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What changed in Castellum, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Castellum, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+232 added−241 removedSource: 10-K (2025-03-11) vs 10-K (2024-03-21)

Top changes in Castellum, Inc.'s 2024 10-K

232 paragraphs added · 241 removed · 158 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+14 added−14 removed34 unchanged
Biggest changeWe 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.
Biggest changeOur 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.
Some significant law 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; • 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 7 Table of Contents 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 Department of Defense 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.
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; 7 Table of Contents • 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.
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. Lastly, through the Company’s IW/IO operations, Castellum provides key services to governments of other nations. International Presence .
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 .
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, Inc.
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.
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 utilize to enforce its procurement law and policies.
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.
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 the Company’s financial statements. Intellectual Property The Company currently has no patents or trademarks that it believes to be material to the business.
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.
In all cases, Castellum seeks acquisitions which are immediately accretive on a revenue, EBITDA (earnings before interest, depreciation, and amortization), and net income per share basis, as well as positive from a net present value perspective and which fit the culture of Castellum.
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.
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.
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 currently support and have previously supported international clients in Australia and other foreign countries and believe that future opportunities for providing our services internationally is growing given current record nominal levels of global spending on defense and the continued rising threat from cybersecurity breaches. Deep-Seated Government Relationships .
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 .
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 government (“USG”), financial services, healthcare, and other users of large data applications.
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.
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.
The Opportunity Pipeline represents the revenue opportunity for the Company from potential future contracts obtained throug h 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.
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 8 Table of Contents recruit, train, promote, and retain high quality people at all levels of the organization.
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.
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. Much of our business is won through submission of formal competitive bids.
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. 4 Table of Contents Much of our business is won through submission of formal competitive bids.
We have strategic business relationships with several companies associated with the 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.
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.
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 polices, service modernization plans, and availability of funds.
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.
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”), Chief Strategy Officer and other executive officers, and other key managers.
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.
Due to our success in completing seven acquisitions over the previous four 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 given a pipeline of identified and acquisition targets.
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.
Acquisition Strategy Castellum seeks acquisitions which fit one or more of the following criteria: (1) expands Castellum's capability in existing areas of expertise such as cybersecurity and electronic warfare; (2) broadens the scope of clients which Castellum serves such as adding a new service branch or new government agency; (3) increases the scale of Castellum's business in existing areas in order to generate better operating profit margins and reduce the Company's 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 Castellum believes are high growth potential; and (7) fills a need 5 Table of Contents 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.
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.
To ensure CMMC compliance, the Company has a senior executive on its management team whose responsibility 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 Congressional appropriations.
To 8 Table of Contents 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.
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 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.
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 / i nvestor-relations.html , as soon as reasonably practical after we electronically file the material with, or furnish it to, the SEC.
The SEC allows us to disclose important information by referring to it in this manner. 9 Table of Contents 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 / i nvestor-relations.html , as soon as reasonably practical after we electronically file the material with, or furnish it to, the SEC.
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 $527 million as of December 31, 2023.
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 approxima tely $635 million as of December 31, 2024.
Each of those contracts are associated with the Company’s areas of core expertise, as follows: (i) an annual contract with 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 with multiple renewal option periods is a T&M contract which supports the cyber and EW work done at the Army Staff Level, and (iii) an annual contract with 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 Command, Control, Communications, and Computer Intelligence Surveillance Reconnaissance (“C4ISR”) sensor systems and subsystems for Department of Defense.
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.
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.
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.
Benefits are viewed as a critical tool for employee recruitment and retention. To that end, Castellum has migrated all of its employees from their legacy benefits programs to the ADP Professional Employer Organization (“PEO”), prior to the acquisition of Global Technology and Management Resources, Inc. (“GTMR”) in March of 2023.
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.
We know of no single competitor that is dominant in our fields of technology. We have a relatively 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.
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.
Our software-defined, full-spectrum cyber, electronic warfare, and C-UAS solutions provide electromagnetic spectrum advantage and deliver precision effects against national security threats.
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.
As of December 31, 2023, we employed 260 full and part-time employees with sixty-five percent (65%) of our employees holding degrees in science, technology, engineering, or mathematics fields, twenty-two percent (22%) holding advanced degrees, and eighty-four percent (84%) of our employees holding security clearances. We also retain 11 independent contractors.
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.
Additionally, as with other government contractors, our business is subject to government customer funding decisions and actions that are beyond our control. 4 Table of Contents 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.
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.
It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K (“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”).
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”).
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.
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. 6 Table of Contents 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.
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. 3 Table of Contents • 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 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.
On June 12, 2019, the Company acquired Bayberry Acquisition Corporation, a Nevada corporation (“Bayberry” and, as context requires, the “Bayberry Acquisition”). On February 23, 2021, Bayberry was dissolved with the Nevada Secretary of State as it was non-operational after the merger with the Company. On November 21, 2019, we acquired Corvus Consulting, LLC, (“Corvus”), a Delaware limited liability company.
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.
Although we operate under the risk of such terminations with the potential to have a material impact on operations, they are not common.
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.
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. • C4ISR, Cyber & Space – Castellum helps ensure information superiority by delivering multi-domain C4 technology and networks.
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. 3 Table of Contents • Command, Control, Communications, and Computer Intelligence Surveillance Reconnaissance (“C4ISR”), Cyber & Space.
However, given the uncertainties discussed above, as well as the risks described in Budget Environment, we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all. 6 Table of Contents 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 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.
In the year ending December 31, 2023, the top three revenue-producing contracts, some of which consist of multiple task orders, accounted for fifty-two percent (52%) of our revenue, or $23,639,493.
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.
The majority of contracted work is operational in nature and is funded on an on-going basis. As a government contractor, Castellum both cooperates (as a teaming partner) and competes with many different companies. Sometimes, Castellum both teams with (on one contract) and competes against (on a different contract) the same company.
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.
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 $25,631,786 (57%), $25,302,224 (61%), and $15,381,979 (78%) of our total revenues from T&M contracts in the years ended December 31, 2023, 2022, and 2021, respectively.
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.
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Among others, Castellum competes with (and sometimes also teams with) Northrup Grumman, CACI, Peraton, and Booz-Allen Hamilton. 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.
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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.
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We design, implement, protect, and manage secure enterprise IT solutions for the United States (“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”).
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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.
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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.
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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.
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Budgetary Environment On December 29, 2022, President Joe Biden signed the Consolidated Appropriations Act of 2023 which was a $1.7 trillion omnibus spending bill. Since that time, there have been a series of continuing resolutions (“CR or CRs”) in the absence of a budget.
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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.
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While we cannot predict the passage of a budget, the CRs have had bipartisan support for the areas in which we support National Security interests. Over 99% of our work is considered mission critical and has not been identified for employee furlough when faced with the risk of a government shutdown.
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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.
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Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract award decisions, and other factors. The Company’s most recent experience with CRs is that organic growth is impacted, but the cybersecurity related operations remain core to what has become a bipartisan National Security focus.
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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.
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However, there is the risk that when a CR expires, unless appropriations bills have been passed by Congress and signed by the then President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity.
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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. 5 Table of Contents Annual appropriations to fund the federal government for fiscal year 2025 have not yet been enacted.
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During Covid our work was deemed a key component of National Security and continued unabated which would suggest that lacking a CR we are likely to continue to operate largely unaffected but such an assumption may prove to be incorrect.
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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.
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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.
Added
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.
Removed
We expect to recognize revenue from a substantial portion of funded backlog within the next 24 months.
Added
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.
Removed
The implementation of the ADP PEO has allowed for the extension of benefits not previously offered to include a broad suite of additional services at reduced cost to the employees (such as financial planning, legal services, additional life insurance, and long-term care). At the time of the GTMR acquisition, the GTMR employees were subject to a legacy benefit program.
Added
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.
Removed
Through the open-enrollment process which will occur during the second quarter of 2024, the Company expects its employees, including the employees of GTMR, to migrate to the same benefit plan.
Added
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.
Removed
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 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814. Our telephone number is (301) 961-4895 and our website address is www.castellumus.com . We make our website content available for information purposes only.
Added
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.
Removed
The SEC allows us to disclose important information by referring to it in this manner.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+19 added−10 removed136 unchanged
Biggest changeOur 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; 11 Table of Contents • 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.
Biggest changeOur 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.
Failure to effectively manage any future 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.
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.
Some significant law 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; • 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 12 Table of Contents • 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.
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; 12 Table of Contents • 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.
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; 14 Table of Contents • 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.
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.
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. The U.S. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance could take many years.
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.
We are focused on building a large, successful technology company in the areas of information technology (“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.
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.
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 circumstances.
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 20 Table of Contents circumstances.
An interested stockholder is a person who, together with the affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) 10 percent or more of the Company’s capital stock entitled to vote.
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.
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 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 21 Table of Contents 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 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.
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. Our annual revenue and operating results could be volatile due to the unpredictability of the USG’s budgeting process and policy priorities.
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. 18 Table of Contents Our annual revenue and operating results could be volatile due to the unpredictability of the USG’s budgeting process and policy priorities.
If the existing holders of our common stock, particularly our directors, officers, and other 5% stockholders, sell a large number of shares, they could adversely affect the market price for our common stock.
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.
In the event any of those key employees would no longer be affiliated with the Company, and we did not replace them with equally capable replacements, it may have a material detrimental impact on our ability to successfully operate 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 10 Table of Contents equally capable replacements, it may have a material detrimental impact on our ability to successfully operate our business.
Funded backlog represents contract value from funds appropriated by the U.S. Congress (“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.
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.
In addition, some of our engagements obligate us to provide ongoing maintenance and other supporting or ancillary services on a fixed-price basis or with limitations on our ability to increase prices. Many of our engagements are also on a T&M basis.
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.
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 15 Table of Contents administratively difficult for us to satisfy and, as a result, could cause actual results to differ materially and adversely from those anticipated.
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.
If we are subject to an enforcement action by the USG, it could materially and adversely affect our results of operations. USG contracts contain numerous provisions that are unfavorable to us.
If we are subject to an enforcement action by the USG, it could materially and adversely affect our results of operations. 13 Table of Contents USG contracts contain numerous provisions that are unfavorable to us.
We evaluate the recoverability of recorded goodwill amounts annually or when 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.
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.
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.
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. 23 Table of Contents Item 1B.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our audited consolidated financial statements and related notes included in Part II, Item 8, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7.
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.
We generate substantially all of our revenue from contracts with the United States 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.
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.
The applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action 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.
The applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action 22 Table of Contents 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.
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, operational, and financial resources.
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, 11 Table of Contents operational, and financial resources.
We generated 7% of our total revenue in the year ended December 31, 2023, 8% of our total revenue in the year ended December 31, 2022, and 19% of our total revenue in the year ended December 31, 2021, from FFP contracts. FFP contracts require us to price our contracts by predicting our expenditures in advance.
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.
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 $10,716,907 of our recorded total assets as of December 31, 2023.
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.
The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a 20 Table of Contents standardized risk disclosure document containing specified information.
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.
Any costs found to be improperly allocated or assigned to contracts will not be reimbursed, and any such costs already reimbursed must be refunded and certain penalties may be imposed.
Any costs found to be improperly allocated or assigned to contracts will not be reimbursed, and any such costs already reimbursed 16 Table of Contents must be refunded and certain penalties may be imposed.
We had an accumulated deficit of $43,982,900 as of December 31, 2023, and we expect to continue to generate a net loss in the year ending December 31, 2024. 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.
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 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. At December 31, 2023, our backlog included cost reimbursable, T&M, and FFP contracts. Cost reimbursable and T&M contracts generally have lower profit margins than FFP contracts.
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.
Financial Statements on this Annual Report on 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.
Should our bus iness 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.
We expect to continue to devote significant capital resources to fund our acquisition strategy. In order 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.
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 management collectively owns a substantial amount of our common stock. Collectively, our officers and directors own or exercise voting and investment control of approximately 44.4% of our outstanding common stock and control 43.8% of the voting power of the Company.
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.
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. 17 Table of Contents Our failure to adequately protect our confidential information and proprietary rights may harm our competitive position.
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.
If we are unable to consistently win new contract awards over any extended 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.
If we are unable to consistently win new contract awards over any extended 15 Table of Contents period, our business and prospects will be adversely affected and that could cause our actual results to differ materially and adversely from those anticipated.
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.
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. 21 Table of Contents 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.
Bell, our CFO, Glen R. Ives, our Chief Operating Officer (“COO”), and Jay O. Wright, our Chief Strategy Officer 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.
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.
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 of Directors (the “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. 22 Table of Contents 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.
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.
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.
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.
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.
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 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.
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.
A security breach in one of these systems could 16 Table of Contents 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.
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.
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. The closing price of our common stock has been below $1.00 for more than thirty (30) consecutive trading days.
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.
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 difficulties, absorb significant management attention, and require significant financial resources that would otherwise be available for the ongoing development of our business.
The integration of these businesses into our operations may result in unforeseen operating 19 Table of Contents difficulties, absorb significant management attention, and require significant financial resources that would otherwise be available for the ongoing development of our business.
Additionally, we have certain potential dilutive instruments, of which the conversion of these instruments could result in dilution to stockholders: As of March 15, 2024 the maximum potential dilution is 28,274,400 shares and includes Series A preferred stock convertible into approximately 587,500 shares of common stock, Series C preferred stock convertible into 481,250 shares of common stock, options granted convertible into 8,243,437 shares of common stock, and warrants granted convertible into 18,962,212 shares of common stock.
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 convertib le 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.
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. We depend on the continued services of our key personnel, including Mark C. Fuller, our CEO, David T.
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.
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. 9 Table of Contents 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.
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.
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.
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.
Each of these types of risks could cause our actual results to differ materially and adversely from those anticipated. 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.
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.
We have substantial indebtedness. We have $12,456,407 of debt as of December 31, 2023, the majority of which originally matured in calendar year 2024 and the terms of which have subsequently been amended to extend the maturity date to calendar year 2026. See subsequent events under Note 16 Part II Item 8.
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 N ote 7 , Part II, Item 8., Financial Statements” on this Form 10-K.
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. 13 Table of Contents 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.
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.
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. 10 Table of Contents We may have difficulty raising additional capital, which could deprive us of necessary resources.
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.
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.
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.
The market for our products and services is intensely competitive and characterized by rapid changes in technology, customer requirements, industry standards, and frequent 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.
The market for our products and services is intensely competitive and characterized by rapid changes in technology, customer requirements, industry standards, and frequent 17 Table of Contents new product introductions and improvements.
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 non-cash charge of $6,919,094. 19 Table of Contents 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.
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.
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.
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.
If the USG imposes sequestration in the absence of an approved budget or CR our participation in USG contract programs could be impaired.
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.
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.
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.
Our business could be adversely affected by changes in spending levels or budgetary priorities of the federal, state, and local governments or by the imposition by the USG of sequestration in the absence of an approved budget or continuing resolution.
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.
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.
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.
Removed
The management team also has limited experience working together as a team.
Added
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.
Removed
The precautions we take to prevent and detect this activity may not be effective, and we could face unknown risks or losses.
Added
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.
Removed
Inflation may cause the Fed to increase interest rates thereby increasing our interest expense. Sustained inflation can cause the Federal Reserve Board and its Open Market Committee (“Fed”) to raise the target for the federal funds rate or keep it at a high level which normally translates into an increase in most banks’ “prime” rate.
Added
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.
Removed
Because our notes with Live Oak Banking Company are both variable interest rate instruments tied to the prime rate, actions by the Fed to increase the federal funds rate or keep it high may increase our cost of debt and our interest expense thereby reducing our pre-tax income and net income.
Added
If we are unable to adequately control these risks, our business, results of operations, and financial condition could be harmed.
Removed
Our borrowing costs have recently increased and would increase with future Fed interest rate increases, although the impacts have been and are expected to continue to be immaterial. Our contracts with U.S. federal, state, and local government customers do not permit us to pass along our increased financing costs.
Added
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.
Removed
The increases to our borrowing costs have not impacted (and are not expected to impact) our ability to make timely payments. 18 Table of Contents Risks Related to our Acquisitions We may have difficulty identifying and executing acquisitions on favorable terms and therefore may grow more slowly than we historically have grown.
Added
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.
Removed
As part of our business strategy, we may acquire or make investments in complementary companies’ services, products, or technologies. Through acquisitions, we have expanded our base of U.S. federal, state, and local governments customers, increased the range of solutions we offer to our customers and deepened our penetration of existing markets and customers.
Added
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. 14 Table of Contents The U.S. continues to face a changing geopolitical environment, along with substantial fiscal, economic, and security challenges, which affect funding and budgetary priorities.
Removed
We may encounter difficulty identifying new acquisitions and executing suitable acquisitions due to lack of financing. To the extent that management is involved in identifying acquisition opportunities or integrating new acquisitions into our business, our management may be diverted from operating our core business.
Added
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.
Removed
Without acquisitions, we may not grow as rapidly as we historically have grown, which could cause our actual results to differ materially and adversely from those anticipated.
Added
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.
Removed
We may encounter other risks in executing our acquisition strategy, including: • increased competition for acquisitions may increase the costs for our acquisitions; • unreasonable expectations of companies related to their perceived versus actual value; • our failure to discover material liabilities during the due diligence process, including the failure of prior owners of any acquired businesses or their employees to comply with applicable laws or regulations, such as the FAR and health, safety, and environmental laws, or their failure to fulfill their contractual obligations to the USG or other customers; • our acquisitions may not ultimately strengthen our competitive position or allow us to achieve our goals, and any acquisitions we complete could be viewed negatively by our customers, analysts, and investors; • acquisition financing may not be available on reasonable terms or at all; • failure to properly integrate our acquisitions with our existing business thereby preventing the realization of potential synergies with the acquired business; and • debt incurred in making acquisitions may reduce our financial flexibility to pursue other opportunities or invest in internal growth.
Added
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.
Added
In addition, we may be unable to detect unauthorized use of our proprietary information in order to take appropriate steps to enforce our rights.
Added
Cost reimbursable and T&M contracts generally have lower profit margins than FFP contracts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+2 added−2 removed4 unchanged
Biggest changeBoard 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.
Biggest changeThe 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.
Our IT department continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs. Engage Third-parties on Risk Management 23 Table of Contents 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.
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 briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; 24 Table of Contents ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards.
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.
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 monitoring includes quarterly assessments by our Vice President of Technology and Deployment (the “VP of Technology”) 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.
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.
Removed
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.
Added
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.
Removed
Management’s Role Managing Risk The VP of Technology and Deployment and the CEO play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide comprehensive briefings to the Audit Committee on a semi-annual basis, with a minimum frequency of once per year.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, our subsidiaries lease property at the following locations: ● Augusta, Georgia ● Vienna, Virginia ● Toms River, New Jersey ● Hollywood, Maryland We believe our existing facilities are adequate to meet our current requirements. We do not own any real property. 24 Table of Contents
Biggest changeAs 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.
Item 2. Properties Our principal executive offices are located at 3 Bethesda Metro Center, Suite 700 Bethesda, Maryland 20814 in a shared office space leased from Regus.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−43 removed4 unchanged
Biggest changeHolders of Record As of March 15, 2024, there were 53,029,915 shares of common stock outstanding held by approximately 214 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 15, 2024 was $0.27.
Biggest changeHolders 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.
The declaration and payment of dividends on our common stock is at the discretion of our Board of Directors and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions, or such other factors as our Board of Directors may deem relevant.
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.
Since October 13, 2022, our common stock has been listed for trading on the NYSE American under the symbol “CTM”.
Since October 13, 2022, our common stock has been listed for trading on the NYSE American LLC (“NYSE American”) under the symbol “CTM”.
Removed
Unregistered Sales of Securities Unless specifically noted otherwise, the issuances described in this subsection were made in reliance on the private placement exemption pursuant to Section 4(a)(2) of the Securities Act because the issuances did not involve a public offering. 2023 Issuances On November 20, 2023, we issued an aggregate of 30,000 shares of common stock to four advisory board members in consideration of services rendered, which we valued at approximately $28,560. 2022 Issuances Common Stock In the three months ended March 31, 2022, we issued (a) 15,000 shares of common stock in accordance with the Series C Preferred Stock subscription agreements, (b) 15,000 shares of common stock in the exercise of stock options, for which we received $12,000, and (c) 7,500 shares of common stock that vest over twelve months to an advisory board member, which we valued at approximately $30,000.
Added
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.
Removed
In April, 2022, we also issued (a) 7,500 shares of common stock in consideration of professional services rendered, which we valued at approximately $30,000, and (b) 125,000 shares of common stock to Robert Eisiminger as a commitment fee to enter into a promissory note valued at $500,000.
Added
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 ]
Removed
On April 4, 2022, we entered into a Securities Purchase Agreement (“SPA”) with Crom Cortana Fund LLC (“Crom”). Among other things, the SPA includes (a) the issuance of 656,250 warrants that mature April 4, 2027, with an exercise price of $1.84 per share; and (b) the issuance of 1,250,000 common shares at $0.40 per share.
Removed
As further inducement to enter into the SPA, Crom was issued 125,000 common shares. 26 Table of Contents As consideration for our acquisition of the assets of Lexington Solutions Group, LLC (“LSG”) on May 4, 2022, the Company issued 600,000 shares of common stock, which we valued at approximately $3,000,000, set forth in the Amendment No. 1 to the LSG Business Acquisition Agreement.
Removed
In May, 2022, 535,000 shares of Series B preferred stock were converted into 2,675,000 shares of common stock, and 7,500 shares of common stock were issued in consideration for professional services rendered, which we valued at approximately $34,000.
Removed
In October, 2022, the two remaining holders of the Series B Preferred Stock converted all of the remaining shares of Series B Preferred Stock outstanding into 15,375,000 shares of common stock.
Removed
In connection with the Company’s Reverse Stock Split, on October 27, 2022, we issued 1,231 shares of common stock to existing shareholder accounts with fractional shares representing “round up” shares.
Removed
On November 7, 2022, we issued 25,000 shares of common stock in connection with our acquisition of the assets of LSG pursuant to the post-closing adjustment set forth in Amendment No. 1 to the LSG Business Acquisition Agreement, which we valued at approximately $30,000.
Removed
On November 16, 2022, we issued a total of 60,000 shares of common stock to three subcontractors for professional services rendered, which we valued at approximately $50,000. We issued 100,000 shares of common stock on December 15, 2022, in connection with the conversion of $160,000 of principal of the Crom Note Payable.
Removed
Stock Options On January 1, 2022, we granted stock options to employees, directors, and officers to purchase a total of 725,000 shares of common stock at an exercise price ranging from $3.30 to $3.40. On April 1, 2022, we granted stock options to a consultant to purchase 10,000 shares of our common stock at an exercise price of $3.40.
Removed
On April 25, 2022, we granted stock options to an officer to purchase 1,800,000 shares of our common stock at an exercise price of $3.80. On November 11, 2022, we granted stock options to an employee to purchase 50,000 shares of our common stock at an exercise price of $2.00.
Removed
Warrants On April 4, 2022, we issued warrants to Crom in accordance with the SPA to purchase 656,250 shares of common stock at an exercise price of $1.84 per share which expire on April 4, 2027.
Removed
On May 2, 2022, we issued warrants to two executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 361,017 shares of common stock at an exercise price of $3.80 per share.
Removed
On October 17, 2022, we issued warrants to three executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 1,500,000 shares of common stock at an exercise price of $2.00 per share.
Removed
Line of Credit On March 28, 2022, we entered into a $950,000 revolving line of credit promissory note with Live Oak Banking Company that has a maturity date of March 28, 2029. The note has a per annum interest rate equal to the prime rate as quoted in the Wall Street Journal, plus 2.75%.
Removed
Convertible Note Payable In connection with the SPA with Crom, we entered into a convertible promissory note dated April 4, 2022 in the amount of $1,050,000 at 7% interest per annum which matures on April 4, 2023 and is convertible at a price of $1.60 per share.
Removed
On February 13, 2023, the Company entered into a series of transactions with Crom to pay off the total amount currently owed under the terms of the convertible promissory note. 2021 Issuances 27 Table of Contents Preferred Stock On September 16, 2021, September 23, 2021, October 20, 2021, November 18, 2021, November 23, 2021, and December 9, 2021, we issued a total of 620,000 shares of Series C Preferred Stock, for proceeds of $620,000, to various outside investors to finance the Company’s operations, acquisitions, and development.
Removed
Common Stock On April 29, 2021 and June 15, 2021, we issued 1,114,023 shares of common stock in connection with the acquisition of Mainnerve Federal Services, Inc., valued at approximately $1,800,000. On August 6, 2021, we issued 500,000 shares of common stock in connection with the acquisition of Merrison Technologies, LLC, valued at approximately $1,700,000.
Removed
On August 25, 2021, we issued 2,600,000 shares of common stock in connection with the acquisition of Specialty Systems, Inc. (“SSI”), valued at approximately $5,200,000.
Removed
On September 16, 2021, September 23, 2021, October 20, 2021, November 18, 2021, November 23, 2021, and December 9, 2021, we issued a total of 62,000 shares of common stock to the holders of the Series C Preferred Stock in accordance with the subscription agreements.
Removed
On October 26, 2021, we issued 32,095 shares of common stock in connection with the acquisition of SSI, valued at approximately $64,000. Stock Options On January 1, 2021, we granted options to five advisory board members and one employee to purchase 150,000 shares of common stock at an exercise price of $1.60 per share.
Removed
On February 21, 2021, we granted options to an employee to purchase 50,000 shares of common stock at an exercise price of $1.00 per share. On March 12, 2021, we granted options to an advisory board member to purchase 50,000 shares of common stock at an exercise price of $1.80 per share for services rendered.
Removed
On April 1, 2021, we granted options to and employee to purchase 100,000 shares of common stock at an exercise price of $1.80 per share.
Removed
On July 1, 2021, we granted options pursuant to the terms of an employment agreement to an officer of the Company to purchase 750,000 shares of common stock at an exercise price of $1.60 per share.
Removed
On August 6, 2021, we granted options to three employees to purchase a total of 600,000 shares of common stock at an exercise price of $3.40 per share. On August 12, 2021, we granted options to three employees to purchase a total of 750,000 shares of common stock at an exercise price of $3.40 per share.
Removed
On August 31, 2021, we granted options to an employee to purchase 12,500 shares of common stock at an exercise price of $4.00 per share.
Removed
Warrants On January 20, 2021, we issued warrants to two executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 130,000 shares of common stock at an exercise price of $1.60 per share.
Removed
On August 5, 2021, we issued warrants to two executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 320,000 shares of common stock at an exercise price of $3.40 per share. 28 Table of Contents On August 12, 2021, we issued warrants to two executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 1,450,851 shares of common stock at an exercise price of $2.00 per share.
Removed
On November 16, 2021, we issued warrants to two executive officers pursuant to the terms of their employment agreements to purchase an aggregate of 170,000 shares of common stock at an exercise price of $4.00 per share.
Removed
Secured Note Payable On August 11, 2021, we entered into a term loan promissory note with Live Oak Banking Company in the principal amount of $4,000,000, that has a maturity date of August 11, 2024.
Removed
The note is secured by all of the assets of the Company and has a per annum interest rate equal to the prime rate as quoted in the Wall Street Journal, plus three percentage points (3%).
Removed
Unsecured Note Payable On August 12, 2021, we issued a note to Emil Kaunitz 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.
Removed
See subsequent events under Note 16 Part II Item 8. Financial Statements on this Annual Report on Form 10-K.
Removed
Convertible Note Payable On February 1, 2021, the First Buckhout Charitable Remainder Trust (“BCR”) Trust Note and the Second BCR Trust Note, which were issued in connection with acquisition of Corvus Consulting, LLC were combined into one new note in the principal amount of $4,279,617 referred to as the Third BCR Trust Note, that has a maturity date of February 1, 2024.
Removed
The interest rate remains at five percent (5%) per annum and required monthly principal payments of $10,000. The Third BCR Trust Note is convertible into common stock of the Company at $0.26 per share. The maturity date and other terms of this note were subsequently amended. See subsequent events under Note 16 Part II Item 8.
Removed
Financial Statements on this Annual Report on Form 10-K. Use of Proceeds On October 12, 2022, the registration statement on Form S-1 (File No. 333-267249) for our initial public offering (“Public Offering”) of our common stock was declared effective by the Securities and Exchange Commission (the “SEC”).
Removed
On October 17, 2022, we closed our Public Offering and 1,500,000 shares of our common stock were issued and sold at a public offering price of $2.00 per share. The shares of common stock sold consisted of 1,350,000 shares offered by us and 150,000 shares offered by an existing stockholder, for an aggregate proceeds of $3,000,000.
Removed
We received $2,700,000 in offering proceeds before deducting underwriting discounts and offering expenses. We did not receive any proceeds from the sale of shares of our common stock by the selling stockholder. The underwriters of our Public Offering were EF Hutton, division of Benchmark Investments, LLC and Joseph Gunnar & Co. LLC.
Removed
We paid the underwriters of our Public Offering underwriting discounts and commissions and incurred offering costs totaling approximately $700,000. Thus, our net offering proceeds, after deducting underwriting discounts and commissions and offering expenses, were approximately $2,000,000.
Removed
Other than the proceeds payable directly to the selling stockholder, no payments were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities, or any affiliates, other than payments in the ordinary course of business to officers for payments made in connection with their employment agreements.
Removed
There has been no material change in the planned use of proceeds from our Public Offering as described in our final prospectus dated October 12, 2022 and filed with the SEC on October 14, 2022 pursuant to Rule 424(b)(4) of the Securities Act.
Removed
As planned, we paid $500,000 to satisfy, in part, principal remaining under the amended and restated convertible promissory note payable to the Buckhout Charitable Remainder Trust, funded, in part, the acquisition of GTMR, and have used remaining funds for working capital and general corporate purposes.
Removed
Issuer Purchases of Equity Securities We did not repurchase any equity securities during the year ended December 31, 2023. 29 Table of Contents Item 6. [ Reserved ]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+37 added−13 removed32 unchanged
Biggest changeFinancing activities During the year ended December 31, 2023, we used $(104,623) in financing activities, primarily due to reduction in proceeds from issuance of preferred and common stock, the reduction in proceeds from notes payable, and an increase in payments on notes payable, compared to net cash provided by financing activities of $1,972,100, for the year ended December 31, 2022. 36 Table of Contents Critical Accounting Policies and Estimates The following is not intended to be a comprehensive list of our accounting policies or estimates.
Biggest changeFinancing 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.
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 and 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.
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.
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.
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.
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.
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.
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 makes subsequent appropriations and the procuring agency allocates funding to the contract.
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.
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).
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”).
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. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties.
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.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 31 Table of Contents Year Ended December 31, Amount of Increase (Decrease) % Change 2023 2022 Revenues $ 45,243,812 $ 42,190,643 $ 3,053,169 7.2 % Cost of revenues 26,568,485 24,593,326 1,975,159 8.0 % Gross profit 18,675,327 17,597,317 1,078,010 6.1 % Operating expenses: Indirect costs 8,935,113 11,859,401 (2,924,288) (24.7) % Overhead 1,884,059 1,560,252 323,807 20.8 % General and administrative expenses 17,697,886 13,586,600 4,111,286 30.3 % Goodwill impairment loss 6,919,094 — 6,919,094 100.0 % (Gain) Loss from change in fair value of contingent earnout (92,000) 555,000 (647,000) (116.6) % Total operating expenses 35,344,152 27,561,253 7,782,899 28.2 % Loss from operations (16,668,825) (9,963,936) (6,704,889) 67.3 % Other income (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 dividend 118,152 100,516 17,636 17.5 % Net loss to common shareholders $ (17,918,330) $ (15,008,554) $ (2,909,776) 19.4 % Revenue 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.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Year Ended December 31, Amount of Increase (Decrease) % Change 2023 2022 Revenues $ 45,243,812 $ 42,190,643 $ 3,053,169 7.2 % Cost of revenues 26,568,485 24,593,326 1,975,159 8.0 % Gross profit 18,675,327 17,597,317 1,078,010 6.1 % Operating expenses: Indirect costs 8,935,113 11,859,401 (2,924,288) (24.7) % Overhead 1,884,059 1,560,252 323,807 20.8 % General and administrative expenses 17,697,886 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 expenses 35,344,152 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 dividend 118,152 100,516 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.
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 totaling $3,209,617. We accessed the New Live Oak Revolver to pay down principal of $809,617.
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.
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 agreement with Live Oak Bank.
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.
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 expected volatility, forfeitures, and performance attributes.
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.
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 Annual Report on Form 10-K.
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.
In January and February of 2024, we undertook the following significant equity and debt transactions that enhance 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 the proceeds from the Security Offering 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 Banking Company which matures on February 22, 2025 (the “New Live Oak Revolver”).
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”).
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 , Note 9 , and Note 16 under Part II, Item 8, of this Annual Report on Form 10-K.
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.
Income Taxes and Uncertain Tax Positions Income taxes and uncertain tax positions are accounted for in accordance with ASC 740, Income Taxes (ASC 740).
Income Taxes and Uncertain Tax Positions Income taxes and uncertain tax positions are accounted for in accordance with ASC 740, Income Taxes (“ASC 740”).
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.
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.
Securities and Exchange Commission on December 12, 2023. 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.
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.
We provide clients in the United States 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 MBSE.
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”).
Gross profit margin is our gross profit divided by our revenues. 30 Table of Contents 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.
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.
The timing and revenue recognition in a period could vary if different judgments were made. Goodwill and Intangible Assets We account for goodwill and intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other (ASC 350).
The timing and revenue recognition in a period could vary if different judgments were made. 35 Table of Contents Goodwill and Intangible Assets We account for goodwill and intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”).
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.
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.
The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. We have filed our 2021 and 2022 federal and state tax returns.
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.
This decrease in net cash from operating activities was primarily driven by an increase in net loss, increases in accounts receivables (due to timing of collections), as well as noncash adjustments related to changes in the fair value of derivative liabilities and contingent earnout during 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.
Gross Profit and Gross Profit Margin Our gross profit comprises our revenues less our cost of revenues.
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.
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 will monthly principal payments of $100,000 for 24 months.
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.
Recently Issued Accounting Standards Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for our assessment of recently issued and adopted accounting standards.
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. 36 Table of Contents 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.
Including priced options that have been awarded but not yet scheduled of $46,431,225, our grand total backlog is $154,445,865. 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 the Budget Environment.
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.
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 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 U.S.
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.
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, 2023 2022 2021 Net cash (used in) provided by: Operating activities $ (2,264,447) $ 990,163 $ (1,350,136) Investing activities (440,985) (339,282) 808,834 Financing activities $ (104,623) $ 1,972,100 $ 146,835 Comparison of the Years Ended December 31, 2023 and 2022 Operating activities We used $(2,264,447) in operating activities for the year ended December 31, 2023, compared to $990,163 provided by operating activities for the year ended December 31, 2022.
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, 2024 2023 2022 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 34 Table of Contents 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.
Interest Expense, Net of Interest Income Interest expense consists of interest paid to service our convertible promissory notes which include the Amended BCR Trust Note, the Term Loan Promissory Note payable and revolving line of credit to Live Oak Banking Company, two promissory notes payable to Robert Eisiminger, the note payable to Emil Kaunitz, and the note payable to Crom Cortana Fund LLC net of interest earned from investments.
Interest Expense, Net of Interest Income Interest expense consists of interest paid to servi ce 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.
Investing activities Net cash used in investing activities increased to $(440,985), for the year ended December 31, 2023, from $(339,282), for the year ended December 31, 2022. The increase in net cash used in investing activities was primarily due to the cash paid in the acquisition of GTMR during 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.
Excluding unscheduled options orders, as of December 31, 2023, the Company had $108,014,640 of funded, unfunded and scheduled priced options. We expect to recognize approximately 34% of the remaining performance obligations over the next 12 months, and approximately 57% over the next 24 months.
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.
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.
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.
The increase in general and administrative costs of $4,111,286 consist of increases in non cash 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 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.
Income tax benefit (expense) 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.
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.
As of December 31, 2023, we had $1,830,841 of cash and cash equivalents on hand and unused borrowing capacity of $324,975 from our revolving line of credit.
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.
The following table summarizes the value of our contract backlog as of December 31, 2023: Backlog Funded $ 17,423,419 Unfunded $ 15,558,445 Priced Options $ 75,032,776 Total Backlog $ 108,014,640 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.
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.
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.
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.
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.
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. 26 Table of Contents 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.
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.
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.
Cost of revenues 33 Table of Contents Total cost of revenues increased by $10,600,428 or 75.8% to $24,593,326 for the year ended December 31, 2022 from $13,992,898 for the year ended December 31, 2021. This increase was driven primarily by the increased level of effort on contracts proportionate to the growth of revenues due to the acquisition activity noted above.
Cost of revenues 31 Table of Contents 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.
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. 37 Table of Contents 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 non-cash charge of $6,919,094.
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.
Income tax (expense) benefit Income tax (expense) benefit increased by $(3,476,239) or (130.9)% to $(819,596) for the year ended December 31, 2022 from $2,656,643 for the year ended December 31, 2021.
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.
Our significant accounting policies are more fully described in 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.
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 have unused borrowing capacity of approximately $2,165,383 under the New Live Oak Revolver. • 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.
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.
This increase was primarily due to the Company establishing a full valuation allowance against its deferred tax assets. 34 Table of Contents Contract Backlog We define backlog to include the following three components: • Funded Backlog .
This increase was primarily driven by the increase in deferred tax liabilities from the acquisition of GTMR and subsequent release of valuation allowance. 32 Table of Contents Contract Backlog We define backlog to include the following three components: • Funded Backlog .
This increase in revenue was due to the acquisition of GTMR (“GTMR Acquisition”), partially offset by lost positions on ongoing contracts principally at SSI and Corvus reducing revenue. Cost of revenues 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 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.
The New Live Oak Revolver replaces the $950,000 revolving credit facility noted above (“Old Live Oak Revolver”), and we rolled over the $625,025 outstanding principal balance outstanding on the Old Live Oak Revolver. We also made payments of $1,209,617 35 Table of Contents to the holders of two notes payable noted below.
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 Table of Contents of Credit and was advanced an additional amount of $904,793.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
The recognition of goodwill impairment resulted from a loss recorded during the 32 Table of Contents 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.
Added
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”).
Removed
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Year Ended December 31, Amount of Increase (Decrease) % Change 2022 2021 Revenues $ 42,190,643 $ 25,067,450 $ 17,123,193 68.3 % Cost of revenues 24,593,326 13,992,898 10,600,428 75.8 % Gross profit 17,597,317 11,074,552 6,522,765 58.9 % Operating expenses: Indirect costs 11,859,401 3,409,649 8,449,752 247.8 % Overhead 1,560,252 850,999 709,253 83.3 % General and administrative expenses 13,586,600 14,539,053 (952,453) (6.6) % Loss from change in fair value of contingent earnout 555,000 — 555,000 100.0 % Total operating expenses 27,561,253 18,799,701 8,761,552 46.6 % Loss from operations (9,963,936) (7,725,149) (2,238,787) 29.0 % Other income (expense) (4,124,506) (2,477,924) (1,646,582) 66.5 % Loss before income taxes and preferred stock dividends (14,088,442) (10,203,073) (3,885,369) 38.1 % Income tax benefit (expense) (819,596) 2,656,643 (3,476,239) (130.9) % Net loss (14,908,038) (7,546,430) (7,361,608) 97.6 % Preferred stock dividend 100,516 12,290 88,226 717.9 % Net loss to common shareholders $ (15,008,554) $ (7,558,720) $ (7,449,834) 98.6 % Revenues Total revenues increased by $17,123,193 or 68.3% to $42,190,643 for the year ended December 31, 2022 from $25,067,450 for the year ended December 31, 2021.
Added
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.
Removed
This increase was driven largely by the contributions from the acquisitions of SSI and Merrison during the third quarter of 2021 as well as the contributions from LSG acquired during the second quarter of 2022.
Added
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.
Removed
Gross Profit Total gross profit increased by $6,522,765 or 58.9% to $17,597,317 for the year ended December 31, 2022 from $11,074,552 for the year ended December 31, 2021. This increase was driven primarily by the growth in revenues due to contributions from SSI, Merrison and LSG, offset by costs of revenues as noted above.
Added
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.
Removed
Operating expenses Total operating expenses increased by $8,761,552 or 46.6% to $27,561,253 for the year ended December 31, 2022 from $18,799,701 for the year ended December 31, 2021.
Added
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.
Removed
This fluctuation was primarily driven by an increase of $8,449,752 in indirect costs during the year ended December 31, 2022, largely attributable to the increase in benefits expense related to the Company’s growth in headcount year over year. In addition, this increase was also driven by increases in non-cash stock based compensation related to executive bonuses.
Added
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.
Removed
This increase was offset by a decrease in general and administrative expenses of $952,453, or 6.6%, which was primarily due to a decrease in acquisition fees from the prior year as well as less acquisition-based stock based compensation in 2022 paid to executives due to less acquisition activity in 2022.
Added
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.
Removed
The increase of $709,253 in overhead was primarily driven by an increase in overhead salaries related to our growth in headcount compared to 2021. Other income (expense) Other income (expense) increased by $(1,646,582) or 66.5% to $(4,124,506) for the year ended December 31, 2022 from $(2,477,924) for the year ended December 31, 2021.
Added
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”).
Removed
This increase was primarily driven by the increase in the amount of debt outstanding during 2022 as well as rate increases during 2022 on its variable rate debt under its agreement with Live Oak Bank.
Added
This resulted in aggregate gross proceeds to the Company of approximately $3.6 million, The Second Registered Offering closed on December 24, 2024.
Removed
For more information related to these transactions, refer to Note 16 under Part II, Item 8, of this Annual Report on Form 10-K.
Added
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.
Removed
Principles of Consolidation Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for a discussion of principles of consolidation.
Added
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”).
Added
This resulted in aggregate gross proceeds to the Company of approximately $3.7 million. The Public Offering closed on December 30, 2024.
Added
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. 27 Table of Contents 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.
Added
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.
Added
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. 28 Table of Contents Income Tax (Provision) Benefit Income taxes are accounted for under the asset and liability method.
Added
The following discussion should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this document. 29 Table of Contents Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Year Ended December 31, Amount of Increase (Decrease) % Change 2024 2023 Revenues $ 44,764,852 $ 45,243,812 $ (478,960) (1.1) % Cost of revenues 26,498,437 26,568,485 (70,048) (0.3) % Gross profit 18,266,415 18,675,327 (408,912) (2.2) % Operating expenses: Indirect costs 9,275,688 8,935,113 340,575 3.8 % Overhead 1,906,682 1,884,059 22,623 1.2 % General and administrative expenses 14,328,672 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 expenses 25,511,042 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 dividend 119,277 118,152 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.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−1 removed1 unchanged
Biggest changeThe Live Oak Revolving Note 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 (2.00%). Additionally, the Live Oak Term Loan Note has a per annum interest rate equal to the Prime Rate, plus three percentage points (3%).
Biggest changeThese 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 38 Table of Contents expected to materially impact our Company’s liquidity.
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 (“SOFR”), or London Interbank Offered Rate (“ LIBOR”). 39 Table of Contents
The Company has no other debt obligations tied to the Prime Rate, Secured Overnight Financing Rate, or London Interbank Offered Rate. 37 Table of Contents
Removed
These risks include the following: Interest Rate Risk The Company maintains a revolving promissory note and a term loan note with Live Oak Bank, referred to as the “Live Oak Revolving Note” and the “Live Oak Term Loan Note”, respectively.

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