What changed in this filing

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Item 1. Business

2025-03-11 compared with 2024-03-21 · 84 added, 64 removed, 158 unchanged (48% of the section changed)

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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.

These services are applicable to customers in the United States (“U.S.”) government (“USG”), financial services, healthcare, and other users of large data applications.

They can be delivered to on-premises enclaves or customers who rely upon cloud-based infrastructures.

The Company has worked with multiple business brokers and contacts within their business network to identify potential acquisitions.

Due to our success in completing seven acquisitions over the previous 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.

Because of our executive officers’ and key managers’ prior experience growing businesses organically, we believe that we are well positioned to grow our existing business via internal growth as well.

The Company has developed a qualified business opportunity (the “Opportunity Pipeline”).

Although there can be no assurance that the Opportunity Pipeline can be converted to revenues, the Company believes that the total value of the Opportunity Pipeline to be approximately $527 million as of December 31, 2023.

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.

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.

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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.

Among others, Castellum competes with (and sometimes also teams with) Northrup Grumman, CACI, Peraton, and Booz-Allen Hamilton.

Castellum competes with many different companies, including Northrop Grumman Corporation, CACI International, Inc., Peraton, Inc., and Booz-Allen Hamilton, Inc.

among others.

It is common in the defense industry for work on major programs to be shared among a number of companies.

A company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve as a subcontractor to the ultimate prime contracting company.

It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts, or vice versa.

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.

• Digital Solutions.

Castellum transforms how government does business.

We modernize enterprise and agency-unique applications, enterprise infrastructure, and business processes to enhance productivity and increase user satisfaction.

We use data analytics and visualization to provide insights and outcomes that optimize our customer’s operations.

• C4ISR, Cyber & Space – Castellum helps ensure information superiority by delivering multi-domain C4 technology and networks.

• Command, Control, Communications, and Computer Intelligence Surveillance Reconnaissance (“C4ISR”), Cyber & Space.

Castellum helps ensure information superiority by delivering multi-domain C4 technology and networks.

Our software-defined, full-spectrum cyber, electronic warfare, and C-UAS solutions provide electromagnetic spectrum advantage and deliver precision effects against national security threats.

We are at the forefront of developing technologies that meet the challenges of 5G wireless communications both on and off the battlefield, millimeter wave, and the use of lasers for free space optical communications and long-range sensing.

• Engineering Services – Castellum provides platform integration, modernization, and sustainment;

• Engineering Services.

Castellum provides platform integration, modernization, and sustainment;

system engineering;

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Our platform-agnostic, mission-first approach ensures optimal performance, so our nation’s forces can overmatch our adversaries.

• Enterprise IT – Castellum amplifies efficiency with unmatched expertise and next-generation technology.

We design, implement, protect, and manage secure enterprise IT solutions for the 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”).

• Enterprise IT.

Castellum amplifies efficiency with unmatched expertise and next-generation technology.

We design, implement, protect, and manage secure enterprise IT solutions for the U.S.

federal, state, and local agencies to optimize efficiency, enhance performance, and ensure end-user satisfaction.

• Mission support.

Castellum specializes in planning and intelligence support for information warfare and information operations (“IW/IO”).

The Company develops IW/IO plans, exercises, doctrine, and training for the Military Services and the Combatant Commands in domestic and deployed overseas locations.

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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.

We perform advanced data analytics on litigation data in support of the Department of Justice (“DoJ”).

Lastly, through the Company’s IW/IO operations, Castellum provides key services to governments of other nations.

International Presence .

We currently support and have previously supported international clients in Australia and other foreign countries and believe that future opportunities for providing our services internationally is growing given current record nominal levels of global spending on defense and the continued rising threat from cybersecurity breaches.

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 .

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Complementary Product and Service Offerings .

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 have strategic business relationships with several companies associated with the information technology (“IT”) industry which have business objectives compatible with ours and offer complementary products and services.

We intend to continue development of these kinds of relationships wherever they support our growth objectives.

Some of these business relationships have ultimately led to Castellum acquiring the teaming partner firm.

Our marketing and new business development is conducted by many of our officers and managers including the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), 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.

We employ business development, capture, and proposal writer professionals who identify and qualify major contract opportunities, primarily in the USG market and submit bids for those opportunities.

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None of Castellum’s subsidiaries have had contract work terminated for non-performance.

Although we operate under the risk of such terminations with the potential to have a material impact on operations, they 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.

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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, 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.

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.

In the year ending December 31, 2024, the top three revenue-producing contracts, some of which consist of multiple task orders, accounted for forty-nine percent (49%) of our revenue, or $21,972,589.

Each of those contracts is associated with the Company’s areas of core expertise, as follows:

(i) an annual contract with Naval Air Systems Command (“NAVAIR”) that contains multiple renewal options is a CPFF contract covering systems engineering, design/software engineering, and development expertise where the Company has developed software that manages the aircraft launch and recovery operations on aircraft carriers, (ii) an annual contract with Peraton, Inc.

with multiple renewal option periods is a T&M contract which supports the cyber and Electronic Warfare (“EW”) work done at the Army Staff Level, and (iii) an annual contract with Naval Sea Systems Command (“NAVSEA”) that contains multiple renewal options is a CPFF contract covering engineering and technical services for the analysis, design, prototyping, test and evaluation, integration, project management, implementation, and documentation of various C4ISR sensor systems and subsystems for the U.S.

Department of Defense “DoD”).

Some of our key initiatives include the following:

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• Differentiate ourselves through our investment, including our strategic mergers and acquisitions which allow us to enhance our current capabilities and create new customer access points.

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.

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.

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.

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.

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.

Political, Budgetary, and Regulatory Environment

continues to face an uncertain and evolving political, budgetary, and regulatory environment.

In particular, it is difficult to predict the specific course of future defense budgets.

Current and future requirements related to the conflicts in Ukraine and the Middle East, threats in the Pacific region and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S.

and globally, will continue to impact our customers’ budgets, spending, and priorities.

political environment may also impact defense budgets and priorities, issues related to the national debt, and government spending broadly and more specifically, the potential impact of the U.S.

DOGE Service Temporary Organization (“DOGE”) on government spending and terminating contracts for convenience.

We anticipate that issues related to budgetary priorities and defense spending levels, the debt ceiling, and the spending caps imposed by the Fiscal Responsibility Act of 2023 (“FRA”), particularly with respect to discretionary spending, will continue to be a subject of considerable debate, with a potentially significant impact on our programs and the Company.

Annual appropriations to fund the federal government for fiscal year 2025 have not yet been enacted.

The continuing resolution (“CR”) enacted on December 21, 2024, extends federal funding at fiscal year 2024 levels through March 14, 2025.

To prevent a government shutdown beyond this date, the U.S.

Congress (“Congress”) and the President must either pass a full-year fiscal year 2025 appropriations bills or another CR.

Government operations under an extended CR could have potential impacts on our programs and new contracts, in particular.

We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans.

We believe that less than 5% of our employees would be at risk due to a CR.

Our business depends on the U.S.

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.

government discretionary spending for fiscal year 2024 and fiscal year 2025, including defense, is capped under the FRA.

If a CR remains in place on April 30, 2025, it will trigger a sequester under the FRA.

These uncertainties, along with broader macroeconomic effects, could materially impact our programs, contracts, financial position, results of operations, and cash flows.

Acquisition Strategy

Castellum seeks acquisitions which fit one or more of the following criteria:

(1) expands 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;

(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 Castellum believes are high growth potential;

and (7) fills a need

within Castellum to be able to serve current customers such as adding a prime contract vehicle or the capability to win new prime contract vehicles.

In all cases, Castellum seeks acquisitions which are immediately accretive on a revenue, 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.

(6) adds technological capability in new areas which we believe are high growth potential;

and (7) fills a need within Castellum to be able to serve current customers such as adding a prime contract vehicle or the capability to win new prime contract vehicles.

In all cases, Castellum seeks acquisitions which are immediately accretive on a revenue, earnings before interest, depreciation, and amortization (“EBITDA”) and net income per share basis, as well as positive from a net present value perspective and which fit the culture of Castellum.

We provide expertise and technology to defense, intelligence, and civilian agencies of the U.S.

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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 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.

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.

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.

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.

Key characteristics of our industry include long operating cycles and intense competition, which is evident through the number of competitors bidding on program opportunities and the number of competitor protests of U.S.

government procurement awards.

We have a small share of the addressable market for our solutions and services and intend to achieve growth and increase market share both organically and through strategic acquisitions.

Research and Development

The Company from time to time engages in research and development relative to its service offerings;

however, the amounts expended for such efforts are not material to the Company’s financial statements.

however, the amounts expended for such efforts are not material to our financial statements.

Intellectual Property

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We deal with numerous USG agencies and entities, and when working with these and other entities, we must comply with and are affected by unique laws and regulations relating to the formation, administration, and performance of government contracts.

Some significant law and regulations that affect us include the following:

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;

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• 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;

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 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”);

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• 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;

• 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;

• 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.

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Internationally, we are subject to special USG laws and regulations (such as The Foreign Corrupt Practices Act of 1977 (the “FCPA”)), local government regulations and procurement policies and practices, including regulations relating to import-export control, investments, exchange controls, and repatriation of earnings, as well as varying currency, political, and economic risks.

To ensure CMMC compliance, the Company has a senior executive on its management team whose responsibility includes preparing the Company for CMMC certification.

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 Congressional appropriations.

In addition, USG contracts are conditioned upon the continuing availability of U.S.

Congressional appropriations.

Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance could take many years.

As is common in the industry, our Company is subject to business risk, including changes in governmental appropriations, national defense polices, service modernization plans, and availability of funds.

Any of these factors could materially adversely affect our Company's business with the USG in the future.

As is common in the industry, we are subject to business risk, including changes in governmental appropriations, national defense policies, service modernization plans, and availability of funds.

Any of these factors could materially adversely affect our business with the USG in the future.

The USG has a broad range of actions it can utilize to enforce its procurement law and policies.

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if successful in obtaining a judgment or settlement, the individual filing the suit may receive up to thirty percent (30%) of the amount recovered by the government.

See Part I Item 1A Risk Factors:

We generate substantially all of our revenue from contracts with the U.S.

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.

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We are in continuing competition for highly skilled professionals in virtually all of our market areas.

The success and growth of our business are significantly correlated with our ability to

recruit, train, promote, and retain high quality people at all levels of the organization.

As of December 31, 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.

The success and growth of our business are significantly correlated with our ability to recruit, train, promote, and retain high quality people at all levels of the organization.

As of December 31, 2024, we employed 238 full and part-time employees with fifty-six percent (56%) of our employees holding degrees in science, technology, engineering, or mathematics fields, twenty-nine percent (29%) holding advanced degrees, and ninety-four percent (94%) of our employees holding security clearances.

We also retain 17 independent contractors.

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All employees are subject to contractual agreements that specify requirements on confidentiality and restrictions on working for competitors, as well as other standard matters.

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.

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.

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.

Castellum considers benefits a critical tool for employee recruitment and retention.

Prior to acquiring Global Technology and Management Resources, Inc.

(“GTMR”) in March 2023, Castellum migrated all employees from their legacy benefits programs to the ADP Professional Employer Organization (“PEO”).

At the time of acquisition, GTMR employees remained under a separate legacy benefits program.

Ahead of our annual benefits open enrollment process in the second quarter of 2024, Castellum transitioned to one benefit model, consolidating all employees under a unified benefits plan covering dental, vision, life insurance, disability coverage, legal assistance, financial planning, and other comprehensive services, effective June 1, 2024.

In December 2024, we merged the company's 401(k) plans into a single plan.

Available Information

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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 November 21, 2019, the Company acquired Corvus Consulting, LLC, (“Corvus”), a Delaware limited liability company.

On December 26, 2019, following our acquisition of Corvus, we changed our name from BioNovelus, Inc.

to Castellum, Inc.

Our principal executive offices are located at 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814.

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 Annual Report on Form 10-K (“Form 10-K”).

It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.

Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S.

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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.

The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Castellum.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business