Castellum, Inc.

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statement of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2026 and 2025

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2026 and 2025

Note 1: Nature of Operations

Castellum, Inc. (the “Company”) is focused on building a large, successful technology company in the areas of information technology, electronic warfare, information warfare and cybersecurity with businesses in the governmental and commercial markets. Services include intelligence analysis, software development, software engineering, program management, strategic planning, information assurance and cybersecurity and policy along with analysis support. These services, which largely focus on securing data and establishing related policies, are applicable to customers in the federal government, financial services, healthcare, and other users of large data applications. The services can be delivered to legacy, customer owned networks, or customers who rely upon cloud-based infrastructures. The Company is actively working with business brokers and contacts within their business network to identify potential acquisitions.

Since November 2019, the Company has made the following acquisitions that specialize in the areas noted above:

•Corvus Consulting, LLC (“Corvus”),

•Mainnerve Federal Services, Inc. dba MFSI Government Group (“MFSI"),

•Merrison Technologies, LLC ("Merrison"),

•Specialty Systems, Inc. (“SSI”),

•the business assets of Pax River from The Albers Group (“Pax River”),

•Lexington Solutions Group, LLC (“LSG”), and

•Global Technology and Management Resources, Inc. ("GTMR").

With the exception of Pax River, all of these acquisitions were considered business combinations under Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements, including the notes, include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation for Interim Periods

Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly our financial position and the results of operations and cash flows for the periods presented.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods. The financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, included in our Annual Report on Form 10-K for the year then ended. We have continued to follow the accounting policies set forth in those financial statements.

Business Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, the Chief Executive Officer, reviews consolidated results of operations to make decisions. The Company maintainsone operating and reportable segment, which is the delivery of products and services in the areas of information technology, electronic warfare, information warfare, and cybersecurity in the governmental and commercial markets.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"). The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met. The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

Revenue is derived primarily from services provided to the Federal government. The Company enters into agreements with customers that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services and solutions are transferred to the customer. The Company also evaluates whether two or more agreements should be accounted for as one single contract.

When determining the total transaction price, the Company identifies both fixed and variable consideration elements within the contract. The Company estimates variable consideration as the most likely amount to which the Company expects to be entitled, limited to the extent that it is probable that a significant reversal will not occur in a subsequent period.

At contract inception, the Company determines whether the goods or services to be provided are to be accounted for as a single performance obligation or as multiple performance obligations. For most contracts, the customers require the Company to perform several tasks in providing an integrated output and, hence, each of these contracts are deemed as having only one performance obligation. When contracts are separated into multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised services underlying each performance obligation.

This evaluation requires professional judgment, and it may impact the timing and pattern of revenue recognition. If multiple performance obligations are identified, the Company generally uses the cost plus a margin approach to determine the relative standalone selling price of each performance obligation. The Company does not assess whether a contract contains a significant financing component if the Company expects, at contract inception, that the period between when payment by the client and the transfer of promised services to the client occur will be less than one year.

The Company currently generates its revenue from three different types of contractual arrangements: cost plus fixed fee (“CPFF”), firm-fixed-price (“FFP”), and time-and-materials (“T&M”) contracts. The Company generally recognizes revenue over time as control is transferred to the customer, based on the extent of progress towards satisfaction of the performance obligation. The selection of the method used to measure progress requires judgment and is dependent on the contract type and the nature of the goods or services to be provided.

For CPFF contracts, the Company uses input progress measures to derive revenue based on hours worked on contract performance as follows: direct costs plus Defense Contract Audit Agency (“DCAA”) approved provisional burdens plus a fee. The provisional indirect rates are adjusted and billed at actual at year end. Revenue from FFP contracts is generally recognized ratably over the contract term, using a time-based measure of progress, even if billing is based on other metrics or milestones, including specific deliverables. Certain FFP contracts require the use of an input method based on estimated costs to complete. For T&M contracts, the Company uses input progress measures to estimate revenue earned based on hours worked on contract performance at negotiated billing rates, plus direct costs and indirect cost burdens associated with materials and the direct expenses incurred in performance of the contract.

These arrangements generally qualify for the “right-to-invoice” practical expedient where revenue is recognized in proportion to billable consideration. FFP level-of-effort contracts are substantially similar to T&M contracts except that the Company is required to deliver a specified level-of-effort over a stated period. For these contracts, the Company estimates revenue earned using contract hours worked at negotiated bill rates as the Company delivers the contractually required services.

Revenue generated by contract support service contracts is recognized over time as services are provided, based on the transfer of control to the customer. Revenue generated by FFP contracts is recognized over time as performance obligations are satisfied, based on the transfer of control to the customer, using an input method based on labor hours and costs incurred relative to total estimated costs. Most contracts do not contain variable consideration and contract modifications are generally minimal. For these reasons, there is not a significant impact of electing these transition practical expedients.

Revenue generated from contracts with Federal, state, and local governments is recorded over time, rather than at a point in time. Under contract support services contracts, the Company performs software design work as it is assigned by the customer, and bills the customer, generally semi-monthly, on either a CPFF or T&M basis, as labor hours are expended. Certain other government contracts for software development have specific deliverables and are structured as FFP contracts, which are generally billed as the performance obligations under the contract are met. Revenue recognition under FFP contracts requires judgment to allocate the transaction price to the performance obligations. Contracts may have terms of up tofive years.

Contract accounting requires judgment relative to assessing risks and estimating contract revenue, as well as costs and assumptions for schedule and technical issues. Due to the size and nature of contracts, estimates of revenue and costs are subject to a number of variables. For contract change orders, claims, or similar items, judgment is required for estimating the amounts, assessing the potential for realization and determining whether realization is probable. Estimates of total contract revenue and costs are continuously monitored during the term of the contract and are subject to revision as the contract progresses. From time to time, facts develop that require revisions of revenue recognized or cost estimates. To the extent that a revised estimate affects the current or an earlier period, the cumulative effect of the revision is recognized in the period in which the facts requiring the revision become known.

The Company accounts for contract costs in accordance with the ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers. The Company recognizes the cost of sales of a contract as an expense when incurred or at the time a performance obligation is satisfied. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future, and the costs are expected to be recovered. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

The following table disaggregates the Company’s revenue by contract type for the nine months ended September 30:

Accounting for Income Taxes

Income taxes are accounted for under the asset and liability method. We estimate our income taxes in each of the jurisdictions where the Company operates. This process involves estimating our current tax expense or benefit together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment, we consider the availability of loss carryforwards, projected reversals of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible tax planning strategies.

We are subject to income taxes in the federal and state tax jurisdictions based upon our business operations in those jurisdictions. Significant judgment is required in evaluating uncertain tax positions. The Company accounts for income taxes under ASC Topic 740, Income Taxes ("ASC 740"). We record uncertain tax positions in accordance with ASC 740-10 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and (2) with respect to those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. Management evaluates its tax positions on a quarterly basis.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service (“IRS”) and state taxing authorities, generally for three years after they were filed.

One Big Beautiful Bill Act on July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted in the U.S. which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international), and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The legislation's enactment did not materially impact our effective income tax rate or cash tax position.

The Company accounts for income taxes under ASC 740. ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an entity's unaudited condensed financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on the Company's evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company's unaudited condensed financial statements.

Recent Accounting Pronouncements

In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-06, which makes targeted updates to the accounting and disclosure requirements for internal-use software under Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). The standard becomes effective for the Company beginning in fiscal year 2029, including interim periods, and permits either prospective or retrospective adoption. We are currently assessing the impact on our financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disclose disaggregated information about specific categories of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) within relevant income statement expense captions, in interim and annual reporting periods. In January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. As clarified, the standard is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments may be applied either prospectively or retrospectively. We are currently assessing the impact on our financial statements and disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the applicability of Topic 270, reorganizes interim disclosure requirements, and adds a principle requiring disclosure of events since the most recent annual reporting period that have a material impact on the Company. The standard is effective for the Company for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently assessing the impact on our interim financial statement disclosures.

Other accounting standards updates adopted and/or issued, but not effective until after September 30, 2026, are not expected to have a material effect on the Company’s consolidated financial position, annual results of operations, and/or cash flows.

Note 3: Fixed Assets

Fixed assets consisted of the following as of September 30, 2026, and December 31, 2025:

Depreciation expense for the three and nine months ended September 30, 2026, was $18,857 and $59,102, respectively, and depreciation expense for the three and nine months ended September 30, 2025, was $18,753 and $57,892, respectively.

Note 4: Intangible Assets and Goodwill

Intangible assets consisted of the following as of September 30, 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 and nine months ended September 30, 2026 was $304,546 and $913,637, respectively, and amortization expense for the three and nine months ended September 30, 2025 was $355,537 and $1,066,611, 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 September 30 is as follows:

The goodwill rollforward for the nine months ended September 30, 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 nine months ended September 30, 2026.

Note 5: Notes Payable

All outstanding notes payable were repaid in full prior to December 31, 2025. Accordingly, there were no notes payable outstanding as of September 30, 2026 or December 31, 2025, and there was no notes payable activity during the nine months ended September 30, 2026.

Interest expense for the three and nine months ended September 30, 2026 was $— and $—, respectively, and $69,589 and $349,507 for the three and nine months ended September 30, 2025, respectively. There wasno accrued interest on the notes payable as of September 30, 2026 and September 30, 2025.

Note 6: Note Payable – Related Party

The Company entered into a note payable with a related party in August 2021 with balances as of September 30, 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 and nine months ended September 30, 2026 was $— and $2,301, respectively, compared to $5,041 and $14,959 for the three and nine months ended September 30, 2025, respectively.

Note 7: 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 as of September 30, 2026.

Interest expense for the nine months ended September 30, 2026 and 2025, was $— and $28,658, respectively.

Note 8: 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 September 30, 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 nine months ended September 30, 2026 and 2025, the Company recognized $54,808 and $54,808, respectively, in Series A dividends, all of which have been paid as of September 30, 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 September 30, 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 September 30, 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 nine months ended September 30, 2026 and 2025, the Company recognized $25,650 and $25,815 in Series C dividends, all of which have been paid as of September 30, 2026.

Common Stock

The Company has 3,000,000,000 shares of common stock, par value $0.0001 authorized. The Company has 94,931,286 and 94,612,750 shares issued and outstanding as of September 30, 2026, and December 31, 2025, respectively.

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. During the nine months ended September 30, 2026, the Company issued 168,536 shares pursuant to the ESPP.

On June 1, 2026, the Company filed a registration statement on Form S-8 (File No.333-296389) to register an additional 4,000,000 shares of common stock for issuance under the Castellum, Inc. Third Amended 2021 Stock Incentive Plan. Following this filing, a total of 13,000,000 shares of common stock are registered and available for issuance under the plan.

On August 27, 2026, a former employee exercised stock options to purchase 150,000 shares of common stock at an exercise price of $0.35 per share. In connection with the exercise,86,809 shares were withheld and sold to satisfy the exercise price, resulting in 63,191 shares of common stock being issued on a net basis.

Warrants

As of September 30, 2026, the Company had 5,653,981 warrants outstanding and exercisable, which were granted to officers, directors, and an investor of the Company between 2019 and 2023 and remain outstanding under their original terms. There was no warrant issuance, exercise, expiration, or cancellation activity during the nine months ended September 30, 2026.

Separately, in 2024 the Company issued warrants in a private transaction, all of which were fully exercised in 2025. The Company also issued warrants in connection with registered offerings completed in the first half of 2025, all of which were either exercised or expired prior to December 31, 2025. No warrants from either of these transactions remained outstanding as of December 31, 2025. See Note 11 to the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for additional information regarding these warrants.

The following table represents a summary of warrants for the nine months ended September 30, 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 the 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. On March 6, 2026 the Board approved an additional amendment to the Second Amended Plan to increase the aggregate number of shares available for issuance by 4,000,000 shares (the "Third Plan Amendment" and the "Third Amended Plan"), resulting in an aggregate of 13,000,000 shares available for issuance under the Third Amended Plan, which was approved by the Company's stockholders at the Company's 2026 annual meeting of stockholders held on May 19, 2026. As of September 30, 2026,8,986,130 stock options have been granted under the Third 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 nine months ended September 30, 2026 and the year ended December 31, 2025:

During the nine months ended September 30, 2026, the Company recognized $2,352,908 of noncash stock-based compensation related to the vesting of service-based stock options and the discount on the shares issued under the terms of the ESPP.150,000 options were exercised during the nine months ended September 30, 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.773,630 options were granted during the three months ended September 30, 2026. The following assumptions were used for the periods as follows:

Note 9: 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 pursuant to a Stock Purchase Agreement ("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 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. The value of the 2022 Crom Warrants is reflected in Derivative Liability on the Consolidated Balance Sheets.

On September 11, 2024, the Company entered into a stock purchase agreement with Lead-Risk Millenia, LLC for the sale of its subsidiary, MFSI (the "MFSI Divestiture"). In connection with the MFSI Divestiture, 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 10: 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 $258,912 and $767,899 for the three and nine months ended September 30, 2026, respectively, as compared to $255,876 and $783,367 for the three and nine months ended September 30, 2025, respectively.

Note 11: 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 nine months ended September 30, 2026 and 2025, the Company had three customers (all parts of the U.S. Government) representing 80% and 72% 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 September 30, 2026, and December 31, 2025, respectively.

Note 12: 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 0.7% and 20.4% for the three months ended September 30, 2026, and 2025, respectively. The decrease in the effective tax for the three months ended September 30, 2026 was primarily due to the change in the valuation allowance, nondeductible stock compensation and state income taxes. The effective tax rate was (2.3)% and (10.8)% for the nine months ended September 30, 2026 and 2025, respectively. The increase in the effective tax rate was primarily due to the change in the valuation allowance, nondeductible stock compensation and state income taxes.

Note 13: Subsequent Events

Subsequent to September 30, 2026, and prior to the filing date of November 5, 2026, there were no subsequent events.