Castellum, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing was signed March 21, 2024. Castellum provides technology, engineering, cybersecurity, and mission-support services, primarily to U.S. government customers, and pursues growth through acquisitions and organic business development.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $45.24 million | $42.19 million |
| Gross profit / margin | $18.68 million / 41.3% | $17.60 million / 41.7% |
| Operating loss | $16.67 million | $9.96 million |
| Net loss | $17.80 million | $14.91 million |
| Net loss attributable to common shareholders | $17.92 million | $15.01 million |
| Net loss per share, basic and diluted | $0.38 | $0.55 |
| Cash from operating activities | $(2.26) million | $0.99 million |
| Cash and cash equivalents, year-end | $1.83 million | $4.64 million |
Revenue increased 7.2%, mainly from the March 2023 GTMR acquisition, partly offset by lost positions on existing contracts. Gross profit rose 6.1%, while gross margin edged down from approximately 41.7% to 41.3%. Operating expenses increased 28.2%; the company recorded a $6.92 million non-cash goodwill impairment after a decline in its share price. General and administrative expense rose 30.3%, including higher stock-based compensation and costs from bringing some functions in-house. Stock-based compensation was $7.50 million.
Cash used in operations reflected the larger net loss and higher receivables, partly due to collection timing. Year-end current assets were $9.50 million and current liabilities were $7.98 million, implying working capital of approximately $1.52 million. Total assets were $30.11 million and stockholders’ equity was $12.95 million. The company reported $12.46 million of debt in its risk disclosures; balance-sheet debt carrying amounts are presented across several liability lines. Interest expense, net, was $3.25 million.
Backlog, contracts, and material changes
- Reported backlog was $108.01 million: $17.42 million funded, $15.56 million unfunded, and $75.03 million in priced options. Including $46.43 million of awarded but unscheduled option orders, the company reported total backlog of $154.45 million. Management estimated recognition of approximately 34% of remaining performance obligations within 12 months and 57% within 24 months; funding and option exercise are not assured.
- Time-and-materials contracts generated $25.63 million, or 57% of 2023 revenue; CPFF contracts generated $16.48 million, and fixed-price contracts generated $3.13 million.
- The top three revenue-producing contracts accounted for 52% of revenue. Three customers also represented 52% of revenue and 54% of year-end receivables, creating significant customer and collection concentration.
- GTMR contributed $7.78 million of 2023 revenue. The company issued approximately $5.30 million in stock consideration for the acquisition.
- For context, 2022 revenue had increased 68.3% from 2021, largely following earlier acquisitions. In 2023, growth moderated, and losses continued to widen.
Liquidity, outlook, risks, and unusual items
- Management said cash, operating cash flows, and subsequent financing arrangements should cover working capital and other cash needs for the next 12 months and beyond. The company also disclosed an accumulated deficit of $43.98 million and expected a net loss in 2024.
- After year-end, a January 2024 registered offering and concurrent private placement generated approximately $2.7 million gross; management reported approximately $2.2 million net proceeds. The offering included common shares, pre-funded warrants, and warrants, creating potential dilution. In February, the company established a $4.0 million Live Oak revolver and reported approximately $2.17 million of unused capacity after the transactions described.
- Subsequent debt actions extended significant maturities: $6.0 million of Eisiminger notes to August 2026 and a $2.4 million replacement note to the Buckhout trust to August 2026. The replacement trust note requires $100,000 monthly principal payments beginning September 2024 and has step-up interest rates. The company also repaid the Crom note and extended other obligations.
- The company agreed to settle the SSI earnout for $720,000, including an initial $180,000 payment and monthly payments of $20,000 plus 5% interest for 27 months.
- Key risks include reliance on government appropriations and contract awards, continuing losses and negative operating cash flow, debt service and refinancing needs, customer concentration, competition, hiring and security-clearance requirements, acquisition integration, and potential dilution. Continuing resolutions may delay awards or funding; management said over 99% of its work was considered mission critical, but shutdown impacts remain uncertain.
- The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the filing does not include an auditor attestation on internal controls.
Important facts for investors to verify
- Whether the post-year-end equity offering and expanded revolver provide adequate liquidity after scheduled principal payments, interest, and earnout obligations.
- How much reported backlog converts to funded work and revenue, particularly unfunded amounts and priced options.
- Whether customer concentration and receivables collection timing improve, and whether operating cash flow turns positive.
- The potential dilution from shares and warrants issued after year-end and outstanding options, warrants, and preferred shares.
- Whether acquisition integration, contract performance, and cost controls can reduce losses; goodwill was $10.72 million after the 2023 impairment.