Castellum, Inc. 10-K

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Price of Our Common Stock Until October 13, 2022, our common stock was quoted on the OTC Pink Marketplace operated by OTC Markets Group Inc. under the trading symbol “ONOV”. Since October 13, 2022, our common stock has been listed for trading on the NYSE American under the symbol “CTM”. Holders 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. Dividend Policy To date, we have not paid any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We have paid cash dividends to holders of our Series A preferred stock and Series C preferred stock and currently expect that comparable cash dividends will continue to be paid in the future. The declaration and payment of dividends on our common stock is at the discretion of our Board of Directors 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. Securities Authorized for Issuance under Equity Compensation Plans See the section titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance. Unregistered Sales of Securities 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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%. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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%). 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. See subsequent events under Note 16 Part II Item 8. Financial Statements on this Annual Report on Form 10-K. 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. 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. 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”). 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. 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. 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. 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. 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. 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. 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 ]