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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-K
________________________________________
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-04321
________________________________________
CASTELLUM, INC.
________________________________________
(Exact name of registrant as specified in its charter)
Nevada
27-4079982
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
1934 Old Gallows Road, Suite 350
Vienna, VA
22182
(Address of Principal Executive Offices)
(Zip Code)
(703) 752-6157
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareCTMNYSE American LLC

Securities registered pursuant to section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o   No  x

As of June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of voting common stock held by non-affiliates of the registrant was approximately $11,601,967 based upon the closing price of the Company’s common stock on the NYSE American LLC.

The registrant had outstanding 80,391,874 shares of common stock, par value $0.0001, as of March 10, 2025.

Documents Incorporated by Reference
The information required by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the registrant's definitive proxy statement relating to the Annual Meeting of Shareholders to be held in 2025, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.

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Castellum, Inc.
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Annual Report on Form 10-K
December 31, 2024

Legal Proceedings
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 15.

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Explanatory Note Regarding Reverse Stock Split
On October 13, 2022, Castellum, Inc. (the “Company,” “our Company,” “we,” “our,” “us,” or “Castellum”) effected a 1-for-20 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split,” “Offering,” “Uplisting”) by way of the filing on October 5, 2022 of an amendment to the Company’s amended and restated articles of incorporation to effect the Reverse Stock Split which was approved by Financial Industry Regulatory Authority on October 12, 2022 in connection with the closing of an underwritten public offering of our common stock and the commencement of the trading of our common stock on the New York Stock Exchange American LLC (“NYSE American”). As a result of the Reverse Stock Split, all authorized and outstanding common stock and per share amounts in this Annual Report on Form 10-K (“Form 10-K”), including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
Explanatory Note Regarding Forward-Looking Statements
Certain information included or incorporated by reference in this Form 10-K, may not address historical facts and, therefore, could be interpreted to be “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including projections of financial performance; statements of plans, strategies, and objectives of management for future operations; any statement concerning developments, performance, or industry rankings relating to products or services; any statements regarding future economic conditions or performance; any statements of assumptions underlying any of the foregoing; and any other statements that address activities, events, or developments that the Company intends, expects, projects, believes, or anticipates will or may occur in the future. Forward-looking statements may be characterized by terminology such as “believe,” “anticipate,” “expect,” “should,” “intend,” “plan,” “will,” “estimates,” “view,” and similar expressions. These statements are based on assumptions and assessments made by the Company’s management in light of its experience and its perception of historical trends, current conditions, expected future developments, and other factors it believes to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties that include but are not limited to the factors set forth under “Part I, Item 1A, Risk Factors” in this Form 10-K.

Any such forward-looking statements are not guarantees of future performance, and actual results, developments, and business decisions may differ materially from those envisaged by such forward-looking statements. The forward-looking statements included herein speak only as of the date of this Form 10-K. The Company disclaims any duty to update such forward-looking statements, all of which are expressly qualified by the foregoing.
Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:
•our limited operating history, ongoing net income losses, and growth trajectory;
•our ability to retain and attract senior management and other employees with suitable experience leading a public company;
•our ability to raise additional capital on acceptable terms and to service our ongoing debt obligations;
•changes in political, economic, or regulatory conditions generally and in the markets in which we operate, and more specifically, the potential impact of the U.S. DOGE Service Temporary Organization on government spending and terminating contracts for convenience;
•our ongoing relationships with government entities, agencies, and teaming partners;
•overall levels of government spending on defense spending and spending on IT services, significant delays or reductions in appropriations for our programs or U.S. government funding more broadly, including a prolonged continuing resolution, government shutdown, or breach of the debt ceiling, as well as the potential imposition of sequestration in the absence of an approved budget or continuing resolution;
•our ability to win new contracts amidst increased levels of competition in contract bidding process;
•delays due to the appropriation process, change in the procurement process, and audits or cost adjustments to our contracts;
•our inability to receive full amounts authorized, or ongoing lack of funding, for contracts in our backlog;
•potential systems failures, security breaches, or the inability of Company employees to obtain required clearances;
2
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•our ability successfully to execute additional acquisitions and integrate those operations into our ongoing businesses;
•the effect of ongoing financing efforts and volatility of our common stock share price; and other risks, including those described in “Part I, Item 1A. Risk Factors” discussion of this Form 10-K.
In this Form 10-K, unless the context otherwise requires, all references to the “Company”, “our Company,” “we,” “our,” “us,” and “Castellum,” refer to Castellum, Inc., a Nevada corporation, and its wholly owned subsidiaries.
Part I
Item 1. Business
Overview
Castellum is focused on building a large, successful technology company in the areas of cybersecurity, IT, electronic warfare, information warfare, and information operations with businesses in the defense, federal, civilian, and commercial markets. Services include intelligence analysis, software development, software engineering, program management, strategic and mission planning, information assurance, cybersecurity and policy support, data analytics, and model based systems engineering (“MBSE”). These services are applicable to customers in the United States (“U.S.”) government (“USG”), financial services, healthcare, and other users of large data applications. They can be delivered to on-premises enclaves or customers who rely upon cloud-based infrastructures. The Company has worked with multiple business brokers and contacts within their business network to identify potential acquisitions. Due to our success in completing seven acquisitions over the previous five years and given our executive officers’ and key managers’ networks of contacts in the IT, telecom, cybersecurity, and defense sectors, we believe that we are well positioned to continue to execute our business strategy. Because of our executive officers’ and key managers’ prior experience growing businesses organically, we believe that we are well positioned to grow our existing business via internal growth as well. The Company has developed a qualified business opportunity (the “Opportunity Pipeline”). Although there can be no assurance that the Opportunity Pipeline can be converted to revenues, the Company believes that the total value of the Opportunity Pipeline to be approximately $635 million as of December 31, 2024. The Opportunity Pipeline represents the revenue opportunity for the Company from potential future contracts obtained through organic growth from qualified customers based on the expected base year contract value plus the value of all option periods.
Our primary customers are currently agencies and departments of the USG. Our expertise and technology support national security missions and government modernization for intelligence, defense, and federal civilian customers. The demand for our expertise and technology, in large measure, is created by the increasingly complex network, systems, and information environments in which governments and businesses operate, and by the need to stay current with emerging technology while increasing productivity, enhancing security, and ultimately, improving performance.
We provide expertise and technology to enterprise and mission customers in support of national security missions and government modernization/transformation. Due to the nature of the work being executed for the USG the budgets are expected to continue to grow in support of bipartisan national security imperatives. The majority of contracted work is operational in nature and is funded on an on-going basis.

Castellum competes with many different companies, including Northrop Grumman Corporation, CACI International, Inc., Peraton, Inc., and Booz-Allen Hamilton, Inc. among others. It is common in the defense industry for work on major programs to be shared among a number of companies. A company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve as a subcontractor to the ultimate prime contracting company. It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts, or vice versa.
Our Markets
We provide our expertise and technology to our domestic and international customers in the following market areas:
•Digital Solutions. Castellum transforms how government does business. We modernize enterprise and agency-unique applications, enterprise infrastructure, and business processes to enhance productivity and increase user satisfaction. We use data analytics and visualization to provide insights and outcomes that optimize our customer’s operations.
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•Command, Control, Communications, and Computer Intelligence Surveillance Reconnaissance (“C4ISR”), Cyber & Space. Castellum helps ensure information superiority by delivering multi-domain C4 technology and networks. Our software-defined, full-spectrum cyber, electronic warfare, and C-UAS solutions provide electromagnetic spectrum advantage and deliver precision effects against national security threats. We are at the forefront of developing technologies that meet the challenges of 5G wireless communications both on and off the battlefield, millimeter wave, and the use of lasers for free space optical communications and long-range sensing.
•Engineering Services. Castellum provides platform integration, modernization, and sustainment; system engineering; naval architecture; training and simulation services; and logistics engineering to help our customers achieve a decisive tactical edge. We enhance platforms to improve situational awareness, mobility, interoperability, lethality, and survivability. We conduct software vulnerability analysis and harden technology to protect against malicious actors. Our platform-agnostic, mission-first approach ensures optimal performance, so our nation’s forces can overmatch our adversaries.
•Enterprise IT. Castellum amplifies efficiency with unmatched expertise and next-generation technology. We design, implement, protect, and manage secure enterprise IT solutions for the U.S. federal, state, and local agencies to optimize efficiency, enhance performance, and ensure end-user satisfaction.
•Mission support. Castellum specializes in planning and intelligence support for information warfare and information operations (“IW/IO”). The Company develops IW/IO plans, exercises, doctrine, and training for the Military Services and the Combatant Commands in domestic and deployed overseas locations. Our intelligence support ensures continuous advances in collection, analysis, and dissemination to optimize decision-making. Castellum also has linguists and cultural advisors who provide clients with insights into the history, media consumption, and cultural nuances of target audiences to maximize the effectiveness of communications plans and ensure mission success.
Strengths and Strategy
Extensive Sector Knowledge and Advanced Technology. We primarily offer our expertise and technology to defense, intelligence, and civilian agencies of the U.S. federal, state, and local governments. Our work for USG agencies may combine a wide range of skills drawn from our expertise and technology. For example, Castellum performs software development and virtualization of infrastructure services for the U.S. Navy. We are subject matter experts in electronic and electromagnetic warfare. We perform advanced data analytics on litigation data in support of the Department of Justice (“DoJ”). Lastly, through the Company’s IW/IO operations, Castellum provides key services to governments of other nations.
International Presence. We currently support and have previously supported international clients in Australia and other foreign countries and believe that future opportunities for providing our services internationally are growing given current nominal levels of global spending on defense and the continued rising threat from cybersecurity breaches.
Deep-Seated Government Relationships. To effectively perform on our existing customer contracts and secure new customer contracts with the U.S. federal, state, and local governments, we must maintain expert knowledge of agency policies, operations, and challenges. We combine this comprehensive knowledge with expertise and technology for our enterprise and mission customers. Our capabilities provide us with opportunities either to compete directly for, or to support other bidders in competition for multi-million dollar and multi-year award contracts from the U.S. federal, state, and local governments.
Complementary Product and Service Offerings. We have strategic business relationships with several companies associated with the information technology (“IT”) industry which have business objectives compatible with ours and offer complementary products and services. We intend to continue development of these kinds of relationships wherever they support our growth objectives. Some of these business relationships have ultimately led to Castellum acquiring the teaming partner firm.

Our marketing and new business development is conducted by many of our officers and managers including the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), Executive Vice-President of Strategy and General Counsel and other executive officers, and other key managers. We employ business development, capture, and proposal writer professionals who identify and qualify major contract opportunities, primarily in the USG market and submit bids for those opportunities.
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Much of our business is won through submission of formal competitive bids. Government and commercial customers typically base their decisions regarding contract awards on their assessment of the quality of past performance, compliance with proposal requirements, price, and other factors. The terms, conditions, and form of government contract bids, however, are in most cases specified by the customer. In situations in which the customer-imposed contract type and/or terms appear to expose us to inappropriate risk or do not offer us a sufficient financial return, we may seek alternative arrangements or opt not to bid for the work. Essentially all contracts with the USG, and many contracts with other government entities, permit the government customer to terminate the contract at any time for the convenience of the government or for default by the contractor. None of Castellum’s subsidiaries have had contract work terminated for non-performance. Although we operate under the risk of such terminations with the potential to have a material impact on operations, they historically have not been common. Additionally, as with other government contractors, our business is subject to government customer funding decisions and actions that are beyond our control.

Our contracts and subcontracts are composed of a wide range of contract types, including firm fixed price (“FFP”), cost plus fixed fee (“CPFF”), time and materials (“T&M”), indefinite delivery/indefinite quantity (“IDIQ”), and government wide acquisition contracts (“GWACS”) such as U.S. General Services Administration (“GSA”) schedule contracts, substantially all of which are annual contracts, with options to renew. Because most government contracts renew annually, the Company does not have a material number of multi-year contracts. Typically, the prime contract will dictate the terms of the subcontracts including, among other things, the workshare percentages, mechanics of payment terms, and the process for operational management. We generated $24,483,023 (55%), $25,631,786 (57%), and $25,302,224 (61%) of our total revenues from T&M contracts in the years ended December 31, 2024, 2023, and 2022, respectively.

In the year ending December 31, 2024, the top three revenue-producing contracts, some of which consist of multiple task orders, accounted for forty-nine percent (49%) of our revenue, or $21,972,589. Each of those contracts is associated with the Company’s areas of core expertise, as follows: (i) an annual contract with Naval Air Systems Command (“NAVAIR”) that contains multiple renewal options is a CPFF contract covering systems engineering, design/software engineering, and development expertise where the Company has developed software that manages the aircraft launch and recovery operations on aircraft carriers, (ii) an annual contract with Peraton, Inc. with multiple renewal option periods is a T&M contract which supports the cyber and Electronic Warfare (“EW”) work done at the Army Staff Level, and (iii) an annual contract with Naval Sea Systems Command (“NAVSEA”) that contains multiple renewal options is a CPFF contract covering engineering and technical services for the analysis, design, prototyping, test and evaluation, integration, project management, implementation, and documentation of various C4ISR sensor systems and subsystems for the U.S. Department of Defense “DoD”).
Some of our key initiatives include the following:
•Continue our unwavering commitment to our customers while supporting the communities in which we work and live;
•Grow organic revenue across our large, addressable market;
•Recruit and hire a world class workforce to execute on our growing backlog; and
•Differentiate ourselves through our investment, including our strategic mergers and acquisitions which allow us to enhance our current capabilities and create new customer access points.
U.S. Political, Budgetary, and Regulatory Environment

The U.S. continues to face an uncertain and evolving political, budgetary, and regulatory environment. In particular, it is difficult to predict the specific course of future defense budgets. Current and future requirements related to the conflicts in Ukraine and the Middle East, threats in the Pacific region and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets, spending, and priorities. The U.S. political environment may also impact defense budgets and priorities, issues related to the national debt, and government spending broadly and more specifically, the potential impact of the U.S. DOGE Service Temporary Organization (“DOGE”) on government spending and terminating contracts for convenience. We anticipate that issues related to budgetary priorities and defense spending levels, the debt ceiling, and the spending caps imposed by the Fiscal Responsibility Act of 2023 (“FRA”), particularly with respect to discretionary spending, will continue to be a subject of considerable debate, with a potentially significant impact on our programs and the Company.

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Annual appropriations to fund the federal government for fiscal year 2025 have not yet been enacted. The continuing resolution (“CR”) enacted on December 21, 2024, extends federal funding at fiscal year 2024 levels through March 14, 2025. To prevent a government shutdown beyond this date, the U.S. Congress (“Congress”) and the President must either pass a full-year fiscal year 2025 appropriations bills or another CR. Government operations under an extended CR could have potential impacts on our programs and new contracts, in particular. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans. We believe that less than 5% of our employees would be at risk due to a CR.

Our business depends on the U.S. government. A shutdown could lead to furloughs within agencies like the DoD, resulting in payment delays, disruptions to existing contracts, and potential impacts on future orders and operations. Additionally, the U.S. Treasury Department may face operational and payment disruptions during fiscal year 2025 if it exhausts extraordinary measures after reaching the debt limit. U.S. government discretionary spending for fiscal year 2024 and fiscal year 2025, including defense, is capped under the FRA. If a CR remains in place on April 30, 2025, it will trigger a sequester under the FRA. These uncertainties, along with broader macroeconomic effects, could materially impact our programs, contracts, financial position, results of operations, and cash flows.

Acquisition Strategy

Castellum seeks acquisitions which fit one or more of the following criteria: (1) expands our capability in existing areas of expertise such as cybersecurity and electronic warfare; (2) broadens the scope of clients Castellum serves such as adding a new service branch or new government agency; (3) increases the scale of our business in existing areas to generate better operating profit margins and reduce the Company's fully burdened cost of labor, including direct and indirect costs or (i.e., the wrap rate); (4) increases the geographic footprint of Castellum in order to offer more capability to existing or new clients; (5) adds management talent to Castellum; (6) adds technological capability in new areas which we believe are high growth potential; and (7) fills a need within Castellum to be able to serve current customers such as adding a prime contract vehicle or the capability to win new prime contract vehicles. In all cases, Castellum seeks acquisitions which are immediately accretive on a revenue, earnings before interest, depreciation, and amortization (“EBITDA”) and net income per share basis, as well as positive from a net present value perspective and which fit the culture of Castellum.
Customers

We provide expertise and technology to defense, intelligence, and civilian agencies of the U.S. federal, state, and local governments. Our clients call us to work on their hardest problems by providing innovative, intelligent, and agile cloud-ready capabilities across the DoD Information Network Operations, Electromagnetic Warfare, Cyberspace Operations, Intelligence, and Information Dominance community. We specialize in intelligence analysis, software development, software engineering, turnkey system development, program management, strategic and mission planning, information assurance, cybersecurity, and policy along with analysis support.
Our government clients include cabinet-level departments of the USG, U.S. Army, U.S. Navy, U.S. Marine Corp, Special Operations, as well as other federal and civilian agencies. We also serve state and local agencies and commercial clients, working to solve their hardest and most sophisticated cyber challenges, and currently support one international client.
Contract Backlog
We define backlog to include the following three components:
•Funded Backlog. Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.
•Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.
•Priced Options. Priced contract options represent 100% of the revenue value of all future contract option periods under existing contracts that may be exercised at our clients’ option and for which funding has not been appropriated or otherwise authorized.
Our backlog does not include contracts that have been awarded but are currently under protest and also does not include any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts.
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We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog. The primary risks that could affect our ability to recognize such revenue on a timely basis or at all are: program schedule changes, contract modifications, and our ability to assimilate and deploy new consulting staff against funded backlog; cost-cutting initiatives and other efforts to reduce USG spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to delays in the completion of the USG's budgeting process and the use of a CR by the USG to fund its operations. The amount of our funded backlog is also subject to change, due to, among other factors: changes in congressional appropriations that reflect changes in USG policies or priorities resulting from various military, political, economic, or international developments; changes in the use of USG contracting vehicles, and the provisions therein used to procure our services and adjustments to the scope of services, or cancellation of contracts, by the USG at any time. In our recent experience, none of the following additional risks have had a material negative effect on our ability to realize revenue from our funded backlog: the unilateral right of the USG to cancel multi-year contracts and related orders or to terminate existing contracts for convenience or default; in the case of unfunded backlog, the potential that funding will not be made available; and, in the case of priced options, the risk that our clients will not exercise their options.
In addition, contract backlog excludes orders under contracts for which the period of performance has expired, and we may not recognize revenue on the funded backlog that includes such orders due to, among other reasons, the tardy submission of invoices by our subcontractors and the expiration of the relevant appropriated funding in accordance with a predetermined expiration date such as the end of the USG's fiscal year.
We expect to recognize revenue from a substantial portion of funded backlog within the next 24 months. However, given the uncertainties discussed above, as well as the risks described in U.S. Political, Budgetary, and Regulatory Environment, we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all.
Competition
We operate in a highly competitive industry that includes many entities, some of which are larger in size and have greater financial resources than we have. We know of no single competitor that is dominant in our fields of technology. Key characteristics of our industry include long operating cycles and intense competition, which is evident through the number of competitors bidding on program opportunities and the number of competitor protests of U.S. government procurement awards. We have a small share of the addressable market for our solutions and services and intend to achieve growth and increase market share both organically and through strategic acquisitions.
Research and Development
The Company from time to time engages in research and development relative to its service offerings; however, the amounts expended for such efforts are not material to our financial statements.
Intellectual Property
The Company currently has no patents or trademarks that it believes to be material to the business. The Company does have significant intellectual property in the form of our highly educated and trained workforce which provides us with technical expertise and an enhanced ability to win “re-compete” business.
Regulation
As a contractor to the USG, as well as state and local governments, we are heavily regulated in most fields in which we operate. We deal with numerous USG agencies and entities, and when working with these and other entities, we must comply with and are affected by unique laws and regulations relating to the formation, administration, and performance of government contracts. Some significant laws and regulations that affect us include the following:
•the Federal Acquisition Regulation (“FAR”) and agency regulations supplemental to FAR, which regulate the formation, administration, and performance of USG contracts;
•the False Claims Act, which imposes civil and criminal liability for violations, including substantial monetary penalties for, among other things, presenting false or fraudulent claims for payments or approval;
•the False Statements Act, which imposes civil and criminal liability for making false statements to the USG;
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•the Truthful Cost or Pricing Data Statute (formerly known as the “Truth in Negotiations Act”), which requires certification and disclosure of cost and pricing data in connection with the negotiation of certain contracts, modifications, or task orders;
•the Procurement Integrity Act, which regulates access to competitor bid and proposal information and certain internal government procurement sensitive information, and our ability to provide compensation to certain former government procurement officials;
•laws and regulations restricting the ability of a contractor to provide gifts or gratuities to employees of the USG;
•post-government employment laws and regulations, which restrict the ability of a contractor to recruit and hire current employees of the USG and deploy former employees of the USG;
•laws, regulations, and executive orders restricting the handling, use, and dissemination of information classified for national security purposes or determined to be “controlled unclassified information” or “for official use only,” and the export of certain products, services, and technical data, including requirements regarding any applicable licensing of our employees involved in such work;
•laws, regulations, and executive orders regulating the handling, use, and dissemination of personally identifiable information in the course of performing a USG contract;
•international trade compliance laws, regulations, and executive orders that prohibit business with certain sanctioned entities and require authorization for certain exports or imports in order to protect national security and global stability;
•laws, regulations, and executive orders governing organizational conflicts of interest that may restrict our ability to compete for certain USG contracts because of the work that we currently perform for the USG or may require that we take measures such as firewalling off certain employees or restricting their future work activities due to the current work that they perform under a USG contract;
•laws, regulations, and executive orders that impose requirements on us to ensure compliance with requirements and protect the government from risks related to our supply chain, including compliance with Cybersecurity Maturity Model Certification (“CMMC”);
•laws, regulations, and mandatory contract provisions providing protections to employees or subcontractors seeking to report alleged fraud, waste, and abuse related to a government contract;
•the National Industrial Security Operating Manual and other laws and regulations concerning the maintenance of a facility security clearance and the safeguarding of classified materials;
•the Contractor Business Systems rule, with authorizes DoD agencies to withhold a portion of our payments if we are determined to have a significant deficiency in our accounting, cost estimating, purchasing, earned value management, material management and accounting, and/or property management system; and
•the Cost Accounting Standards and Cost Principles, which impose accounting and allowability requirements that govern our right to reimbursement under certain cost-based USG contracts and require consistency of accounting practices over time.
Given the magnitude of our revenue derived from contracts with the DoD, the Defense Contract Audit Agency (“DCAA”) is our relevant government audit agency. The DCAA audits the adequacy of our internal control systems and policies including, among other areas, compensation. The Defense Contract Management Agency (“DCMA”) as our relevant government contract management agency, may determine that a portion of our employee compensation is unallowable based on the findings and recommendations in the DCAA’s audits. In addition, the DCMA directly reviews the adequacy of certain other business systems, such as our purchasing system. We are also subject to audit by Inspectors General of other USG agencies.
The USG may revise its procurement practices or adopt new contract rules and regulations at any time. Internationally, we are subject to special USG laws and regulations (such as The Foreign Corrupt Practices Act of 1977 (the “FCPA”)), local government regulations and procurement policies and practices, including regulations relating to import-export control, investments, exchange controls, and repatriation of earnings, as well as varying currency, political, and economic risks. To
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ensure CMMC compliance, the Company has a senior executive on its management team whose responsibilities includes preparing the Company for CMMC certification.
USG contracts are, by their terms, subject to termination by the USG either for convenience or default by the contractor. In addition, USG contracts are conditioned upon the continuing availability of U.S. Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance could take many years. As is common in the industry, we are subject to business risk, including changes in governmental appropriations, national defense policies, service modernization plans, and availability of funds. Any of these factors could materially adversely affect our business with the USG in the future.
The USG has a broad range of actions it can utilize to enforce its procurement law and policies. These include proposing a contractor, certain of its operations, or individual employees for debarment; or, suspending or debarring a contractor, certain of its operations or individual employees from future government business. In addition to criminal, civil, and administrative actions by the USG, under the False Claims Act, an individual alleging fraud related to payments under a USG contract or program may file a qui tam lawsuit on behalf of the government against us; if successful in obtaining a judgment or settlement, the individual filing the suit may receive up to thirty percent (30%) of the amount recovered by the government.
See “Part I, Item 1A, Risk Factors.” We generate substantially all of our revenue from contracts with the U.S. federal, state, and local governments which are subject to a number of challenges and risks that may adversely impact our business, prospects, financial condition, and operating results.
Human Capital Resources
Our employees are our most valuable resource. We are in continuing competition for highly skilled professionals in virtually all of our market areas. The success and growth of our business are significantly correlated with our ability to recruit, train, promote, and retain high quality people at all levels of the organization. As of December 31, 2024, we employed 238 full and part-time employees with fifty-six percent (56%) of our employees holding degrees in science, technology, engineering, or mathematics fields, twenty-nine percent (29%) holding advanced degrees, and ninety-four percent (94%) of our employees holding security clearances. We also retain 17 independent contractors. We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective bargaining arrangements. We consider our employee relations to be good. All employees are subject to contractual agreements that specify requirements on confidentiality and restrictions on working for competitors, as well as other standard matters.
Castellum considers benefits a critical tool for employee recruitment and retention. Prior to acquiring Global Technology and Management Resources, Inc. (“GTMR”) in March 2023, Castellum migrated all employees from their legacy benefits programs to the ADP Professional Employer Organization (“PEO”). At the time of acquisition, GTMR employees remained under a separate legacy benefits program. Ahead of our annual benefits open enrollment process in the second quarter of 2024, Castellum transitioned to one benefit model, consolidating all employees under a unified benefits plan covering dental, vision, life insurance, disability coverage, legal assistance, financial planning, and other comprehensive services, effective June 1, 2024. In December 2024, we merged the company's 401(k) plans into a single plan.
Available Information

The Company was incorporated in Nevada on September 30, 2010 under the name Passionate Pet, Inc. and in January 2013, the Company changed its name to Firstin Wireless Technology, Inc. In March 2015, the Company changed its name to BioNovelus, Inc. On June 12, 2019, the Company acquired Bayberry Acquisition Corporation, a Nevada corporation (“Bayberry” and, as context requires, the “Bayberry Acquisition”). On November 21, 2019, the Company acquired Corvus Consulting, LLC, (“Corvus”), a Delaware limited liability company. On December 26, 2019, following our acquisition of Corvus, we changed our name from BioNovelus, Inc. to Castellum, Inc.

Our principal executive offices are located at 1934 Old Gallows Road, Suite 350, Vienna, Virginia 22182. Our telephone number is (703) 752-6157 and our website address is www.castellumus.com.

We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.

Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S. Securities and Exchange Commission (“SEC”). The SEC allows us to disclose important information by referring to it in this manner.
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Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements for our annual stockholders’ meetings and amendments to those reports are available free of charge on our website www.castellumus.com/investor-relations.html, as soon as reasonably practical after we electronically file the material with, or furnish it to, the SEC. In addition, copies of our annual report will be made available, free of charge, upon written request. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Castellum.


Item 1A. Risk Factors
A description of some of the most important risks and uncertainties associated with our business is set forth below. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K, including our audited consolidated financial statements and related notes included in “Part II, Item 8, Financial Statements” and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations, and growth prospects.
Risks Related to our Business, Industry and Operations
We lack a long-term operating history on which to evaluate our consolidated business and determine if we will be able to execute our business plan, and we can give no assurance that our operations will result in sustained profitability.
We are focused on building a large, successful technology company in the areas of IT, electronic warfare, information warfare, and cybersecurity with businesses in the governmental and commercial markets. Since November 2019, we have executed our business plan and completed seven acquisitions. As a result, we have a limited operating history on a consolidated basis to evaluate our business and prospects. Our business operations are subject to numerous risks, uncertainties, expenses, and difficulties associated with early-stage enterprises. You should consider an investment in our Company in light of these risks, uncertainties, expenses, and difficulties. Such risks include:
•limited operating history at our current scale;
•our ability to raise capital to develop our business and fund our operations;
•our ability to anticipate and adapt to developing markets;
•acceptance by our customers;
•limited marketing experience;
•competition from competitors with substantially greater financial resources and assets; and
•the ability to identify, attract, and retain qualified personnel.
Because we are subject to these risks, and the other risks outlined below, you may have a difficult time evaluating our business and your investment in our Company.
We have historically suffered net losses, and we may not be able to sustain profitability.
We had an accumulated deficit of $54,082,484 as of December 31, 2024, and we expect to continue to generate a net loss in the year ending December 31, 2025. As a result, we are incurring net losses, and it is possible that we may not be able to achieve the revenue levels necessary to achieve and sustain net profitability. If we fail to generate sufficient revenues to operate profitably on a consistent basis, or if we are unable to fund our continuing losses, you could lose all or part of your investment.
We rely upon a few, select key employees who are instrumental to our ability to conduct and grow our business. In the event any of those key employees would no longer be affiliated with the Company, and we did not replace them with
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equally capable replacements, it may have a material detrimental impact on our ability to successfully operate our business.
Our future success will depend in large part on our ability to attract, retain, and motivate high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors. The loss of qualified executives and key employees, or our inability to attract, retain, and motivate high-quality executives and employees required for the planned expansion of our business, may harm our operating results and impair our ability to grow.
Effective July 1, 2024, Glen R. Ives, the Company’s former chief operating officer (“COO”), was appointed as President and CEO, after which, on September 1, 2024, Andrew L. Merriman was promoted to COO. We depend on the continued services of our key personnel, including our CEO, David T. Bell, our Chief Financial Officer (“CFO”), our COO, and Jay O. Wright, our Executive Vice-President of Strategy and General Counsel. Our work with each of these key personnel is subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.
Certain key members of our management team lack significant public company experience in their positions and our executive management team has limited time working together.
The members of our team do not all have significant prior experience working in their roles for a public company, including our CEO, COO, and CFO. The management team also has limited experience working together as a team. The inability of any member of our management team to operate effectively in their position, or for the management team to effectively work together, could materially and adversely affect our operating results and future prospects.
We may have difficulty raising additional capital, which could deprive us of necessary resources.
We expect to continue to devote significant capital resources to fund our acquisition strategy. To support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of public or private debt or equity financing or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets and the market price of our common stock. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock. If we are unable to raise additional capital to implement our business plan it could have a material adverse effect on our financial condition, business prospects, and operations, and the value of an investment in our Company.
You may experience dilution, subordination of stockholder rights, preferences, and privileges, and decrease in market price of our common stock as a result of our financing efforts.
Any future equity financing may involve substantial dilution to our then existing stockholders. Any future debt financing could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. There can be no assurance that such additional capital will be available, on a timely basis, or on terms acceptable to us. If we are unsuccessful in raising additional capital or the terms of raising such capital are unacceptable, then we may have to modify our business plan and/or curtail our planned activities and other operations.
Sales of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock. We may issue substantial amounts of common stock in the future, which would dilute the percentage ownership held by the investors who purchase shares of our common stock in any such offering. Additionally, we have certain potential dilutive instruments, of which the conversion of these instruments could result in dilution to stockholders: As of March 10, 2025 the maximum potential dilution is 15,873,277 shares and includes Series A preferred stock convertible into approximately 587,500 shares of common stock, Series C preferred stock convertible into 356,250 shares of common stock, options granted exercisable into 9,515,000 shares of common stock, and warrants granted exercisable into 5,664,527 shares of common stock.
Failure to effectively manage any future growth could place strains on our managerial, operational, and financial resources and could adversely affect our business and operating results.
Our expected growth could place a strain on our managerial, operational, and financial resources. Further, if our subsidiaries’ businesses grow, then we will be required to manage multiple relationships. Any further growth by us or our subsidiaries, or any increase in the number of our strategic relationships, will increase the strain on our managerial,
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operational, and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan and could have a material adverse effect on our financial condition, business prospects, and operations, and the value of an investment in our Company.
We generate substantially all of our revenue from contracts with the U.S. federal, state, and local governments which are subject to a number of challenges and risks that may adversely impact our business, prospects, financial condition, and operating results.
Sales to U.S. federal, state, and local governmental agencies have in the past accounted for, and may in the future account for, substantially all of our revenue. Sales to such government entities are subject to the following risks:
•selling to governmental agencies can be highly competitive, expensive, and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale. Our existing contracts typically expire after some period of time and must be “re-competed.” There is no guarantee that we will win such re-compete efforts;
•government certification requirements applicable to our products may change and in doing so restrict our ability to sell into the U.S. federal government sector until we have attained the revised certification;
•government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products and services;
•governments can generally terminate our contracts “for convenience”, meaning we could lose part or all of our revenue on short notice, and more specifically, the potential impact of the U.S. DOGE Service Temporary Organization on government spending and terminating contracts for convenience;
•governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our services, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal activities; and
•when we are a subcontractor, we have less control over the execution and success of the contract with the government.
If we were suspended or debarred from contracting with the USG, if our reputation or relationship with government agencies was impaired, or if the government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, prospects, financial condition, and operating results would be materially and adversely affected.
We operate in an industry that is highly regulated and unexpected changes in laws could have a significant adverse impact on our business.
As a contractor to the USG, as well as state and local governments, we are heavily regulated in most fields in which we operate. We deal with numerous USG agencies and entities, and when working with these and other entities, we must comply with and are affected by unique laws and regulations relating to the formation, administration, and performance of government contracts. Some significant laws and regulations that affect us include the following:
•the FAR, and agency regulations supplemental to FAR, which regulate the formation, administration, and performance of USG contracts;
•the False Statements Act, which imposes civil and criminal liability for making false statements to the USG;
•the Truthful Cost or Pricing Data Statute (formerly known as the “Truth in Negotiations Act”), which requires certification and disclosure of cost and pricing data in connection with the negotiation of certain contracts, modifications, or task orders;
•the Procurement Integrity Act, which regulates access to competitor bid and proposal information and certain internal government procurement sensitive information, and our ability to provide compensation to certain former government procurement officials;
•laws and regulations restricting the ability of a contractor to provide gifts or gratuities to employees of the USG, including the FCPA which prohibits U.S. citizens and entities from bribing foreign government officials to benefit their business interests;
•post-government employment laws and regulations, which restrict the ability of a contractor to recruit and hire current employees of the USG and deploy former employees of the USG;
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•laws, regulations, and executive orders restricting the handling, use, and dissemination of information classified for national security purposes or determined to be “controlled unclassified information” or “for official use only,” and the export of certain products, services, and technical data, including requirements regarding any applicable licensing of our employees involved in such work;
•laws, regulations, and executive orders regulating the handling, use, and dissemination of personally identifiable information in the course of performing a USG contract;
•international trade compliance laws, regulations, and executive orders that prohibit business with certain sanctioned entities and require authorization for certain exports or imports in order to protect national security and global stability, including The International Traffic in Arms Regulations that controls the manufacture, sale, and distribution of defense and space-related articles and services as defined in the United States Munitions List;
•laws, regulations, and executive orders governing organizational conflicts of interest that may restrict our ability to compete for certain USG contracts because of the work that we currently perform for the USG or may require that we take measures such as firewalling off certain employees or restricting their future work activities due to the current work that they perform under a USG contract;
•laws, regulations, and executive orders that impose requirements on us to ensure compliance with requirements and protect the USG from risks related to our supply chain such as compliance with CMMC;
•laws, regulations, and mandatory contract provisions providing protections to employees or subcontractors seeking to report alleged fraud, waste, and abuse related to a USG contract;
•the Contractor Business Systems rule, which authorizes DoD agencies to withhold a portion of our payments if we are determined to have a significant deficiency in our accounting, cost estimating, purchasing, earned value management, material management and accounting, and/or property management system; and
•the Cost Accounting Standards and Cost Principles, which impose accounting and allowability requirements that govern our right to reimbursement under certain cost-based USG contracts and require consistency of accounting practices over time.
Given the magnitude of our revenue derived from contracts with the DoD, the DCAA is our relevant government audit agency. The DCAA audits the adequacy of our internal control systems and policies including, among other areas, compensation. The DCMA, as our relevant government contract management agency, may determine that a portion of our employee compensation is unallowable based on the findings and recommendations in the DCAA’s audits. In addition, the DCMA directly reviews the adequacy of certain other business systems, such as our purchasing system. We are also subject to audit by Inspectors General of other USG agencies.
The USG may revise its procurement practices or adopt new contract rules and regulations at any time. When operating outside the U.S., we are subject to special USG laws and regulations (such as the FCPA), local government regulations and procurement policies and practices, including regulations relating to import-export control, investments, exchange controls, and repatriation of earnings, as well as varying currency, political, and economic risks.
USG contracts are, by the terms, subject to termination by the USG either for convenience or default by the contractor. In addition, USG contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance could take many years. As is common in the industry, our Company is subject to business risk, including changes in governmental appropriations, national defense policies, service modernizations plans, military base reductions and closures, and availability of funds. Any of these factors could materially adversely affect our Company's business with the USG in the future.
The USG has a broad range of actions it can instigate to enforce its procurement law and policies. These include proposing a contractor, certain of its operations or individual employees for debarment or suspending or debarring a contractor, certain of its operations or individual employees from future government business. In addition to criminal, civil, and administrative actions by the USG, under The False Claims Act, an individual alleging fraud related to payments under a USG contract or program may file a qui tam lawsuit on behalf of the government against us; if successful in obtaining a judgment or settlement, the individual filing the suit may receive up to 30% of the amount recovered by the government. If we are subject to an enforcement action by the USG, it could materially and adversely affect our results of operations.
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USG contracts contain numerous provisions that are unfavorable to us.
USG contracts contain provisions and are subject to laws and regulations that give the government rights and remedies, some of which are not typically found in commercial contracts, including allowing the government to:
•cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;
•claim rights in systems and software developed by us;
•suspend or debar us from doing business with the USG or with a governmental agency;
•impose fines and penalties and subject us to criminal prosecution; and
•control or prohibit the export of our data technology or proprietary service solutions.
If the government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses, and profit on work completed prior to the termination. If the government terminates a contract for default, we may be unable to recover even those amounts and instead may be liable for excess costs incurred by the government in procuring undelivered items and services from another source. Depending on the value of a contract, such termination could cause our actual results to differ materially and adversely from those anticipated. Certain contracts also contain organizational conflicts of interest (“OCI”) clauses that limit our ability to compete for or perform certain other contracts. OCIs arise any time we engage in activities that (i) make us unable or potentially unable to render impartial assistance or advice to the government; (ii) impair or might impair our objectivity in performing contract work; or (iii) provide us with an unfair competitive advantage. Depending upon the value of the matters affected, an OCI issue that precludes our participation in or performance of a program or contract could cause our actual results to differ materially and adversely from those anticipated.
If we are unable to maintain successful relationships with our teaming partners, our ability to market, sell, and distribute our services will be limited, and our business, financial position, and results of operations will be harmed.
We expect that sales through teaming partners will continue to be a significant percentage of our revenue. Our agreements with our teaming partners are generally non-exclusive, meaning our teaming partners may offer customers services from several different companies, including services that compete with ours. The loss of a substantial number of our teaming partners, our possible inability to replace them, or the failure to recruit additional teaming partners could materially and adversely affect our results of operations.
We are exposed to the credit risk of some of our teaming partners, which could result in material losses.
Most of our sales for work performed for the USG are through our teaming partners and are on an open credit basis. We cannot assure an investor these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, results of operations, and financial condition could be harmed.
Our business could be adversely affected by significant delays or reductions in appropriations for our programs or USG funding more broadly, including a prolonged continuing resolution, government shutdown, or breach of the debt ceiling, as well as the imposition by the USG of sequestration in the absence of an approved budget or CR.

USG programs are subject to annual congressional budget authorization and appropriation processes. For many programs, Congress appropriates funds annually even though the program performance period may extend over several years. Programs are often partially funded initially, with additional funds committed only as Congress makes further appropriations. Because we derive substantially all of our revenue from contracts with the federal, state, and local governments, we believe that the success and development of our business will continue to depend on our successful participation in federal, state, and local contract programs. Since the majority of our revenue comes from the USG, changes in USG budgetary priorities, such as for homeland security or to address Social Security or Medicare reform, or actions taken to address government budget deficits, the national debt, and/or prevailing economic conditions, could directly affect our financial performance.

When we or our subcontractors incur costs in excess of funds obligated on a contract, we are generally at risk for reimbursement unless and until additional funds are obligated to the contract. We cannot predict what funding will ultimately be approved for individual programs. In addition, pressures on, as well as laws and plans relating to the federal budget, potential changes in priorities and defense spending, the timing and substance of the appropriations process, use of continuing resolutions, and the federal debt limit (including a breach of the federal debt ceiling), could adversely affect the amount and timing of funding for individual programs and delay purchasing or payments by our customers.
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The U.S. continues to face a changing geopolitical environment, along with substantial fiscal, economic, and security challenges, which affect funding and budgetary priorities. The budget and macroeconomic environment, global security environment, political instability, and uncertainty surrounding the appropriations processes and the debt ceiling, remain significant short and long-term risks. See “U.S. Political, Budgetary, and Regulatory Environment” in MD&A. In addition, high deficit levels and high debt servicing costs could drive cuts to federal spending. Considerable uncertainty exists regarding how future budget and program decisions will unfold. If annual appropriations bills are not timely enacted, the USG may continue to operate under a CR, (potentially of extended duration), restricting new contract or program starts, presenting resource allocation challenges and placing limitations on budgets.

We also may face a prolonged government shutdown that could lead to program cancellations, disruptions and/or stop work orders and could limit the USG’s ability to progress programs and make timely payments. A prolonged shutdown could limit our ability to perform on our contracts and successfully compete for new work. If the statutory debt limit is not increased adequately, we could be obligated to work without receiving timely payments, and a prolonged breach could have far-reaching adverse consequences.
If the USG imposes sequestration in the absence of an approved budget or CR, our participation in USG contract programs could be impaired. A significant decline in USG expenditures, a shift of expenditures away from programs that we support, or a change in USG contracting policies could cause USG agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty or not to exercise options to renew contracts.
At times, we may continue to work without funding, and use our own internal funds to meet our customer’s desired delivery dates for products or services. It is uncertain at this time which of our programs’ funding could be reduced in future years or whether new legislation will be passed by Congress in the next fiscal year that could result in additional or alternative funding cuts.
If we fail to establish and maintain important relationships with government entities and agencies, our ability to successfully bid for new business may be adversely affected.
To facilitate our ability to prepare bids for new business, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal input and advice to government entities and agencies prior to the development of a formal bid. We may be unable to successfully maintain our relationships with government entities and agencies, and any failure to do so may adversely affect our ability to bid successfully for new business and could cause our actual results to differ materially and adversely from those anticipated.
We derive significant revenue from contracts and task orders awarded through a competitive bidding process. If we are unable to consistently win new awards over any extended period, our business and prospects will be adversely affected.
Our contracts and task orders with the USG are typically awarded through a competitive bidding process. We expect that much of that business we will seek in the foreseeable future will continue to be awarded through competitive bidding. Budgetary pressures and changes in the procurement process have caused many government customers to increasingly purchase goods and services through IDIQ contracts, GSA schedule contracts, and other GWACs. These contracts, some of which are awarded to multiple contractors, have increased competition and pricing pressure, requiring that we make sustained post-award efforts to realize revenue under each such contract.
This competitive bidding process presents a number of risks, including the following:
•we bid on programs before the completion of their design, which may result in unforeseen technological difficulties and cost overruns;
•we expend substantial cost and managerial time and efforts to prepare bids and proposals for contracts that we may not win;
•we may be unable to estimate accurately the resources and cost structure that will be required to service any contract we win; and
•we may encounter expense and delay if our competitors protest or challenge awards or contracts to us in competitive bidding, and any such protest or challenge could result in the resubmission of bids on modified specifications, or in termination, reduction, or modification of the awarded contract.
If we are unable to win particular contracts we may be prevented from providing services to customers that are purchased under those contracts for a number of years. If we are unable to consistently win new contract awards over any extended
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period, our business and prospects will be adversely affected and that could cause our actual results to differ materially and adversely from those anticipated. If we are unable to win prime contracts, or acquire companies with prime contract vehicles, our business and prospects will be adversely affected. In addition, upon the expiration of a contract, if the customer requires further services of the type provided by the contract, there is frequently a competitive rebidding process. There can be no assurance that we will win any particular bid, or that we will be able to replace business lost upon expiration or completion of a contract and the termination or non-renewal of any of our significant contracts could cause our actual results to differ materially and adversely from those anticipated.
Our business may suffer if we or our employees are unable to obtain the security clearances or other qualifications needed to perform services for our customers.
Many of our USG contracts require us to have security clearances and employ personnel with specified levels of education, work experience, and security clearances. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain. If we or our employees lose or are unable to obtain necessary security clearances, we may not be able to win new business and our existing customers could terminate their contracts with us or decide not to renew them. To the extent we cannot obtain or maintain the required security clearances for our employees working on a particular contract, we may not generate the revenue anticipated from the contract which could cause our results to differ materially and adversely from those anticipated.
If our prime contractors fail to maintain their relationships with the applicable governmental agency and fulfill their contractual obligations, our performance as a subcontractor and our ability to obtain future business could be materially and adversely impacted and our actual results could differ materially and adversely from those anticipated.
Our performance as a subcontractor on a government contract is dependent on our prime contractor’s ability to satisfactorily maintain its relationship with the applicable government agency and fulfill its obligations under their contract. A failure by our prime contractor to fulfill its obligations under their contract could result in the termination of the prime contract, thereby resulting in the termination of our subcontract. If any significant subcontract is terminated in this manner, it could cause our actual results to differ materially and adversely from those anticipated.
The USG’s appropriation process and other factors may delay the collection of our receivables, and our business may be adversely affected if we cannot collect our receivables in a timely manner.
We depend on the timely collections of our receivables to generate cash flow, provide working capital, pay debt, and continue our business operations. If the USG or any of our other customers or any prime contractors for which we are a subcontractor fail to pay or delays the payment of their outstanding invoices for any reason, our business and financial condition may be materially and adversely affected. The USG may fail to pay outstanding invoices for a number of reasons, including lack of appropriated funds, administrative error, or lack of an approved budget. If we experience difficulties collecting receivables, it could cause our actual results to differ materially and adversely from those anticipated.
The USG may change its procurement or other practices in a manner adverse to us.
The USG may change its procurement practices or adopt new contracting rules and regulations, such as those related to cost accounting standards. It could also adopt new contracting methods relating to GSA contracts or other government-wide contracts, adopt new socio-economic requirements, or change the basis upon which it reimburses our compensation and other expenses or otherwise limit such reimbursements. In all such cases, there is uncertainty surrounding the changes and what actual impacts they may have on contractors. These changes could impair our ability to obtain new contracts or win re-competed contracts or adversely affect our future profit margin. Any new contracting methods could be costly or administratively difficult for us to satisfy and, as a result, could cause actual results to differ materially and adversely from those anticipated.
Our contracts and administrative processes and systems are subject to audits and cost adjustments by the USG, which could reduce our revenue, disrupt our business, or otherwise adversely affect our operating results.
USG agencies routinely audit and investigate government contracts and government contractors’ administrative processes and systems. These agencies review our performance on contracts, pricing practices, cost structure, and compliance with applicable laws, regulations, and standards. They also evaluate the adequacy of internal controls over our business systems, including our purchasing, accounting, estimating, earned value management, and government property systems. Any costs found to be improperly allocated or assigned to contracts will not be reimbursed, and any such costs already reimbursed
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must be refunded and certain penalties may be imposed. Moreover, if any of the administrative processes and systems are found not to comply with requirements, we may be subjected to increased government scrutiny and approval that could delay or otherwise adversely affect our ability to compete for or perform contracts or collect our revenue in a timely manner. Therefore, an unfavorable outcome of an audit by the DCAA or another government agency could cause actual results to differ materially and adversely from those anticipated. If a government investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines, and suspension or debarment from doing business with the USG. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Each of these results could cause actual results to differ materially and adversely from those anticipated.
We may not receive the full amounts authorized under the contracts included in our backlog, which could reduce our revenue in future periods below the levels anticipated.
Our total backlog consists of funded and unfunded amounts. Funded backlog represents contract value from funds appropriated by Congress and obligated by the customer which is expected to be recognized as revenue. Unfunded backlog represents the sum of the unappropriated contract value on executed contracts and unexercised option years that is expected to be recognized as revenue. The primary risks that could affect our ability to recognize revenue from backlog on a timely basis or at all are: program schedule changes, contract modifications, and our ability to assimilate and deploy new consulting staff against funded backlog; cost-cutting initiatives and other efforts to reduce USG spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to delays in the completion of the USG's budgeting process and the use of CRs by the USG to fund its operations. The amount of our funded backlog is also subject to change, due to, among other factors: changes in congressional appropriations that reflect changes in USG policies or priorities resulting from various military, political, economic, or international developments; changes in the use of USG contracting vehicles, and the provisions therein used to procure our services and adjustments to the scope of services, or cancellation of contracts, by the USG at any time. In addition, contract backlog includes orders under contracts for which the period of performance has expired, and we may not recognize revenue on the funded backlog that includes such orders due to, among other reasons, the tardy submission of invoices by our subcontractors and the expiration of the relevant appropriated funding in accordance with a predetermined expiration date such as the end of the USG's fiscal year. Our backlog may not result in actual revenue in any particular period, or at all, which could cause our actual results to differ materially and adversely from those anticipated.
Without additional Congressional appropriations, some of the contracts included in our backlog will remain unfunded, which could materially and adversely affect our future operating results.
Many of our USG contracts include multi-year performance periods in which Congress appropriates funds on an annual basis. A majority of our contracts are only partially funded at any point during their full performance period and unfunded contract work is subject to future appropriations by Congress. As a result of a lack of appropriated funds or efforts to reduce USG spending, our backlog may not result in revenue or may be delayed. If our backlog estimate is inaccurate and we fail to realize those amounts as revenue, our future operating results could be materially and adversely affected.
Employee misconduct, including security breaches, could result in the loss of customers and our suspension or debarment from contracting with the USG.
We may be unable to prevent our employees from engaging in misconduct, fraud, or other improper activities that could adversely affect our business and reputation. Misconduct could include the failure to comply with USG procurement regulations, regulations regarding the protection of classified information, and legislation regarding the pricing of labor and other costs in government contracts. Many of the systems we work on involve managing and protecting information involved in national security and other sensitive government functions. A security breach in one of these systems could prevent us from having access to such critically sensitive systems. Other examples of employee misconduct could include timecard fraud and violations of the Anti-Kickback Act of 1986. The precautions we take to prevent and detect this activity may not be effective, and we could face unknown risks or losses. As a result of employee misconduct, we could face fines and penalties, loss of security clearance, and suspension or debarment from contracting with the USG, which could cause our actual results to differ materially and adversely from those anticipated.
We face intense competition and could fail to gain market share from our competitors, which could adversely affect our business, financial condition, and results of operations.

We obtain much of our business on the basis of proposals submitted in response to requests from potential and current customers, who may also receive proposals from other firms. The market for our products and services is intensely competitive and characterized by rapid changes in technology, customer requirements, industry standards, and frequent
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new product introductions and improvements. We anticipate continued challenges from current competitors, which in many cases are more established and enjoy greater resources than us, as well as by new entrants into the industry. Non-traditional players have entered the market and have established positions related to such areas as cloud computing, cyber, satellite operations, and business systems. We also face indirect competition from certain government agencies that perform services for themselves similar to those marketed by us. If we are unable to anticipate or effectively react to these competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate or revenue that could adversely affect our business and results of operations.
In addition, some of our larger competitors have substantially broader product and service offerings and may be able to leverage their relationships with distribution partners and customers based on other products or services, or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our products, subscriptions and services, including by selling at zero or negative margins, product bundling, or offering closed technology platforms. Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. As a result, even if the features of our platform or the quality of our services are superior, customers may not purchase our products or services. In addition, new innovative start-up companies, and larger companies that are making significant investments in research and development, may invent similar or superior products and technologies that compete with our platform. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition, and results of operations could be adversely affected.
Systems failures may disrupt our business and have an adverse effect on our operating results.

Any systems failures, including network, software, or hardware failures, whether caused by us, a third-party service provider, unauthorized intruders and hackers, computer viruses, natural disasters, power shortages, or terrorist attacks, could cause loss of data or interruptions or delays in our business or that of our customers. Like other companies, we have experienced cyber security threats to our data and systems, our Company sensitive information, and our IT infrastructure, including attempted malware and computer virus attacks, unauthorized access, systems failures, and temporary disruptions. Prior attempted cyber-attacks directed at us have not had a material adverse impact on our business and financial results.

Many of the systems that we develop, integrate, maintain, otherwise support or use involve managing and protecting intelligence, national security, and other sensitive government information. A security breach or system failure in a system that we develop, integrate, maintain or otherwise support could result in a loss of revenue, remediation costs, claims for damages or contract termination and our errors and omissions liability insurance may be inadequate to compensate us from all the damages that we might incur. Any such event could also cause serious damage to our reputation and prevent us from having access to or being eligible further work on such sensitive systems for government customers.

In addition, to provide services to our customers, we often depend upon or use customer systems that are supported by the customer or third parties. Any security breach or system failure in such systems could result in an interruption of our customer’s operations, significant delays under a contract, loss of revenue, claims for damages, contract termination, and have a material adverse effect on our results of operations.

Our insurance, including for errors and omissions liability and property and business interruption, may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our actual results could differ materially and adversely from those anticipated.
Our failure to adequately protect our confidential information and proprietary rights may harm our competitive position.
Our success depends, in part, upon our ability to protect our proprietary information. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter misappropriation of our proprietary information. In addition, we may be unable to detect unauthorized use of our proprietary information in order to take appropriate steps to enforce our rights. If we are unable to prevent third parties from infringing or misappropriating our proprietary information, our competitive position could be harmed, and our actual results could differ materially and adversely from those anticipated.
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Our annual revenue and operating results could be volatile due to the unpredictability of the USG’s budgeting process and policy priorities.
Our annual revenue and operating results may fluctuate significantly and unpredictably in the future. If the USG does not adopt, or delays adoption of, a budget for each fiscal year beginning on October 1, or fails to pass a CR, federal agencies may be forced to suspend our contracts and delay the award of new and follow-on contracts and orders due to a lack of funding. Further, the rate at which the USG procures technology may be negatively affected following changes in presidential administrations and senior government officials or by “divided government” where one political party controls the White House and another party controls Congress. Therefore, period-to-period comparisons of our operating results may not be a good indication of our future performance. Our annual operating results may not meet the expectations of securities analysts or investors, which in turn may have an adverse effect on the market price of our common stock.
We may lose money or generate less than anticipated profits if we do not accurately estimate the cost of an engagement which is conducted on a fixed-price basis.
We generated 6% of our total revenue in the year ended December 31, 2024, 7% of our total revenue in the year ended December 31, 2023, and 8% of our total revenue in the year ended December 31, 2022, from FFP contracts. FFP contracts require us to price our contracts by predicting our expenditures in advance. In addition, some of our engagements obligate us to provide ongoing maintenance and other supporting or ancillary services on a FFP basis or with limitations on our ability to increase prices. Many of our engagements are also on a T&M basis. To the extent that our actual labor costs are higher than the contract rates, our actual results could differ materially and adversely from those anticipated.
When making proposals for engagements on a FFP basis, we rely on our estimates of costs and timing for completing the projects. These estimates reflect our best judgment regarding our capability to complete the task efficiently. Any increased or unexpected costs or unanticipated delays in connection with the performance of FFP contracts, including delays caused by factors outside of our control, could make these contracts less profitable or unprofitable. If we encounter such problems in the future, our actual results could differ materially and adversely from those anticipated.
Our earnings and margins may vary based on the mix of our contracts and programs.
As of December 31, 2024, our backlog included cost reimbursable, T&M, and FFP contracts. Cost reimbursable and T&M contracts generally have lower profit margins than FFP contracts. Our earnings and margins may, therefore, vary materially and adversely depending on the relative mix of contract types, the costs incurred in their performance, the achievement of other performance objectives and the state of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined.
Our self-insurance program may expose us to significant and unexpected costs and losses.

To help control our overall long-term costs associated with employee health benefits, we began maintaining our employee medical insurance benefits on a self-insured basis effective June 1, 2024. To limit our exposure, we have third party stop-loss insurance coverage which sets a limit on our liability for both individual and aggregate claim costs. We record a liability for our estimated cost of claims incurred but unpaid as of each balance sheets date. Our estimated liability is based on assumptions we believe to be reasonable under the current circumstances and will be adjusted as warranted based on changing circumstances. It is possible, however, that our actual liabilities may exceed our estimates of losses. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, which could cause us to record additional expenses. Our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance. If a successful claim is made against us and is not covered by our insurance or exceeds our policy limits, our business may be negatively and materially impacted. These fluctuations could have a material adverse effect on our business, operating results, and financial condition.

Risks Related to our Acquisitions
We may have difficulty integrating the operations of any companies we acquire, which could cause actual results to differ materially and adversely from what we anticipated.
The success of our acquisition strategy will depend on our ability to continue to successfully integrate any businesses we may acquire in the future. The integration of these businesses into our operations may result in unforeseen operating
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difficulties, absorb significant management attention, and require significant financial resources that would otherwise be available for the ongoing development of our business. These integration difficulties include the integration of personnel with disparate business backgrounds, the transition of new information systems, coordination of geographically dispersed organizations, loss of key employees of acquired companies, and reconciliation of different corporate cultures. For these or other reasons, we may be unable to retain key customers of acquired companies. Moreover, any acquired business may fail to generate the revenue or net income we expected or produce the efficiencies or cost-savings we anticipated. Any of these outcomes could cause our actual results to differ materially and adversely from those anticipated.
We have substantial investments in recorded goodwill as a result of prior acquisitions and a change in future business conditions could cause these investments to become impaired, requiring substantial write-downs that would reduce our operating income.
Goodwill accounts for $10,676,834 of our recorded total assets as of December 31, 2024. We evaluate the recoverability of recorded goodwill amounts annually or more frequently, if evidence of potential impairment exists. The annual impairment test is based on several factors requiring judgment. Principally, a decrease in expected reporting unit cash flows or changes in market conditions may indicate potential impairment of recorded goodwill. If there is an impairment, we would be required to write down the recorded amount of goodwill, which would be reflected as a charge against operating income and would reduce the value of our total assets and our total equity on our balance sheet. During the third quarter of 2023, due to decline in stock price, Management determined that a triggering event occurred representing an indicator of goodwill impairment, resulting in a noncash charge of $6,919,094. No triggering events were identified during 2024.
Risks Related to our Indebtedness
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
We have substantial indebtedness. We have $10,399,944 of debt as of December 31, 2024, the majority of which originally matured in calendar year 2024 and the terms of which have been amended to extend the maturity date to calendar year 2026. See “Notes Payable under Note 7, Part II, Item 8., Financial Statements” on this Form 10-K. Should our business fail to generate cash flow from operations sufficient to service our debt and make necessary capital expenditures we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining equity capital on terms that may be onerous or highly dilutive. Such a “fire sale” would materially and adversely affect the value of our common stock.
Risks Related to our Common Stock and Preferred Stock
Future sales or potential sales of our common stock in the public market could cause our share price to decline.
If the existing holders of our common stock, particularly our directors, officers, and other 10% stockholders, sell a large number of shares, they could adversely affect the market price for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.
Because we will not pay dividends on our common stock in the foreseeable future, holders of common stock will only benefit from owning common stock if it appreciates.
We have never paid cash dividends on our common stock, and we do not intend to do so in the foreseeable future. We intend to retain any future earnings to finance our growth. However, the holders of our Series A preferred stock and Series C preferred stock receive cash dividends and have seniority in liquidation preference to the holders of our common stock. Accordingly, any potential investor who anticipates the need for current dividends from his investment should not purchase our common stock.
Low Trading Price of Common Stock on the NYSE American

Our common stock was approved for listing on the NYSE American and began trading there on October 13, 2022. In the case of a company whose common stock sells for a low price per share for a substantial period of time, the NYSE American continued listing rules permit the exchange to de-list a listed company in the event it fails to effect a reverse split of such shares within a reasonable time after being notified that the exchange deems such action to be appropriate under the
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circumstances. We have not received any such notification from the NYSE American but could receive it in the future. In the event we received such a notice from the NYSE American and failed to comply within a reasonable time after receiving such notice with its request to effect a reverse stock split of our common shares, our shares of common stock could be delisted from the NYSE American.
Our failure to meet the continued listing requirements of the NYSE American could result in a delisting of our common stock and subject us to the penny stock rules.
Our common stock was approved for listing on the NYSE American and began trading there on October 13, 2022; however, if we subsequently fail to meet any of NYSE American’s continued listing requirements, our common stock may be delisted. In addition, our Board may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the NYSE American may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment. The delisting of our common stock would also subject us to the rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and as a result, stockholders may have difficulty selling their shares.
We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of  (i) the last day of the fiscal year in which we have total annual gross revenues of  $1,235,000,000 or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of the public offering; (iii) the date on which we have issued more than $1,000,000,000 in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our financial condition and profitability and we may take tax positions that the Internal Revenue Service or other tax authorities may contest.
We are subject to income taxes in the U.S. Significant judgments and estimates are required to be made in determining our provision for income taxes. Changes in estimates of projected future operating results, loss of deductibility of items, recapture of prior deductions, limitations on our ability to utilize tax net operating losses in the future, or changes in assumptions regarding our ability to generate future taxable income could result in significant increases to our tax expense and liabilities that could adversely affect our financial condition and profitability.
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We have in the past and may in the future take tax positions that the Internal Revenue Service (“IRS”) or other tax authorities may contest. We are required by an IRS regulation to disclose particular tax positions to the IRS as part of our tax returns for that year and future years. If the IRS or other tax authority successfully contests a tax position that we take, we may be required to pay additional taxes, interest, or fines that may adversely affect our results of operations and financial position.
Anti-takeover provisions in our charter documents and Nevada law could discourage, delay, or prevent a change in control of our Company and may affect the trading price of our common stock.
We are a Nevada corporation and the anti-takeover provisions of the Nevada Revised Statutes may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders. An interested stockholder is a person who, together with the affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) ten percent or more of the Company’s capital stock entitled to vote. In addition, our amended and restated articles of incorporation, as amended (the “Amended and Restated Articles of Incorporation”) and amended and restated bylaws (the “Amended and Restated Bylaws”) may discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws (i) authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors (“Board”) to thwart a takeover attempt; (ii) provide that vacancies on our Board, including newly created directorships, may be filled by a majority vote of directors then in office, (iii) provide that the Board shall have the sole power to adopt, amend, or repeal the Amended and Restated Bylaws, and (iv) requires a stockholder to provide advance written notice of a stockholder proposal.
Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws contain an exclusive forum provision, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that, to the fullest extent permitted by law, and unless the Company consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada, shall, to the fullest extent permitted by law, be the sole and exclusive forum for state law claims with respect to: (a) any derivative action or proceeding brought in the name or right of the Company or on its behalf, (b) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee, or agent of the Company to the Company or the Company’s stockholders, (c) any action arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or 92A or any provision of the Amended and Restated Articles of Incorporation or the Amended and Restated Bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce, or determine the validity of the Amended and Restated Articles of Incorporation or the Amended and Restated Bylaws. Pursuant to Article IX of the Amended and Restated Articles of Incorporation and pursuant to Article XIII of the Amended and Restated Bylaws, and for the avoidance of doubt, this exclusive forum provision shall not be applicable to any action brought under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to the provisions of Article IX of our Amended and Restated Articles of Incorporation and Article XIII of our Amended and Restated Bylaws. There exists uncertainty, however, as to whether such forum selection provisions of our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws would be enforced by a court.
The choice of forum provision in our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such lawsuits against us and our directors, officers, employees, and agents even though an action, if successful, might benefit our stockholders. The applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action
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may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. With respect to the provision making the Eighth Judicial District Court of Clark County, Nevada the sole and exclusive forum for certain types of actions, stockholders who do bring a claim in the Eighth Judicial District Court of Clark County, Nevada could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Nevada. Finally, if a court were to find this provision of our Amended and Restated Articles of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on us.
Our management collectively owns a substantial amount of our common stock.
Collectively, our officers and directors own or exercise voting and investment control of approximately 35.5% of our outstanding common stock and control 35.1% of the voting power of the Company. As a result, unless required by a stock exchange rule, investors may be prevented from affecting matters involving our Company, including:
•the composition of our Board and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers;
•any determination with respect to mergers or other business combinations;
•our acquisition or disposition of assets; and
•our corporate financing activities.
Furthermore, this concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also adversely affect the trading price of our common stock because investors may perceive disadvantages in owning stock in a Company that is controlled by a small number of stockholders.
Although our Company does not intend to utilize the controlled company exemptions to the NYSE American corporate governance listing standards, if we are eligible to utilize the controlled company exemptions in the future, we may choose to do so. In such instance we would be exempted from, among other things, the requirements to have a board with a majority of independent members and the requirement that we have a nominating and governance committee and compensation committee that are composed entirely of independent directors and have written charters addressing the respective committee’s purpose and responsibilities. Our Company’s reliance on such exemption would likely result in a reduction in transparency to shareholders on various governance matters which could negatively impact their investment decisions.
If we fail to establish and maintain an effective system of internal control or disclosure controls and procedures are not effective, we may not be able to report our financial results accurately and timely or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease in our stock price.
There can be no assurances that weakness in our internal controls will not occur in the future. If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting (if and when required), we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the NYSE American, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition, or divert financial and management resources from our core business and would have a material adverse effect on our business, financial condition, and results of operations.
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Item 1B. Unresolved Staff Comments

None.
Item 1C. Cybersecurity

Risk management and strategy

The Company recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.

Managing Material Risks & Integrated Overall Risk Management

Castellum strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our IT department continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.

Engage Third-parties on Risk Management

Recognizing the complexity and evolving nature of cybersecurity threats, the Company engages with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our critical systems. These partnerships enable us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices. Our collaboration with these third parties includes periodic audits, threat assessments, and consultation on security enhancements.

Oversee Third-party Risk

Because we are aware of the risks associated with third-party service providers, the Company implements stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes quarterly assessments by our Cybersecurity Manager and on an ongoing basis by our security engineers. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties.

Risks from Cybersecurity Threats

We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.

Governance

The Board is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence. The Board is briefed on a periodic basis as to the nature of actions taken to mitigate risks from cyberattacks.

Board of Directors Oversight

The Audit Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain. The Audit Committee is composed of board members with diverse expertise including, risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.

Management’s Role Managing Risk

The COO and the CEO play a pivotal role in informing the Audit Committee on cybersecurity risks. The COO was Castellum’s Vice President of Technology and Deployment before becoming COO in September of 2024, and is a certified CMMC Professional. They provide comprehensive briefings to the Audit Committee on an at least an annual basis. These briefings encompass a broad range of topics, including:

●Current cybersecurity landscape and emerging threats;
●Status of ongoing cybersecurity initiatives and strategies;
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●Incident reports and learnings from any cybersecurity events; and
●Compliance with regulatory requirements and industry standards.

Item 2. Properties
Our principal executive offices are located at 1934 Old Gallows Road, Suite 350, Vienna, Virginia 22182 in a shared office space leased from Intelligent Office. As of December 31, 2024, our subsidiaries lease property at the following locations:

●Augusta, Georgia
●Vienna, Virginia
●Toms River, New Jersey
●Hollywood, Maryland

We believe our existing facilities are generally adequate to meet our current requirements; however, due to recent hires our location in Hollywood, Maryland currently has limited remaining space and we are therefore evaluating options for expansion. We do not own any real property.
Item 3. Legal Proceedings
As a commercial enterprise and employer, the Company and our subsidiaries are subject to threatened litigation and other legal actions in the ordinary course of business, including employee-related matters, inquiries, and administrative proceedings regarding our employment practices or other matters. Neither our Company nor any of our subsidiaries is a party to any legal proceeding that, individually or in the aggregate, we believe to be uncovered by insurance or otherwise material to our Company as a whole.
Item 4 Mine Safety Disclosures

Not applicable.
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Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price of Our Common Stock

Until October 13, 2022, our common stock was quoted on the OTC Pink Marketplace operated by OTC Markets Group Inc. under the trading symbol “ONOV”. Since October 13, 2022, our common stock has been listed for trading on the NYSE American LLC (“NYSE American”) under the symbol “CTM”.

Holders of Record

As of March 10, 2025, there were 80,391,874 shares of common stock outstanding held by approximately 190 holders of record (not including an indeterminate number of beneficial holders of stock held in street name), and the last reported sale price of our common stock on the NYSE American on March 10, 2025 was $1.07.

Dividend Policy

To date, we have not paid any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We have paid cash dividends to holders of our Series A preferred stock and Series C preferred stock and currently expect that comparable cash dividends will continue to be paid in the future. The declaration and payment of dividends on our common stock is at the discretion of our Board of Directors (“Board”) and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions, or such other factors as our Board may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

See the section titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance.

Unregistered Sales of Securities

Other than those unregistered securities previously disclosed in reports filed with the SEC during the period covered by this report, we have not sold any securities without registration under the Securities Act of 1933, as amended, during the period covered by this report, except as provided below. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act because the issuances did not involve a public offering. The securities contain a legend restricting their transferability absent registration or applicable exemption.

Item 6. [ Reserved ]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K (“Form 10-K”). The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings “Forward-Looking Statements” and “Risk Factors” elsewhere in this Form 10-K.

Business Overview

We are a technology company focused on leveraging the power of information technology to help solve our nation’s most pressing national security challenges. We provide clients in the United States (“U.S.) government (“USG”), financial services, healthcare, and other users of large data applications with services which include intelligence analysis, software development, software engineering, program management, strategic and mission planning, information assurance, cybersecurity and policy support, data analytics, and model based systems engineering (“MBSE”). In addition to constantly innovating and enhancing our organic capabilities, Castellum is executing strategic acquisitions of technology companies in the areas of cybersecurity, information technology (“IT”), electronic warfare, information warfare, and information operations with businesses in the defense, federal, civilian, and commercial markets that share our passionate commitment to U.S. national security and have a history of bringing exceptional value to their clients.
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Recent Developments

On October 17, 2022, the Company closed its public offering of 1,500,000 shares of common stock consisting of 1,350,000 shares sold by the Company and 150,000 shares sold by certain selling stockholders, at a public offering price of $2.00 per share. The Company’s registration statement on Form S-1, as amended (File No. 333-267249) relating to the offering was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on October 12, 2022.

On December 1, 2023, the Company filed a universal shelf registration statement on Form S-3 (File No. 333-275840) which was declared effective by the SEC on December 12, 2023 pursuant to which the Company may offer and sell up to $10 million in the aggregate of equity securities. Additionally, certain selling stockholders may offer and sell up to 1,425,000 shares in the aggregate of the Company’s common stock. We will not receive any proceeds from the sale of our common stock by the selling stockholders.

On January 25, 2024 the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 5,243,967 shares of the Company’s common stock, at a purchase price of $0.32 per share and (ii) 3,193,534 pre-funded warrants (the “Pre-funded Warrant(s)”) to purchase up to an aggregate of 3,193,534 shares of common stock for aggregate gross proceeds to the Company of approximately $2.7 million, before deducting the placement agent fees and estimated offering expenses payable by the Company (the “Registered Offering”). The Pre-funded Warrants were sold at an offering price of $0.319 per Pre-funded Warrant and are exercisable at a price of $0.001 per share. As of December 31, 2024, all Pre-funded Warrants have been exercised.

In a concurrent private placement, the Company agreed to issue to the same institutional investor, for each ordinary share and Pre-funded Warrant purchased in the offering, an additional ordinary share purchase warrant (“Regular Warrants”). The Regular Warrants have an exercise price of $0.35 and are exercisable to purchase an aggregate of 8,437,501 shares of common stock. The Regular Warrants are exercisable for five years. The shares, the Pre-funded Warrants, and the Pre-funded Warrant Shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the SEC on December 12, 2023, and a related prospectus supplement dated January 25, 2024, related to the Registered Offering. The Registered Offering closed on January 29, 2024.

Pursuant to a placement agency agreement dated as of January 25, 2024 (the “Placement Agency Agreement”), the Company engaged Maxim Group LLC (“Maxim”) to act as the lead placement agent in connection with the Registered Offering. At closing, the Company paid Maxim (i) a cash fee equal to 7.0% of the aggregate gross proceeds of the Registered Offering and (ii) reimbursed Maxim for all reasonable and documented out-of-pocket expenses of $60,000, which included the reasonable fees, costs, and disbursements of its legal counsel.

In December of 2024, 6,437,501 of the Regular Warrants have been exercised to purchase an equal number of common shares, for total gross proceeds of $2.3 million and 700,000 warrants, issued in 2023, were exercised to purchase an equal number of common shares, which resulted in proceeds to the Company of approximately $966,000.

On December 22, 2024, the Company entered into a securities purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 9,473,700 shares of the Company’s common stock, at a purchase price of $0.38 per share (the “Second Registered Offering”). This resulted in aggregate gross proceeds to the Company of approximately $3.6 million, The Second Registered Offering closed on December 24, 2024. The shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the SEC on December 12, 2023, and a related prospectus supplement, dated December 22, 2024, related to the Second Registered Offering.

On December 27, 2024, the Company entered into a securities purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a public offering that included certain additional other purchasers an aggregate of 4,355,000 shares of the Company’s common stock, at a purchase price of $0.85 per share (the “Public Offering”). This resulted in aggregate gross proceeds to the Company of approximately $3.7 million. The Public Offering closed on December 30, 2024. The shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the SEC on December 12, 2023, and a related prospectus supplement, dated December 27, 2024, related to the Public Offering.
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Pursuant to placement agency agreements dated as of December 22, 2024 and December 27, 2024, respectively, the Company engaged Maxim to act as the lead placement agent in connection with the Second Registered Offering and the Public Offering. In connection therewith, the Company has agreed to (i) pay Maxim a cash fee equal to 7.0% of the aggregate gross proceeds of the Second Registered Offering and the Public Offering, and (ii) reimburse Maxim for all reasonable and documented out-of-pocket expenses, including the reasonable fees, costs, and disbursements of its legal counsel in the aggregate of $120,000.

Key Components of Our Results of Operations
Revenues
Our revenues are primarily derived from services provided to the U.S. federal, state and local governments. We currently generate our revenue from three different types of contractual arrangements: Cost Plus Fixed Fee (“CPFF”), Fixed Firm Price (“FFP”) and Time and Materials (“T&M”) contracts. For CPFF contracts, we use input progress measures to derive revenue based on hours worked on contract performance as follows: direct costs plus Defense Contract Audit Agency (“DCAA”) approved provisional burdens plus fee. The provisional indirect rates are adjusted and billed at actual at year end. Revenue from FFP contracts is generally recognized ratably over the contract term, using a time-based measure of progress, even if billing is based on other metrics or milestones, including specific deliverables. For T&M contracts, we use input progress measures to estimate revenue earned based on hours worked on contract performance at negotiated billing rates, plus direct costs and indirect cost burdens associated with materials and the direct expenses incurred in performance of the contract.
Cost of Revenues
Cost of Revenues include direct costs incurred to provide goods and services related to contracts, specifically labor, contracted labor, materials, and other direct costs, which includes rent, insurance, and software licenses. Cost of Revenues related to contracts is recognized as expense when incurred or at the time a performance obligation is satisfied.
Gross Profit and Gross Profit Margin
Our gross profit comprises our revenues less our cost of revenues. Gross profit margin is our gross profit divided by our revenues.
Operating Expenses
Our operating expenses include indirect costs, overhead, and general and administrative expenses.
•Indirect costs consist of expenses generally associated with bonuses and fringe benefits, including employee health and medical insurance, 401k matching contributions, and payroll taxes.
•Overhead consists of expenses associated with the support of operations or production, including labor for management of contracts, operations, training, supplies, and certain facilities to perform customer work.
•General and administrative expenses consist primarily of corporate and administrative labor expenses, administrative bonuses, legal expenses, IT expenses, and insurance expenses.
Interest Expense, Net of Interest Income
Interest expense consists of interest paid to service our convertible promissory notes which include the amended trust note with the Buckhout Charitable Remainder Trust (the “Amended BCR Trust Note”), the term loan promissory note payable and revolving line of credit to the Live Oak Banking Company ("Live Oak Bank") (the “Term Loan Promissory Note Payable” and “Revolving Line of Credit,” respectively), two promissory notes payable to Robert Eisiminger, the note payable to Emil Kaunitz, and the note payable to Crom Cortana Fund LLC (“Crom”) net of interest earned from investments. During 2024, the Amended BCR Trust Note was extinguished resulting in a new note, the note payable to Crom and the Term Loan Promissory Note Payable were paid off, and the two promissory notes payable to Robert Eisiminger were combined into one note payable.

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Income Tax (Provision) Benefit
Income taxes are accounted for under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entity. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.

We follow ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on a quarterly basis.

Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. When necessary, a valuation allowance is provided to reduce deferred tax assets to an amount that is more likely than not to be realized.

We file income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service (“IRS’) and state taxing authorities, generally for three years after they were filed. We have filed our 2022 and 2023 federal and state tax returns.
Results of Operations
The year to year comparisons of our results of operations have been prepared using the historical periods included in our audited consolidated financial statements. The following discussion should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this document.

























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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Year Ended December 31,Amount of Increase (Decrease)% Change
20242023
Revenues$44,764,852 $45,243,812 $(478,960)(1.1)%
Cost of revenues26,498,437 26,568,485 (70,048)(0.3)%
Gross profit18,266,415 18,675,327 (408,912)(2.2)%
Operating expenses:
Indirect costs9,275,688 8,935,113 340,575 3.8 %
Overhead1,906,682 1,884,059 22,623 1.2 %
General and administrative expenses14,328,672 17,697,886 (3,369,214)(19.0)%
Goodwill impairment loss— 6,919,094 (6,919,094)(100.0)%
(Gain) Loss from change in fair value of contingent earnout— (92,000)92,000 (100.0)%
Total operating expenses25,511,042 35,344,152 (9,833,110)(27.8)%
Loss from operations(7,244,627)(16,668,825)9,424,198 (56.5)%
Other expense(2,667,648)(2,388,470)(279,178)11.7 %
Loss before income taxes and preferred stock dividends(9,912,275)(19,057,295)9,145,020 (48.0)%
Income tax (expense) benefit (68,032)1,257,117 (1,325,149)(105.4)%
Net loss(9,980,307)(17,800,178)7,819,871 (43.9)%
Preferred stock dividend119,277 118,152 1,125 1.0 %
Net loss to common shareholders$(10,099,584)$(17,918,330)$7,818,746 (43.6)%
Revenue

Total revenues decreased by $(478,960) or (1.1)% to $44,764,852 for the year ended December 31, 2024 from $45,243,812 for the year ended December 31, 2023. This decrease in revenue was mainly due to the sale of the Mainnerve Federal Services, Inc. dba MFSI Government Group, a Delaware corporation, entity on September 11, 2024.
Cost of revenues

Total cost of revenues decreased by $(70,048) or (0.3)% to $26,498,437 for the year ended December 31, 2024 from $26,568,485 for the year ended December 31, 2023. This decrease was driven primarily by the sale of the Mainnerve Federal Services, Inc. dba MFSI Government Group, a Delaware corporation, entity on September 11, 2024.

Gross Profit

Total gross profit decreased by $(408,912) or (2.2)% to $18,266,415 for the year ended December 31, 2024 from $18,675,327 for the year ended December 31, 2023. This decrease was driven by changes in revenue noted above.

Operating expenses

Total operating expenses decreased by $(9,833,110) or (27.8)% to $25,511,042 for the year ended December 31, 2024 from $35,344,152 for the year ended December 31, 2023. The increase in indirect cost of $340,575 was driven primarily by the increase in accrued paid leave resulting from the Company's implementation of a new paid time off policy that initially increased the accrued leave balance. The decrease in general and administrative (“G&A”) costs of $(3,369,214) was primarily driven by a reduction in salaries, achieved through the implementation of strategic cost-saving initiatives and the enhancement of operational efficiencies across all G&A support departments, and a decrease in noncash stock based compensation granted to certain employees of $2,068,783. In 2024, it was determined that no goodwill impairment expense
30
was required, the expense was $6,919,094 in 2023, and the contingent earnout was agreed to and noted as a liability in Due to Seller in the Consolidated Balance Sheets, under Part II, Item 8, of this Form 10-K.

Other income (expense)

Other income (expense) increased by $279,178 or 11.7% to $(2,667,648) for the year ended December 31, 2024 from $(2,388,470) for the year ended December 31, 2023. This increase was primarily driven by the fair value of the derivative liability offset by the decrease in amortization of debt discounts, due to the restructuring of the Company’s debt as detailed in Note 7, under Part II, Item 8, of this Form 10-K. With the exception of $807,173 of interest expense paid in 2024, the remainder of other income (expense) is related to noncash items, such as the amortization of debt discount of $359,567, and the change in the fair value of the derivative of $725,600 as noted in Note 12, under Part II, Item 8, of this Form 10-K.

Income tax benefit (expense)

Income tax benefit (expense) increased by $1,325,149 or (105.4)% to $(68,032) for the year ended December 31, 2024 from $1,257,117 for the year ended December 31, 2023. This increase was primarily driven by the increase in deferred tax liabilities from the acquisition of Global Technology Management Resources, Inc. (“GTMR”) and subsequent release of valuation allowance.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Year Ended December 31,Amount of Increase (Decrease)% Change
20232022
Revenues$45,243,812 $42,190,643 $3,053,169 7.2 %
Cost of revenues26,568,485 24,593,326 1,975,159 8.0 %
Gross profit18,675,327 17,597,317 1,078,010 6.1 %
Operating expenses:
Indirect costs8,935,113 11,859,401 (2,924,288)(24.7)%
Overhead1,884,059 1,560,252 323,807 20.8 %
General and administrative expenses17,697,886 13,586,600 4,111,286 30.3 %
Loss from change in fair value of contingent earnout(92,000)555,000 (647,000)(116.6)%
Total operating expenses35,344,152 27,561,253 7,782,899 28.2 %
Loss from operations(16,668,825)(9,963,936)(6,704,889)67.3 %
Other expense(2,388,470)(4,124,506)1,736,036 (42.1)%
Loss before income taxes and preferred stock dividends(19,057,295)(14,088,442)(4,968,853)35.3 %
Income tax benefit (expense)1,257,117 (819,596)2,076,713 (253.4)%
Net loss(17,800,178)(14,908,038)(2,892,140)19.4 %
Preferred stock dividend118,152 100,516 17,636 17.5 %
Net loss to common shareholders$(17,918,330)$(15,008,554)$(2,909,776)19.4 %
Revenues

Total revenues increased by $3,053,169 or 7.2% to $45,243,812 for the year ended December 31, 2023 from $42,190,643 for the year ended December 31, 2022. This increase in revenue was due to the acquisition of GTMR (“GTMR Acquisition”), partially offset by a reduction in revenue from lost positions on ongoing contracts principally at SSI and Corvus.

Cost of revenues
31

Total cost of revenues increased by $1,975,159 or 8.0% to $26,568,485 for the year ended December 31, 2023 from $24,593,326 for the year ended December 31, 2022. This increase was driven primarily by the net increased level of effort on contracts proportionate to the changes in revenue noted above.

Gross Profit

Total gross profit increased by $1,078,010 or 6.1% to $18,675,327 for the year ended December 31, 2023 from $17,597,317 for the year ended December 31, 2022. This increase was driven by changes in revenue noted above.

Operating expenses

Total operating expenses increased by $7,782,899 or 28.2% to $35,344,152 for the year ended December 31, 2023 from $27,561,253 for the year ended December 31, 2022. The decrease in indirect cost of $(2,924,288) was driven primarily by a reduction in acquisition based bonuses to certain executives from 2022, as well as cost savings implemented in 2023. The increase in overhead costs of $323,807 is related to increases in lease expense due to the GTMR Acquisition. The increase in general and administrative costs of $4,111,286 consist of increases in noncash stock based compensation granted to certain employees, as well as increases in general and administrative salary expense as we in-sourced certain functions such as accounting and business development. The recognition of goodwill impairment resulted from a loss recorded during the third quarter of 2023. The decrease in the loss from change in fair value of contingent earnout is due to adjustments as we finalized the amount after the earnout period ended in late 2023.

Other income (expense)

Other income (expense) decreased by $1,736,036 or (42.1)% to $(2,388,470) for the year ended December 31, 2023 from $(4,124,506) for the year ended December 31, 2022. This decrease was primarily driven by decreases in the fair value of the derivative liability offset by an increase in interest expense due to rate increases during 2023 on our variable rate debt under our agreements with Live Oak Bank.

Income tax (expense) benefit

Income tax benefit (expense) increased by $2,076,713 or (253.4)% to $1,257,117 for the year ended December 31, 2023 from $(819,596) for the year ended December 31, 2022. This increase was primarily driven by the increase in deferred tax liabilities from the acquisition of GTMR and subsequent release of valuation allowance.

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Contract Backlog
We define backlog to include the following three components:
•Funded Backlog. Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.
•Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.
•Priced Options. Priced contract options represent 100% of the potential revenue value of all scheduled and unscheduled future contract option periods or orders under existing contracts that may be exercised at our clients’ option and for which funding has not been appropriated or otherwise authorized.
Our backlog does not include contracts that have been awarded but are currently under protest and also does not include any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts.
The following table summarizes the value of our contract backlog as of December 31, 2024:

Backlog
Funded$12,742,938 
Unfunded$15,373,290 
Priced Options$72,365,465 
Total Backlog$100,481,693 

Our total backlog consists of remaining performance obligations, certain orders under contracts for which the original period of performance has expired, unexercised option periods, and other unexercised or unscheduled optional orders. Excluding unscheduled options orders, as of December 31, 2024, the Company had $100,481,693 of funded, unfunded, and scheduled priced options. We expect to recognize approximately 28% of the remaining performance obligations over the next 12 months, and approximately 49% over the next 24 months. Including priced options that have been awarded but not yet scheduled of $19,330,955, our grand total backlog is $119,812,648. The remainder is expected to be recognized thereafter. As with all government contracts there is no guarantee the customer will have future funding or exercise their contract option in the out-years. Other budget risks are discussed in “Part I, Item1. U.S. Political, Budgetary, and Regulatory Environment.” Our backlog includes orders under contracts that in some cases extend for several years. Congress generally appropriates funds for our clients on a yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to complete. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress (“Congress”) makes subsequent appropriations and the procuring agency allocates funding to the contract.
Liquidity and Capital Resources

Sources

We have historically sourced our liquidity requirements with cash flows from operations, borrowings under our current credit facilities, and in October 2022, with an equity issuance through the listing of our common stock on the NYSE American. As of December 31, 2024, we had $12,005,048 of cash and cash equivalents on hand and unused borrowing capacity of $0 from our revolving line of credit. During the fiscal year 2024, we undertook the following significant equity and debt transactions that enhanced our liquidity and sources of funds:

•In January 2024, after filing a universal shelf registration statement on Form S-3 with the SEC in December of 2023 allowing us to issue additional equity (“Security Offering”), we raised net proceeds of approximately $2,200,000.
•In February 2024, we used cash on hand to pay the outstanding principal and accrued interest owed on a note payable to Crom in the amount of $847,000.
•In February 2024, we agreed with Emil Kaunitz to extend the maturity date of a $400,000 note payable from December 31, 2024, to August 1, 2025, after which we will make monthly principal payments of $50,000 per month for eight months.
•In February 2024, we entered into a new $4,000,000 revolving credit facility with Live Oak Bank which matures on February 22, 2025 (the “New Live Oak Revolver”). The New Live Oak Revolver replaces the $2,000,000 Revolving Line of Credit , and we rolled over the $625,000 outstanding principal balance on the Revolving Line
33
of Credit and was advanced an additional amount of $904,793. We also made payments of $1,209,617 to the holders of two notes payable noted below.
•In February 2024, we agreed with Robert Eisiminger to extend the maturity dates of two notes payable totaling $6,000,000 from September 30, 2024, to August 31, 2026. The change in the terms of the two notes resulted in the debt extinguishment of both the old notes and resulted in the establishment of one note totaling $6,000,000. We also accessed the New Live Oak Revolver to pay off a third note totaling $400,000.
•In February 2024, we agreed with the Buckhout Charitable Remainder Trust to pay down and amend a convertible promissory note payable. We accessed the New Live Oak Revolver to pay down principal of $809,617. We simultaneously agreed to enter into a new note payable in the principal amount of $2,400,000 which matures on August 31, 2026, and may not be converted into common stock. Commencing in September 2024, we began making monthly principal payments of $100,000 for 24 months.
•In May 2024, the Company entered in to a program to self-insure some of its healthcare risk up to a certain limit, with the use of a stop loss policy. In June 2024, the Company made an equity investment of $54,533 in a captive insurance company. To mitigate risks, the Company created a reserve as of December 31, 2024, of $79,217 based on six months of claims data. Additionally, the Company has engaged with a third-party actuarial firm to assist in providing reports related to claims incurred but not reported. Losses will be accrued based on the Company's historical claims experience and reports provided by the actuaries.
•On July 8, 2024, we repaid the balance owed on the Term Loan Promissory Note Payable of $252,678, that was due to mature on August 11, 2024. This payment retired the Term Loan Promissory Note Payable with Live Oak bank.
•In December 2024, the Company entered into a securities purchase agreements with several institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 9,473,700 shares of the Company’s common stock, at a purchase price of $0.38 per share. This resulted in aggregate gross proceeds to the Company of approximately $3.6 million, The offering closed on December 24, 2024
•In December 2024, the Company entered into a securities purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a public offering that included certain additional other purchasers, 4,355,000 shares of the Company’s common stock, at a purchase price of $0.85 per share. This resulted in aggregate gross proceeds to the Company of approximately $3.7 million. The offering closed on December 30, 2024.
•As of December 31, 2024, 6,437,501 of the Regular Warrants have been exercised, resulting in $2.3 million net proceeds. In addition, 700,000 warrants issued in 2023 were exercised which resulted in aggregate proceeds to the Company of approximately $966,000.

We believe our existing cash and cash equivalents provided by our ongoing operations, together with funds available through the transactions noted above, will be sufficient to meet our working capital, capital expenditures, and cash needs for the next 12 months and beyond.

Uses

Our material cash requirements from known contractual and other obligations primarily relate to payments on our credit facilities. For information related to these cash requirements, refer to Note 6, Note 7, Note 8, and Note 9, under Part II, Item 8., Financial Statements of this Form 10-K.

Information about our cash flows is presented in our statements of cash flows and is summarized in the following table:

Twelve Months Ended December 31,
202420232022
Net cash provided (used in) by:
Operating activities
$1,120,105 $(2,264,447)$990,163 
Investing activities
221,356 (440,985)(339,282)
Financing activities
$9,082,746 $(104,623)$1,972,100 


Comparison of the Years Ended December 31, 2024 and 2023

Operating activities

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Net cash provided by operating activities increased to $1,120,105 for the year ended December 31, 2024, compared to $(2,264,447) used in operating activities for the year ended December 31, 2023. This increase in net cash from operating activities was primarily driven by a decrease in net loss, decreases in accounts receivables (due to timing of collections), as well as noncash adjustments related to changes in the fair value of derivative liabilities during the year ended December 31, 2024, and goodwill impairment recognized during the year ended December 31, 2023.

Investing activities

Net cash provided by investing activities increased to $221,356, for the year ended December 31, 2024, from $(440,985), for the year ended December 31, 2023. The decrease in net cash used in investing activities was primarily due to the cash paid in the acquisition of GTMR during 2023.

Financing activities

During the year ended December 31, 2024, $9,082,746 net cash was provided by financing activities, primarily due to the proceeds from the issuance of common stock, pre-funded warrants, and the exercise of regular warrants, offset by an increase in repayment of notes payable, notes payable - related party, and repayments of amounts due to seller, compared to net cash provided used in financing activities of $(104,623), for the year ended December 31, 2023.


Critical Accounting Policies and Estimates
The following is not intended to be a comprehensive list of our accounting policies or estimates. Our significant accounting policies are more fully described in Part II, Item 8. Financial Statements, Note 2 — Summary of Significant Accounting Policies to our annual audited consolidated financial statements, included elsewhere in the document. In preparing our financial statements and accounting for the underlying transactions and balances, we apply our accounting policies and estimates as disclosed in the Notes. We consider the policies and estimates discussed below as critical to an understanding of our financial statements because their application places the most significant demands on our judgment, with financial reporting results dependent on estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Specific risks for these critical accounting estimates are described in the following paragraphs. Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue, and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that we do not deem “critical.”
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. (“Topic 606”). Topic 606 requires entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The principles in the standard are applied in five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Our revenue recognition policies are consistent with this five-step framework. Understanding the complex terms of agreements and determining the appropriate time, amount, and method to recognize revenue for each transaction requires judgment. These significant judgments include: (1) determining what point in time or what measure of progress depicts the transfer of control to the customer; (2) estimating contract revenue, costs, and assumptions for schedule and technical issues; (3) selecting the appropriate method to measure progress; and (4) estimating how and when contingencies, or other forms of variable consideration, will impact the timing and amount of recognition of revenue. The timing and revenue recognition in a period could vary if different judgments were made.
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Goodwill and Intangible Assets
We account for goodwill and intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Our acquisitions require the application of purchase accounting, which results in tangible and identifiable intangible assets and liabilities of the acquired entity being recorded at fair value. The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill. We are responsible for determining the valuation of assets and liabilities and for the allocation of purchase price to assets acquired and liabilities assumed.
Assumptions must be made in determining fair values, particularly where observable market values do not exist. Assumptions may include discount rates, growth rates, cost of capital, tax rates, and remaining useful lives. These assumptions can have a significant impact on the value of identifiable assets and accordingly can impact the value of goodwill recorded. Different assumptions could result in different values being attributed to assets and liabilities. Since these values impact the amount of annual depreciation and amortization expense, different assumptions could also impact our statement of operations and could impact the results of future asset impairment reviews. Due to the many variables inherent in the estimation of a business’s fair value and the relative size of our goodwill, if different assumptions and estimates were used, it could have an adverse effect on our impairment analysis.

During the third quarter of 2023, due to decline in stock price, management determined that a triggering event occurred representing an indicator of goodwill impairment, resulting in a noncash charge of $6,919,094. During 2024, no triggering events were noted.
Income Taxes and Uncertain Tax Positions
Income taxes and uncertain tax positions are accounted for in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Management determines recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. This approach to estimate the potential outcome of any uncertain tax issue is subject to its assessment of relevant risks, facts, and circumstances existing at that time. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. When necessary, a valuation allowance is provided to reduce deferred tax assets to an amount that is more likely than not to be realized.
Share-Based Compensation
We account for share-based compensation in accordance with ASC 718 Compensation – Stock Compensation. We calculate compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants.
In determining the grant date fair value of share-based awards, we must estimate the performance attributes. Since share-based compensation expense can be material to our financial condition, different assumptions and estimates could have a material adverse effect on our financial statements.

Principles of Consolidation

Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8., Financial Statements within this Form 10-K for a discussion of principles of consolidation.
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Recently Issued Accounting Standards

Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8., Financial Statements within this Form 10-K for our assessment of recently issued and adopted accounting standards.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. These risks include the following:

Interest Rate Risk

The Company maintains a revolving line of credit with Live Oak Bank. The Live Oak Bank line of credit is a variable rate instrument with a per annum interest rate equal to the prime rate as quoted in the Wall Street Journal (the “Prime Rate”), plus two percentage points (2.75%). Rising interest rates would increase our interest expense in the future. Such additional cost would need to be funded out of existing cash or additional financing. Future increase in interest rates are not expected to materially impact our Company’s liquidity. The Company has no other debt obligations tied to the Prime Rate, Secured Overnight Financing Rate, or London Interbank Offered Rate.




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Table of Contents
Item 8. Financial Statements and Supplementary Data


Index to Consolidated Financial Statements







































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Table of Contents
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Castellum, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Castellum, Inc. and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor since 2020.

McLean, Virginia
March 11, 2025
39
Castellum, Inc. and Subsidiaries
Consolidated Balance Sheets

For the Year Ended December 31,
20242023
Assets
Current assets:
Cash$12,005,048 $1,830,841 
Restricted Cash250,000 — 
Accounts receivable5,507,384 6,883,566 
Contract assets270,147 160,649 
Due from buyer36,214 — 
Prepaid income taxes154,793 216,909 
Prepaid expenses and other current assets667,592 404,228 
Total current assets18,891,178 9,496,193 
Fixed assets, net156,111 310,170 
Noncurrent assets:
Due from buyer, net of current portion191,470 — 
Right of use asset – operating leases1,075,982 613,143 
Investment in captive insurance entity52,110 — 
Intangible assets, net6,793,750 8,970,864 
Goodwill10,676,834 10,716,907 
Total noncurrent assets18,946,257 20,611,084 
Total assets$37,837,435 $30,107,277 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses$1,140,321 $784,965 
Accrued payroll and payroll related expenses3,398,300 2,925,312 
Current portion of lease liability – operating leases310,380 185,263 
Due to seller240,000 350,000 
Obligation to issue common and preferred stock402,708 255,940 
Contingent earnout— 380,000 
Derivative liability883,000 157,600 
Revolving credit facility1,999,944 625,025 
Notes payable, related party250,000 — 
Current portion of convertible promissory notes – related parties, net of discount— 238,212 
Current portion of notes payable, net of discount1,200,000 2,074,775 
Total current liabilities9,824,653 7,977,092 
Noncurrent liabilities:
Deferred tax liability— 6,292 
Lease liability – operating leases, net of current portion780,756 435,204 
Contingent earnout, net of current portion— 340,000 
Due to seller, net of current portion100,000 — 
Convertible promissory notes – related parties, net of current portion— 2,000,000 
Notes payable, net of current portion6,800,000 6,000,000 
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Note payable – related party, net of current portion150,000 400,000 
Total noncurrent liabilities7,830,756 9,181,496 
Total liabilities17,655,409 17,158,588 
Stockholders' Equity
Preferred stock, 50,000,000 shares authorized
Series A Preferred stock, par value $0.0001; 10,000,000 shares authorized; 5,875,000 issued and outstanding as of December 31, 2024 and 2023
588 588 
Series C Preferred stock, par value $0.0001; 10,000,000 shares authorized; 770,000 and 770,000 issued and outstanding as of December 31, 2024 and 2023, respectively
77 77 
Common stock, par value $0.0001; 3,000,000,000 shares authorized, 77,076,129 and 47,672,427 shares issued and outstanding as of December 31, 2024 and 2023, respectively
7,707 4,767 
Additional paid in capital74,256,138 56,926,157 
Accumulated deficit(54,082,484)(43,982,900)
Total stockholders’ equity20,182,026 12,948,689 
Total liabilities and stockholders' equity$37,837,435 $30,107,277 
See accompanying notes to consolidated financial statements.
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Table of Contents
Castellum, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Year Ended December 31,
202420232022
Revenues$44,764,852 $45,243,812 $42,190,643 
Cost of revenues26,498,437 26,568,485 24,593,326 
Gross profit18,266,415 18,675,327 17,597,317 
Operating expenses:
Indirect costs9,275,688 8,935,113 11,859,401 
Overhead1,906,682 1,884,059 1,560,252 
General and administrative14,328,672 17,697,886 13,586,600 
Goodwill impairment loss— 6,919,094 — 
(Gain) loss from change in fair value of contingent earnout— (92,000)555,000 
Total operating expenses25,511,042 35,344,152 27,561,253 
Loss from operations before other income (expense)(7,244,627)(16,668,825)(9,963,936)
Other income (expense):
Loss on induced conversion— (300,000)— 
Loss on extinguishment of debt(822,847)— — 
Gain from sale of subsidiary39,234 — — 
Gain (loss) from change in fair value of derivative liability(725,600)1,054,025 (132,000)
Other income, net— 106,419 303 
Interest expense, net of interest income(1,158,435)(3,248,914)(3,992,809)
Total other expense(2,667,648)(2,388,470)(4,124,506)
Loss from operations before (expense) benefit for income taxes(9,912,275)(19,057,295)(14,088,442)
Income tax (expense) benefit (68,032)1,257,117 (819,596)
Net loss(9,980,307)(17,800,178)(14,908,038)
Less: preferred stock dividends119,277 118,152 100,516 
Net loss to common shareholders$(10,099,584)$(17,918,330)$(15,008,554)
Net loss per share
Basic and diluted$(0.18)$(0.38)$(0.55)
Shares used in calculation of net loss per share
Basic and diluted55,287,65747,177,95027,468,226
See accompanying notes to consolidated financial statements.
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Table of Contents
Castellum, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Year Ended December 31,
202420232022
Cash flows from operating activities:
Net loss$(9,980,307)$(17,800,178)$(14,908,038)
Adjustments to reconcile net loss to net cash provided (used in) by operating activities:
Depreciation and amortization2,220,185 2,528,815 2,032,459 
Amortization of discounts, premiums and deferred cost1,118,194 2,265,061 2,553,317 
Share-based compensation5,426,985 7,495,759 8,796,641 
Deferred tax provision— (1,480,166)610,033 
Gain on lease termination(9,225)— — 
Gain on sale of reporting unit(39,234)— — 
Gain on sale of fixed assets— — (303)
Financing fee and bank charges for note payable and advances on revolving credit line— — 3,775 
Goodwill impairment loss— 6,919,094 — 
Lease cost286,572 218,314 1,139 
Legal fees paid out of proceeds from note payable— — 30,000 
Change in fair value of contingent earnout— (92,000)555,000 
Change in fair value of derivative liabilities725,600 (1,054,025)132,000 
Gain from timing difference on issuance of shares— (107,491)— 
Changes in assets and liabilities
Accounts receivable1,036,587 (1,187,118)634,448 
Proceeds from factoring accounts receivable— 850,141 — 
Prepaid expenses and other current assets(147,602)75,614 (321,593)
Contract asset (liability)(109,498)96,785 333,621 
Lease liabilities(269,518)(185,261)— 
Accounts payable and accrued expenses861,366 (807,791)537,664 
Net cash provided (used in) by operating activities1,120,105 (2,264,447)990,163 
Cash flows from investing activities:
Acquisition of business, cash paid to seller— (485,739)(250,000)
Sale of subsidiary, cash received from buyer279,207 — — 
Cash paid to seller from factoring— (411,975)— 
Acquisition of business, cash received from seller— 475,000 — 
Investment in captive insurance entity(54,534)— — 
Purchases of fixed assets(3,317)(18,271)(89,282)
Net cash provided (used in) by investing activities221,356 (440,985)(339,282)
Cash flows from financing activities:
Proceeds from revolving credit line1,374,919 325,000 300,000 
Payment of debt issuance costs(64,219)(15,000)— 
Proceeds from issuance of preferred and common stock12,052,704 126,000 625,000 
Proceeds from note payable— 1,200,000 1,470,000 
Proceeds from exercise of stock options— — 12,000 
Proceeds from stock offering related to uplisting— — 2,000,756 
Preferred stock dividend(119,277)(118,152)(100,516)
Loss on induced conversion— 300,000 — 
Repayment of convertible note payable - related party(809,617)— (500,000)
Repayment of amounts due to seller(730,000)(280,000)(471,003)
Repayment of notes payable(2,621,764)(1,642,471)(1,364,137)
Net cash provided (used in) by financing activities9,082,746 (104,623)1,972,100 
Net increase (decrease) in cash10,424,207 (2,810,055)2,622,981 
Cash and restricted cash - beginning of period1,830,841 4,640,896 2,017,915 
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Cash and restricted cash - end of period$12,255,048 $1,830,841 $4,640,896 
Supplemental disclosures:
Cash paid for interest$794,361 $994,449 $912,965 
Cash paid for income taxes$47,315 $72,484 $467,910 
Summary of noncash activities:
Extinguishment of debt discount - derivative liabilities$— $171,128 $— 
Extinguishment of debt discount - debt issuance costs$— $8,034 $— 
Debt discount on note payable$— $28,000 $500,000 
Partial conversion of note payable$— $— $160,000 
Common shares issued for obligation to issue shares $— $— $533,750 
Derivative liabilities incurred for note payable$— $421,000 $692,000 
Extinguishment of derivative liability$— $33,375 $— 
Gain on extinguishment of convertible note payable - related party$— $— $2,667,903 
Adjustment to contingent consideration and customer relationships$— $— $275,000 
Fair value adjustment recognized on issuance of common stock in Securities Purchase Agreement $— $— $93,000 
Deferred issuance costs recognized for note payable$— $— $59,300 
Conversion of Series B preferred shares to common stock $— $— $1,805 
Derecognition of lease liability$396,388 $— $— 
Derecognition of ROU asset$387,164 $— $— 
Gain on lease termination$9,225 $— $— 

See accompanying notes to consolidated financial statements.
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Castellum, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
Series A PreferredSeries B PreferredSeries C
Preferred		CommonAdditional
Paid-In Capital		Accumulated
Deficit		Total
SharesAmountSharesAmountSharesAmount
Balances at December 31, 20215,875,000$588 3,610,000$361 620,000$62 19,960,632$1,996 $26,405,126 $(11,086,016)$15,322,117 
Stock-based compensation - options—— —— —— — — 4,985,233 — 4,985,233 
Stock-based compensation - warrants—— —— —— — — 3,496,912 — 3,496,912 
Stock-based compensation - shares issued for services and Restricted stock—— —— —— 75,0008 379,491 — 379,499 
Shares issued for uplisting, net of offering costs of approximately $$700,000
—— —— —— 1,351,231135 2,000,621 — 2,000,756 
Shares issued for exercise of stock options—— —— —— 15,0002 11,998 — 12,000 
Shares issued for cash including fair value adjustment—— —— —— 1,250,000125 499,875 — 500,000 
Subscription agreement—— —— 150,00015 15,0002 149,983 — 150,000 
Debt discount recognized for obligation to issue common stock—— —— —— 0— (100,000)— (100,000)
Partial conversion of note payable—— —— —— 100,00010 159,990 — 160,000 
Shares issued to satisfy obligation to issue shares—— —— —— 132,50013 533,737 — 533,750 
Fair value adjustment on common stock for Crom—— —— —— 0— 93,000 — 93,000 
Deferred issuance costs—— —— —— 125,00012 59,288 — 59,300 
Conversion of Series B preferred shares to common stock—— (3,610,000)(361)—— 18,050,0001,805 (1,444)— — 
Net loss for the year—— —— —— — — — (15,008,554)(15,008,554)
Balances at December 31, 20225,875,000$588 —$— 770,000$77 41,699,363$4,170 $43,621,651 $(26,094,570)$17,531,916 
Stock-based compensation - options—— —— —— — — 5,923,200 — 5,923,200 
Stock-based compensation - warrants—— —— —— — — 1,076,969 — 1,076,969 
Stock-based compensation - shares issued for services and Restricted stock—— —— —— 462,24445 423,614 — 423,659 
Shares issued in acquisition of GTMR—— —— —— 4,866,570487 5,304,075 — 5,304,562 
Extinguishment of Crom Note—— —— —— 556,25056 589,944 — 590,000 
Loss on induced conversion—— —— —— — — 300,000 — 300,000 
Extinguishment of debt discount related to derivative liability—— —— —— — — (171,128)— (171,128)
Extinguishment of debt discount related to debt issuance—— —— —— — — (8,034)— (8,034)
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Extinguishment of derivative liability—— —— —— 0— 33,375 — 33,375 
Shares issued in private placement—— —— —— 63,0006 125,994 — 126,000 
Shares issued as commitment shares in Crom Transaction—— —— —— 25,0003 10,997 — 11,000 
Balance sheet reclassification adjustment (a)—— —— —— — — (304,500)30,000 (274,500)
Net loss—— —— —— — — — (17,918,330)(17,918,330)
Balances at December 31, 20235,875,000$588 —$— 770,000$77 47,672,427$4,767 $56,926,157 $(43,982,900)$12,948,689 
Stock-based compensation - options—— —— —— — — 5,280,217 — 5,280,217 
Shares issued to institutional investor—— —— —— 5,357,487 536 755,231 — 755,767 
Sale of common stock, net of filing fees—— —— —— 13,828,701 1,382 6,465,973 — 6,467,355 
Private warrants issued to institutional investor—— —— —— 7,137,501 714 4,299,883 — 4,300,597 
Pre-funded warrants issued to institutional investor—— —— —— 3,080,013 308 528,677 — 528,985 
Net loss—— —— —— — — — (10,099,584)(10,099,584)
Balances at December 31, 20245,875,000588——770,0007777,076,1297,70774,256,138(54,082,484)20,182,026

On July 19, 2021, the Company filed a certificate of amendment with the State of Nevada to change the par value of all common and preferred stock to all be $0.0001. All changes to the par value dollar amount for these classes of stock and adjustment to additional paid in capital have been made retroactively.

On October 13, 2022, the Company effected a 1-for-20 reverse split of our authorized and outstanding shares of common stock (“Reverse Stock Split”). As a result of the Reverse Stock Split, all authorized and outstanding common stock and per share amounts in this Annual Report on Form 10-K (“Form 10-K”), including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
(a) In the second quarter of 2023, the Company made an immaterial balance sheet reclassification to reduce additional paid in capital by $304,500 and to increase the obligation to issue common shares account and the accumulated deficit account by $274,500 and $30,000, respectively. These immaterial amounts are also reflected in the Company's Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and the Consolidated Statement of Changes in Stockholders' Equity.
See accompanying notes to consolidated financial statements.
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Castellum, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1: Nature of Operations
Castellum, Inc. (the “Company”) is focused on building a large, successful technology company in the areas of information technology, electronic warfare, information warfare and cybersecurity with businesses in the governmental and commercial markets. Services include intelligence analysis, software development, software engineering, program management, strategic planning, information assurance and cybersecurity and policy along with analysis support. These services, which largely focus on securing data and establishing related policies, are applicable to customers in the federal government, financial services, healthcare, and other users of large data applications. The services can be delivered to legacy, customer owned networks, or customers who rely upon cloud-based infrastructures. The Company has worked with multiple business brokers and contacts within their business network to identify potential acquisitions.
Bayberry Acquisition Corporation (“Bayberry”) was a wholly owned subsidiary of the Company. Jay Wright and Mark Fuller controlled and managed Bayberry and were named officers and directors of the Company upon the acquisition of Bayberry. The transaction was accounted for as a reverse merger. As a result, Bayberry was considered the accounting acquirer.
Corvus Consulting, LLC (“Corvus”), acquired in November 2019, is a wholly owned subsidiary of the Company. Corvus provides scientific, engineering, technical, operational support, and training services to federal government and commercial clients. Corvus focuses on Cyberspace Operations, Electronic Warfare, Information Operations, Intelligence and Joint/Electromagnetic Spectrum Operations. The specialties of Corvus range from high-level policy development and Congressional liaison to requirements analysis, DOTMLPF-p development assistance and design services for hardware and software systems fulfilling the mission needs of the Department of Defense and Intelligence Communities.
The Company entered into a definitive merger agreement with Mainnerve Federal Services, Inc. dba MFSI Government Group, a Delaware corporation (“MFSI”), effective as of January 1, 2021. This acquisition closed on February 11, 2021. MFSI, a government contractor, has built strong relationships with numerous customers, in the software engineering and IT arena. MFSI provides services in data security and operations for Army, Navy and Intelligence Community clients, and currently works as a software engineering/development, database administration and data analytics subcontractor. The Company entered into a stock purchase agreement to sell MFSI (the “MFSI Divestiture”) on September 11, 2024.
The Company acquired Merrison Technologies, LLC, a Virginia limited liability company (“Merrison”), on August 5, 2021. Merrison, is a government contractor with expertise in software engineering and IT in the classified arena. Effective December 1, 2023, all operations, contracts and employees were merged into Corvus and Merrison was dissolved with the Virginia Secretary of State.
Specialty Systems, Inc. (“SSI”) was acquired August 12, 2021. SSI is a New Jersey based government contractor that provides critical mission support to the Navy at Joint Base McGuire-Dix-Lakehurst in the areas of software engineering, cyber security, systems engineering, program support, and network engineering.

The Company acquired certain business assets from The Albers Group, LLC located in Pax River, Maryland (“Pax River”) which closed on November 16, 2021 in an asset purchase for up to 550,000 shares of common stock and cash of $200,000 paid monthly over a 10-month period starting February 2022 upon the satisfaction of conditions in the acquisition agreement.

The Company acquired Lexington Solutions Group, LLC (“LSG”), on April 15, 2022. LSG is a government contractor with a wide range of national security, strategic communication, and management consulting services.

The Company acquired Global Technologies Management Resources, Inc. (“GTMR”) on March 23, 2023. GTMR is a government contractor based in Hollywood, Maryland near Naval Air Station Patuxent River.
On July 19, 2021, the Company filed a certificate of amendment with the State of Nevada to change the par value of all common and preferred stock to all be $0.0001. All changes to the par value dollar amount for these classes of stock and adjustment to additional paid in capital have been made retroactively.

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On October 13, 2022, the Company completed a $3,000,000 public offering, a 1-for-20 Reverse Stock Split of its common shares, and an uplisting to the NYSE American LLC. All share and per share figures related to the common stock have been retroactively adjusted in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 4C.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of Castellum, Inc. and its subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Castellum, Inc. owns 100% of Corvus, MFSI (until sale of subsidiary on September 11, 2024), Merrison (until dissolved as of December 1, 2023), and SSI.
The Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”).
The Company accounted for these acquisitions as business combinations and the difference between the consideration paid and the net assets acquired was first attributed to identified intangible assets and the remainder of the difference was applied to goodwill.
Reclassification
The Company has reclassified certain amounts in the 2022 financial statements to comply with the 2023 presentation. These principally relate to classification of “Gain on Disposal of Fixed Assets” to “Other” on our consolidated statements of operations. The reclassifications had no impact on total net loss or net cash flows for the years ended December 31, 2024 and 2023.
Business Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, the Chief Executive Officer, reviews consolidated results of operations to make decisions. The Company maintains one operating and reportable segment, which is the delivery of products and services in the areas of information technology, electronic warfare, information warfare and cybersecurity in the governmental and commercial markets.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principle (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Restricted Cash

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December 31, 2024 and 2023, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank. The Company does not consider this risk to be material.

The Company holds $250,000 in a restricted cash account with Live Oak bank. Effective August 15, 2024, the Company modified the terms of the New Live Oak Revolver with Live Oak Bank. Under the terms of the modified agreement, the Company is required to (i) establish a collateral account with a balance of not less than $250,000 until such time as the senior debt service covenant is replaced by a total debt service covenant of 1.15:1.00 at which time funds shall be released at lender's sole discretion, (ii) modified the frequency of the reporting of the borrowing base certificate from once a month to twice a month, and (iii) reduced the borrowing capacity from $4,000,000 to $2,000,000.
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Fixed Assets and Long-Lived Assets, Including Intangible Assets and Goodwill
Fixed assets are stated at cost. Depreciation on fixed assets is computed using the straight-line method over the estimated useful lives of the assets, which range from three to 15 years for all classes of fixed assets.
ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment effective April 1, 2017.
The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.
Intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets capitalized as of December 31, 2024 represent the valuation of the Company’s customer relationships, trade names, backlog and non-compete agreements which were acquired in the acquisitions. These intangible assets are being amortized on either the straight-line basis over their estimated average useful lives (certain trademarks, tradenames, backlog and non-compete agreements) or are being amortized based on the present value of the future cash flows (customer relationships, certain tradenames, backlog, and non-compete agreements). Amortization expense of the intangible assets runs through March 2038.
The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.Significant underperformance relative to expected historical or projected future operating results;
2.Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.Significant negative industry or economic trends.
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on fair value. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

When the Company acquires a controlling financial interest through a business combination, the Company uses the acquisition method of accounting to allocate the purchase consideration to the assets acquired and liabilities assumed, which are recorded at fair value. Any excess of purchase consideration over the net fair value of the net assets acquired is recognized as goodwill.

Prior to 2022, the Company performed its annual goodwill and intangible asset impairment test at the end of the fourth quarter. In 2022, the Company changed the date of its annual goodwill and intangible asset impairment assessment to the first day of the fourth quarter. The Company believes this change does not represent a material change in method of applying an accounting principle. This voluntary change is preferable under the circumstances as it results in better alignment with the timing of the Company’s long-range planning and forecasting process and provides the Company with additional time to complete its annual goodwill impairment testing in advance of its year-end reporting. This change does not delay, accelerate, or avoid an impairment of goodwill.

During the third quarter of 2023, due to decline in stock price, Management determined that a triggering event occurred representing an indicator of goodwill impairment and requiring goodwill impairment testing for each of its reporting units as of September 30, 2023. Management elected to bypass a qualitative assessment and performed a quantitative assessment, including a market capitalization reconciliation, to evaluate the performance of its reporting units. The impairment assessment resulted in a noncash goodwill impairment charge related to all three reporting units totaling $6,919,094.

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During 2024, the Company has noted no indicator or triggering events that demonstrate it is more-likely-than-not our goodwill may be impaired.
Subsequent Events
Subsequent events were evaluated through March 11, 2025, the date the consolidated financial statements for the year ended December 31, 2024 were issued.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.
Revenue is derived primarily from services provided to the federal government. The Company enters into agreements with customers that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services and solutions are transferred to the customer. The Company also evaluates whether two or more agreements should be accounted for as one single contract.

When determining the total transaction price, the Company identifies both fixed and variable consideration elements within the contract. The Company estimates variable consideration as the most likely amount to which the Company expects to be entitled limited to the extent that it is probable that a significant reversal will not occur in a subsequent period.

At contract inception, the Company determines whether the goods or services to be provided are to be accounted for as a single performance obligation or as multiple performance obligations. For most contracts, the customers require the Company to perform several tasks in providing an integrated output and, hence, each of these contracts are deemed as having only one performance obligation. When contracts are separated into multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised services underlying each performance obligation.

This evaluation requires professional judgment, and it may impact the timing and pattern of revenue recognition. If multiple performance obligations are identified, the Company generally uses the cost plus a margin approach to determine the relative standalone selling price of each performance obligation. The Company does not assess whether a contract contains a significant financing component if the Company expects, at contract inception, that the period between when payment by the client and the transfer of promised services to the client occur will be less than one year.

The Company currently generates its revenue from three different types of contractual arrangements: cost plus fixed fee (“CPFF”), firm-fixed-price contracts (“FFP”) and time-and-materials (“T&M”) contracts. The Company generally recognizes revenue over time as control is transferred to the customer, based on the extent of progress towards satisfaction of the performance obligation. The selection of the method used to measure progress requires judgment and is dependent on the contract type and the nature of the goods or services to be provided.
For CPFF contracts, the Company uses input progress measures to derive revenue based on hours worked on contract performance as follows: direct costs plus Defense Contract Audit Agency (“DCAA”) approved provisional burdens plus fee. The provisional indirect rates are adjusted and billed at actual at year end. Revenue from FFP contracts is generally recognized ratably over the contract term, using a time-based measure of progress, even if billing is based on other metrics or milestones, including specific deliverables. For T&M contracts, the Company uses input progress measures to estimate revenue earned based on hours worked on contract performance at negotiated billing rates, plus direct costs and indirect cost burdens associated with materials and the direct expenses incurred in performance of the contract.
These arrangements generally qualify for the “right-to-invoice” practical expedient where revenue is recognized in proportion to billable consideration. FFP Level-Of-Effort contracts are substantially similar to T&M contracts except that the Company is required to deliver a specified level of effort over a stated period. For these contracts, the Company
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estimates revenue earned using contract hours worked at negotiated bill rates as the Company delivers the contractually required workforce.
Revenue generated by Contract Support Service contracts is recognized over time as services are provided, based on the transfer of control. Revenue generated by FFP contracts is recognized over time as performance obligations are satisfied. Most contracts do not contain variable consideration and contract modifications are generally minimal. For these reasons, there is not a significant impact of electing these transition practical expedients.
Revenue generated from contracts with federal, state, and local governments is recorded over time, rather than at a point in time. Under the Contract Support Services contracts, the Company performs software design work as it is assigned by the customer, and bills the customer, generally semi-monthly, on either a CPFF or T&M basis, as labor hours are expended. Certain other government contracts for software development have specific deliverables and are structured as FFP contracts, which are generally billed as the performance obligations under the contract are met. Revenue recognition under FFP contracts require judgment to allocate the transaction price to the performance obligations. Contracts may have terms up to five years.
Contract accounting requires judgment relative to assessing risks and estimating contract revenue and costs and assumptions for schedule and technical issues. Due to the size and nature of contracts, estimates of revenue and costs are subject to a number of variables. For contract change orders, claims or similar items, judgment is required for estimating the amounts, assessing the potential for realization and determining whether realization is probable. Estimates of total contract revenue and costs are continuously monitored during the term of the contract and are subject to revision as the contract progresses. From time to time, facts develop that require revisions of revenue recognized or cost estimates. To the extent that a revised estimate affects the current or an earlier period, the cumulative effect of the revision is recognized in the period in which the facts requiring the revision become known. When estimates of total costs to be incurred on a contract exceed total revenue, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.
The Company accounts for contract costs in accordance with ASC Topic 340-40, Contracts with Customers. The Company recognizes the cost of sales of a contract as expense when incurred or at the time a performance obligation is satisfied. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.
The following table disaggregates the Company’s revenue by contract type for the years ended December 31:
202420232022
Revenue:
Time and material$24,483,023 $25,631,786 $25,302,224 
Firm fixed price2,804,574 3,129,520 3,350,084 
Cost plus fixed fee17,477,255 16,482,505 13,538,335 
Total$44,764,852 $45,243,811 $42,190,643 
Contract Balances
Contract assets include unbilled amounts typically resulting from FFP contracts when the revenue recognized exceeds the amounts billed to the customer on uncompleted contracts. Contract liabilities consist of billings in excess of costs and estimated earnings on uncompleted contracts.
In accordance with industry practice, contract assets and liabilities related to costs and estimated earnings in excess of billings on uncompleted contracts, and billings in excess of costs and estimated earnings on uncompleted contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year; thus, collection of the amounts related to these contracts may extend beyond one year.

Derivative Financial Instruments
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Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of certain of the convertible instruments are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Valuations derived from various models are subject to ongoing internal and external verification and review. The model used incorporates market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income (loss).
With the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments.

Under current GAAP, an equity-linked financial instrument that otherwise is not required to be classified as a liability under the guidance Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting.
Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), a reporting entity is required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
The amendments in this accounting standards update revise the guidance for instruments with embedded features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting.
Accounts Receivable and Concentration of Credit Risk
An allowance for credit losses is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable; however, United States (“U.S.”) government agencies may pay interest on invoices outstanding more than 30 days. Interest income is recorded when received. As of December 31, 2024 and 2023, management did not consider an allowance for credit losses is necessary.
The Company’s customer base is concentrated with a relatively small number of customers. The Company does not generally require collateral or other security to support accounts receivable. To reduce credit risk, the Company performs ongoing credit evaluations on its customers’ financial condition. The Company establishes allowances for credit losses based upon factors surrounding the credit risk of customers, historical trends and other information.
For the years ended December 31, 2024, 2023, and 2022, the Company had two customers represent 47%, and three representing 52%, and 62% of revenue earned, respectively. Any customer that represents 10% or greater of total revenue represents a risk. The Company also has four customers that represent 65% of the total accounts receivable as of December 31, 2024 and three customers that represented 54% of the total accounts receivable as of December 31, 2023.
Accounting for Income Taxes
Income taxes are accounted for under the asset and liability method. We estimate our income taxes in each of the jurisdictions where the Company operates. This process involves estimating our current tax expense or benefit together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment, we consider the availability of loss carryforwards, projected reversals of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible tax planning strategies.

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We are subject to income taxes in the federal and state tax jurisdictions based upon our business operations in those jurisdictions. Significant judgment is required in evaluating uncertain tax positions. We record uncertain tax positions in accordance with ASC 740-10 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and (2) with respect to those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. Management evaluates its tax positions on a quarterly basis.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service (“IRS”) and state taxing authorities, generally for three years after they were filed.
Share-Based Compensation
The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (“Topic 718”) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants.
The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows.
Fair Value of Financial Instruments
ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, approximate fair value because of the short-term maturity of those instruments. The fair value of debt reflects the price at which the debt instrument would transact between market participants, in an orderly transaction at the measurement date. The fair value of the equity consideration from business combinations are measured using the price of our common stock at the measurement date, along with applying an appropriate discount for lack of marketability. For contingent liabilities from business combinations, the fair value is measured on the acquisition date using an option pricing model. The Company does not utilize derivative instruments for hedging purposes.
Loss Per Share of Common Stock
Basic net loss per common share is computed using the weighted average number of common shares outstanding, as well as a warrant to purchase 1,080,717 shares of common stock for a total aggregate exercise price of $1 granted in connection with the $5,600,000 note payable maturing August 31, 2026, as the cash consideration for the holder/grantee to receive common shares was determined to be nonsubstantive. Diluted earnings per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and all other warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations. The Company subtracts dividends on preferred stock when calculating loss per share.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (“Topic 740”): Improvements to Income Tax Disclosures. This update requires disaggregated information about a reporting entity’s effective tax rate reconciliations as well as information on income taxes paid. This update is effective for annual periods beginning in our fiscal year ending December 31, 2025. Early adoption is permitted. We are currently evaluating the impact that this update will have on our financial statement disclosures.

On November 4, 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses (Subtopic 220-40). ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to apply the standard
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retrospectively. We are evaluating the disclosure impact of ASU 2023-09; however, we do not expect the standard will have a material impact on the company’s consolidated financial position, results of operations, and/or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2024, are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations, and/or cash flows.
Note 3: Acquisition and Disposition
The Company has completed the following acquisition and disposition to achieve its business purposes as discussed in Note 1:
GTMR

On March 22, 2023, the Company entered into an agreement and plan of merger with GTMR. This acquisition was accounted for as a business combination whereby GTMR became a 100% owned subsidiary of the Company. The Company acquired GTMR to expand our capabilities, increase market share, gain access to new contracts, and achieve cost efficiencies through synergies and economies of scale.

As the acquisition was an equity acquisition of GTMR, certain assets of the acquisition (intangible assets and goodwill) are not considered deductible for tax purposes.

The following represents the preliminary assets and liabilities acquired in this acquisition:

March 31, 2023AdjustmentsDecember 31, 2023
Cash$475,000 $— $475,000 
Accounts receivable and other receivables1,380,203 (9,384)1,370,819 
Income tax receivable155,449 (127,992)27,457 
Prepaid expenses116,892 (30,856)86,036 
Other assets17,182 — 17,182 
Furniture and equipment163,301 103,760 267,061 
Right of use asset - operating lease— 641,392 641,392 
Customer relationships2,426,000 — 2,426,000 
Right of use - finance lease— 17,456 17,456 
Tradename517,000 — 517,000 
Backlog1,774,000 — 1,774,000 
Goodwill1,822,466 279,571 2,102,037 
Deferred tax liability(1,244,368)(242,093)(1,486,461)
Lease liability - operating lease(17,608)(603,799)(621,407)
Lease liability - finance lease— (12,549)(12,549)
Accounts payable and accrued expenses(1,030,957)141,341 (889,616)
Net assets acquired$6,554,560 $156,847 $6,711,407 

The consideration paid for GTMR was as follows:

Cash$470,233 
Due to Seller350,000 
Other consideration17,791 
Cash from factoring411,975 
Common stock5,304,561 
Accounts receivable note156,847 
Total consideration paid$6,711,407 

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The GTMR Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the GTMR Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. To determine the fair values of tangible and intangible assets acquired and liabilities assumed for GTMR, we engaged a third-party independent valuation specialist. Intangible assets, which are primarily comprised of customer relationships and backlog, were valued using the excess earnings discounted cash flow method. On the date of the acquisition, the Company simultaneously factored $411,975 of the accounts receivable from GTMR to finance the acquisition.

The Company had received a preliminary valuation from its specialist and recorded the value of the assets and liabilities acquired based on historical inputs and data as of March 22, 2023. The allocation of the purchase price is based on the best information available. The Company paid $185,896 in transaction costs of GTMR, which was excluded from the purchase price and issued an accounts receivable note (“Accounts Receivable Note”) and held back $240,000, the details for which have been discussed in amounts due to seller in Note 10.

During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. The measurement period for the GTMR Acquisition closed on March 22, 2024, and there were no further adjustments.

During the measurement period, the Company recorded several adjustments to goodwill as a result of GTMR's adoption of ASC 842, tax adjustments, and an update to the fair value of acquired furniture and equipment. These measurement period adjustments were subsequently identified as a result of the completion of third party accounting assistance.

For all acquisitions disclosed, there were no transaction costs that were not recognized as an expense. Revenue attributable to the GTMR acquisition included in our consolidated statement of operations for the year ended December 31, 2023, was $7,779,478 and $10,858,762 in December 31, 2024.

MFSI

On September 11, 2024, the Company entered into a stock purchase agreement with Lead-Risk Millenia, LLC (the "Buyer") for the sale of one of its subsidiaries, MFSI (the "MFSI Divestiture"). The stock purchase agreement, approved by the Board of Directors on September 13, 2024, was for the purchase and sale of 100% of the issued and outstanding stock of MFSI, which became effective on September 16, 2024. The stock purchase agreement requires an initial cash payment of $15,000. Additionally, the Company will receive future consideration equal to 6% of all revenue generated by MFSI until September 30, 2029, or until total payments reach $705,000, whichever comes first. As part of the MFSI Divestiture, the Company retained all of MFSI's cash deposits and accounts receivable in excess of $150,000.

Management estimated the present value of future consideration to be received, recognizing short and long term components of a receivable, which we will accrete over time and reassess periodically. An 8.5% discount rate was applied to calculate the present value of the receivable, totaling $296,009 ("Anticipated Receivable"). The Company recorded a gain of $39,234 from the MFSI Divestiture. The balance of the Anticipated Receivable, accounts receivable in excess of $150,000, and any payments made by the Company on behalf of the Buyer, are reflected in Due from Buyer on the Consolidated Balance Sheets.

After considering qualitative and quantitative aspects of MFSI and its sale relative to the Guidance of ASC 205-20, Presentation of Financial Statements - Discontinued Operations, Management concluded MFSI should not be reported or disclosed as a discontinued operation. Further, because MFSI represented less than 5% of the total revenue for the Company, and as such was immaterial to the Company's financial statements, pro forma financial statements are not required.
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Note 4: Fixed Assets
Fixed assets consisted of the following as of December 31:
20242023
Equipment and software$261,408 $258,091 
Furniture43,119 43,119 
Automobile43,928 43,928 
Leasehold improvements192,959 192,959 
Total fixed assets541,414 538,097 
Accumulated depreciation(385,303)(227,927)
Fixed assets, net$156,111 $310,170 
Depreciation expense for the years ended December 31, 2024, 2023, and 2022 was $157,376, $148,512, and $62,026 respectively.
Note 5: Intangible Assets and Goodwill
Intangible assets consisted of the following as of December 31, 2024 and December 31, 2023:

December 31, 2024
Gross carrying valueAccumulated AmortizationNet carrying value
Customer relationships
4.5– 15 years
$11,613,000 $(6,736,666)$4,876,334 
Trade name15 years783,000 (449,319)333,681 
Trademark10 years533,864 (195,862)338,002 
Backlog3 years3,210,000 (1,984,267)1,225,733 
Non-compete agreement2 years680,000 (660,000)20,000 
$16,819,864 $(10,026,114)$6,793,750 
December 31, 2023
Customer relationships
4.5– 15 years
$11,961,000 $(5,529,674)$6,431,326 
Trade name4.5 years783,000 (363,938)419,062 
Trademark15 years533,864 (145,277)388,587 
Backlog2 years3,210,000 (1,513,986)1,696,014 
Non-compete agreement
3-4 years
684,000 (648,125)35,875 
$17,171,864 $(8,201,000)$8,970,864 
The intangible assets, with the exception of the trademarks, were recorded as part of the acquisitions of Corvus, MFSI, Merrison, LSG, SSI, and GTMR. Amortization expense for the years ended December 31, 2024, 2023, and 2022 was $2,062,809, $2,380,303, and $1,970,433 respectively, and the intangible assets are being amortized based on the estimated future lives as noted above.
Future amortization of the intangible assets for the next five years as of December 31 are as follows:
2025$1,422,149 
20261,218,182 
20271,014,558 
2028528,784 
2029441,568 
Thereafter2,168,509 
Total$6,793,750 
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The following table presents changes to goodwill for the years ended December 31, 2024 and 2023 for each reporting unit:

CorvusSSIMFSIMerrisonTotal
December 31, 2022$6,387,741 $8,461,150 $685,073 $— $15,533,964 
Goodwill acquired through acquisition— 2,102,037 — — 2,102,037 
Merrison subsumed into Corvus(4,429,000)(1,845,094)(645,000)— (6,919,094)
December 31, 20231,958,741 8,718,093 40,073 — 10,716,907 
Goodwill removed through disposition— — (40,073)— (40,073)
December 31, 2024$1,958,741 $8,718,093 $— $— $10,676,834 

Note 6: Convertible Promissory Notes – Related Party
The Company entered into convertible promissory notes – related party as follows as of December 31:
20242023
Convertible note payable with a trust related to one of the Company’s former directors, convertible at $0.260 per share, at 5% interest, (extinguished on April 4, 2022 for new note)
$— $3,209,617 
Total Convertible Notes Payable – Related Party$— $3,209,617 
Less: Debt discount— (971,405)
$— $2,238,212 
Interest expense which includes amortization of discount and premium for the years ended December 31, 2024 and 2023 was $209,622 and $1,399,262, respectively. The amount of the debt discount recorded related to the conversion feature granted to the note holder was evaluated for characteristics of liability or equity and was determined to be equity under ASC 470 and ASC 480. The Company recognized this as additional paid in capital, and the discount is being amortized over the life of the note.
On February 22, 2024, the Company entered into an agreement to amend the related party convertible promissory note with the Buckhout Charitable Remainder Trust (Laurie Buckhout – Trustee) (the “BCRT”), resulting in the elimination of the convertible discount feature, change in the interest rate, extension of the term, and change in the payoff schedule. As part of this amendment, a partial payment of $809,617 was made on the date of the agreement, resulting in an outstanding balance of $2,400,000 as of that date. The change in terms of the note were evaluated for characteristics of modification or extinguishment, and it was determined that under ASC 470, the debt amendment was considered to be an extinguishment, thus the amended note is considered a new note. As of February 22, 2024, the remaining unamortized carrying value of the convertible discount feature was $761,783, which was treated as a loss on debt extinguishment on the income statement. Concurrent with this amendment, we determined that the trustee of the BCRT Remainder Trust (who resigned as an officer of the Company) is no longer a related party to the Company. See Note 7, "Notes Payable" for more information about the terms of the new note.
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Note 7: Notes Payable
The Company entered into notes payable as follows as of December 31:
20242023
Note payable at 7% originally due November 2023, maturing September 30, 2024 (a)
$— $5,600,000 
Note payable at 10% interest dated February 22, 2022 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note including the successful completion of an equity offering of at least $15,000,000 (b)
— 400,000 
Note payable at 7.5% dated February 22, 2024, maturing August 31, 2026 (c)
6,000,000 — 
Note payable at 12% interest dated April 6, 2023 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note (d)
— 400,000 
Convertible note payable, convertible at $1.20 per share, at 10%, maturing February 13, 2024 (e)
— 840,000 
Promissory note payable (f)2,000,000 — 
Term note payable, at prime plus 3% interest, applied on a deferred basis (8.50% at December 31, 2023 and 6.25% at December 31, 2022) maturing August 11, 2024 (g)
— 981,764 
Total Notes Payable8,000,000 8,221,764 
Less: Debt Discount— (146,989)
$8,000,000 $8,074,775 
(a)On August 12, 2021, the note payable was amended to extend the maturity date to September 30, 2024 (the "Eisiminger Note 1"). It was determined that under ASC 470, the debt amendment was considered a modification. The amount of the debt discount recorded related to the warrants granted to the note holder was evaluated for characteristics of liability or equity and was determined to be equity under ASC 470 and ASC 480 and the entire balance was fully amortized as of December 31, 2023. On February 22, 2024, the Company entered into an agreement to amend the Eisiminger Note 1, resulting in a change to the interest rate and an extension of the maturity date. The amended note was evaluated for characteristics of debt modification or extinguishment and it was determined that under ASC 470, the debt amendment was considered an extinguishment. As a result of the amendment, the Eisiminger Note 1 was combined with Eisiminger Note 2 as defined and described in (b) below, resulting in a new note, (the "2024 Eisiminger Note"). See (c) below.
(b)On February 28, 2022, the Company was obligated to issue 125,000 shares of common stock as further consideration for making this loan to the Company (the "Eisiminger Note 2"). The shares were issued in April 2022. On February 22, 2024, the Company entered into an agreement to amend the Eisiminger Note 2 resulting in a change to the interest rate and an extension of the maturity date. The Eisiminger Note 2 was evaluated for characteristics of debt modification or extinguishment and it was determined that under ASC 470, the debt amendment was considered an extinguishment. Therefore, the remaining unamortized debt discount balance of $61,263 was recorded as a loss in the income statement. As a result of the amendment, the principal balances of the Eisiminger Note 2 was combined with the Eisiminger Note 1 as described in (a) above, resulting in the 2024 Eisiminger Note. See (c) below.
(c)On February 22, 2024, as a result of amending the Eisiminger Note 1 and the Eisiminger Note 2, the Company entered into the 2024 Eisiminger Note, with a principal balance of $6,000,000, maturing on August 31, 2026, and bearing interest at 7.5% per annum until February 1, 2025, after which the interest rate will increase to 8% per annum.
(d)On April 6, 2023, the Company entered into a promissory note with a principal balance of $400,000 bearing interest at 12% per annum (the "Eisiminger Note 3"). On February 22, 2024, the Company paid the outstanding principal and accrued interest owed on the Eisiminger Note 3.
(e)On February 13, 2023, the Company entered into a series of transactions with Crom Cortana Fund LLC (“Crom”), the primary purpose of which was related to the GTMR Acquisition entered into on March 22, 2023. In connection therewith, the Company and Crom entered into an agreement to pay off the amount owed to Crom under the terms of the convertible promissory note in the original principal amount of $1,050,000 due April 4,
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2023 ("Prior Crom Note"). In consideration of a $300,000 cash payment and 556,250 shares of common stock representing conversion of the remaining principal balance thereunder, the Company’s obligations under the Prior Crom Note was deemed satisfied reducing the balance to zero; we induced conversion of the debt, which effectively extinguished the debt. Simultaneously therewith, the parties entered into a securities purchase agreement (the “2023 SPA”) pursuant to which Crom purchased (a) a convertible promissory note in the principal amount of $840,000 (the “2023 Note Payable”), which matured February 13, 2024 and bears interest at a per annum rate equal to 10% to be paid monthly, and (b) a warrant pursuant to which Crom has the right to purchase up to 700,000 shares of the Company’s common stock (the “2023 Warrant”) at an exercise price of $1.38 which expires 60 months from the date of issuance. The proceeds of the 2023 Note Payable were used primarily to fund the GTMR Acquisition, as well as fund the aforementioned debt repayment. On January 25, 2024, the Company paid the outstanding principal and accrued interest owed on the 2023 Note Payable to Crom. During December 2024, Crom exercised the 700,000 warrants to purchase 700,000 shares at an exercise price of $1.38. See Note 11, “Stockholders’ Equity” for further information on warrants.
(f)On February 22, 2024, the Company and the BCRT entered into a new note payable in the principal amount of $2,400,000 (the "Buckhout February 2024 Note") which matures on August 31, 2026, and accrues interest at a per annum rate of 5% through January 1, 2025, 8% per annum through January 1, 2026, and 12% per annum thereafter. The principal amount will be amortized at the rate of $100,000 per month, commencing in September 2024 until the final payment is made in August 2026. The terms of the Buckhout February 2024 Note do not permit the principal amount to be converted into common stock. Refer to Note 6, "Convertible Promissory Notes - Related Party" for relevant information regarding the previous note with the BCRT.
(g)On July 8, 2024, the Company repaid the balance owed on the Term Loan Promissory Note Payable of $252,678, that was due to mature on August 11, 2024. This payment retired the Term Loan Promissory Note Payable.
Interest expense, which includes amortization of discount, for the years ended December 31, 2024, 2023, and 2022 was $706,054, $1,732,265, and $1,874,142, respectively.
The total principal payments on our notes payable for the next two years are as follows:
2025$1,200,000 
20266,800,000 
Total$8,000,000 
Note 8: Note Payable – Related Party
The Company entered into a note payable – related party as follows as of December 31:
20242023
Note payable at 5% due March 31, 2026, in connection with the acquisition of SSI
$400,000 $400,000 
Interest expense for the years ended December 31, 2024, 2023, and 2022 was $20,000.

On February 16, 2024, the Company entered into a letter agreement to (i) extend the maturity date from December 31, 2024 to August 1, 2025 and (ii) require subsequent monthly principal payments of $50,000 for eight months commencing on the maturity date, with the final payment by March 31, 2026. All other terms of the note payable remain unchanged. As a result, $250,000 is reflected in current liabilities and the remaining balance is reflected in non-current liabilities.

Note 9: Revolving Credit Facility

On April 4, 2022, the Company secured a $950,000 revolving credit facility with Live Oak Banking Company ("Live Oak Bank" and the “Revolving Credit Facility”). The Revolving Credit Facility was to mature on March 28, 2029, and draws on it were charged interest at the rate of prime plus 2.75% per annum. Interest is payable monthly. As of December 31, 2023, the Company had $625,025 outstanding on the Revolving Credit Facility.

On February 22, 2024 the Company entered into a $4,000,000 revolving credit facility with Live Oak Bank that bears interest at prime plus 2% interest and matures on February 22, 2025 (the “New Live Oak Revolver"). The New Live Oak
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Revolver replaces the Revolving Credit Facility. The Company rolled over the principal balance outstanding of approximately $625,000 on the Revolving Credit Facility and was advanced an additional amount of $904,793, the majority of which was used to make the partial payment on the convertible promissory note with the BCRT. See Note 6, "Convertible Promissory Notes - Related Party".

Effective August 15, 2024, the Company modified the terms of the New Live Oak Revolver with Live Oak Bank. Under the terms of the modified agreement, the Company is required to (i) establish a collateral account with a balance of not less than $250,000 until such time as the senior debt service covenant is replaced by a total debt service covenant of 1.15:1.00 at which time funds shall be released at lender's sole discretion, (ii) modified the frequency of the reporting of the borrowing base certificate from once a month to twice a month, and (iii) reduced the borrowing capacity from $4,000,000 to $2,000,000.

As of December 31, 2024, the total amount outstanding on the New Live Oak Revolver was $1,999,944. The Company incurred $187,384 in interest in the twelve months ended December 31, 2024, none of which is accrued as of December 31, 2024.

On February 13, 2025, the Company fully repaid its outstanding line of credit with Live Oak Bank in the amount of $1,989,986 Following this payment, the line of credit was closed and the restricted cash was released to the Company’s checking account. The Company has no remaining obligations under this facility. Refer to subsequent events in Note 17 for more detail.
Note 10: Due To Seller and Contingent Earnout

As part the GTMR Acquisition, the Company was obligated to pay $1,250,000 which included $350,000 held back to satisfy any net working capital deficiencies. This balance was originally scheduled to be paid six months following the closing date, however, payment was postponed, and the unpaid balance of $350,000 accrued interest at an annual rate equal to the rate of interest announced publicly by Citibank N.A. in New York, plus 2% until it was paid in full in July of 2024.

Also as part of the GTMR Acquisition, the Company issued an Accounts Receivable Note to the sellers of GTMR whereby the Company was obligated to pay the sellers a principal amount of $206,587, adjusted for deficiencies in net working capital, for four months following the closing date of the acquisition. The Company determined a net working capital deficiency of $49,740, resulting in an amount due to the sellers of $156,847. This amount was paid in full in September of 2023.

As part of the acquisition of SSI (the "SSI Acquisition"), the Company was obligated to pay an earnout contingent on the results of operations of SSI through August 2023. On February 15, 2024, the Company entered into an agreement with the former shareholders of SSI concerning the amount and timing of the contingent earnout included in total consideration for the SSI Acquisition in August 12, 2021. The parties agreed to settle the amount for a total of $720,000, with an initial payment of $180,000 that was made by the Company at signing of the agreement, plus starting in March 2024, monthly payments of $20,000 plus interest payable at 5% per annum for 27 months. As a result, $240,000 is recorded as Due to Seller in current liabilities and $100,000 is reflected in non-current liabilities as of December 31, 2024. Prior to the February 15, 2024 agreement, this earnout was recorded as Contingent Earnout on the Consolidated Balance Sheets.

Note 11: Stockholders’ Equity (Deficit)
On October 13, 2022, the Company effected a 1-for-20 reverse split of our authorized and outstanding shares of common stock. As a result of the Reverse Stock Split, all authorized and outstanding common stock and per share amounts in this Form 10-K, including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
Preferred Stock
The Company has 50,000,000 shares of preferred stock authorized. The Company has designated a Series A preferred stock, Series B preferred stock and Series C preferred stock. The Series B preferred stock was fully converted into common stock during 2022, and as such, there is no outstanding Series B preferred stock as of December 31, 2024.
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Series A Preferred Stock
The Company has designated 10,000,000 shares of Series A preferred stock, par value of $0.0001.

On April 7, 2022, the Company amended the certificate of designation for its Series A preferred stock to (a) provide for an annualized dividend of $0.0125 per share to be paid monthly; (b) amend the conversion ratio for each share of Series A preferred stock to convert into 0.1 share of common stock instead of 1.0 share of common stock; and (c) provide for the Company to have the option to repurchase the Series A preferred stock at any time at a price of $1 per share.

As of December 31, 2024 and December 31, 2023, the Company had 5,875,000 shares of Series A preferred stock issued and outstanding, respectively, convertible into 587,500 shares of common stock. The 5,875,000 shares were issued to the Former Officers of the Company in settlement of debt. For the year ended December 31, 2024, the Company has total preferred stock dividends recognized of $119,277, of which $73,077 is related to Series A preferred stock dividends.
Series B Preferred Stock
The Company has designated 10,000,000 shares of Series B preferred stock, par value of $0.0001. On October 17, 2022 the Company issued a total of 15,375,000 shares of common stock in connection with the conversion of all of its Series B preferred shares outstanding in connection with its public offering. As of December 31, 2024 and December 31, 2023, the Company had no shares of Series B preferred stock issued and outstanding.
Series C Preferred Stock
The Company has designated 10,000,000 shares of Series C preferred stock, par value of $0.0001 (effective July 19, 2021). In the year ended December 31, 2023, the Company raised $150,000 for 150,000 shares of Series C preferred stock along with 300,000 common shares.. In the year ended December 31, 2021, the Company raised $620,000 for 620,000 shares of Series C preferred stock along with 1,240,000 common shares. Each share of the Series C preferred stock is convertible into 0.625 common shares, and the Series C preferred stock pays a $0.06 dividend per Series C preferred share per year. The dividend commenced accruing when the Series C preferred shares were fully designated and issued.

For the year ended December 31, 2024, the Company has total preferred stock dividends recognized of $119,277 of which $46,200 is related to Series C preferred stock dividends. The Series C preferred stockholders under their subscription agreements were issued 0.1 common shares per Series C preferred share for their investment. As a result, as of December 31, 2024, 770,000 shares of Series C preferred stock have been issued. See Note 17, “Subsequent Events”, for conversions of Series C preferred stock.
Common Stock
The Company has 3,000,000,000 shares of common stock, par value $0.0001 authorized. The Company had 77,076,129 and 47,672,427 shares issued and outstanding as of December 31, 2024 and 2023, respectively. The holders of the Company’s Common Stock are entitled to one vote for each share of common stock held.

On January 25, 2024 the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 5,243,967 shares of the Company’s common stock, at a purchase price of $0.32 per share and (ii) 3,193,534 pre-funded warrants (the “Pre-funded Warrant(s)”) to purchase up to an aggregate of 3,193,534 shares of common stock for aggregate gross proceeds to the Company of approximately $2.7 million, before deducting the placement agent fees and estimated offering expenses payable by the Company (the “Registered Offering”). The Pre-funded Warrants were sold at an offering price of $0.319 per Pre-funded Warrant and are exercisable at a price of $0.001 per share.

In a concurrent private placement, the Company agreed to issue to the same institutional investor, for each ordinary share and Pre-funded Warrant purchased in the offering, an additional ordinary share purchase warrant (“Regular Warrants”). The Regular Warrants have an exercise price of $0.35 and are exercisable to purchase an aggregate of 8,437,501 shares of common stock. The Regular Warrants are exercisable for five years. The shares, the Pre-Funded Warrants, and the Pre-Funded Warrant Shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on December 12, 2023, and a related prospectus supplement dated January 25, 2024, related to the Registered Offering. The Registered Offering closed on January 29, 2024.
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Pursuant to a placement agency agreement dated as of January 25, 2024 (the “Placement Agency Agreement”), the Company engaged Maxim Group LLC (“Maxim”) to act as the lead placement agent in connection with the Registered Offering. At closing, the Company paid Maxim (i) a cash fee equal to 7.0% of the aggregate gross proceeds of the Registered Offering and (ii) reimbursed Maxim for all reasonable and documented out-of-pocket expenses of $60,000, which included the reasonable fees, costs, and disbursements of its legal counsel.

On December 22, 2024, the Company entered into a securities purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 9,473,700 shares of the Company’s common stock, at a purchase price of $0.38 per share (the “Second Registered Offering”). This resulted in aggregate gross proceeds to the Company of approximately $3.6 million, The Second Registered Offering closed on December 24, 2024. The shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the SEC on December 12, 2023, and a related prospectus supplement, dated December 22, 2024, related to the Second Registered Offering.

On December 27, 2024, the Company entered into a securities purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a public offering that included certain additional other purchasers an aggregate of 4,355,000 shares of the Company’s common stock, at a purchase price of $0.85 per share (the “Public Offering”). This resulted in aggregate gross proceeds to the Company of approximately $3.7 million. The Public Offering closed on December 30, 2024. The shares are being offered pursuant to a shelf registration statement on Form S-3 (File No. 333-275840), which was declared effective by the SEC on December 12, 2023, and a related prospectus supplement, dated December 27, 2024, related to the Public Offering.

Pursuant to placement agency agreements dated as of December 22, 2024 and December 27, 2024, respectively the Company engaged Maxim to act as the lead placement agent in connection with the Second Registered Offering and the Public Offering. In connection therewith, the Company has agreed to (i) pay Maxim a cash fee equal to 7.0% of the aggregate gross proceeds of the Second Registered Offering and the Public Offering, and (ii) reimburse Maxim for all reasonable and documented out-of-pocket expenses, including the reasonable fees, costs, and disbursements of its legal counsel in the aggregate of $120,000.
During the twelve months ended December 31, 2024, the Company recorded an obligation to issue 515,464 restricted shares of common stock, that vest ratably over a period of one year, to its Board of Directors (“Board”) for their service on the Board from January 1, 2024, through June 30, 2024. The total expense booked to record this obligation was $146,768. Any unvested restricted shares of common stock are forfeited upon termination of the members position on the Board prior to the end of 2024. As of December 31, 2024. these shares have not been issued.

During the twelve months ended December 31, 2024, 29,403,701 shares of common stock were issued related to the Registered Offering, Second Registered Offering, and the Public Offering, for common stock, along with the warrant exercises noted below.
Warrants

The Pre-funded Warrants were immediately exercisable and do not have an expiration date. As noted above, the Company sold Pre-funded Warrants to purchase up to an aggregate of 3,193,534 shares of common stock at an offering price of $0.319 per Pre-funded Warrant, which are exercisable at a price of $0.001 per share. As of December 31, 2024, all Pre-funded Warrants have been exercised.

The Regular Warrants became exercisable on March 20, 2024, upon effectiveness of shareholder approval which was obtained on February 12, 2024. The Regular Warrants expire on March 20, 2029, and have an exercise price of $0.35 per share. As of December 31, 2024, 6,437,501 of the Regular Warrants have been exercised, with a remaining 2,000,000, exercised in February of 2025. Refer to subsequent events in Note 17 for more detail.

The Regular Warrants and the Pre-funded Warrants do not require a cash settlement. Based on the terms of the agreements, both the Regular Warrants and the Pre-funded Warrants were freestanding, equity-linked instruments that represented separate units of account. The Company allocated the value of the net proceeds from the Registered Offering to the common stock, Regular Warrants and Pre-funded Warrants based on relative fair value. The value allocated to the Regular Warrants and Pre-funded Warrants was recorded in Additional Paid-In Capital in the Consolidated Balance Sheets.
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In December, Crom exercised 700,000 warrants, at an exercise price of $1.38, which were issued February 13, 2023, acquiring an equal number of shares of the Company’s common stock.
20242023
NumberWeighted
Average
Exercise
Price		NumberWeighted
Average
Exercise
Price
Beginning balance7,444,698$1.68 5,678,836$1.84 
Granted11,631,0350.34 1,765,8621.17 
Exercised(10,331,035)0.41 — — 
Ending balance8,744,698$1.40 7,444,698$1.68 
Intrinsic value of warrants$6,661,661 $327,214 
Weighted Average Remaining Contractual Life (Years)3.86
Options
On November 9, 2021, the Company approved the 2021 Stock Incentive Plan (“Stock Incentive Plan”) that authorized the Company to grant up to 2,500,000 shares of common stock. Prior to this date, the granting of options was not done pursuant to the terms of a stock incentive plan. On November 9, 2023 the Board approved an amendment to the Stock Incentive Plan to increase the aggregate number of shares available for issuance from 2,500,000 to 6,000,000 (the "Amended Plan"), which was approved by the Company's shareholders at its annual meeting on May 29, 2024. As of December 31, 2024, the Company has granted 4,032,500 shares of common stock under the Stock Incentive Plan.

The following represents a summary of options for the Amended Plan and additional options granted outside of the Amended Plan for the years ended December 31, 2024 and 2023:
Number of OptionsWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Term (in Years)Weighted-Average Fair Value
Outstanding, December 31, 20226,425,000 $2.69 6.21$4.26 
Granted1,932,500 1.48 6.191.10 
Exercised— — 
Forfeited(114,063)2.00 
Outstanding December 31, 20238,243,437 2.38 4.763.55 
Granted1,900,000 0.22 6.490.19 
Exercised— — 
Forfeited(628,437)1.55 
Outstanding December 31, 20249,515,000 $2.03 3.89$3.12 
As of December 31, 2024
Vested and Exercisable6,367,785 $2.22 3.81$2.77 
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Stock based compensation expense related to options for the years ended December 31, 2024 and 2023 was $5,280,217 and $5,923,200, respectively, which is comprised of $4,940,735 and $4,675,129 in service-based grants and $339,482 and $1,248,071 in performance-based grants, for the years ended December 31, 2024 and 2023, respectively.

In accordance with ASC 718-10-50, the Company measures the fair value of its share-based payment arrangements using the Black-Scholes model. The Company measures the share-based compensation on the grant date using the following assumptions:
Year Ended December 31,
202420232022
Expected term7 years7 years7 years
Expected volatility
123.05% - 124.33%
161.61% - 166.14%
135.00% – 177.00%
Expected dividend yield— — — 
Risk-free interest rate
3.89% - 4.45%
3.48% - 3.89%
0.10 %
The Company measures the share-based compensation for all options and warrants that are not considered derivative liabilities using the Black-Scholes method with these assumptions, and any changes to these inputs can produce significantly higher or lower fair value measurements. The weighted average grant date fair value of the options granted during the years ended December 31, 2024, 2023 and 2022 was $0.19, $1.10 and $3.34, respectively. The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury Security with a maturity equal to the expected life of the stock option from the date of the grant. The assumption for expected volatility is based on the historical volatility of the Company. Aside from dividends paid on preferred shares, it is the Company's intent to retain all profits for the operations of the business for the foreseeable future, as such the dividend yield assumption is zero.
Note 12: Fair Value
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:

Level 1 – defined as observable inputs, such as quoted market prices in active markets.

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and cash equivalents, accounts receivable, accounts payable, contingent consideration and derivative liabilities. The estimated fair value of cash and cash equivalents, accounts receivable, fixed interest debt and accounts payable approximates their carrying value.

On April 4, 2022, the Company issued common stock, a convertible note, and warrants in a securities purchase agreement (“SPA”), with Crom (“2022 Crom SPA”). The Company had evaluated the conversion option liability in the convertible note and the warrants to determine proper accounting treatment and determined them to be derivative liabilities (“Derivative Liabilities”).

On February 13, 2023, the 2022 Crom SPA was terminated through an induced conversion thereby extinguishing the conversion option liability associated with the 2022 Crom note; the warrants were not affected. Concurrent with the termination of the 2022 Crom SPA, the Company issued common stock, a convertible note, and warrants in the 2023 SPA. The Company evaluated the conversion option in this convertible note and these warrants to determine proper accounting treatment and determined them to be derivative liabilities (also “Derivative Liabilities”). The Derivative Liabilities had and have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The warrants issued in connection with the 2023 SPA were exercised in December 2024. Refer to Note 11, “Stockholders’ Equity” for more detail.

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On February 13, 2024, the Company paid the outstanding principal and accrued interest owed on the 2023 Note Payable to Crom, thereby extinguishing the conversion feature associated with this note; the warrants were not affected.

The Company recognized liabilities for the estimated fair values of the Derivative Liabilities. The estimated fair values of these liabilities were calculated using a binomial pricing model with key input variables by an independent third party, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).

In connection with the MFSI Divestiture, as discussed in Note 3, "Acquisition and Disposition", Management estimated the present value of future consideration to be received, using a probability-weighted analysis to determine the amount of the receivable and applying a discount rate that captures the risks associated with the duration of the consideration. The Company determined that the significant inputs used to value the Anticipated Receivable fall within Level 3 of the fair value hierarchy.

The Company determined that the significant inputs used to value the Derivative Liabilities fall within Level 3 of the fair value hierarchy. As a result, the Company has determined that the valuation of its Derivative Liabilities and contingent earnout are classified in Level 3 of the fair value hierarchy as shown in the table below:

Fair Value Measurements at December 31, 2024
Level 1Level 2Level 3Total
Anticipated Receivable$— $— $265,739 $265,739 
Derivative Liabilities$— $— $883,000 $883,000 

Fair Value Measurements at December 31, 2023
Level 1Level 2Level 3Total
Derivative Liabilities$— $— $157,600 $157,600 

The Company’s Derivative Liabilities as of December 31 are as follows:

20242023Inception
Fair value of 656,250 warrants issued on April 04, 2022
$883,000 $66,000 $378,000 
Fair value of conversion option of Crom convertible note$— $200 $162,000 
Fair value of 700,000 warrants issued on February 13, 2023
$— $91,400 $259,000 
$883,000 $157,600 

During the year ended December 31, 2024, 2023, and 2022 the Company recognized changes in the fair value of the Derivative Liabilities of $(725,400), $666,400, and $824,000 respectively.

Activity related to the Derivative Liabilities for the year ended December 31, 2024 is as follows:

Beginning balance as of December 31, 2023$(157,600)
Issuance of Derivative Liabilities— 
Change in fair value of Derivative Liabilities(725,400)
Ending balance as of December 31, 2024$(883,000)

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of the Derivative Liabilities is estimated using a binomial valuation model. The assumptions, inputs, and methodologies the Company uses in determining fair value result in inherent uncertainty. The following assumptions were used for the periods as follows:

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20242023
Stock Price$2.00 $0.30 
Conversion option - convertible noten/a1.20 
Strike price - warrants1.84
1.38 - 1.84
Term
2.26 years
0.12 years - 4.10 years
Volatility122.30 %
98.00% - 148.30%
Market yield - conversion optionn/a17.40 %
Risk-free rate4.26 %
3.90% - 5.60%
Note 13: Related-Party Transactions
On August 12, 2021, the Company issued a note to an employee in the principal amount of $400,000 that has a maturity date of December 31, 2024 and bears interest at a rate of five percent (5%). The maturity date and other terms of this note were subsequently amended on February 16, 2024, as noted in Note 8, “Note Payable - Related Party”.

As part of the SSI Acquisition Agreement, the Company was obligated to pay an earnout contingent on the results of operations of SSI through August 2023. On February 15, 2024, the Company entered into an agreement with the former shareholders of SSI concerning the amount and timing of the contingent earnout included in total consideration for the SSI Acquisition in August 12, 2021. The former shareholders were both employed by the Company during 2024. Refer to Note 10, “Due to Seller and Contingent Earnout”, for additional details.

During 2023, the Company granted warrants to two of its officers pursuant to the employment agreements with these officers as a bonus for closing the GTMR Acquisition.

As part of the GTMR Acquisition, the Company was obligated to pay $1,250,000 which included $350,000 held back to satisfy any net working capital deficiencies. This balance was originally scheduled to be paid six months following the closing date, however, payment was postponed and the unpaid balance of $350,000 accrued interest at an annual rate equal to the rate of interest announced publicly by Citibank N.A. in New York, plus 2% until it was paid in full in July of 2024. One of the sellers of GTMR remains an employee of the Company.

Note 14: Defined Contribution Plan

The Company and its subsidiaries maintain 401(k) plans as a defined contribution retirement plan for all eligible employees. Each 401(k) plan provides for tax-deferred contributions of employees’ salaries, limited to a maximum annual amount as established by the IRS. The plans enroll employees immediately with no age or service requirement.

The aggregate 401(k) Plan employer match was $907,989, $882,707 and $651,353 in the years ended December 31, 2024, 2023 and 2022, respectively.

Note 15: Commitments

As of March 11, 2025, the Company has no material contractual obligations, purchase commitments, or other significant commitments that require disclosure in this note. Should the Company enter into any such commitments in the future, it will update its disclosures accordingly in its periodic filings.

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Note 16: Income Taxes
The following table summarizes the significant differences between the U.S. federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31:
202420232022
Federal income taxes at statutory rate21.00 %21.00 %21.00 %
State income taxes at statutory rate(0.40)%2.20 %3.50 %
Change in tax rate(0.50)%(0.80)%(2.90)%
Permanent differences(8.40)%(3.60)%(7.70)%
Other(2.10)%0.50 %(1.70)%
Goodwill impairment— %(6.30)%— %
Change in valuation allowance(10.30)%(6.40)%(17.90)%
Totals(0.70)%6.60 %(5.70)%
The following is a summary of the net deferred tax asset (liability) as of December 31:
202420232022
Deferred tax assets:
Deferred interest$864,967 $698,231 $— 
Lease liabilities297,596 160,042 8,973 
Accrued expenses317,407 352,346 148,776 
Stock compensation3,896,517 3,530,993 3,008,318 
Transaction costs40,488 44,665 41,817 
Other(68,193)160 149,153 
Total deferred tax assets5,348,782 4,786,437 3,357,037 
Deferred tax liabilities:
Intangible assets(761,765)(1,348,275)(939,607)
ROU Assets(292,115)(156,788)(9,052)
Property and equipment(17,890)(55,164)(8,569)
Debt discount(113,542)(256,788)(741,579)
Cash to accrual method change— (136,667)(43,443)
Total deferred tax liabilities(1,185,312)(1,953,682)(1,742,250)
Valuation allowance$(4,163,470)$(2,839,047)$(1,614,787)
Net deferred tax assets (liabilities)$— $(6,292)$— 
The Company recognized a valuation allowance against deferred tax assets of $4,163,470 and $2,839,047 as of December 31, 2024 and 2023, respectively. The valuation allowance increased by $1,324,423 for the year ended December 31, 2024, compared to the increase of $1,224,260 for the year ended December 31, 2023. The increase in the valuation allowance is a result of the current year losses partially offset by nondeductible expenses that are not tax benefited. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a valuation allowance has been recorded. These factors include the Company’s history of net losses since its inception.

The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company has not recognized any interest and penalties in its consolidated statements of
67
operations, nor has it accrued for or made payments for interest and penalties. The Company has no material unrecognized tax benefits as of December 31, 2024 and 2023.
The provision (benefit) for income taxes for the years ended December 31 are as follows:
202420232022
Current$68,032 $223,049 $209,563 
Deferred— (1,480,166)610,033 
Total$68,032 $(1,257,117)$819,596 
Note 17: Subsequent Events

On January 3, 2025, a member of the Company’s Board of Directors, exercised stock options at $0.212 per share for 110,028 shares of Common Stock.

On January 3 and January 8, 2025, two holders of the Company’s Series C Preferred Stock, converted 200,000 shares of Series C Preferred Stock to 125,000 shares of common stock at a conversion rate of 0.625 shares of Common Stock per share of Series C Preferred Stock.

The Company filed a universal shelf registration on Form S-3 (File No. 333-284205) on January 10, 2025, which was declared effective by the SEC on January 24, 2025, pursuant to which the Company may offer and sell up to $100,000,000 of equity and debt securities. The shelf registration provides the Company with the flexibility to issue securities from time to time in one or more offerings, subject to market conditions and corporate needs.

During the month of February, an institutional investor exercised an aggregate of 2,000,000 warrants to purchase 2,000,000 shares of the Company’s common stock which resulted in aggregate proceeds to the Company of $700,000. All warrants held by this investor have now been fully exercised.

On February 12, 2025, an investor exercised an aggregate of 1,080,717 warrants to purchase 1,080,717 shares of the Company’s common stock which resulted in proceeds to the Company of $1. The treatment of these warrants was accessed under ASC 260-10, Earnings Per Share—Overall, where shares issuable for little or no cash consideration shall be considered outstanding common shares and are included in the computation of basic earnings per share since they were originally granted.

On February 13, 2025, the Company fully repaid the New Live Oak Revolver in the amount of $1,989,986. Following this payment, the New Live Oak Revolver was closed and the restricted cash was released to the Company’s checking account. The Company has no remaining obligations under the New Live Oak Revolver.

On February 27, 2025, the GTMR subsidiary was awarded a $103.3 million, five and one-half year contract for Special Missions Management of On-Site Services (“MOSS”) in support of the Naval Air Systems Command (“NAVAIR”) Program Office 290 (“PMA-290”) Special Missions.




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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

None.
Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as amended) as of December 31, 2024, the end of the period covered by this Form 10-K. Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). The rules define internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting is subject to inherent limitations. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

Attestation Report of the Registered Public Accounting Firm

Pursuant to rules of the SEC that permit us to provide only our management’s report in this Form 10-K, an attestation report of our independent registered public accounting firm regarding internal control over financial reporting is not included in this Form 10-K.


Item 9B. Other Information

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c ) of Regulation S-K) during the year ending December 31, 2024.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.
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Table of Contents
Part III
Certain information required in Part III is omitted from this report but is incorporated herein by reference from our Proxy Statement for the 2025 Annual Meeting of Stockholders (as amended or supplemented, the “2025 Proxy Statement”) to be filed with the Securities and Exchange Commission (the “SEC”). The 2025 Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item 10 of this Annual Report on Form 10-K (“Form 10-K”) is incorporated herein by reference to our 2025 Proxy Statement.
Item 11. Executive Compensation

The information required by this Item 11 of this Form 10-K is incorporated herein by reference to our 2025 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 of this Form 10-K is incorporated herein by reference to our 2025 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 of this Form 10-K is incorporated herein by reference to our 2025 Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by this Item 14 of this Form 10K is incorporated herein by reference to our 2025 Proxy Statement.
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Table of Contents
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K (“Form 10-K”):

(1) Consolidated Financial Statements

The consolidated financial statements are filed as part of this Form 10-K under “Item 8. Financial Statements and Supplementary Data.”

(2) Financial Statement Schedules

The financial statement schedules are omitted because they are either not applicable or the information required is presented in the financial statements and notes thereto under “Part II, Item 8., Financial Statements and Supplementary Data.”

(3) Exhibits

The documents listed in the following Exhibit Index of this Form 10-K are incorporated herein by reference or are filed with this Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K):

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Table of Contents
Incorporated by Reference
Exhibit NumberFormFile NumberExhibitFiling Date
2.1S-1333-2672492.1September 2, 2022
2.2S-1333-2672492.2September 2, 2022
2.3S-1333-2672492.3September 2, 2022
2.4S-1333-2672492.4September 2, 2022
2.5S-1333-2672492.5September 2, 2022
2.68-K001-415262.1March 28, 2023
3.1
S-3
333-284205
3.1January 10, 2025
3.2S-1/A333-2672493.2October 4, 2022
3.3
S-3
333-284205
3.2January 10, 2025
3.4
S-3
333-284205
3.3January 10, 2025
4.1S-1333-2672494.1September 2, 2022
4.2S-1333-2672494.4September 2, 2022
4.38-K001-415264.1February 16, 2023
10.1S-1333-26724910.8September 2, 2022
10.2+S-1333-26724910.9September 2, 2022
10.3+S-1333-26724910.144806
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Table of Contents
10.4+S-1333-26724910.1444806
10.5+8-K001-4152610.145013
10.6+8-K001-4152610.245013
10.7+8-K001-4152610.145476
10.8+8-K001-4152610.245476
10.9S-1333-26724910.1544806
10.10S-1333-26724910.1644806
10.11++S-1333-26724910.17September 2, 2022
10.12++S-1333-26724910.18September 2, 2022
10.13++S-1333-26724910.19September 2, 2022
10.14++S-1333-26724910.2September 2, 2022
10.15++S-1333-26724910.21September 2, 2022
10.16++S-1333-26724910.22September 2, 2022
10.178-K001-4152610.2February 22, 2024
10.188-K001-4152610.3February 22, 2024
10.198-K001-4152610.4February 22, 2024
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Table of Contents
10.208-K001-4152610.5February 22, 2024
10.218-K001-4152610.6February 22, 2024
10.228-K001-4152610.7February 22, 2024
10.238-K001-4152610.80February 22, 2024
10.248-K001-4152610.9February 22, 2024
10.25++
Form 8-K
001-4152610.25February 28, 2025
14.1S-1333-26724914.1September 2, 2022
19.1*
21.1*
23.1*
24.1*
31.1*
31.2*
32.1*
32.2*
97.1*
101The following financial information from Castellum, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, and (v) Notes to the Consolidated Financial Statements.
104
Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)
75
Table of Contents

*    Filed herewith.

#    The certifications attached as Exhibits 32.1 and 32.2 that accompany this Form 10-K are not deemed filed with the SEC and not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

+    Management contract or compensatory plan.

++    Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is (i) not material and (ii) the type of information the Company treats as confidential. The Company will furnish supplementally an unredacted copy of such exhibit to the Securities and Exchange Commission or its staff upon its request.
(b) Financial statement schedules.
All schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.
Item 16. Form 10-K Summary

None.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.


CASTELLUM, INC.
By: /s/ Glen R. Ives
Date: March 11, 2025
Glen R. Ives
Chief Executive Officer
(Principal Executive Officer)
Date: March 11, 2025
By: /s/ David T. Bell
David T. Bell
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)






























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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Glen R. Ives and David T. Bell, and each or any one of them, his or her lawful attorneys-in-fact and agents, for such person in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorney-in-fact and agent, or substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SignatureTitleDate
/s/ Jay O. WrightGeneral Counsel, DirectorMarch 11, 2025
Jay O. Wright
/s/ Mark S. AlarieDirectorMarch 11, 2025
Mark S. Alarie
/s/ Bernard S. ChampouxChair, DirectorMarch 11, 2025
Bernard S. Champoux
/s/ John F. CampbellDirectorMarch 11, 2025
John F. Campbell
/s/ Mark C. FullerDirectorMarch 11, 2025
Mark C. Fuller
/s/ C. Thomas McMillenDirectorMarch 11, 2025
C. Thomas McMillen
78

Castellum, Inc.
Insider Trading Policy
Revised and adopted by the Board of Directors on November 9, 2023
I. Purpose
Castellum, Inc. (the “Company”) has adopted this Insider Trading Policy (this “Policy”) to help its directors, officers, and employees comply with the insider trading laws and to prevent even the appearance of improper insider trading.
II. Scope
A. This Policy applies to all directors, officers, and employees of the Company, as well as their respective family members and others in their households (collectively referred to as “Insiders”), and any other individual the Compliance Officer, as defined below, may designate as Insiders because they have access to material nonpublic information concerning the Company.
B. Except as set forth explicitly below, this Policy applies to any and all transactions in the Company’s securities, including transactions in common stock, options, preferred stock, restricted stock, restricted stock units, and any other type of securities that the Company may issue. This Policy applies to such securities regardless of whether they are held in a brokerage account, a 401(k) or similar account, through an employee stock purchase plan or otherwise.
III. Specific Guidance
A. Generally Prohibited Activities. The prohibitions below apply to actions an Insider may take directly or indirectly through family members or other persons or entities.
    1. Trading in Company Securities.
    a.     No Insider may buy, sell, or otherwise transact in (including gifting of) Company securities while aware of material nonpublic information concerning the Company.
    b.    No Insider may buy, sell, or otherwise trade in Company securities during any special trading blackout period applicable to such Insider as designated by the Compliance Officer.
    2. Tipping.
    Providing material nonpublic information to another person who may trade or advise others to trade on the basis of that information is known as “tipping” and is illegal. Therefore, no Insider may “tip” or provide material nonpublic information concerning the Company, unless required as part of that Insider’s regular duties for the Company and authorized by the Compliance Officer.
    3. Giving Trading Advice.
    No Insider may give trading advice of any kind about the Company to anyone, whether or not such an Insider is aware of material nonpublic information about the Company, except that Insiders should advise other Insiders not to trade if such trading might violate the law or this Policy.
1


    4. Engaging in Short Sales.
    No Insider may engage in short sales of Company securities. A short sale is the sale of a security that the seller does not own at the time of the trade.
    5. Engaging in Derivative Transactions.
    No Insider may engage in transactions in puts, calls, or other derivative instruments that relate to or involve Company securities. Such transactions are, in effect, bets on short term movements in the Company’s stock price and therefore create the appearance that the transaction is based on nonpublic information.
    6. Hedging.
    No Insider may engage in hedging transactions involving Company securities, including forward sale or purchase contracts, equity swaps, collars, or exchange funds. Such transactions are speculative in nature and therefore create the appearance that the transaction is based on nonpublic information.
    7. Trading on Margin or Pledging.
    No Insider may hold Company securities in a margin account or pledge (or hypothecate) Company securities as collateral for a loan. Margin sales or foreclosure sales may occur at a time when the Insider is aware of material nonpublic information or otherwise is not permitted to trade in Company securities.
    8. Trading in Securities of Other Companies.
    No Insider may, while in possession of material nonpublic information about any other public company gained in the course of employment with the Company, (a) trade in securities of the other public company, (b) “tip” or disclose such material nonpublic information concerning that company to anyone, or (c) give trading advice of any kind to anyone concerning the other public company.
B. Additional Restrictions Applicable to Section 16 Individuals and Key Employees.
    1. No Section 16 Individual or Key Employee (each as defined below) may trade in Company securities outside of the Company trading window described in Section V.B. below.
    2. No Section 16 Individual may trade in Company securities unless the trade(s) have been approved by the Compliance Officer in accordance with the procedures set forth in Section V.C.1. below.
C. Exceptions.
    The prohibited activities do not apply to:
    1. Exercises of stock options or similar equity awards or the surrender of shares to the Company in payment of the stock option exercise price or in satisfaction of any withholding obligations, provided that any securities acquired pursuant to such exercise may not be sold, including as part of a broker-assisted cashless exercise, while the Insider is in possession of material nonpublic information or subject
2


to a special trading blackout or, with respect to Section 16 Individuals and Key Employees, while the Company’s trading window is closed.
    2. The vesting of restricted stock, or the exercise of a tax withhold right pursuant to which an Insider elects to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock, provided that any securities acquired pursuant to such vesting may not be sold while the Insider is in possession of material nonpublic information or subject to a special trading blackout or, with respect to Section 16 Individuals and Key Employees, while the Company’s trading window is closed.
    3. Acquisitions or dispositions of Company securities under any individual account that are made pursuant to standing instructions entered into while the Insider is not in possession of material nonpublic information or otherwise subject to a special trading blackout and, with respect to Section 16 Individuals and Key Employees, while the Company’s trading window is open.
    4. Other purchases of securities from the Company or sales of securities to the Company that do not involve a market transaction.
    5. Purchases or sales made pursuant to a Rule 10b5-1 plan that is adopted and operated in compliance with the terms of this Policy (see Section VII).
IV. Determining whether information is material and nonpublic.
A. Definition of “Material” Information.
    1. There is no bright line test for determining whether particular information is material. Such a determination depends on the facts and circumstances unique to each situation and cannot be made solely on the potential financial impact of the information.
    2. In general, information about the Company should be considered “Material” if:
•A reasonable investor would consider the information significant when deciding whether to buy or sell Company securities; or
•The information, if disclosed, could be viewed by a reasonable investor as having significantly altered the total mix of information available in the marketplace about the Company.
•Put simply, if the information could reasonable be expected to affect the price of the Company’s stock, it should be considered material.
    3. It is important to remember that whether information is material will be viewed by enforcement authorities with the benefit of hindsight. In other words, if the price of the Company’s stock changed as a result of the information having been made public, it will likely be considered material by enforcement authorities.    
    4. While it is not possible to identify every type of information that could be deemed “Material,” the following matters ordinarily should be considered material:
•Projections of future earnings or losses, or other earnings guidance, or changes in projections or guidance.
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•Financial performance, especially quarterly and year-end earnings or significant changes in financial performance or liquidity.
•Potential significant mergers and acquisitions or the sale of significant assets or subsidiaries.
•New major contracts, orders, suppliers, customers, or finance sources, or the loss thereof.
•Major discoveries or significant changes or developments in products, services, research, or technologies.
•Stock splits, public or private securities/debt offerings, or changes in dividend policies or amounts.
•Significant changes in senior management.
•Actual or threatened major litigation, or the resolution of such litigation.
•The contents of forthcoming publications that may affect the market price of the Company securities.
•Significant breaches of information technology systems or other events impacting cybersecurity.
B. Definition of “Nonpublic” Information.
    Information is “nonpublic” if it has not been disseminated to investors through a widely circulated new or wire service (such as Dow Jones, Bloomberg, PR Newswire, etc.) or through a public filing with the Securities and Exchange Commission (the “SEC”). For the purposes of this Policy, information will be not considered public until after the close of trading on the first full trading day following the Company’s widespread public release of the information.
C. Consult the Compliance Officer for Guidance.
    Any Insider who is unsure whether the information that he or she possesses is material or nonpublic should consult the Compliance Officer for guidance before trading in any Company securities.
V. Additional provisions for Section 16 Individuals and Key Employees
    A. Definitions of Section 16 Individuals and Key Employees.
    1. “Section 16 Individual” – Each member of the Company’s Board of Directors (“Board”), those officers of the Company designated by the Board as “Section 16 Officers” of the Company, and their respective family members and others in their households.
    2. “Key Employees” – the following individuals are Key Employees because of their position with the Company and their possible access to material nonpublic information:
•Active employees of the Company who have met or currently meet the eligibility requirements to receive annual stock option and/or restricted stock unit awards from the Compensation, Culture, and People Committee of the Board (the “Committee”); and
•Any other individual designated from time to time by the Compliance Officer, the Board, or the Committee as a Key Employee.
•Employees and other individuals who are recipients of stock options and/or restricted stock unit awards from the Committee that are broad-based or special awards from the Chief Executive Officer or other authorized officer under a pool of stock options or restricted stock units
4


established by the Committee shall not be considered Key Employees unless they also meet one or more of the conditions set forth in the preceding two bullets.

B. The Trading Window.
    1. Trading Only While Trading Window is Open. Section 16 Individuals and Key Employees may buy, sell, or trade in Company securities only while the Company’s trading window is open. In general, the Company’s trading window opens after the close of trading on the second full trading day following the Company’s public announcement of the previous quarter’s earnings and ends on the last trading day of the second week prior to the end of the next fiscal quarter.
    2. No Trading While Aware of Material Nonpublic Information. Notwithstanding the provisions of the immediately preceding section, any Section 16 Individual or Key Employee who is in possession of material nonpublic information regarding the Company may not trade in Company securities during an open trading window until the close of trading on the first full trading day following the Company's widespread public release of such information.
    3. Exceptions for Hardship Cases. The Compliance Officer may, on a case-by-case basis, authorize trading in Company securities outside of the applicable trading windows (but not during special trading blackout periods) due to financial hardship or other hardships but only in accordance with the procedures set forth in Section V.C.2. below.
C. Procedures for Approving Trades by Section 16 Individuals and Hardship Cases.
    1. Section 16 Individual Trades. No Section 16 Individual may trade in Company securities until:
    a. the individual has notified the Compliance Officer in writing, at least three business days prior to the proposed trade(s), of the amount and nature of the proposed trade(s), and
    b. the individual has certified to the Compliance Officer in writing, no more than three business days prior to the proposed trade(s), that he or she is not aware of material nonpublic information regarding the Company.
    The notice and certification required by this Section V.C.1. shall be given using the form attached hereto as Exhibit A. Beginning on the day that is the fourth business day following the date of such notice, and for four additional business days thereafter, provided that the facts referred to in Section V.C.1.b. remain correct, the Section 16 Individual may execute the trade set forth in such notice. Once the approval period identified in the notice has expired, a new notice and certification pursuant to this Section V.C.1. must be given in order for the Section 16 Individual to trade in Company securities.
    2. Hardship Trades. The Compliance Officer may, on a case-by-case basis, authorize trading in Company securities outside of an applicable trading window due to financial hardship or other hardships only after:
    a. the person trading has notified the Compliance Officer in writing of the circumstances of the hardship and the amount and nature of the proposed trade(s), and
5


    b. the person trading has certified to the Compliance Officer in writing no earlier than two business days prior to the proposed trade(s) that he or she is not aware of material nonpublic information concerning the Company.
    3. Compliance Officer Trades. If the Compliance Officer desires to complete any trades involving Company securities, he or she must first obtain the approval of the Chief Executive Officer or the Chief Financial Officer of the Company.
    4. No Obligation to Approve Trades. The existence of the foregoing approval procedures does not in any way obligate the Compliance Officer (or, in the case of any trade by the Compliance Officer, the Chief Executive Officer or the Chief Financial Officer of the Company) to approve any trades requested by Section 16 Individuals, hardship applicants, or the Compliance Officer.
VI. Compliance Officer.
    The Company has designated its General Counsel as the individual responsible for administration of this Policy (the “Compliance Officer”). The duties of the Compliance Officer include the following:
    A. Administering the Policy and monitoring and enforcing compliance with all Policy provisions and procedures.
    B. Responding to all inquiries relating to this Policy.
    C. Reviewing and either approving or denying all proposed trades by Section 16 Individuals in accordance with the procedures set forth in Section V.C.1. above.
    D. After discussing with the Chief Financial Officer and Chairman of the Audit Committee, designating and announcing special trading blackout periods during which certain Insiders may not trade in Company securities.
    E. Providing copies of this Policy and other appropriate materials to all new Insiders.
    F. Administering, monitoring, and enforcing compliance with all federal and state insider trading laws and regulations.
    G. Assisting in the preparation and filing of all required SEC reports relating to insider trading in Company securities.
    H. Revising the Policy as necessary to reflect changes in federal or state insider trading laws and regulations, or as otherwise deemed necessary or appropriate.
    I. The Compliance Officer may designate one or more individuals who may perform the Compliance Officer’s duties in the event that the Compliance Officer is unable or unavailable to perform such duties.
VII. Rule 10b-5-1 Trading Plans.
    A. General Information.
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    Under Rule 10b5-1 of the Securities Exchange Act of 1934, an individual has an affirmative defense against an allegation of insider trading if he or she demonstrates that the purchase, sale, or trade in question took place pursuant to a binding contract, specific instruction, or written plan that was put into place before he or she became aware of material nonpublic information. Such contracts, irrevocable instructions, and plans are commonly referred to as Rule 10b5-1 plans (“Trading Plan(s)”).
    Trading Plans have the obvious advantage of protecting against insider trading liability. However, they also require advance commitments regarding the amounts, prices, and timing of purchases or sales of Company securities and this limits flexibility and discretion. In addition, once a Trading Plan has been adopted, it is generally not permissible to amend or modify it. Accordingly, while some individuals may find Trading Plans attractive, they may not be suitable for all Insiders.
    B. Specific Requirements.
    1. Pre-Approval. For a Trading Plan to serve as an adequate defense against an allegation of insider trading, a number of legal requirements must be satisfied. Accordingly, anyone wishing to establish a Trading Plan must first submit the proposed plan to be adopted to the Compliance Officer and receive approval from the Compliance Officer or his or her designee. Section 16 Individuals or Key Employee wanting to establish a Trading Plan must also satisfy the notification and certification requirements set forth in section V.C.1. above., as well as providing a written certification at the time of the adoption of the Trading Plan or modified Trading Plan that (a) he or she is not aware of any material nonpublic information about the Company or its securities, and (b) he or she is adopting the plan in good faith and not as a part of a plan or scheme to evade the prohibitions of Rule 10b-5.
    2. Material Nonpublic Information, Special Blackouts and Trading Plan Adopted in Good Faith. An individual desiring to enter into a Trading Plan must (a) enter into the Trading Plan at a time when he or she is not aware of any material nonpublic information about the Company, (b) not otherwise be subject to a special trading blackout, and (c) adopt the plan in good faith and not as a part of a plan or scheme to evade the prohibitions of Rule 10b-5.
    3. Trading Window. Section 16 Individuals and Key Employees may only establish a Trading Plan when the Company’s trading window is open.
    4. Waiting Period. To avoid even the appearance of impropriety, trades under a Trading Plan cannot begin until the later of (a) 90 days after the adoption or modification of the Trading Plan or (b) two business days after the Company files a quarterly or annual financial report with the SEC covering the quarter in which the Trading Plan was adopted or modified, but no later than 120 days after the Trading Plan is established. The waiting period does not begin until the Compliance Officer or his designee has provided the approval required in VII.B.1.
    5. Trading Plan Limitations. Section 16 Individuals and Key Employees will generally be permitted to have only one Trading Plan covering the same time period for open market purchases or sales; provided, however, the Compliance Officer may permit Section 16 Individuals and Key Employees to have two separate Trading Plans if (a) trading under one plan does not commence until all trades under the other have been completed or (b) the second Trading Plan is established to cover sales needed to satisfy tax withholding obligations triggered by the vesting of equity compensation granted to
7


the Section 16 Individual or Key Employee. Section 16 Individuals and Key Employees will be prohibited from establishing more than one Trading Plan in any twelve month period which facilitates a single-trade (a “Single Trade Plan”); provided, however, the Compliance Officer may permit a second Single Trade Plan if it is established to cover sales needed to satisfy tax withholding obligations triggered by the vesting of equity compensation granted to the Section 16 Individual or Key Employee.
        
VIII. Post-Termination Transactions.
    This Policy continues to apply to transactions in the Company’s securities after termination of service to the Company. If an individual is in possession of material nonpublic information when his or her service terminates, or if the Company’s trading window is closed at the time of termination, that individual may not trade in the Company’s securities until any such material nonpublic information has become public or is no longer material and/or the Company’s trading window has opened. The pre-clearance procedures specified in Section V.C.1. above, however, will cease to apply to transactions in the Company’s securities upon the opening of the Company’s trading window and/or expiration of any special trading blackout period, at which point the provisions set forth in Section V.B.1. above shall no longer apply.
IX. Potential Penalties and Disciplinary Sanctions.
    A. Civil and Criminal Penalties. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be required to disgorge the profit made or the loss avoided by the trading, pay the loss suffered by the person who purchased securities from or sold securities to the Insider or tippee, pay significant civil and/or criminal penalties, and serve a lengthy jail term. The Company in such circumstances may also be required to major civil or criminal penalties.
    B. Company Discipline. Violation of this Policy or federal or state insider trading or tipping laws by any Insider may, in the case of a director, subject the director to dismissal proceedings, and in the case of an officer or employee, subject the officer or employee to disciplinary action by the Company up to and including termination for cause.
    C. Reporting of Violations. Any Insider who violates this Policy or any federal or state law governing insider trading or tipping, or knows of any such violation by any other Insider, must report the violation immediately to the Compliance Officer. Upon determining that any such violation has occurred, the Compliance Officer, in consultation with the Chair of the Company’s Audit Committee of the Board, will determine whether the Company should release any material nonpublic information, and when required by applicable law, shall cause the Company to report the violation to the SEC or other appropriate governmental authority.
X. Miscellaneous.
    This Policy will be delivered to all directors, officers, employees, and designated outsiders upon its adoption by the Board of Directors of the Company and to all new directors, officers, employees, and designated outsiders at the start of their employment or relationship with the Company. Upon first receiving a copy of this Policy or revised versions, each Section 16 Individual and Key Employee must
8


sign an acknowledgement that he or she has received a copy of this Policy and agrees to comply with its terms.

9


Receipt and Acknowledgement

Upon first receiving a copy of the Castellum, Inc. Insider Trading Policy or any revised version thereof, each member of the Board of Directors, each officer designated under the Policy as a “Section 16 Individual” and each individual meeting the definition of “Key Employee” must sign and return to the office of the General Counsel the following receipt and acknowledgement.

I, ___________________________, hereby acknowledge that I have received and read a copy of the Castellum, Inc. Insider Trading Policy and agree to comply with its terms. I understand the violation of insider trading or tipping laws and regulations may subject me to severe civil and/or criminal penalties, and that violation of the terms of the Castellum, Inc. Insider Trading Policy may subject me to discipline by the Company up to and including termination for cause.
    

                    ___________________________________
                    Signature/Date
                    ___________________________________
                    Printed Name



10


Exhibit A
Castellum, Inc.
Insider Trading Policy
Notice and Certification for Section 16 Individuals

To the Compliance Officer:
I hereby notify you of my intent to trade in securities of Castellum, Inc (the ‘Company”). The amount and nature of the proposed trade is as follows:
_____    Exercise ________ non-qualified stock options granted under the Castellum, Inc. 2021 Stock Incentive Plan on ________________;
_____ Sell in the open market ________ shares of the Company’s common stock currently held at ______________________________(example: Name of brokerage firm, or in certificated form);
_____ Purchase in the open market ________ shares of the Company’s common stock;
_____ Gift shares of Company’s common stock to ____________________________.
_____ Adopt a Trading Plan to sell ____________ shares of the Company’s common stock on ________________________________.
_____ Other (explain)
I understand that I am not authorized to trade in Company securities or adopt a Trading Plan in reliance upon this Notice and Certification until the date upon which this Notice and Certification is approved by the Compliance Officer or his/her designee, and that such authorization will continue until _____________(insert the date that is five business days after the date hereof.) I understand that if I have not completed my proposed trade or adopted my Trading Plan by the last date of the authorization set forth in the immediately preceding sentence, I must submit a new Notice and Certification in order to trade in Company securities or adopt a plan.
I hereby certify that I am not aware of material nonpublic information concerning the Company.
If I am adopting a Trading Plan, I further certify that I am not otherwise subject to a special trading blackout, and this Trading Plan is be adopted in good faith and not as a part of a plan or scheme to evade the prohibitions of Rule 10b-5.
                    ___________________________________
                    Signature/Date
                    ___________________________________
                    Printed Name

11
Exhibit 21.1
List of Subsidiaries
Castellum, Inc.

Subsidiary Name
State of Organization
Percentage Owned
Corvus Consulting, LLC (“Corvus”)
Virginia
100%
Specialty Systems, Inc. (“SSI”)

New Jersey

100%
Global Technology and Management Resources, Inc. (“GTMR”)Maryland100%

EXHIBIT 23.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We consent to the incorporation by reference in the Registration Statement No. 333-284205 on Form S-3 of Castellum, Inc. of our report dated March 11, 2025, relating to the consolidated financial statements of Castellum, Inc., appearing in this Annual Report on Form 10-K of Castellum, Inc. for the year ended December 31, 2024.


/s/ RSM US LLP

McLean, Virginia
March 11, 2025

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Glen R. Ives, Chief Executive Officer of Castellum, Inc. (the “Company”), certify that:
(1)I have reviewed this Annual Report on Form 10-K for the fiscal period ended December 31, 2024;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4)The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5)The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and


(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
March 11, 2025
/s/ Glen R. Ives
Glen R. Ives
Chief Executive Officer
(Principal Executive Officer)


Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, David T. Bell, Chief Financial Officer of Castellum, Inc. (the “Company”), certify that:
(1)I have reviewed this Annual Report on Form 10-K for the fiscal period ended December 31, 2024;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4)The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5)The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and


(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
March 11, 2025
/s/ David T. Bell
David T. Bell
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)


Exhibit 32.1



CERTIFICATION PURSUANT TO
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report on Form 10-K of Castellum, Inc. (the “Company”) for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Glen R. Ives, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 11, 2025
/s/ Glen R. Ives
Glen R. Ives
Chief Executive Officer
(Principal Executive Officer)


Exhibit 32.2



CERTIFICATION PURSUANT TO
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report on Form 10-K of Castellum, Inc. (the “Company”) for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, David T. Bell, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 11, 2025
/s/ David T. Bell
David T. Bell
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)


Castellum, Inc.
Compensation Clawback Policy

Revised and adopted by the Board of Directors on November 9, 2023

Each current or former executive officer shall repay or forfeit, to the fullest extent permitted by law and as directed by the independent members of the Board of Directors as identified pursuant to applicable exchange listing standards (“Independent Directors”) of Castellum, Inc. (“Company,”), any annual incentive or other performance-based compensation awards (“Awards”) received by him or her, if:

a.the payment, grant, or vesting of the Awards was based on the achievement of financial results that were subsequently the subject of a restatement of the Company’s financial statements filed with the Securities and Exchange Commission; and

a.the amount of the compensation that would have been received by the executive officer had the financial results been properly reported would have been lower than the amount actually received.

The Independent Directors shall have full and final authority to make all determinations under this policy, including without limitation whether the policy applies and whether any recovery would be deemed impracticable. Repayment can be made from the proceeds of the sale of Company stock and the forfeiture of other outstanding awards. All determinations and decisions made by the Board’s Independent Directors pursuant to the provisions of this policy shall be final, conclusive, and binding on all persons, including the Company, its affiliates, its stockholders, and employees.

Each Award agreement or other document setting forth the terms and conditions of any annual incentive or other performance-based Award granted to an executive officer shall be deemed to include the provisions of this policy. The remedy specified in this policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company.