Item 1. Business
Item 1. Business
Overview
Castellum is focused on building a large, successful technology services, solutions, and products company in the areas of cybersecurity, IT, electronic warfare, information warfare, system modernization, and information operations with businesses in the defense, federal, civilian, and commercial markets. Services include intelligence analysis, software development, software engineering, program management, strategic and mission planning, information assurance, cybersecurity and policy support, data analytics, and model based systems engineering (“MBSE”). These services are applicable to customers in the United States (“U.S.”) government (“USG”), financial services, legal, 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 routinely works with multiple business brokers and contacts within their business network to identify potential acquisitions. Due to our success in completing seven acquisitions since 2019 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 $817 million as of December 31, 2025. The Opportunity Pipeline represents the revenue opportunity for the Company from potential future contracts obtained through organic growth from qualified customers based on the expected base year contract value plus the value of all option periods.
Our primary customers are currently agencies and departments of the USG. Our expertise and technology support national security missions and government modernization for intelligence, defense, and federal civilian customers. The demand for our expertise and technology, in large measure, is created by the increasingly complex network, systems, and information environments in which governments and businesses operate, and by the need to stay current with emerging technology while increasing productivity, enhancing security, and ultimately, improving performance.
We provide expertise and technology to enterprise and mission customers in support of national security missions and government modernization/transformation. Due to the nature of the work being executed for the USG the budgets are expected to continue to grow in support of bipartisan national security imperatives. The majority of contracted work is operational in nature and is funded on an on-going basis.
Castellum competes with many different companies, including Northrop Grumman Corporation, CACI International, Inc., Peraton, Inc., and Booz-Allen Hamilton, Inc. among others. It is common in the defense industry for work on major programs to be shared among a number of companies. A company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve as a subcontractor to the ultimate prime contracting company. It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts, or vice versa.
Our Markets
We provide our expertise and technology to our domestic and international customers in the following market areas:
• Digital Solutions. Castellum transforms how government does business. We modernize enterprise and agency-unique applications, enterprise infrastructure, and business processes to enhance productivity, security, and increase user satisfaction. We transform data into actionable intelligence through advanced analytics and visualization, enabling our customers to improve performance and operational efficiency.
• Command, Control, Communications, and Computer (“C4”) 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 Counter-Unmanned Aircraft Systems solutions provide electromagnetic spectrum advantage and deliver precision
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effects against national security threats. We are at the forefront of developing policies 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. We support the development, qualification and deployment of specialty ISR sensors on military and commercial UAVs and aircraft. We independently test and/or evaluate complex ISR systems at our facilities.
• Engineering Services. Castellum provides platform integration, modernization, and sustainment; system engineering; naval architecture; training and simulation services; and logistics engineering to help our customers achieve a decisive tactical edge. We enhance platforms to improve situational awareness, mobility, interoperability, lethality, and survivability. We conduct software vulnerability analysis and harden technology to protect against malicious actors. Our platform-agnostic, mission-first approach ensures optimal performance, so our nation’s forces can overmatch our adversaries. We also specialize in Interactive Electronic Technical Manual (“IETM”) technical publication development with colorized graphics and interactive wiring diagrams with circuitry illumination.
• IT Services. Castellum amplifies efficiency with unmatched expertise and next-generation technology. We design, implement, protect, and manage secure enterprise IT solutions for the USG, state, and local agencies to optimize efficiency, enhance performance, and ensure end-user satisfaction. We implement Agile and DevSecOps methodologies supporting rapid, secure, and continuous delivery of mission-critical capabilities. We offer Risk Management Framework and Accreditation support services to obtain and maintain systems’ Authority to Operate (“ATO”).
• Mission support. Castellum specializes in planning and intelligence support for information warfare and information operations (“IW/IO”). The Company develops IW/IO plans, exercises, doctrine, and training for the Military Services and the Combatant Commands in domestic and deployed overseas locations. Our intelligence support ensures continuous advances in collection, analysis, and dissemination to optimize decision-making. Castellum also has linguists and cultural advisors who provide clients with insights into the history, media consumption, and cultural nuances of target audiences to maximize the effectiveness of communications plans and ensure mission success.
Strengths and Strategy
Extensive Sector Knowledge and Advanced Technology . We primarily offer our expertise and technology to defense, intelligence, and civilian agencies of the U.S. federal, state, and local governments. Our work for USG agencies may combine a wide range of skills drawn from our expertise and technology. For example, Castellum performs software development and virtualization of infrastructure services for the U.S. Navy. We are subject matter experts in electronic and electromagnetic warfare. We perform advanced data analytics on litigation data in support of the Department of Justice (“DOJ”).
Deep-Seated Government Relationships . To effectively perform on our existing customer contracts and secure new customer contracts with the U.S. federal, state, and local governments, we must maintain expert knowledge of agency policies, operations, and challenges. We combine this comprehensive knowledge with expertise and technology for our enterprise and mission customers. Our capabilities provide us with opportunities either to compete directly for, or to support other bidders in competition for multi-million dollar and multi-year award contracts from the U.S. federal, state, and local governments.
Complementary Product and Service Offerings . We have strategic business relationships with several companies associated with the IT and defense industry which have business objectives compatible with ours and offer complementary products and services. We continue to develop these types of relationships wherever they support our growth objectives. Some of these business relationships may lead 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 Financial Officer (“CFO”), and General Counsel, 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.
Much of our business is won through submission of formal competitive bids. Government customers typically base their decisions regarding contract awards on their assessment of the quality of past performance, compliance with proposal requirements, price, and other factors. The terms, conditions, and form of government contract bids, however, are in most cases specified by the customer. In situations in which the customer-imposed contract type and/or terms appear to expose
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us to inappropriate risk or do not offer us a sufficient financial return, we may seek alternative arrangements or opt not to bid for the work. Essentially all contracts with the USG, and many contracts with other government entities, permit the government customer to terminate the contract at any time for the convenience of the government or for default by the contractor. None of Castellum’s subsidiaries have had contract work terminated for non-performance. Although we operate under the risk of such terminations with the potential to have a material impact on operations, they historically have not been common. Additionally, as with other government contractors, our business is subject to government customer funding decisions and actions that are beyond our control.
Our contracts and subcontracts are composed of a wide range of contract types, including firm fixed price (“FFP”), cost plus fixed fee (“CPFF”), time and materials (“T&M”), indefinite delivery/indefinite quantity (“IDIQ”), and government wide acquisition contracts (“GWACS”) such as U.S. General Services Administration (“GSA”) schedule contracts, substantially all of which are annual contracts, with options to renew. Because most government contracts renew annually, the Company does not have a material number of multi-year contracts. Typically, the prime contract will dictate the terms of the subcontracts including, among other things, the workshare percentages, mechanics of payment terms, and the process for operational management. We generated $16,987,361 (32%), $24,483,023 (55%), and $25,631,786 (57%) of our total revenues from T&M contracts in the years ended December 31, 2025, 2024, and 2023, respectively.
In the year ending December 31, 2025, the top three revenue-producing contracts, some of which consist of multiple task orders, accounted for fifty-four percent (54%) of our revenue, or $28,341,498. Each of those contracts is associated with the Company’s areas of core expertise.
• An annual contract with Naval Air Systems Command (“NAVAIR”) Naval Air Warfare Center Aircraft Division (“NAWCAD”) that contains multiple renewal options is a CPFF contract providing cyber engineering, systems engineering, design/software engineering, development, and sustainment expertise. The Company is supporting a broad portfolio of mission-critical systems that enable carrier-based and expeditionary naval aviation operations for Aircraft Launch and Recovery Equipment.
• An annual contract with Special Missions Management of On-Site Services (“MOSS”) in support of the Naval Air Systems Command (“NAVAIR”) Program Office 290 (“PMA-290”) Special Missions is a CPFF contract which consists of multiple Intelligence, Surveillance, Reconnaissance, and Targeting (“ISR&T”) programs. These programs include, but are not limited to, the Maritime Patrol and Reconnaissance Force Family of Systems, P-8A Research and Development, SM Platforms, Minotaur Family of Services, P-8A Increment 3, P-8A Foreign Military Sales, MQ-4C Triton Multiple Intelligence, Mobile Quick Look, ground & mission support stations, and future capabilities.
• An annual contract with Naval Sea Systems Command (“NAVSEA”) that contains multiple renewal options is a CPFF contract covering engineering and technical services for the analysis, design, prototyping, test and evaluation, integration, project management, implementation, and documentation of various C4ISR sensor systems and subsystems for the U.S. Department of Defense (“DoD”).
Some of our key initiatives include the following:
• Continue our unwavering commitment to our customers while supporting the communities in which we work and live;
• Grow organic revenue across our large, addressable market;
• Recruit and hire a world class workforce to execute on our growing backlog; and
• Differentiate ourselves through our investments, including our strategic mergers and acquisitions which allow us to enhance our current capabilities and create new customer access points.
U.S. Political, Budgetary, and Regulatory Environment
The U.S. continues to face an uncertain and evolving political, budgetary, and regulatory environment. In particular, it is difficult to predict the specific course of future defense budgets. Current and future requirements related to the conflicts in Ukraine and the Middle East, threats in the Pacific region and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets, spending, and priorities. The U.S. political environment may also impact defense budgets
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and priorities, issues related to the national debt, and government spending more broadly. We anticipate that issues related to budgetary priorities and defense spending levels, the debt ceiling, and the spending caps, 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.
The majority of the U.S. federal government is currently funded through September 30, 2026 pursuant to Public Law 119-75, the Consolidated Appropriations Act, 2026 (H.R. 7148), which provides full-year appropriations for most major federal agencies, including the Department of Defense. Additional appropriations legislation enacted during fiscal year 2026 provided full-year funding for other federal agencies; however, the Department of Homeland Security (“DHS”) received only temporary funding through February 13, 2026 under a continuing resolution, resulting in a partial federal government shutdown beginning February 14, 2026. The Company currently does not maintain contracts with DHS.
The Presidential Administration (the “Administration”) has issued numerous executive orders affecting federal acquisition and defense procurement policies, including initiatives to modernize the Federal Acquisition Regulation (“FAR”), reform defense acquisition processes, and address contractor performance, production investment, and related incentive structures. Certain executive orders remain subject to legal challenges, and the scope and timing of implementation remain uncertain. Changes in executive policy, regulatory requirements, federal budget priorities, debt ceiling actions, or broader geopolitical and economic conditions could create a more challenging or costly operating environment and may materially impact defense spending generally and the Company’s programs specifically.
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 a new product or solution to our offerings; (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 revenue, earnings before interest, depreciation, and amortization (“EBITDA”) and net income per share bases, as well as positive from a net present value perspective and which fit the culture of Castellum.
Customers
We provide expertise and technology to defense, intelligence, and civilian agencies of the U.S. federal, state, and local governments. Our clients call us to work on their hardest problems by providing innovative, intelligent, and agile cloud-ready capabilities across the DoD Information Network Operations, Electromagnetic Warfare, Cyberspace Operations, Intelligence, and Information Dominance community. We specialize in intelligence analysis, software development, software engineering, turnkey system development, program management, strategic and mission planning, information assurance, cybersecurity, and policy along with analysis support.
Our government clients include cabinet-level departments of the USG, U.S. Army, U.S. Navy, U.S. Marine Corp, Special Operations, as well as other federal and civilian agencies. We also serve state and local agencies and commercial clients, working to solve their hardest and most sophisticated cyber challenges.
Contract Backlog
We define backlog to include the following three components:
• Funded Backlog . Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.
• Unfunded Backlog . Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.
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• Priced Options . Priced contract options represent 100% of the revenue value of all future contract option periods under existing contracts that may be exercised at our clients’ option and for which funding has not been appropriated or otherwise authorized.
Our backlog does not include (1) contracts that have been awarded but are currently under protest and (2) any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts.
We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog. The primary risks that could affect our ability to recognize such revenue on a timely basis or at all are: program schedule changes, contract modifications, and our ability to assimilate and deploy new consulting staff against funded backlog; cost-cutting initiatives and other efforts to reduce USG spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to delays in the completion of the USG's budgeting process and the use of a CR by the USG to fund its operations. The amount of our funded backlog is also subject to change, due to, among other factors: changes in U.S. Congressional appropriations that reflect changes in USG policies or priorities resulting from various military, political, economic, or international developments; changes in the use of USG contracting vehicles, and the provisions therein used to procure our services and adjustments to the scope of services, or cancellation of contracts, by the USG at any time. In our recent experience, none of the following additional risks have had a material negative effect on our ability to realize revenue from our funded backlog: the unilateral right of the USG to cancel multi-year contracts and related orders or to terminate existing contracts for convenience or default; in the case of unfunded backlog, the potential that funding will not be made available; and, in the case of priced options, the risk that our clients will not exercise their options.
In addition, contract backlog excludes orders under contracts for which the period of performance has expired, and we may not recognize revenue on the funded backlog that includes such orders due to, among other reasons, the tardy submission of invoices by our subcontractors and the expiration of the relevant appropriated funding in accordance with a predetermined expiration date such as the end of the USG's fiscal year.
We expect to recognize revenue from a substantial portion of funded backlog within the next 24 months. However, given the uncertainties discussed above, as well as the risks described in U.S. Political, Budgetary, and Regulatory Environment, we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all.
Competition
We operate in a highly competitive industry that includes many entities, some of which are larger in size and have greater financial resources than we have. We know of no single competitor that is dominant in our fields of technology. Key characteristics of our industry include long operating cycles and intense competition, which is evident through the number of competitors bidding on program opportunities and the number of competitor protests of USG procurement awards. We have a small share of the addressable market for our solutions and services and intend to achieve growth and increase market share both organically and through strategic acquisitions.
Research and Development
The Company from time to time engages in research and development relative to its service offerings; however, the amounts expended for such efforts are not material to our financial statements.
Intellectual Property
The Company currently has no patents or trademarks that it believes to be material to the business. The Company does have significant intellectual property in the form of our highly educated and trained workforce which provides us with technical expertise and an enhanced ability to win “re-compete” business.
Regulation
As a contractor to the USG, as well as state and local governments, we are heavily regulated in most fields in which we operate. We deal with numerous USG agencies and entities, and when working with these and other entities, we must comply with and are affected by unique laws and regulations relating to the formation, administration, and performance of government contracts. Some significant laws and regulations that affect us include the following:
• the FAR and agency regulations supplemental to FAR, which regulate the formation, administration, and performance of USG contracts;
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• 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;
• laws, regulations, and executive orders governing organizational conflicts of interest that may restrict our ability to compete for certain USG contracts because of the work that we currently perform for the USG or may require that we take measures such as firewalling off certain employees or restricting their future work activities due to the current work that they perform under a USG contract;
• laws, regulations, and executive orders that impose requirements on us to ensure compliance with requirements and protect the government from risks related to our supply chain, including compliance with Cybersecurity Maturity Model Certification (“CMMC”);
• laws, regulations, and mandatory contract provisions providing protections to employees or subcontractors seeking to report alleged fraud, waste, and abuse related to a government contract;
• the National Industrial Security Operating Manual and other laws and regulations concerning the maintenance of a facility security clearance and the safeguarding of classified materials;
• the Contractor Business Systems rule, with authorizes DoD agencies to withhold a portion of our payments if we are determined to have a significant deficiency in our accounting, cost estimating, purchasing, earned value management, material management and accounting, and/or property management system; and
• the Cost Accounting Standards and Cost Principles, which impose accounting and allowability requirements that govern our right to reimbursement under certain cost-based USG contracts and require consistency of accounting practices over time.
Given the magnitude of our revenue derived from contracts with the DoD, the Defense Contract Audit Agency (“DCAA”) is our relevant government audit agency. The DCAA audits the adequacy of our internal control systems and policies including, among other areas, compensation. The Defense Contract Management Agency (“DCMA”) as our relevant government contract management agency, may determine that a portion of our employee compensation is unallowable based on the findings and recommendations in the DCAA’s audits. In addition, the DCMA directly reviews the adequacy of certain other business systems, such as our purchasing system. We are also subject to audit by Inspectors General of other USG agencies.
The USG may revise its procurement practices or adopt new contract rules and regulations at any time. Internationally, we are subject to special USG laws and regulations (such as The Foreign Corrupt Practices Act of 1977 (the “FCPA”)), local government regulations and procurement policies and practices, including regulations relating to import-export control,
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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 responsibilities includes preparing the Company for CMMC certification.
USG contracts are, by their terms, subject to termination by the USG either for convenience or default by the contractor. In addition, USG contracts are conditioned upon the continuing availability of U.S. Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance could take many years. As is common in the industry, we are subject to business risk, including changes in governmental appropriations, national defense policies, service modernization plans, and availability of funds. Any of these factors could materially adversely affect our business with the USG in the future.
The USG has a broad range of actions it can utilize to enforce its procurement law and policies. These include proposing a contractor, certain of its operations, or individual employees for debarment; or, suspending or debarring a contractor, certain of its operations or individual employees from future government business. In addition to criminal, civil, and administrative actions by the USG, under the False Claims Act, an individual alleging fraud related to payments under a USG contract or program may file a qui tam lawsuit on behalf of the government against us; if successful in obtaining a judgment or settlement, the individual filing the suit may receive up to thirty percent (30%) of the amount recovered by the government.
See “Part I, Item 1A, Risk Factors.” We generate substantially all of our revenue from contracts with the U.S. federal, state, and local governments which are subject to a number of challenges and risks that may adversely impact our business, prospects, financial condition, and operating results.
Human Capital Resources
Our employees are our most valuable resource. We are in continuing competition for highly skilled professionals in virtually all of our market areas. The success and growth of our business are significantly correlated with our ability to recruit, train, promote, and retain high quality people at all levels of the organization. As of December 31, 2025, we employed 244 full and part-time employees with fifty-eight percent (58%) of our employees holding degrees in science, technology, engineering, or mathematics fields, twenty percent (20%) holding advanced degrees, and ninety-seven percent (97%) of our employees holding security clearances. We also retain nine independent contractors. We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective bargaining arrangements. We consider our employee relations to be good. All employees are subject to contractual agreements that specify requirements on confidentiality and restrictions on working for competitors, as well as other standard matters.
Castellum considers employee benefits to be a critical component of its human capital strategy and its ability to attract, retain, and motivate highly qualified personnel in a competitive labor market. The Company offers a comprehensive benefits program, including a 401(k) retirement plan with employer matching contributions and a suite of fully insured health and welfare benefits. Management believes these programs promote employee engagement, support workforce stability, and contribute to operational effectiveness. The Company periodically reviews its benefits offerings to ensure they remain competitive and aligned with employee needs and industry practices.
Available Information
Our principal executive offices are located at 1934 Old Gallows Road, Suite 350, Vienna, Virginia 22182. Our telephone number is (703) 752-6157 and our website address is www.castellumus.com .
We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.
Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S. Securities and Exchange Commission (“SEC”). The SEC allows us to disclose important information by referring to it in this manner.
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. In addition, copies of our annual report will be made available, free of charge, upon written
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request. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Castellum.