Castellum, Inc.

Note 3: Disposition

During 2024, the Company completed the following disposition to achieve its business purposes as discussed in Note 1.

MFSI

On September 11, 2024, the Company entered into a stock purchase agreement with Lead-Risk Millenia, LLC (the "Buyer") for the sale of its subsidiary, MFSI (the "MFSI Divestiture"). The stock purchase agreement, approved by the Board of Directors on September 13, 2024, was for the purchase and sale of 100% of the issued and outstanding stock of MFSI, which became effective on September 16, 2024. The stock purchase agreement required an initial cash payment of $15,000. Additionally, the Company will receive future consideration equal to 6% of all revenue generated by MFSI until September 30, 2029, or until total payments reach $705,000, whichever comes first. As part of the MFSI Divestiture, the Company retained all of MFSI's cash deposits and accounts receivable in excess of $150,000.

Management estimated the present value of future consideration to be received, recognizing short- and long-term components of a receivable, which we will accrete over time and reassess periodically. An 8.5% discount rate was applied to calculate the present value of the receivable, totaling $101,420 ("Anticipated Receivable"). The Anticipated Receivable is revalued each quarter. The Company recorded a gain of $39,234 from the MFSI Divestiture. The balance of the Anticipated Receivable, accounts receivable in excess of $150,000, and any payments made by the Company on behalf of the Buyer, are reflected in Due from Buyer on the Consolidated Balance Sheets.

After considering qualitative and quantitative aspects of MFSI and its sale relative to the guidance of ASC 205-20, Presentation of Financial Statements - Discontinued Operations, Management concluded MFSI should not be reported or disclosed as a discontinued operation. Further, since MFSI represented less than 5% of the total revenue for the Company, it was deemed immaterial to the Company's financial statements, and as such, pro forma financial statements are not required.

Note 4: Fixed Assets

Fixed assets consisted of the following as of March 31, 2026, and December 31, 2025:

Depreciation expense for the three months ended March 31, 2026 and March 31, 2025, was $20,444 and $22,650, respectively.

Note 5: Intangible Assets and Goodwill

Intangible assets consisted of the following as of March 31, 2026, and December 31, 2025:

The intangible assets with the exception of the trademarks were recorded as part of the acquisitions of Corvus, Merrison, SSI, LSG, and GTMR. Amortization expense for the three months ended March 31, 2026 was $304,546, and amortization expense for the three months ended March 31, 2025 was $355,537, respectively. The intangible assets are being amortized based on the estimated future lives as noted above.

Future amortization of the intangible assets for the next five years as of March 31 is as follows:

The goodwill rollforward for the three months ended March 31, 2026, reflects no changes, as follows:

When the Company acquires a controlling financial interest through a business combination, the Company uses the acquisition method of accounting to allocate the purchase consideration to the assets acquired and liabilities assumed, which are recorded at fair value. Any excess of purchase consideration over the net fair value of the net assets acquired is recognized as goodwill. There wereno additions of goodwill for the three months ended March 31, 2026.

Note 6: Notes Payable

There were no notes payable activity during the three months ended March 31, 2026.

Interest expense for the three months ended March 31, 2026 and March 31, 2025 was $— and $153,808, respectively. There wasno accrued interest on the notes payable as of March 31, 2026 and March 31, 2025.

Note 7: Note Payable – Related Party

The Company entered into a note payable with a related party in August 2021 with balances as of March 31, 2026 and December 31, 2025, as follows:

On February 11, 2026, the Company fully repaid the $400,000 note payable with the related party.

Interest expense for the three months ended March 31, 2026, was $2,301, and $4,932 for the three months ended March 31, 2025, respectively.

Note 8: Revolving Credit Facility

On April 4, 2022, the Company obtained a $950,000 revolving credit facility with Live Oak Banking Company (“Live Oak Bank”), maturing March 28, 2029. On February 22, 2024, the Company replaced this facility with a new $4,000,000 revolving credit facility maturing February 22, 2025 ("New Live Oak Revolver"). The outstanding balance of approximately $625,000 was rolled over, and an additional $904,793 was advanced. As of December 31, 2025, $0 was outstanding under the new facility.

Effective August 15, 2024, the Company amended the New Live Oak Revolver, requiring a $250,000 collateral account, increasing borrowing base reporting to twice monthly, and reducing borrowing capacity from $4,000,000 to $2,000,000.

On February 13, 2025, the Company fully repaid the $1,999,944 balance plus interest, after which the line of credit was closed and the restricted cash released. No obligations remain under the facility.

Interest expense for the three months ended March 31, 2026 and 2025, was $— and $28,658, respectively.

Note 9: Due to Seller

As part of the acquisition of SSI (the "SSI Acquisition"), the Company was obligated to pay an earnout contingent on the results of operations of SSI through August 2023. On February 15, 2024, the Company entered into an agreement with the former shareholders of SSI concerning the amount and timing of the contingent earnout included in total consideration for the SSI Acquisition which closed in August 2021. The parties agreed to settle the amount for a total of $720,000, with an initial payment of $180,000 that was made by the Company at signing of the agreement, plus starting in March 2024, monthly payments of $20,000 plus interest payable at 5% per annum for 27 months. In November 2025, the balance was fully paid off.

Note 10: Stockholders’ Equity

Preferred Stock

The Company has 50,000,000 shares of preferred stock authorized. The Company has designated a Series A Preferred Stock, a Series B Preferred Stock, and a Series C Preferred Stock.

Series A Preferred Stock

The Company has designated 10,000,000 shares of Series A Preferred Stock, par value of $0.0001. As of March 31, 2026 and December 31, 2025, the Company has 5,875,000 shares of Series A Preferred Stock issued and outstanding, which is convertible into 587,500 shares of the Company's common stock.

For the three months ended March 31, 2026 and 2025, the Company recognized $18,269 and $18,269, respectively, in Series A dividends, all of which have been paid as of March 31, 2026.

Series B Preferred Stock

The Company has designated 10,000,000 shares of Series B Preferred Stock, par value of $0.0001. As of March 31, 2026 and December 31, 2025, the Company has 0 shares of Series B Preferred Stock issued and outstanding.

Series C Preferred Stock

The Company has designated 10,000,000 shares of Series C Preferred Stock, par value of $0.0001. As of March 31, 2026, the Company has 570,000 shares of Series C Preferred Stock issued and outstanding, which is convertible into 356,250 shares of the Company's common stock. As of December 31, 2025, the Company had 570,000 shares of Series C Preferred Stock issued and outstanding.

For the three months ended March 31, 2026 and 2025, the Company recognized $8,550 and $8,715 in Series C dividends, all of which have been paid as of March 31, 2026.

Common Stock

The Company has 3,000,000,000 shares of common stock, par value $0.0001 authorized. The Company had 94,612,750 shares issued and outstanding as of both March 31, 2026, and December 31, 2025.

On September 17, 2025, the Company filed a registration statement on Form S-8 (File No. 333-290331) to register an aggregate of 3,000,000 shares of the Company's common stock to be issued pursuant to the Castellum, Inc. 2025 Employee Stock Purchase Plan ("ESPP"). The ESPP was adopted by the Company’s Board of Directors on March 11, 2025 and approved by the Company’s stockholders at the annual meeting held on May 28, 2025. The ESPP is a voluntary employee benefit program that permits eligible employees to contribute up to 5% of their eligible compensation through payroll deductions each pay period. Payroll deductions and purchases of Company common stock under the ESPP did not commence until 2026. Shares are purchased on behalf of participating employees on a quarterly basis at a price equal to

85% of the fair market value on the applicable purchase date. The ESPP is intended to provide employees with an opportunity to acquire an ownership interest in the Company and is not a component of executive compensation.

On September 17, 2025, the Company filed a registration statement on Form S-8 (File No. 333-290332) to register an aggregate of 9,000,000 shares of the Company's common stock to be issued pursuant to the Castellum, Inc. Second Amended 2021 Stock Incentive Plan.

On January 3, 2025, a member of the Company’s Board of Directors, exercised stock options at $0.210 per share for 110,028 shares of common stock. On August 21, 2025, a member of the Company's Board of Directors, exercised stock options at $0.210 per share for 125,000 shares of common stock.

In January 2025, two holders of the Company’s Series C Preferred Stock, converted 200,000 shares of Series C Preferred Stock into 125,000 shares of common stock at a conversion rate of 0.625 shares of common stock per share of Series C Preferred Stock.

On January 10, 2025, the Company filed a universal shelf registration on Form S-3 (File No. 333-284205), which was declared effective by the SEC on January 24, 2025, pursuant to which the Company may offer and sell up to $100,000,000 of equity and debt securities.

On February 12, 2025, an investor exercised an aggregate of 1,080,717 warrants to purchase 1,080,717 shares of the Company’s common stock which resulted in proceeds to the Company of $1. Prior to this exercise, the treatment of these warrants was evaluated under ASC 260-10, Earnings Per Share — Overall. Under this guidance, shares issuable for little or no cash consideration are considered outstanding common shares and are included in the computation of basic earnings per share from the date they are granted. Accordingly, the exercise of these warrants does not impact the Company's earnings per share calculation.

On March 19, 2025, the Company closed on the public offering (the "March 2025 Public Offering") of 4,500,000 units ("Unit(s)") at a public offering price of $1.00 per Unit. Each Unit consisted of one share of common stock and one warrant to purchase one share of common stock (the "March 2025 Warrants"). The March 2025 Warrants were immediately exercisable at $1.08 per share and expired 60 days from the date of issuance. The shares of common stock and March 2025 Warrants were immediately separable and issued separately. Gross proceeds from the March 2025 Public Offering were approximately $4.5 million before deducting placement agent fees and offering expenses. Castellum used the net proceeds of the March 2025 Offering for working capital and general corporate purposes.1,755,543 of the March 2025 Warrants issued were exercised at $1.08 per share, for gross proceeds of $1.90 million before deducting placement agent fees. The remaining 2,744,457 March 2025 Warrants expired on May 19, 2025.

On June 13, 2025, the Company closed on the June 2025 Public Offering of 4,166,667 units ("Unit(s)") at a public offering price of $1.20 per Unit. Each Unit consists of one share of common stock and one warrant to purchase one share of common stock. The June 2025 Warrants were immediately exercisable at $1.22 per share and expired 60 days from the date of issuance. The shares of common stock and June 2025 Warrants were immediately separable and issued separately. Gross proceeds from the June 2025 Public Offering were approximately $5.0 million before deducting placement agent fees and offering expenses. Castellum used the net proceeds of the June 2025 Public Offering for working capital and general corporate purposes.3,673,666 of the June 2025 Warrants issued were exercised at $1.22 per share, for gross proceeds of $4.48 million before deducting placement agent fees. The remaining 493,001 June 2025 Warrants expired on August 12, 2025.

During the three months ended March 31, 2026, no shares of common stock were issued.

Warrants

The Pre-funded Warrants were immediately exercisable and did not have an expiration date. As noted above, the Company sold Pre-funded Warrants to purchase up to an aggregate of 3,193,534 shares of common stock at an offering price of $0.319 per Pre-funded Warrant, which are exercisable at a price of $0.001 per share. As previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2025, all Pre-funded Warrants have been exercised.

The Regular Warrants became exercisable on March 20, 2024, upon effectiveness of shareholder approval which was obtained on February 12, 2024. The Regular Warrants had an original expiration date of March 20, 2029, and had an exercise price of $0.35 per share.6,437,501 of the Regular Warrants were exercised in 2024. The remaining 2,000,000 warrants were exercised in February of 2025 to purchase 2,000,000 shares of the Company’s common stock which resulted in aggregate proceeds to the Company of $700,000. All warrants held by this investor have now been fully exercised.

On February 12, 2025, an investor exercised an aggregate of 1,080,717 warrants to purchase 1,080,717 shares of the Company’s common stock which resulted in proceeds to the Company of $1. The treatment of these warrants was accessed under ASC 260-10, Earnings Per Share—Overall, where shares issuable for little or no cash consideration shall be considered outstanding common shares and are included in the computation of basic earnings per share since they were originally granted.

Of the 4,500,000 March 2025 Warrants issued during the March Public Offering,1,755,543 warrants were exercised at $1.08 per share prior to March 31, 2026. The remaining 2,744,457 warrants expired on May 19, 2025.

Of the 4,166,667 June 2025 Warrants issued during the June 2025 Public Offering,3,673,666 warrants were exercised at $1.22 per share prior to March 31, 2026. The remaining 493,001 warrants expired on August 12, 2025.

The following table represents a summary of warrants for the three months ended March 31, 2026 and the year ended December 31, 2025:

Options

On November 9, 2021, the Company approved the 2021 Stock Incentive Plan ("Stock Incentive Plan") that authorized the Company to issue up to 2,500,000 shares of common stock. Prior to this date, the granting of options was not done pursuant to the terms of a stock incentive plan. On November 9, 2023 the Board approved an amendment to the Stock Incentive Plan to increase the aggregate number of shares available for issuance from 2,500,000 to 6,000,000 (the "Amended Plan"), which was approved by the Company's shareholders at its annual meeting on May 29, 2024.

On March 11, 2025, the Board approved an amendment to the Amended Plan to further increase the aggregate number of shares available for issuance from 6,000,000 to 9,000,000 (the "Second Plan Amendment" and the "Second Amended Plan"), which was approved by the Company's stockholders at the Company's 2025 annual meeting of stockholders held on May 28, 2025. As of March, 31, 2026,8,352,500 stock options have been granted under the Amended Plan.

The following represents a summary of options granted under the terms of the Amended Plan and additional options granted outside of the Amended Plan, for the three months ended March 31, 2026 and the year ended December 31, 2025:

During the three months ended March 31, 2026, the Company recognized $767,937 of noncash stock-based compensation related to the vesting of service-based stock options. No options were exercised during the three months ended March 31, 2026.

The fair value of each option is estimated using the Black-Scholes valuation model. Changes to these inputs could produce a significantly higher or lower fair value measurement. The following assumptions were used for the year ended December 31, 2025, no options were granted during three months ended March 31, 2026:

Note 11: Fair Value

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. U.S. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:

Level 1 – defined as observable inputs, such as quoted market prices in active markets.

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash, accounts receivable, accounts payable, contingent consideration, and derivative liabilities. The estimated fair value of cash and cash equivalents, accounts receivable, and accounts payable approximates their carrying value.

On April 4, 2022, the Company issued common stock, a convertible note, and warrants in a SPA with Crom (respectively, the "2022 Crom Note", the "2022 Crom Warrants, and the “2022 Crom SPA”). The Company had evaluated the conversion option liability in the 2022 Crom Note and the 2022 Crom Warrant to determine proper accounting treatment and determined them to be derivative liabilities (the "Derivative Liabilities").

On February 13, 2023, the 2022 Crom SPA was terminated through an induced conversion thereby extinguishing the conversion option liability associated with the 2022 Crom Note; the 2022 Crom Warrants were not affected. The Derivative Liabilities in the tables below include the 2022 Crom Warrants. Refer to Note 10, “Stockholders’ Equity”, for more detail.

The Company recognized a liability for the estimated fair value of the 2022 Crom Warrants. The estimated fair value of the liability was calculated using a binomial pricing model with key input variables by an independent third party, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company determined that the significant inputs used to value the 2022 Crom Warrants fall within Level 3 of the fair value hierarchy.

In connection with the divestiture of MFSI , as discussed in Note 3, "Disposition", Management estimated the present value of future consideration to be received, using a probability-weighted analysis to determine the amount of the receivable and applying a discount rate that captures the risks associated with the duration of the consideration. The Company determined that the significant inputs used to value the Anticipated Receivable fall within Level 3 of the fair value hierarchy. The balance of the Anticipated Receivable is reflected in Due from Buyer on the Consolidated Balance Sheets.

The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of the 2022 Crom Warrants is estimated using a binomial valuation model. The following assumptions were used for the period as follows:

Note 12: Defined Contribution Plan

The Company sponsors a qualified 401(k) plan that allows eligible employees to make contributions, subject to certain limitations. The Company provides a matching contribution of up to 4% of an employee's compensation. The aggregate 401(k) Plan employer match was $255,010, and $264,921 for the three months ending March 31, 2026 and March 31, 2025, respectively.

Note 13: Concentrations

Concentration of Credit Risk. The Company’s customer base is concentrated with a relatively small number of customers. The Company does not generally require collateral or other security to support accounts receivable. To reduce credit risk, the Company performs ongoing credit evaluations on its customers’ financial condition. The Company establishes allowance for credit losses based upon factors surrounding the credit risk of customers, historical trends, and other information.

For the three months ended March 31, 2026 and 2025, the Company had three customers (all parts of the U.S. government) representing 71% and 63% of revenue earned, respectively. Any customer that represents 10% or greater of total revenue represents a risk. The Company also has three customers (all parts of the U.S. government) that represent 73% and 65% of the total accounts receivable as of March 31, 2026, and December 31, 2025, respectively.

Note 14: Income Taxes

The Company's quarterly provision for income taxes is measured using an estimated annual effective tax rate adjusted for discrete items that occur within the quarter. The effective income tax rate was (1.90)% and 6.80% for the three months ended March 31, 2026, and 2025, respectively. The effective tax for the three months ended March 31, 2026 was primarily due to nondeductible compensation and increase in valuation allowance offset by state taxes. The effective tax rate for the three months ended March 31, 2025 was primarily due to the nondeductible compensation and increase in valuation allowance offset by state taxes.

Note 15: Subsequent Events

Subsequent to March 31, 2026, and prior to the filing date of May 8, 2026, there were no subsequent events..