitment shares. Each note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and the commitment shares associated with each note were deemed earned in full as of the applicable closing date. The material terms of the individual transactions are summarized below.

On April 2, 2026, the Company issued a convertible promissory note (the "First Convertible Note") to an institutional accredited investor in the original principal amount of $150,000, for a purchase price of $135,000, reflecting an original issue discount of $15,000. The investor withheld $4,000 from the purchase price to cover legal fees and $5,000 to cover due diligence costs, resulting in net proceeds to the Company of approximately $126,000. The First Convertible Note carries a one-time interest charge of 12% applied to the principal amount on the issuance date, equal to $18,000, which is guaranteed and fully earned as of the issuance date, resulting in a total repayment obligation of $168,000. Repayment is structured through nine scheduled amortization payments - eight installments of $18,750 commencing 120 days after the closing date and continuing at thirty-day intervals thereafter, with a final payment of the remaining outstanding balance due on March 30, 2027 (the maturity date per the underlying note). The Company issued the investor 1,563 restricted shares of common stock as additional consideration for the purchase of the First Convertible Note, deemed earned in full as of the closing date, and granted the investor piggyback registration rights with respect to such shares and the shares of common stock issuable upon conversion. Following an Event of Default or a failure by the Company to pay any scheduled amortization payment, the holder has the right to convert outstanding amounts into shares of the Company's common stock at a conversion price equal to 65% of the lowest traded price of the common stock during the fifteen (15) trading days immediately preceding the applicable conversion date, subject to a 4.99% beneficial ownership limitation. Upon the occurrence of an Event of Default, amounts outstanding become due at 150% of the then-outstanding principal, accrued interest, and applicable fees. The First Convertible Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder. The related Securities Purchase Agreement was executed on March 30, 2026, with closing occurring on April 2, 2026 upon the Company's receipt of the purchase price. Proceeds were applied to working capital and general corporate purposes.

On April 2, 2026, the Company issued a convertible promissory note (the "Second Convertible Note") to an accredited investor in the principal amount of $50,000, for a purchase price of $50,000. The Second Convertible Note carries a one-time guaranteed interest charge of 15% per annum for twelve months, applied to the principal on the issuance date and payable in a lump sum at maturity, resulting in a total repayment obligation of $57,500 due on April 2, 2027. Any unpaid amounts not satisfied by the maturity date bear interest at the lesser of 25% per annum or the maximum amount permitted by applicable law. The Company issued the investor 822 restricted shares of common stock as additional consideration for the purchase of the Second Convertible Note, deemed earned in full as of the closing date. Following an Event of Default, the holder may elect to convert outstanding principal, accrued interest, and applicable penalties into shares of the Company's common stock at a conversion price equal to 65% of the lowest trading price of the common stock during the twenty (20) trading days immediately preceding the delivery of a conversion notice, subject to a 4.99% beneficial ownership limitation. Upon the occurrence of an Event of Default, amounts outstanding become due at 150% of outstanding principal plus accrued interest and fees. The related Securities Purchase Agreement contains a most-favored-nation provision in favor of the investor. The Second Convertible Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On April 2, 2026, the Company issued a convertible promissory note (the "Third Convertible Note") to an accredited investor in the principal amount of $150,000, for a purchase price of $150,000. The Third Convertible Note carries a one-time guaranteed interest charge of 15% per annum for twelve months, applied to the principal on the issuance date and payable in a lump sum at maturity, resulting in a total repayment obligation of $172,500 due on April 2, 2027. Any unpaid amounts not satisfied by the maturity date bear interest at the lesser of 25% per annum or the maximum amount permitted by applicable law. The Company issued the investor 2,468 restricted shares of common stock as additional consideration for the purchase of the Third Convertible Note, deemed earned in full as of the closing date. Following an Event of Default, the holder may elect to convert outstanding principal, accrued interest, and applicable penalties into shares of the Company's common stock at a conversion price equal to 65% of the lowest trading price of the common stock during the twenty (20) trading days immediately preceding the delivery of a conversion notice, subject to a 4.99% beneficial ownership limitation. Upon the occurrence of an Event of Default, amounts outstanding become due at 150% of outstanding principal plus accrued interest and fees. The related Securities Purchase Agreement contains a most-favored-nation provision in favor of the investor. The Third Convertible Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On April 20, 2026, the Company entered into a Securities Purchase Agreement with an institutional lender, pursuant to which the Company issued a convertible promissory note (the "Note") with a face principal amount of $146,160, including an original issue discount of $15,660, for a purchase price of $130,500. Net proceeds to the Company, after deducting a $5,000 placement agent fee, $2,000 in legal fee reimbursement, and a $3,500 due diligence fee retained by the lender, were approximately $120,000. The Note carries a one-time interest charge of 12% applied to the principal on the issuance date, equal to $17,539, resulting in a total repayment obligation of $163,699. Repayment is structured in five mandatory installments commencing October 30, 2026, with a final installment of $32,222 due February 28, 2027. The Company has a five-day grace period with respect to each scheduled payment and may prepay in full at any time without penalty.

Following an Event of Default, the holder has the right to convert outstanding amounts into shares of the Company's common stock at a conversion price equal to 65% of the lowest trading price of the common stock during the 10 trading days immediately preceding the applicable conversion date, subject to a 4.99% beneficial ownership limitation. Upon the occurrence and continuation of an Event of Default, amounts outstanding become due at 150% of the then-outstanding principal, accrued interest, and applicable fees, escalating to 200% in certain circumstances. The Note was issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

On April 28, 2026, the Company issued a convertible promissory note (the "Note") to an individual accredited investor in the initial principal amount of $500,000. The Note bears interest at a rate of 20% per annum on the unpaid principal balance and matures 270 days from the date of issuance, on or about January 23, 2027. Any unpaid principal and accrued interest not previously converted shall be due and payable on the Maturity Date, subject to acceleration upon an Event of Default. The holder may elect, at any time on or prior to the Maturity Date, to convert outstanding principal and accrued interest into shares of the Company's common stock at a conversion price equal to the lower of (i) $5.12 per share or (ii) 90% of the lowest daily volume-weighted average price ("VWAP") of the Company's common stock during the three trading days immediately preceding the applicable conversion date. Any fractional shares resulting from a conversion will be settled in cash or rounded up to the nearest whole share at the Company's election. The Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to the Company's working capital requirements.

On April 29, 2026, the Company issued a convertible promissory note (the "Note") to an individual accredited investor in the principal amount of $25,000. The Note bears a one-time guaranteed interest charge of 15% per annum for twelve months, applied to the principal on the issue date and payable in a lump sum at maturity, resulting in a total repayment obligation of $28,750 due on April 29, 2027. Any unpaid amounts not satisfied by the Maturity Date bear interest at the lesser of 25% per annum or the maximum amount permitted by applicable law. Following an Event of Default, the holder may elect to convert outstanding principal, accrued interest, and applicable penalties into shares of the Company's common stock at a conversion price equal to 65% of the lowest trading price of the common stock during the 20 trading days immediately preceding the delivery of a conversion notice, subject to a 4.99% beneficial ownership limitation. Upon the occurrence of an Event of Default, amounts outstanding become due at 150% of outstanding principal plus accrued interest and fees. The Note was issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On June 1, 2026, the Company issued a bridge note (the "June Bridge Note") to an accredited investor in the aggregate principal amount of $134,960, including an original issue discount of $14,460, for a purchase price of $120,500. At closing, the Company reimbursed the investor $5,500 for legal fees and due diligence costs. The June Bridge Note matures on March 30, 2027. A one-time interest charge of 12% was applied to the principal at issuance, resulting in an aggregate repayment obligation of $151,155, payable in five monthly installments beginning November 30, 2026 through the maturity date; amounts not paid when due accrue default interest at 22% per annum. The Company may prepay the June Bridge Note in full, subject to a prepayment discount equal to 97% of outstanding principal and accrued interest if prepaid within 90 days of issuance, or 98% if prepaid between 91 and 180 days after issuance. The June Bridge Note becomes convertible into shares of the Company's common stock only following an Event of Default and after 180 days have elapsed from issuance, at a conversion price equal to 65% of the lowest trading price of the Company's common stock during the ten trading days prior to the conversion date, subject to a 4.99% beneficial ownership limitation. In connection with the transaction, the Company delivered irrevocable instructions to its transfer agent with respect to the reservation and issuance of shares of common stock issuable upon any such conversion. A registered broker-dealer acted in connection with the transaction and is entitled to compensation in respect thereof. The June Bridge Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. Proceeds were applied to working capital and general corporate purposes.

On June 9, 2026, the Company issued a convertible promissory note (the "June Convertible Note") to an accredited investor in the principal amount of $150,000, for a purchase price of $150,000. The June Convertible Note carries a one-time guaranteed interest charge of 15% per annum for twelve months, applied to the principal on the issue date and added to the principal balance, resulting in a total repayment obligation of $172,500 due on June 8, 2027. Any unpaid amounts not satisfied by the maturity date bear interest at the lesser of 25% per annum or the maximum amount permitted by applicable law. The Company issued the investor 807 restricted shares of common stock as additional consideration for the purchase of the June Convertible Note, deemed earned in full as of the closing date. Following an Event of Default, the holder may elect to convert outstanding principal, accrued interest, and applicable penalties into shares of the Company's common stock at a conversion price equal to 65% of the lowest trading price of the common stock during the twenty (20) trading days immediately preceding the delivery of a conversion notice, subject to a 4.99% beneficial ownership limitation. Upon the occurrence of an Event of Default, amounts outstanding become due at 150% of outstanding principal plus accrued interest and fees. The June Convertible Note and the related Securities Purchase Agreement contain a most-favored-nation provision in favor of the investor, restrictions on the incurrence of additional indebtedness and on the disposition of assets outside the ordinary course of business without the holder's consent, and cross-default provisions. The June Convertible Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On June 10, 2026, the Company entered into a Securities Purchase Agreement with an institutional accredited investor and issued a convertible promissory note (the "June 10 Note") in the original principal amount of $227,150, including an original issue discount of $20,650, for a purchase price of $206,500. The investor withheld $4,000 from the purchase price to cover legal fees and $2,500 to cover due diligence costs, resulting in net proceeds to the Company of $200,000. The June 10 Note carries a one-time interest charge of 10% applied to the principal amount on the issuance date, equal to $22,715, which is guaranteed and fully earned as of the issuance date, and matures twelve months from issuance, on June 10, 2027. In addition to all other payment obligations, the Company is required to make seven amortization payments in cash, consisting of six monthly payments of $35,695 commencing December 10, 2026 and a final payment of all remaining outstanding amounts on June 10, 2027; each amortization payment is applied first to accrued and unpaid interest and then to outstanding principal. The Company issued the investor 4,000 restricted shares of common stock as commitment shares, deemed earned in full as of the closing date. The June 10 Note becomes convertible at the holder's election on the earlier of (i) the occurrence of an Event of Default, (ii) the Company's failure to pay an amortization payment when due, and (iii) the date that is 180 calendar days after the issuance date, at a conversion price equal to 75% of the lowest closing bid price of the common stock during the fifteen trading days immediately preceding the applicable conversion date, subject to a 4.99% beneficial ownership limitation that the holder may increase to not more than 9.99% upon 61 days' prior written notice. The Company is required to reserve for issuance the greater of 500,000 shares of common stock and three times the number of shares issuable upon full conversion of the June 10 Note. The June 10 Note is an unsecured obligation of the Company and may be prepaid only during the first 180 days following issuance, at 95% to 98% of the principal and accrued interest then outstanding depending on the date of prepayment. Amounts not paid when due bear interest at the lesser of 22% per annum and the maximum rate permitted by law, and upon an Event of Default amounts outstanding become due at 150% of the then-outstanding principal and accrued interest. The June 10 Note and the related Securities Purchase Agreement contain a most-favored-nation provision, a prohibition on the Company entering into any transaction structured under Section 3(a)(10) of the Securities Act, a right of prior notice with respect to subsequent placements of debt or equity securities, a covenant requiring the Company to obtain directors' and officers' liability insurance within 60 days of closing, and a provision entitling the holder, at its election, to require the Company to apply up to 25% of the cash proceeds of certain future financings and asset sales to repayment of the June 10 Note. The June 10 Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder. Proceeds were applied to working capital and general corporate purposes.

Subsequent to June 30, 2026, the Company issued six additional notes, the material terms of which are summarized below.

On July 1, 2026, the Company closed one convertible note financing with an unaffiliated institutional accredited investors, with face principal of $150,000 and a purchase price of $135,000. The note is accompanied by the issuance 2,000 of commitment shares. Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

On July 1, 2026, the Company issued two convertible promissory notes (each, a "July 1 Note" and together, the "July 1 Notes") to two separate accredited investors, each in the aggregate principal amount of $122,222, including an original issue discount of $12,222, for a purchase price of $110,000, and each on substantially identical terms. In the aggregate, the July 1 Notes have a principal amount of $244,444, including aggregate original issue discount of $24,444, for an aggregate purchase price of $220,000. In each case the investor withheld $5,000 from the purchase price to cover legal fees, resulting in net proceeds to the Company of $105,000 per note and $210,000 in the aggregate. Each July 1 Note bears interest at 12% per annum from the issuance date and matures on July 1, 2027. Accrued interest is payable in shares of the Company's common stock rather than in cash. Each July 1 Note is convertible at the holder's

election at any time following the six-month anniversary of the issuance date at a conversion price equal to 65% of the lowest trading price of the common stock during the fifteen trading days immediately preceding the applicable conversion date, subject to a 4.99% beneficial ownership limitation that the holder may increase to not more than 9.9% upon 60 days' prior written notice. If the common stock becomes subject to a deposit chill at The Depository Trust Company, the conversion price is reduced to 55% of the lowest trading price during the same measurement period for so long as the chill remains in effect. The Company may prepay a July 1 Note prior to the 180th day following issuance at premiums ranging from 105% to 140% of principal plus accrued interest depending on the date of prepayment, and may not prepay thereafter. The Company is required to reserve 169,669 shares of common stock for issuance upon conversion of each July 1 Note, or 339,338 shares in the aggregate. Upon an Event of Default, interest accrues at 24% per annum and the conversion price is reduced to 50% of the lowest trading price during the applicable measurement period. Events of Default under each July 1 Note include the failure of the common stock to maintain a bid price in the market on which it trades, the penalty for which is an increase in the then-outstanding principal amount by 20%, delinquency in the Company's periodic report filings with the Securities and Exchange Commission, which after the six-month anniversary of the note entitles the holder to use the lowest closing bid price during the delinquency period as the base price for subsequent conversions, and a change in a majority of the members of the Board of Directors serving as of the issuance date. The related securities purchase agreements contain a most-favored-nation provision in favor of each investor. Each July 1 Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On July 9, 2026, the Company entered into a Securities Purchase Agreement with an accredited investor and issued a convertible promissory note (the "July 9 Note") in the aggregate principal amount of $90,000, including an original issue discount of $8,000, for a purchase price of $82,000. The investor withheld $2,000 from the purchase price to cover legal fees, resulting in net proceeds to the Company of $80,000. The July 9 Note carries a one-time guaranteed interest charge of 14%, equal to $12,600, which is fully earned as of the issuance date and added to the principal balance, resulting in a total repayment obligation of $102,600 due on July 9, 2027. Repayment is structured through six installments of $17,100 commencing on the 180th day following issuance and continuing at thirty-day intervals thereafter, with any remaining balance due on the maturity date. The Company issued the investor 525 restricted shares of common stock as commitment shares, deemed earned in full as of the closing date. The July 9 Note becomes convertible at the holder's election only following an Event of Default, at a fixed conversion price of $10.00 per share or, at the holder's election following an uncured Event of Default, at 75% of the lowest trading price of the common stock during the ten trading days immediately preceding the applicable conversion date, in each case subject to a 4.99% beneficial ownership limitation. The Company is required to reserve 53,700 shares of common stock for issuance upon conversion. Amounts not paid when due bear interest at the lesser of 24% per annum and the maximum rate permitted by law, and upon an Event of Default amounts outstanding become due at 150% of the then-outstanding principal and accrued interest. The July 9 Note and the related Securities Purchase Agreement contain a most-favored-nation provision in favor of the investor, restrictions on the incurrence of additional indebtedness and on the disposition of assets outside the ordinary course of business without the holder's consent, and cross-default provisions. The July 9 Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On July 18, 2026, the Company issued a promissory note (the "July 18 Note") to an institutional accredited investor in the aggregate principal amount of $150,000, including an original issue discount of $15,000, for a purchase price of $135,000. The July 18 Note carries a one-time interest charge of 12% applied to the principal amount on the issuance date, equal to $18,000, which is guaranteed and fully earned as of the issuance date, resulting in a total repayment obligation of $168,000 due on July 18, 2027. In addition to all other payment obligations, the Company is required to make eight amortization payments in cash, consisting of six payments of $24,000 commencing 140 calendar days after the closing date and continuing at thirty-day intervals thereafter, a seventh payment of $23,000, and a final payment of all remaining outstanding amounts on July 18, 2027; each amortization payment is applied first to accrued and unpaid interest and then to outstanding principal. The July 18 Note becomes convertible at the holder's election on the earlier of the occurrence of an Event of Default and the Company's failure to pay an amortization payment when due, at a conversion price equal to 65% of the lowest traded price of the common stock during the fifteen trading days immediately preceding the applicable conversion date, subject to a 4.99% beneficial ownership limitation. The Company is required to reserve for issuance the greater of 1,000,000 shares of common stock and three times the number of shares issuable upon full conversion of the July 18 Note. The July 18 Note is an unsecured obligation of the Company and may be prepaid upon three trading days' prior written notice at 100% of the principal and accrued interest then outstanding plus a $750 administrative fee, during which notice period the holder may instead elect to convert. Amounts not paid when due bear interest at the lesser of 22% per annum and the maximum rate permitted by law, and upon an Event of Default amounts outstanding become due at 150% of the then-outstanding principal and accrued interest. Events of Default under the July 18 Note include the Company's failure to maintain a market capitalization of at least $10,000,000 on any trading day, the suspension or halting of trading in the common stock or its failure to be quoted or listed on a principal market, and cross-defaults with other indebtedness of the Company. The July 18 Note and the related Securities Purchase Agreement contain a most-favored-nation provision, a dilutive issuance adjustment to the conversion price, a prohibition on the Company entering into any transaction structured under Section 3(a)(10) of the Securities Act, restrictions on affiliate transactions and asset dispositions, and a provision entitling the holder, at

its election, to require the Company to apply up to 50% of the cash proceeds of any public offering of securities or sale of assets to repayment of the July 18 Note. The July 18 Note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Proceeds were applied to working capital and general corporate purposes.

On August 17, 2026, the Company issued an unsecured convertible promissory note to an institutional accredited investor in the principal amount of $250,000, for a purchase price of $225,000, reflecting an original issue discount of $25,000. After $11,000 of legal and due diligence costs withheld by the investor, net proceeds to the Company were approximately $214,000. The note bears interest at 10% per annum, with the first twelve months of interest, equal to $25,000, guaranteed and earned upon issuance, and matures on August 17, 2027. Repayment is structured through six monthly amortization payments of approximately $39,000 commencing 180 days after closing, with the remaining balance due at maturity. Following an Event of Default or missed amortization payment, the holder may convert outstanding amounts into shares of the Company's common stock at 75% of the lowest traded price during the fifteen trading days preceding conversion, subject to a 4.99% beneficial ownership limitation. The note was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D. Proceeds are to be used for business development and general working capital.

The Company is evaluating the accounting for the July 1 Notes, the July 9 Note and the July 18 Note, including whether the conversion features embedded in each note require bifurcation and separate measurement as derivative liabilities under ASC 815, and the amount and amortization of the related debt discounts. See Note 15: Subsequent Events.

Purchase Order Financing Advance

On April 8, 2026, the Company's wholly owned subsidiary, Keen Labs Operations, Inc., received an additional advance under the previously disclosed factoring and security agreement (as amended) with its lender. Pursuant to a supplier letter agreement among the lender, Keen Labs Operations, Inc., and a third party vendor, the lender remitted approximately $134,000 directly to the vendor representing the balance due on an approved purchase order, net of a deposit previously paid by Keen Labs Operations, Inc. and a warranty holdback payable upon delivery and acceptance of the goods.

The advance is governed by the existing terms of the facility, with charges accruing at 1.625% per 15 day period from the date of advance until the related invoice is verified and funded. The obligation is secured by substantially all assets of the applicable obligors under the facility's cross collateralization and cross default provisions and is guaranteed by the Company.

On August 6, 2026, Keen Labs Operations, Inc. received two additional advances under the same facility with the same lender. The advances were remitted directly to the manufacturer representing final payments due on two separate approved purchase orders, in the amounts of approximately $179,000 and $142,000, respectively. Charges on these advances accrue at 1.55% for the initial 30 day period, plus 0.55% for each 10 day period thereafter, from the date of advance until the related invoices are verified and funded. These advances are secured and guaranteed on the same basis as the facility's existing terms described above.

Conversion Activity Under SEPA Convertible Promissory Note

On April 21, 2026, the holder of the Company's outstanding convertible promissory note dated December 17, 2024 (issued in connection with the Company's previously disclosed Standby Equity Purchase Agreement) submitted a conversion notice with respect to a portion of the outstanding balance under such note. Pursuant to the conversion, $190,000 of outstanding principal and $5,000 of accrued interest, representing a total conversion amount of $195,000, were converted into 35,000 shares of the Company's common stock and delivered to the holder's designated brokerage account. Following this conversion, the remaining outstanding principal balance under the note was approximately $800,000.

On May 5, 2026, the holder submitted an additional conversion notice with respect to a further portion of the outstanding balance under the same note. Pursuant to the conversion, $201,135 of outstanding principal and $2,169 of accrued interest, representing a total conversion amount of $203,304.35, were converted into 37,931 shares of the Company's common stock and delivered to the holder's designated brokerage account. Following this conversion, the remaining outstanding principal balance under the note is $600,000.

The shares issued in each of the foregoing conversions were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended, as conversions of an existing security of the same issuer without additional consideration.

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.

Conversion of Convertible Promissory Note

On May 11, 2026, the holder of the Company's previously disclosed convertible promissory note dated December 8, 2025 submitted a notice of conversion under such note. Pursuant to the conversion, $1,084,384, representing outstanding principal together with accrued but unpaid interest, was converted into 210,944 shares of the Company's common stock. The shares were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended, as a conversion of an existing security of the same issuer without additional consideration. The note was fully satisfied and cancelled upon completion of the conversion.

Key Operating and Financial Metrics and Outlook

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented below are useful in evaluating our operating performance, as they are similar to measures by our public competitors and are regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures, which exclude the results of discontinued operations, are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net (loss) income or net (loss) income margin, respectively, calculated in accordance with GAAP. See "Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP measures.

The following table sets forth these metrics for the periods presented:

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Gross Profit and Gross Margin

We define gross profit as revenue, net less cost of revenues and depreciation and amortization related to cost of revenues, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue, net. See "- Non-GAAP Financial Measures" for a reconciliation of Gross Profit and Gross Margin.

Contribution Profit and Contribution Margin

We define contribution profit as revenue, net less direct costs of revenue, commissions expense and depreciation and amortization, and define contribution margin, expressed as a percentage, as the ratio of contribution profit to revenue, net. Contribution profit and margin can be used to understand our financial performance and efficiency and allows investors to evaluate our pricing strategy and compare against competitors. Our management uses these metrics to make strategic decisions, identify areas for improvement, set targets

for future performance and make informed decisions about how to allocate resources going forward. Contribution margin reflects our Contribution profit as a percentage of revenues. See "- Non-GAAP Financial Measures" for a reconciliation of Gross Profit to Contribution Profit and Contribution Margin.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and, income tax expense, depreciation and amortization, loss (gain) on change in fair value of financial instruments, stock based compensation, loss (gain) on extinguishment of debt and payable, loss on disposal of business, and transaction and integration related expenses. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. See "- Non-GAAP Financial Measures" for a reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted EBITDA Margin.

Non-GAAP Financial Measures

The non-GAAP financial measures in this Quarterly Report have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

The following table provides a reconciliation of gross profit to contribution profit from continuing operations for the periods presented:

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Adjusted EBITDA

We define Adjusted EBITDA, a non-GAAP financial measure, as net income (loss) before interest and, income tax expense, depreciation and amortization, loss (gain) on change in fair value of financial instruments, stock based compensation, loss (gain) on extinguishment of debt and payable, loss on disposal of business, and transaction and integration related expenses. We utilize Adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. Adjusted EBITDA should not be viewed as a substitute for net (loss) income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues. The adjusted EBIDTA excludes gain from discontinued operations for all periods presented.

The following table provides a reconciliation of net (loss) income from continuing operations to Adjusted EBITDA for the periods presented:

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Key Factors Affecting Operating Results

The Company believes 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 international expansion for sales and distribution of our products and services.

Reportable Segments

ConnectM's reportable operating segments are as follows:

Key Components of Our Results of Operations

Revenue

ConnectM's revenue is derived from contracts with customers and is recognized in accordance with ASC 606, comprising (i) installation and maintenance services for solar energy systems and HVAC solutions across customers, (ii) logistics and delivery services, (iii) product sales of hardware with embedded software to OEMs and wholesale distribution of heat pump equipment and smart controls through national distribution partners, (iv) software subscription services providing access to the Company's IIoT platform, (v) managed solutions including HR, procurement, marketing and lead generation services, (vi) distributed energy and renewables services in India, including EPC activities, sale of electricity under power purchase agreements, and ongoing energy management (vii) Keen Labs platform offerings, including industrial IoT hardware, energy storage systems, smart heat pumps, connected vehicle technologies, the wholesale procurement and distribution of solar energy equipment and balance-of-system components to U.S. installation partners and (viii) HKA provides specialized engineering, logistics support, technical documentation and lifecycle support services primarily to the U.S. Department of Defense and defense industry customers. 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.

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.

The Company excludes 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 the Company's 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 is actively managing operations costs to drive gross margin expansion, operating leverage, and improved operating cash flow as revenue scales.

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.

While selling, general and administrative expenses may continue to reflect the costs of operating as a public company, including SEC compliance, legal, audit, insurance, and investor relations, the Company is focused on managing these expenses to achieve operating leverage as revenue scales.

Loss on impairment of intangible assets

Loss on impairment of intangible assets consist of non-cash charges recognized when the carrying value of certain intangible assets exceeds their recoverable amount. The Company performs impairment assessments whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The recognition of such losses reflects management's ongoing evaluation of the continued utility and value of acquired intangibles in the context of the Company's evolving operations and strategic priorities.

Other income (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 agreements and other miscellaneous income or expenses incurred throughout the period.

Results of Operations

The following table summarizes our financial results for the period indicated:

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Revenues

Revenue increased approximately $1,909,000, or 24%, to approximately $9,794,000 for the three months ended June 30, 2026 from approximately $7,885,000 for the three months ended June 30, 2025. The increase was primarily attributable to the Company's Logistics and Keen Labs segments, which generated revenue of $3,626,992 and $3,854,734, respectively, for the three months ended June 30, 2026 and together represented approximately 76% of total revenue, partially offset by continued declines in the Owned Service Network and Managed Solutions segments, reflecting the Company's rationalization of certain HVAC, solar, and other home service operations, including the divestiture of Green Energy Gains and the wind-down of Blue Sky Electric, Inc., both completed in the first quarter of 2026, and the termination of the AC Authority MSA during the second quarter of 2026.

Revenue increased approximately $1,300,000, or 8%, to approximately $17,440,000 for the six months ended June 30, 2026 from approximately $16,140,000 for the six months ended June 30, 2025. The increase was primarily attributable to the Company's Logistics and Keen Labs segments, which generated revenue of $6,738,332 and $5,704,660, respectively, for the six months ended June 30, 2026 and together represented approximately 71% of total revenue, partially offset by continued declines in the Owned Service Network and Managed Solutions segments, reflecting the Company's rationalization of certain HVAC, solar, and other home service operations, including the divestiture of Green Energy Gains and the wind-down of Blue Sky Electric, Inc., both completed in the first quarter of 2026, and the termination of the AC Authority MSA during the second quarter of 2026. The smaller increase on a six-month basis, relative to the 24% increase for the quarter alone, reflects the sequential acceleration of revenue in the Logistics and Keen Labs segments during the second quarter relative to the first.

Cost of Revenues and Gross Profit

Cost of revenues increased approximately $1,986,000, or 40%, to approximately $6,990,000 for the three months ended June 30, 2026 from approximately $5,004,000 for the three months ended June 30, 2025. The increase was primarily attributable to cost of revenue in the Company's Logistics and Keen Labs segments, of $2,823,815 and $2,700,005, respectively, for the three months ended June 30, 2026, partially offset by reduced costs in the Owned Service Network segment resulting from divestitures and wind-downs amid the Company's ongoing segment rationalization. Gross profit for the three months ended June 30, 2026 was approximately $2,804,000, representing a gross margin of 28.6%, compared to approximately $2,881,000 and 36.5% for the three months ended June

30, 2025. The decline in gross margin percentage reflects the revenue mix shift toward the Company's Logistics and Keen Labs segments, which generated gross margins of approximately 22.1% and 30.0%, respectively, for the three months ended June 30, 2026, below the approximately 37.0% margin generated by the Owned Service Network segment, together with the continued wind-down of higher-margin Owned Service Network revenue that was unprofitable at the operating level. Both the Logistics and Keen Labs segments generated positive income from operations for the three months ended June 30, 2026, consistent with the Company's continued strategic focus on segments that contribute positively to operating results despite lower gross margins.

Cost of revenues increased approximately $2,438,000, or 24%, to approximately $12,771,000 for the six months ended June 30, 2026 from approximately $10,333,000 for the six months ended June 30, 2025. The increase was primarily attributable to cost of revenue in the Company's Logistics and Keen Labs segments, of $5,250,912 and $3,907,269, respectively, for the six months ended June 30, 2026, partially offset by reduced costs in the Owned Service Network segment resulting from divestitures and wind-downs amid the Company's ongoing segment rationalization. Gross profit for the six months ended June 30, 2026 was approximately $4,669,000, representing a gross margin of 26.8%, compared to approximately $5,806,000 and 36.0% for the six months ended June 30, 2025. The decline in gross margin percentage reflects the revenue mix shift toward the Company's Logistics and Keen Labs segments, which generated gross margins of approximately 22.1% and 31.5%, respectively, for the six months ended June 30, 2026, below the approximately 26.9% margin generated by the Owned Service Network segment for the same period. Both the Logistics and Keen Labs segments generated positive income from operations for the six months ended June 30, 2026, consistent with the Company's continued strategic focus on segments that contribute positively to operating results despite lower gross margins.

Selling, General and Administrative expenses

Selling, general and administrative expenses decreased approximately $1,024,000, or 16%, to approximately $5,398,000 for the three months ended June 30, 2026 from approximately $6,421,000 for the three months ended June 30, 2025. The decrease reflects the Company's continued cost rationalization efforts, including the wind-down and divestiture of certain Owned Service Network entities and tighter management of corporate overhead, partially offset by selling, general and administrative expenses associated with the Company's Logistics and Keen Labs segments of $514,521 and $960,322, respectively, for the three months ended June 30, 2026. As a percentage of revenue, SG&A expenses improved from 81.4% in the prior-year quarter to 55.1% for the three months ended June 30, 2026, reflecting both the lower expense base and higher revenue in the current quarter.

Selling, general and administrative expenses decreased approximately $2,438,000, or 19%, to approximately $10,118,000 for the six months ended June 30, 2026 from approximately $12,556,000 for the six months ended June 30, 2025. The decrease reflects the Company's continued cost rationalization efforts, including the wind-down and divestiture of certain Owned Service Network entities and tighter management of corporate overhead, partially offset by selling, general and administrative expenses associated with the Company's Logistics and Keen Labs segments of $1,175,854 and $1,613,470, respectively, for the six months ended June 30, 2026. As a percentage of revenue, SG&A expenses improved from 77.8% in the prior-year period to 58.0% for the six months ended June 30, 2026.

Other Income (Expense)

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Total other income (expense), net was income of approximately $1,739,000 for the three months ended June 30, 2026, compared to expense of approximately $3,353,000 for the three months ended June 30, 2025, an improvement of approximately $5,093,000. The improvement was primarily driven by change in fair value of investment in equity securities of approximately $2,313,000, following the closing of the Blue Cloud Transaction on June 17, 2026, and equity in earnings of equity method investee of approximately $427,000 from the Company's 40% interest in Sun Solar, LLC, neither of which had a comparable contribution in the prior-year quarter.

The remaining change reflected several offsetting movements within the Company's debt and liability-related items. Favorable movements included an approximately $1,374,000 swing in the change in fair value on the Section 3(a)(10) Settlement Agreement (see Note 9), approximately $797,000 improvement in the gain/(loss) on extinguishment of debt and vendor payable, approximately $530,000 improvement in the change in fair value of derivative liabilities, approximately $182,000 improvement in other income (expense), net, approximately $167,000 gain on settlement of contingent consideration, gain on extinguishment of debt by approximately $48,000 and approximately $68,000 improvement in the change in fair value of convertible debt. These were partially offset by approximately $758,000 increase in interest expense to approximately $844,000, reflecting increased borrowings during the period, and a new approximately $36,100 loss on issuance of financial instruments.

Total other expense, net was approximately $1,634,000 for the six months ended June 30, 2026, a decrease of approximately $5,379,000, or 78%, from approximately $7,013,000 for the six months ended June 30, 2025. The decrease was primarily driven by a $3,303,000 improvement in the gain/(loss) on extinguishment of debt and vendor payable, and change in fair value of investment in equity securities of approximately $2,313,000, following the closing of the Blue Cloud Transaction on June 17, 2026, and equity in earnings of equity method investee of approximately $708,000 from the Company's 40% interest in Sun Solar, LLC, neither of which had a comparable contribution in the prior-year period. These improvements were substantially offset by a $2,909,000 loss recognized in the first quarter of 2026 on the dispositions of Air Temp Service Co. and Green Energy Gains, included in other income (expense), net (see Note 4, Disposals and Discontinued Operations).

The remaining change reflected the non-recurrence of a $971,000 loss on the change in fair value of the forward purchase agreement, which was no longer outstanding during 2026, together with favorable movements of $892,000 in the change in fair value on the Section 3(a)(10) Settlement Agreement (Note 9), $505,000 in the change in fair value of derivative liabilities, $283,000 in the change in fair value of convertible debt, $167,000 from a gain on settlement of contingent consideration, gain on extinguishment of debt by approximately $48,000 and $55,000 in other income (expense), net. These were partially offset by a $775,000 increase in interest expense to approximately $1,348,000, reflecting increased borrowings during the period, and a new $72,600 loss on issuance of financial instruments.

Result of operations for discontinued operations

Net income from discontinued operations was approximately $13,928,000 for the three months ended June 30, 2026, compared with $2,237,000 for the same period in 2025. The increase was primarily attributable to the $19,054,000 gain on disposal, partially offset by income tax provision of approximately $4,900,000. The 2025 period included a $2,487,000 bargain purchase gain.

Net income from discontinued operations was $13,488,000 for the six months ended June 30, 2026, compared with $2,129,000 for the same period in 2025. The increase was primarily driven by a $19,054,000 gain on disposal in 2026, partially offset by income tax provision of approximately $4,900,000. The 2025 period included a $2,487,000 bargain purchase gain.

Liquidity and Capital Resources

Our 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 June 30, 2026, the Company had cash and cash equivalents of approximately $2,394,000 and a working capital deficit of approximately $29,761,000, compared to cash and cash equivalents of approximately $2,737,000 as of December 31, 2025. For the six months ended June 30, 2026, the Company incurred a net loss from its continuing operations of approximately $7,406,000 and net cash used in operating activities of approximately $4,586,000, compared to a net loss of approximately $13,763,000 and net cash used in operating activities of approximately $4,311,000 for the six months ended June 30, 2025. These conditions are indicators of substantial doubt as to the Company's ability to continue as a going concern for at least one year from the date of issuance of these condensed consolidated financial statements. The Company's ability to continue as a going concern is dependent upon the management of expenses, the ability to obtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and the attainment of profitable operations.

If additional equity or debt financing is required from outside sources, we may not be able to raise it on terms acceptable to it or at all. If we are 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 our existing stockholders and could result in significant financial operating covenants that would negatively impact our business.

Based on the foregoing, our management has concluded there is substantial doubt as to our ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. The 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 we be unable to continue as a going concern.

Cash Flows

The following table summarizes the Company's cash flows for the period indicated:

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Net cash used in operating activities - continuing operations

Net cash used in operating activities for the six months ended June 30, 2026 was approximately $4,586,000. Net cash used in operating activities consisted of non-cash items principally including: loss on disposal of business of approximately $2,909,000; amortization of debt discount of approximately $730,000; depreciation and amortization of long-lived and intangible assets of approximately $280,000; offset be provision for credit losses of approximately $769,000; the change in fair value of convertible debt of approximately $547,000; the change in fair value of derivative liabilities of approximately $39,000; the change in fair value of the Section 3(a)(10) Settlement Agreement of approximately $34,000; right-of-use asset amortization on operating and finance leases of approximately $37,000 in the aggregate; and loss on issuance of financial instruments of approximately $73,000; offset by the Company's share of equity in earnings of Sun Solar and Blue Cloud of approximately $3,021,000. Net changes in operating assets and liabilities used cash of approximately $282,000, primarily reflecting an increase in accounts receivable, accounts payable and other current assets and a decrease in prepaid and other payables.

Net cash used in operating activities for the six months ended June 30, 2025 was approximately $4,311,000. Net cash used in operating activities consisted primarily of net loss of approximately $13,763,000 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 $7,764,000 of noncash items, primarily related to the loss on extinguishment of debt of approximately $3,331,000, change in fair value measurement of convertible debt of approximately $830,000, 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 $194,000, and amortization of the Company's debt discount recorded on its different debt facilities of approximately $105,000. In addition, for the six months ended June 30, 2025, net changes in operating assets and liabilities resulted in cash provided by operating activities of approximately $1,688,000.

Net cash used in investing activities - continuing operations

Net cash used in investing activities for the six months ended June 30, 2026 was approximately $73,000, consisting principally of cash paid for capitalized software development costs of approximately $146,000 and purchases of property and equipment of approximately $3,000, partially offset by proceeds of approximately $50,000 from the sale of property and equipment and cash received from acquisition of HKA of approximately $25,000.

Net cash used in investing activities for the six months ended June 30, 2025 was approximately $11,000. Investing activities primarily included the purchase of capitalized software development costs of approximately $34,000 and sale of property and equipment of approximately $24,000.

Net cash provided by financing activities - continuing operations

Net cash provided by financing activities for the six months ended June 30, 2026 was approximately $4,240,000. Financing activities consisted primarily of proceeds from the issuance of debt of approximately $4,767,000, and proceeds from the issuance of convertible

notes of approximately $3,292,000, partially offset by repayments of debt of approximately $1,931,000, repayments on convertible notes of approximately $905,000, proceeds from factoring receivable arrangements of approximately $306,000, and payments on debt issuance cost of approximately $1,238,000.

Net cash provided by financing activities for the six months ended June 30, 2025 was approximately $4,371,000. Financing activities consisted primarily of proceeds from the issuance of convertible debt of approximately $3,556,000, issuance of debt of approximately $735,000 and proceeds from stocks subscription agreement of $596,000 offset by repayment of debt of approximately $743,000 and payments on convertible note and finance leases of approximately $124,000.

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 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 U.S. GAAP as currently in effect. Future events could cause actual payments to differ from these amounts.

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 condensed consolidated financial statements and in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 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 2025 Annual Report on Form 10-K. The accounting principles used in preparing our condensed consolidated financial statements conform in all material respects to U.S. GAAP.