000187793912-312023Q3falseNV0.050.05http://fasb.org/us-gaap/2022#DerivativeLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#DerivativeLiabilitiesCurrent69400018779392023-01-012023-09-3000018779392023-11-10xbrli:shares00018779392023-09-30iso4217:USD00018779392022-12-310001877939ctm:NonrelatedPartyMember2023-09-300001877939ctm:NonrelatedPartyMember2022-09-300001877939ctm:RelatedPartyMember2023-09-300001877939ctm:RelatedPartyMember2022-09-300001877939us-gaap:SeriesAPreferredStockMember2023-09-30iso4217:USDxbrli:shares0001877939us-gaap:SeriesAPreferredStockMember2022-12-310001877939us-gaap:SeriesBPreferredStockMember2023-09-300001877939us-gaap:SeriesBPreferredStockMember2022-12-310001877939us-gaap:SeriesCPreferredStockMember2023-09-300001877939us-gaap:SeriesCPreferredStockMember2022-12-3100018779392023-07-012023-09-3000018779392022-07-012022-09-3000018779392022-01-012022-09-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2021-12-310001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2021-12-310001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2021-12-310001877939us-gaap:CommonStockMember2021-12-310001877939us-gaap:AdditionalPaidInCapitalMember2021-12-310001877939us-gaap:RetainedEarningsMember2021-12-3100018779392021-12-310001877939us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100018779392022-01-012022-03-310001877939us-gaap:CommonStockMember2022-01-012022-03-310001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMemberctm:SeriesCPreferredSubscriptionAgreementsMember2022-01-012022-03-310001877939us-gaap:CommonStockMemberctm:SeriesCPreferredSubscriptionAgreementsMember2022-01-012022-03-310001877939us-gaap:AdditionalPaidInCapitalMemberctm:SeriesCPreferredSubscriptionAgreementsMember2022-01-012022-03-310001877939ctm:SeriesCPreferredSubscriptionAgreementsMember2022-01-012022-03-310001877939us-gaap:RetainedEarningsMember2022-01-012022-03-310001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2022-03-310001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2022-03-310001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2022-03-310001877939us-gaap:CommonStockMember2022-03-310001877939us-gaap:AdditionalPaidInCapitalMember2022-03-310001877939us-gaap:RetainedEarningsMember2022-03-3100018779392022-03-310001877939us-gaap:CommonStockMember2022-04-012022-06-300001877939us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000018779392022-04-012022-06-300001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2022-04-012022-06-300001877939us-gaap:CommonStockMemberus-gaap:SeriesBPreferredStockMember2022-04-012022-06-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:SeriesBPreferredStockMember2022-04-012022-06-300001877939us-gaap:SeriesBPreferredStockMember2022-04-012022-06-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:WarrantMember2022-04-012022-06-300001877939us-gaap:WarrantMember2022-04-012022-06-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:RestrictedStockMember2022-04-012022-06-300001877939us-gaap:RestrictedStockMember2022-04-012022-06-300001877939us-gaap:RetainedEarningsMember2022-04-012022-06-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2022-06-300001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2022-06-300001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2022-06-300001877939us-gaap:CommonStockMember2022-06-300001877939us-gaap:AdditionalPaidInCapitalMember2022-06-300001877939us-gaap:RetainedEarningsMember2022-06-3000018779392022-06-300001877939us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:RestrictedStockMember2022-07-012022-09-300001877939us-gaap:RestrictedStockMember2022-07-012022-09-300001877939us-gaap:RetainedEarningsMember2022-07-012022-09-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2022-09-300001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2022-09-300001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2022-09-300001877939us-gaap:CommonStockMember2022-09-300001877939us-gaap:AdditionalPaidInCapitalMember2022-09-300001877939us-gaap:RetainedEarningsMember2022-09-3000018779392022-09-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2022-12-310001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2022-12-310001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2022-12-310001877939us-gaap:CommonStockMember2022-12-310001877939us-gaap:AdditionalPaidInCapitalMember2022-12-310001877939us-gaap:RetainedEarningsMember2022-12-310001877939us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-3100018779392023-01-012023-03-310001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:WarrantMember2023-01-012023-03-310001877939us-gaap:WarrantMember2023-01-012023-03-310001877939us-gaap:CommonStockMember2023-01-012023-03-310001877939us-gaap:RetainedEarningsMember2023-01-012023-03-310001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2023-03-310001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2023-03-310001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2023-03-310001877939us-gaap:CommonStockMember2023-03-310001877939us-gaap:AdditionalPaidInCapitalMember2023-03-310001877939us-gaap:RetainedEarningsMember2023-03-3100018779392023-03-310001877939us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-3000018779392023-04-012023-06-300001877939us-gaap:CommonStockMember2023-04-012023-06-300001877939us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2023-04-012023-06-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:PrivatePlacementMember2023-04-012023-06-300001877939us-gaap:PrivatePlacementMember2023-04-012023-06-300001877939us-gaap:RetainedEarningsMember2023-04-012023-06-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2023-06-300001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2023-06-300001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2023-06-300001877939us-gaap:CommonStockMember2023-06-300001877939us-gaap:AdditionalPaidInCapitalMember2023-06-300001877939us-gaap:RetainedEarningsMember2023-06-3000018779392023-06-300001877939us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001877939us-gaap:CommonStockMember2023-07-012023-09-300001877939us-gaap:CommonStockMemberus-gaap:RestrictedStockMember2023-07-012023-09-300001877939us-gaap:AdditionalPaidInCapitalMemberus-gaap:RestrictedStockMember2023-07-012023-09-300001877939us-gaap:RestrictedStockMember2023-07-012023-09-300001877939us-gaap:AdditionalPaidInCapitalMembersrt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2023-07-012023-09-300001877939srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2023-07-012023-09-300001877939srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2023-07-012023-09-300001877939us-gaap:RetainedEarningsMember2023-07-012023-09-300001877939us-gaap:SeriesAPreferredStockMemberus-gaap:PreferredStockMember2023-09-300001877939us-gaap:SeriesBPreferredStockMemberus-gaap:PreferredStockMember2023-09-300001877939us-gaap:SeriesCPreferredStockMemberus-gaap:PreferredStockMember2023-09-300001877939us-gaap:CommonStockMember2023-09-300001877939us-gaap:AdditionalPaidInCapitalMember2023-09-300001877939us-gaap:RetainedEarningsMember2023-09-300001877939ctm:RelatedPartiesMember2023-01-012023-09-300001877939ctm:RelatedPartiesMember2022-01-012022-09-300001877939ctm:NonrelatedPartiesMember2023-01-012023-09-300001877939ctm:NonrelatedPartiesMember2022-01-012022-09-300001877939ctm:PublicOfferingMember2022-10-132022-10-130001877939exch:CISDus-gaap:IPOMember2022-10-172022-10-17xbrli:purectm:contractualArrangementType0001877939srt:MaximumMember2023-01-012023-09-300001877939ctm:TimeAndMaterialMember2023-01-012023-09-300001877939ctm:TimeAndMaterialMember2022-01-012022-09-300001877939ctm:FirmFixedPriceMember2023-01-012023-09-300001877939ctm:FirmFixedPriceMember2022-01-012022-09-300001877939ctm:CostPlusFixedFeeMember2023-01-012023-09-300001877939ctm:CostPlusFixedFeeMember2022-01-012022-09-300001877939us-gaap:AdditionalPaidInCapitalMembersrt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-01-012023-06-300001877939srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-01-012023-06-300001877939srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2022-01-012023-06-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-03-220001877939ctm:GlobalTechnologyManagementResourcesMember2023-01-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-03-310001877939ctm:GlobalTechnologyManagementResourcesMember2023-04-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:CustomerRelationshipsMember2023-03-310001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:CustomerRelationshipsMember2023-04-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:CustomerRelationshipsMember2023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:TrademarksAndTradeNamesMember2023-03-310001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:TrademarksAndTradeNamesMember2023-04-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:TrademarksAndTradeNamesMember2023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberctm:BacklogMember2023-03-310001877939ctm:GlobalTechnologyManagementResourcesMemberctm:BacklogMember2023-04-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberctm:BacklogMember2023-09-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-09-302023-09-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-01-012023-06-300001877939ctm:LexingtonSolutionsGroupMember2022-04-152022-04-150001877939ctm:LexingtonSolutionsGroupMember2022-05-042022-05-040001877939ctm:LexingtonSolutionsGroupMember2022-04-150001877939ctm:TrancheTwoMemberctm:LexingtonSolutionsGroupMember2022-04-152022-04-150001877939ctm:LexingtonSolutionsGroupMemberctm:TrancheThreeMember2022-04-150001877939ctm:LexingtonSolutionsGroupMember2023-01-012023-09-300001877939ctm:LexingtonSolutionsGroupMemberctm:MiscellaneousLicenseMember2022-04-150001877939ctm:LexingtonSolutionsGroupMemberus-gaap:CustomerRelationshipsMember2022-04-150001877939ctm:LexingtonSolutionsGroupMemberus-gaap:NoncompeteAgreementsMember2022-04-150001877939ctm:LexingtonSolutionsGroupMemberctm:BacklogMember2022-04-150001877939us-gaap:CommonStockMemberctm:LexingtonSolutionsGroupMember2022-05-042022-05-040001877939ctm:LexingtonSolutionsGroupMemberctm:HoldbackSharesMember2022-04-152022-04-150001877939us-gaap:EquipmentMember2023-09-300001877939us-gaap:EquipmentMember2022-12-310001877939us-gaap:FurnitureAndFixturesMember2023-09-300001877939us-gaap:FurnitureAndFixturesMember2022-12-310001877939us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2023-09-300001877939us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-12-310001877939us-gaap:LeaseholdImprovementsMember2023-09-300001877939us-gaap:LeaseholdImprovementsMember2022-12-310001877939us-gaap:CustomerRelationshipsMembersrt:MinimumMember2023-01-012023-09-300001877939us-gaap:CustomerRelationshipsMembersrt:MaximumMember2023-01-012023-09-300001877939us-gaap:CustomerRelationshipsMember2023-09-300001877939us-gaap:CustomerRelationshipsMember2022-12-310001877939us-gaap:TradeNamesMember2023-01-012023-09-300001877939us-gaap:TradeNamesMember2023-09-300001877939us-gaap:TradeNamesMember2022-12-310001877939srt:MinimumMemberus-gaap:TrademarksMember2023-01-012023-09-300001877939srt:MaximumMemberus-gaap:TrademarksMember2023-01-012023-09-300001877939us-gaap:TrademarksMember2023-09-300001877939us-gaap:TrademarksMember2022-12-310001877939srt:MinimumMemberctm:BacklogMember2023-01-012023-09-300001877939srt:MaximumMemberctm:BacklogMember2023-01-012023-09-300001877939ctm:BacklogMember2023-09-300001877939ctm:BacklogMember2022-12-310001877939us-gaap:NoncompeteAgreementsMembersrt:MinimumMember2023-01-012023-09-300001877939us-gaap:NoncompeteAgreementsMembersrt:MaximumMember2023-01-012023-09-300001877939us-gaap:NoncompeteAgreementsMember2023-09-300001877939us-gaap:NoncompeteAgreementsMember2022-12-31ctm:reportingUnit0001877939ctm:CorvusMember2022-12-310001877939ctm:SSIAcquisitionMember2022-12-310001877939ctm:MFSIAcquisitionMember2022-12-310001877939ctm:CorvusMember2023-01-012023-09-300001877939ctm:SSIAcquisitionMember2023-01-012023-09-300001877939ctm:MFSIAcquisitionMember2023-01-012023-09-300001877939ctm:CorvusMember2023-09-300001877939ctm:SSIAcquisitionMember2023-09-300001877939ctm:MFSIAcquisitionMember2023-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMember2023-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMember2022-12-310001877939ctm:ConvertibleNotePayableToRelatedPartyMemberctm:ConvertibleDebtPursuantToDebtAmendmentRelatedPartyPayableWithATrustDeedToOneOfTheCompaniesDirectorsConversionPriceOfZeroPointTwoSixPerShareMember2023-07-012023-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMemberctm:ConvertibleDebtPursuantToDebtAmendmentRelatedPartyPayableWithATrustDeedToOneOfTheCompaniesDirectorsConversionPriceOfZeroPointTwoSixPerShareMember2023-01-012023-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMemberctm:ConvertibleDebtPursuantToDebtAmendmentRelatedPartyPayableWithATrustDeedToOneOfTheCompaniesDirectorsConversionPriceOfZeroPointTwoSixPerShareMember2022-07-012022-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMemberctm:ConvertibleDebtPursuantToDebtAmendmentRelatedPartyPayableWithATrustDeedToOneOfTheCompaniesDirectorsConversionPriceOfZeroPointTwoSixPerShareMember2022-01-012022-09-300001877939ctm:ConvertibleNotePayableToRelatedPartyMember2023-09-300001877939ctm:NotePayableMaturingSeptember302024Memberus-gaap:NotesPayableOtherPayablesMember2023-09-300001877939ctm:NotePayableMaturingSeptember302024Memberus-gaap:NotesPayableOtherPayablesMember2022-12-310001877939ctm:PromissoryNoteMemberctm:NotePayableMaturingTheEarlierOfSeptember302024OrCompletionOfEquityOfferingMember2023-09-300001877939ctm:PromissoryNoteMemberctm:NotePayableMaturingTheEarlierOfSeptember302024OrCompletionOfEquityOfferingMember2022-12-310001877939ctm:PromissoryNoteMemberctm:NotePayableMaturingTheEarlierOfSeptember302024OrAccelerationOfObligationsMember2023-09-300001877939ctm:PromissoryNoteMemberctm:NotePayableMaturingTheEarlierOfSeptember302024OrAccelerationOfObligationsMember2022-12-310001877939ctm:ConvertiblesMaturingApril42023Memberus-gaap:ConvertibleNotesPayableMember2023-09-300001877939ctm:ConvertiblesMaturingApril42023Memberus-gaap:ConvertibleNotesPayableMember2022-12-310001877939us-gaap:ConvertibleNotesPayableMemberctm:ConvertiblesMaturingFebruary132024Member2023-09-300001877939us-gaap:ConvertibleNotesPayableMemberctm:ConvertiblesMaturingFebruary132024Member2022-12-310001877939ctm:TermNotePayableMember2023-01-012023-09-300001877939ctm:TermNotePayableMember2023-09-300001877939ctm:TermNotePayableMember2022-12-310001877939ctm:PromissoryNoteMember2022-02-280001877939ctm:PromissoryNoteDatedApril62023Member2023-04-060001877939ctm:PromissoryNoteMember2023-04-060001877939us-gaap:ConvertibleNotesPayableMember2022-04-040001877939us-gaap:ConvertibleNotesPayableMember2023-02-132023-02-130001877939us-gaap:ConvertibleNotesPayableMember2023-02-130001877939ctm:CromMemberus-gaap:ConvertibleNotesPayableMemberctm:ConvertiblesMaturingFebruary132024Member2023-02-130001877939ctm:ConvertibleNotesWarrantsMember2023-02-130001877939ctm:CromMemberus-gaap:ConvertibleNotesPayableMember2023-02-132023-02-130001877939srt:ScenarioForecastMemberus-gaap:ConvertibleNotesPayableMember2024-01-012024-09-300001877939srt:ScenarioForecastMemberus-gaap:ConvertibleNotesPayableMember2025-01-012025-09-300001877939ctm:NotePayableMemberctm:SSIMember2023-09-300001877939ctm:NotePayableMemberctm:SSIMember2022-12-310001877939ctm:SSIMember2023-09-300001877939ctm:SSIMember2022-12-310001877939ctm:NotePayableMember2023-07-012023-09-300001877939ctm:NotePayableMember2023-01-012023-09-300001877939ctm:NotePayableMember2022-07-012022-09-300001877939ctm:NotePayableMember2022-01-012022-09-300001877939us-gaap:RevolvingCreditFacilityMemberctm:LiveOakBankMember2022-04-040001877939us-gaap:RevolvingCreditFacilityMemberctm:LiveOakBankMember2022-04-042022-04-040001877939us-gaap:RevolvingCreditFacilityMember2022-04-120001877939us-gaap:RevolvingCreditFacilityMember2023-01-190001877939us-gaap:RevolvingCreditFacilityMember2023-01-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-03-222023-03-220001877939ctm:GlobalTechnologyManagementResourcesMember2023-03-222023-06-300001877939ctm:GlobalTechnologyManagementResourcesMember2023-06-302023-06-300001877939us-gaap:SeriesAPreferredStockMember2023-01-012023-09-300001877939us-gaap:SeriesCPreferredStockMember2023-01-012023-09-300001877939us-gaap:CommonStockMember2023-01-012023-09-300001877939ctm:GlobalTechnologyManagementResourcesMemberus-gaap:CommonStockMember2023-01-012023-09-300001877939us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2023-07-012023-09-300001877939us-gaap:PrivatePlacementMember2023-09-300001877939us-gaap:RestrictedStockMember2023-01-012023-09-300001877939us-gaap:RestrictedStockMembersrt:ScenarioForecastMember2023-10-012023-12-310001877939us-gaap:WarrantMember2022-12-310001877939us-gaap:WarrantMember2021-12-310001877939us-gaap:WarrantMember2023-01-012023-09-300001877939us-gaap:WarrantMember2022-01-012022-12-310001877939us-gaap:WarrantMember2023-09-300001877939us-gaap:WarrantMember2023-07-012023-09-300001877939ctm:ConvertibleNotesWarrantsMembersrt:OfficerMember2023-09-300001877939ctm:ConvertibleNotesWarrantsMembersrt:OfficerMember2023-01-012023-09-30ctm:officer0001877939ctm:ConvertibleNotesWarrantsMemberctm:CromMember2023-09-300001877939ctm:StockIncentivePlanMember2021-11-090001877939ctm:StockIncentivePlanMember2023-09-300001877939us-gaap:EmployeeStockOptionMember2022-12-3100018779392022-01-012022-12-310001877939us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001877939us-gaap:EmployeeStockOptionMember2023-03-310001877939us-gaap:EmployeeStockOptionMember2023-06-300001877939us-gaap:EmployeeStockOptionMember2023-09-300001877939us-gaap:EmployeeStockOptionMember2023-01-012023-09-300001877939ctm:ServiceBasedStockOptionMember2023-01-012023-09-300001877939exch:CISDus-gaap:IPOMember2022-10-132022-10-130001877939us-gaap:FairValueInputsLevel1Member2023-09-300001877939us-gaap:FairValueInputsLevel2Member2023-09-300001877939us-gaap:FairValueInputsLevel3Member2023-09-300001877939us-gaap:FairValueInputsLevel1Member2022-12-310001877939us-gaap:FairValueInputsLevel2Member2022-12-310001877939us-gaap:FairValueInputsLevel3Member2022-12-310001877939ctm:ConvertibleNoteMemberctm:PriorCromConvertibleNoteMember2023-09-300001877939ctm:ConvertibleNoteMemberctm:PriorCromConvertibleNoteMember2022-12-310001877939ctm:ConvertibleNoteMemberctm:PriorCromConvertibleNoteMember2022-04-040001877939ctm:ConvertiblesMaturingApril42023Memberctm:WarrantsMember2022-04-040001877939ctm:ConvertiblesMaturingApril42023Memberctm:WarrantsMember2023-09-300001877939ctm:ConvertiblesMaturingApril42023Memberctm:WarrantsMember2022-12-310001877939ctm:CromCortanaFundLLCMemberctm:ConvertibleNoteMember2023-09-300001877939ctm:CromCortanaFundLLCMemberctm:ConvertibleNoteMember2022-12-310001877939ctm:CromCortanaFundLLCMemberctm:ConvertibleNoteMember2022-04-040001877939ctm:WarrantsMemberctm:ConvertiblesMaturingFebruary132024Member2023-02-130001877939ctm:WarrantsMemberctm:ConvertiblesMaturingFebruary132024Member2023-09-300001877939ctm:WarrantsMemberctm:ConvertiblesMaturingFebruary132024Member2022-12-310001877939ctm:WarrantsMemberctm:ConvertiblesMaturingFebruary132024Member2022-04-0400018779392022-04-040001877939ctm:MeasurementInputExpectedTermConversionOptionMember2023-01-012023-09-300001877939ctm:MeasurementInputExpectedTermWarrantsMember2023-09-300001877939us-gaap:MeasurementInputSharePriceMember2023-09-300001877939us-gaap:MeasurementInputOptionVolatilityMember2023-09-300001877939ctm:MeasurementInputVolatilityHaircutMember2023-09-300001877939ctm:MeasurementInputVolatilityPostHaircutMember2023-09-300001877939us-gaap:MeasurementInputRiskFreeInterestRateMember2023-09-300001877939ctm:MeasurementInputOasDifferentialBetweenCccAndBBondsMember2023-09-300001877939ctm:ThreeCustomersMemberus-gaap:SalesRevenueProductLineMemberus-gaap:RevenueFromRightsConcentrationRiskMember2023-01-012023-09-300001877939us-gaap:SalesRevenueProductLineMemberus-gaap:RevenueFromRightsConcentrationRiskMemberctm:TwoCustomersMember2022-01-012022-09-300001877939us-gaap:AccountsReceivableMemberctm:ThreeCustomersMember2023-09-300001877939us-gaap:AccountsReceivableMemberctm:ThreeCustomersMember2022-12-310001877939ctm:EmploymentAgreementMembersrt:ChiefExecutiveOfficerMember2023-03-222023-03-220001877939ctm:EmploymentAgreementMembersrt:ChiefExecutiveOfficerMember2023-03-220001877939ctm:EmploymentAgreementMembersrt:ChiefExecutiveOfficerMembersrt:MaximumMember2023-03-220001877939ctm:GlobalTechnologyManagementResourcesMember2023-01-012023-03-310001877939ctm:GlobalTechnologyManagementResourcesMember2022-01-012022-12-310001877939srt:MaximumMember2023-01-242023-01-240001877939srt:MinimumMember2023-01-012023-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
Or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number: 001-41526
CASTELLUM, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA27-4079982
(STATE OF INCORPORATION)(I.R.S Employer I.D.)
3 Bethesda Metro Center, Suite 700, Bethesda, MD 20814
(301) 961-4895
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareCTM
NYSE American LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company x
 
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding as of November 10, 2023
Common Stock, par value $0.0001 per share47,642,427


CASTELLUM, INC.
FORM 10-Q
For the Quarter Ended September 30, 2023
INDEX


Explanatory Note Regarding Reverse Stock Split
On October 13, 2022, Castellum, Inc. (the “Company”, “our Company,” “we,” “our,” “us,” and “Castellum”) effected a 1-for-20 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split,” “Offering,” “Uplisting”) by way of the filing on October 5, 2022 of an amendment to the Company’s amended and restated articles of incorporation to effect the Reverse Stock Split which was approved by Financial Industry Regulatory Authority on October 12, 2022 in connection with the closing of an underwritten public offering of our common stock and the commencement of the trading of our common stock on the New York Stock Exchange American LLC ("NYSE American"). As a result of the Reverse Stock Split, all authorized and outstanding common stock and per share amounts in this Quarterly Report on Form 10-Q, including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
Explanatory Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” which statements involve substantial risk and uncertainties. These statements do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In particular, these statements relate to future actions, prospective products and services, market acceptance, future performance or results of current and anticipated products and services, sales efforts, expenses, and the outcome of contingencies such as legal proceedings and financial results.
Examples of forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our business strategy, business prospects, operating results, operating expenses, working capital, liquidity, and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products and services, the cost, terms, and availability of components, pricing levels, the timing and cost of capital expenditures, competitive conditions, and general economic conditions. These statements are based on our management’s expectations, beliefs, and assumptions concerning future events affecting us, which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.
Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:
changes in the market acceptance of our products and services;
overall levels of government spending, including defense spending and spending on IT services;
increased levels of competition;
changes in political, economic, or regulatory conditions generally and in the markets in which we operate;
adverse conditions in the industries in which our customers operate;
our ability to retain and attract senior management and other employees;
our ability to respond quickly and effectively to new technological developments;
our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company;
sequestration or other budgetary restrictions imposed by the United States government in the absence of an approved budget or continuing resolution;
1

existing revenues related to small business contracts which are not replaced by other opportunities; and
failure by our company to win prime contracts or acquire companies with prime contract vehicles.
We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this Quarterly Report on Form 10-Q are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.
In this Quarterly Report on Form 10-Q, unless the context otherwise requires, all references to the “Company,” “our Company,” “we,” “our,” “us,” and “Castellum” refer to Castellum, Inc., a Nevada corporation, and its wholly owned subsidiaries.
2

Part I
Item 1. Unaudited Consolidated Financial Statements
Castellum, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

September 30,
2023
December 31,
2022
(unaudited)
Assets
Current Assets:
Cash$1,335,977 $4,640,896 
Accounts receivable7,814,468 5,193,562 
Contract asset575,942 257,434 
Prepaid income taxes28,944 351,116 
Prepaid expenses and other current assets332,548 222,995 
Total current assets10,087,879 10,666,003 
Fixed assets, net353,816 173,350 
Non-Current Assets:
Right of use asset - operating lease703,054 35,524 
Intangible assets, net9,592,449 6,634,167 
Goodwill10,716,907 15,533,964 
Total non-current assets21,366,226 22,377,005 
Total Assets$31,454,105 $33,043,008 
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
Accounts payable and accrued expenses$991,386 $1,617,596 
Accrued payroll and payroll related expenses3,172,180 1,869,517 
Due to seller350,000 280,000 
Obligation to issue common and preferred stock284,500  
Contingent earnout877,000 812,000 
Derivative liabilities125,300 824,000 
Revolving credit facility625,025 300,025 
Current portion of notes payable, net of discount8,222,891 2,033,348 
Current portion of convertible promissory notes - related parties, net of discount1,920,125  
3

Current portion of lease liability - operating lease187,086 22,054 
 
Total current liabilities16,755,493 7,758,540 
Non-Current Liabilities
Deferred Tax Liability  
Lease liability - operating lease, net of current portion524,346 12,632 
Note payable - related party, net of current portion400,000 400,000 
Convertible promissory notes - related parties, net of discount, net of current portion 999,430 
Notes payable, net of discount, net of current portion 6,340,490 
Total non-current liabilities924,346 7,752,552 
Total Liabilities17,679,839 15,511,092 
Stockholders' Equity
Preferred stock, 50,000,000 shares authorized
Series A Preferred stock, par value $0.0001; 10,000,000 shares authorized; 5,875,000 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
588 588 
Series B Preferred stock, par value $0.0001; 10,000,000 shares authorized; 0 and 0 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
  
Series C Preferred stock, par value $0.0001; 10,000,000 shares authorized; 770,000 and 770,000 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
77 77 
Common stock, par value, $0.0001, 3,000,000,000 shares authorized, 47,579,402 and 41,699,363 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
4,758 4,170 
Additional paid in capital55,536,292 43,621,651 
Accumulated deficit(41,767,449)(26,094,570)
Total stockholders' equity13,774,266 17,531,916 
Total Liabilities and Stockholders' Equity$31,454,105 $33,043,008 
See notes to consolidated financial statements.
4

Castellum, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenues$11,741,164 $11,120,712 $34,153,979 $32,166,104 
Cost of Revenues6,903,689 6,474,261 20,066,904 18,698,820 
Gross Profit4,837,475 4,646,451 14,087,075 13,467,284 
Operating Expenses   
Indirect costs2,258,082 2,130,513 6,710,421 7,458,319 
Overhead493,706 407,804 1,498,325 1,167,346 
General and administrative expenses3,739,975 3,297,319 14,030,818 9,633,064 
Goodwill impairment loss6,919,094  6,919,094  
Change in fair value of contingent earnout 864,000 65,000 864,000 
Total operating expenses13,410,857 6,699,636 29,223,658 19,122,729 
Loss From Operations Before Other Income (Expense)(8,573,382)(2,053,185)(15,136,583)(5,655,445)
Other Income (Expense)   
Loss on induced conversion  (300,000) 
Gain (loss) from change in fair value of derivative liability241,700 76,000 1,086,325 (97,000)
Other income (expense)85,230  84,157 303 
Interest expense, net of interest income(843,148)(978,314)(2,484,263)(2,579,915)
Total other income (expense)(516,218)(902,314)(1,613,781)(2,676,612)
Loss From Operations Before Benefit For Income Taxes(9,089,600)(2,955,499)(16,750,364)(8,332,057)
Income tax benefit (expense)(102,584)(159,025)1,136,345 (902,820)
Net Loss(9,192,184)(3,114,524)(15,614,019)(9,234,877)
Less: preferred stock dividends28,719 29,911 88,858 70,447 
Net Loss To Common Shareholders$(9,220,903)$(3,144,435)$(15,702,877)$(9,305,324)
Net Loss Per Share - Basic And Diluted$(0.19)$(0.12)$(0.34)$(0.39)
Weighted Average Shares Outstanding - Basic And Diluted48,527,47225,868,84946,673,95923,621,551
See notes to consolidated financial statements.
5

Castellum, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)

Series A PreferredSeries B Preferred Series C PreferredCommon Stock Additional
Paid-In
Capital
Accumulated
Deficit
Total
SharesAmountShares Amount SharesAmountShares Amount
Balance - December 31, 20215,875,000 $588 3,610,000 $361 620,000 $62 19,960,632 $1,996 $26,405,126 $(11,086,016)$15,322,117 
Stock-based compensation - options— — — — — — — — 875,640 — 875,640 
Stock-based compensation - warrants— — — — — — — — — — — 
Stock-based compensation - restricted shares— — — — — — — — 30,937 — 30,937 
Shares issued in acquisition of MFSI— — — — — — — — — — — 
Cancellation of shares in acquisition of MFSI— — — — — — — — — — — 
Shares issued for service, net of amounts prepaid— — — — — — 7,500 1 6,187 — 6,188 
Shares issued in exercise of stock options— — — — — — 15,000 2 11,998 — 12,000 
Shares issued for cash in Series C Preferred
Subscription Agreement— — — — 150,000 15 15,000 2 149,983 — 150,000 
Net loss for the period— — — — — — — — — (1,406,715)(1,406,715)
Balance - March 31, 20225,875,000 588 3,610,000 361 770,000 77 19,998,132 2,001 27,479,871 (12,492,731)14,990,167 
Shares issued for services net of amounts prepaid— — — — — — 7,500 1 11,939 — 11,940 
Shares issued for cash, including fair value adjustment— — — — — — 1,250,000 125 592,875 — 593,000 
Shares issued for commitment fees— — — — — — 125,000 13 59,288 — 59,300 
Shares issued to satisfy obligation to issue common stock— — — — — — 132,500 13 533,737 — 533,750 
Shares issued to acquire LSG— — — — — — 600,000 60 2,279,940 — 2,280,000 
Conversion of Series B Preferred to Common Shares— — (535,000)(54)— — 2,675,000 268 (214)—  
Stock-based compensation - options— — — — — — — — 1,117,335 — 1,117,335 
Stock-based compensation - warrants— — — — — — — — 1,603,219 — 1,603,219 
Stock-based compensation - restricted shares— — — — — — — — 30,938 — 30,938 
Gain on extinguishment of related party convertible note— — — — — — — — 2,667,903 — 2,667,903 
Net loss for the period— — — — — — — — — (4,754,175)(4,754,175)
Balance - June 30, 20225,875,0005883,075,000307770,0007724,788,1322,48036,376,831(17,246,906)19,133,377
Stock-based compensation - options— — — — — — — — 1,139,018 — 1,139,018 
Stock-based compensation - restricted shares— — — — — — — — 30,937 — 30,937 
Net loss for the period— — — — — — — — — (3,144,435)(3,144,435)
Balance - September 30, 20225,875,0005883,075,000307770,0007724,788,1322,48037,546,786(20,391,341)17,158,897
6

Balance - December 31, 20225,875,000 588   770,000 77 41,699,363 4,170 43,621,651 (26,094,570)17,531,916 
Stock-based compensation - options— — — — — — — — 2,436,299 — 2,436,299 
Stock-based compensation - warrants— — — — — — — — 1,076,969 — 1,076,969 
Stock-based compensation - restricted stock and shares issued for services— — — — — — 125,504 12 149,987 — 149,999 
Shares issued to acquire GTMR— — — — — — 4,866,570 487 5,304,075 — 5,304,562 
Shares issued in induced conversion of Crom note— — — — — — 556,250 56 589,944 — 590,000 
Loss on induced conversion— — — — — — — — 300,000 — 300,000 
Extinguishment of debt discount - derivative liability— — — — — — — — (171,128)— (171,128)
Extinguishment of debt discount - debt issuance costs— — — — — — — — (8,034)— (8,034)
Extinguishment of derivative liability— — — — — — — — 33,375 — 33,375 
Net loss for the period— — — — — — — — — (4,353,710)(4,353,710)
Balance - March 31, 20235,875,000 588   770,000 77 47,247,687 4,725 53,333,138 (30,448,280)22,890,248 
Stock-based compensation - options— — — — — — — — 1,089,165 — 1,089,165 
Stock-based compensation - restricted stock and shares issued for services— — — — — — 63,025 6 74,994 — 75,000 
Shares issued in private placement— — — — — — 63,000 6 125,994 — 126,000 
Net loss for the period— — — — — — — — — (2,128,266)(2,128,266)
Balance - June 30 20235,875,000 588   770,000 77 47,373,712 4,737 54,623,291 (32,576,546)22,052,147 
Stock-based compensation - options— — — — — — — — 1,089,163 — 1,089,163 
Stock-based compensation - shares issued to advisory board— — — — — — 48,000 5 17,275 — 17,280 
Restricted stock and shares issued for services— — — — — — 132,690 13 100,066 — 100,079 
Shares issued to Crom Cortana in Crom Transaction25,000310,997— 11,000 
Balance sheet reclassification adjustment (Note 2)— — — — — — — — (304,500)30,000 (274,500)
Net loss for the period— — — — — — — — — (9,220,903)(9,220,903)
Balance - September 30, 20235,875,000 588   770,000 77 47,579,402 4,758 55,536,292 (41,767,449)13,774,266 
See notes to consolidated financial statements.
7

Castellum, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
20232022
Cash Flow From Operating Activities
Net loss$(15,614,019)$(9,234,877)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization1,865,839 1,520,329 
Amortization of discounts, premium and deferred costs1,746,019 1,869,152 
Stock-based compensation6,112,184 4,906,152 
Deferred tax provision(1,486,460)610,033 
Gain on disposal of fixed assets (303)
Financing fee and bank charges for note payable and advances on revolving credit line 3,775 
Goodwill impairment loss6,919,094  
Lease cost128,403 833 
Legal fees paid out of proceeds from a note payable 30,000 
Gain from timing difference on issuance of shares(85,231) 
Change in fair value of contingent earnout65,000 864,000 
Change in fair value of derivative liability(1,086,325)97,000 
Changes in assets and liabilities
Accounts receivable(2,118,021)(2,637,969)
Proceeds from factoring accounts receivable850,141  
Prepaid expenses and other current assets335,262 (58,051)
Contract asset (liability)(318,509)673,638 
Lease liability(94,295) 
Accounts payable and accrued expenses(354,502)801,641 
Net cash used in operating activities(3,135,420)(554,647)
Cash Flows From Investing Activities
Acquisition of business, cash paid to seller(485,739)(250,000)
Cash paid to seller from factoring(411,975) 
Cash received in acquisition of GTMR475,000  
Purchases of fixed assets(20,526)(92,436)
Net cash used in investing activities(443,240)(342,436)
Cash Flows From Financing Activities
Proceeds from revolving credit line325,000 300,000 
Payment of debt issuance costs(15,000) 
Proceeds from issuance of preferred and common stock126,000 625,000 
Proceeds from notes payable1,200,000 1,470,000 
Preferred stock dividend(88,858)(70,449)
Proceeds from exercise of stock options 12,000 
Repayment of amounts due to seller(280,000)(160,000)
Loss on induced conversion300,000  
Repayment of convertible note payable - related party (500,000)
8

Repayment of note payable(1,293,401)(943,995)
Net cash provided by financing activities273,741 732,556 
 
Net Decrease in Cash(3,304,919)(164,527)
 
Cash - Beginning of Period4,640,896 2,017,915 
 
Cash - End of Period$1,335,977 $1,853,388 
 
Supplemental Disclosures
Cash paid for interest expense$749,465 $559,234 
Cash refunded (paid) from income taxes$(4,751)$118,885 
 
Summary of Non-Cash Activities:
 
Debt discount on note payable$28,000 $500,000 
Derivative liability incurred for note payable 421,000 692,000 
Extinguishment of debt discount - derivative liability171,128  
Extinguishment of debt discount - debt issuance costs8,034  
Extinguishment of derivative liability on Crom note 33,375  
Adjustment to contingent consideration and customer relationships 275,000 
Gain on extinguishment of convertible note payable - related party applied to APIC 2,667,903 
Common shares issued for obligation to issue common stock 533,750 
Deferred issuance costs recognized for note payable 59,300 
Fair value adjustment recognized on issuance of common stock in Securities Purchase Agreement 93,000 
Common shares issued in conversion of Series B preferred shares$ $5,350 
For the non-cash activities related to the Company's acquisitions and debt transaction see Note 3, "Acquisitions" and Note 7, "Notes Payable".
See notes to consolidated financial statements.
9

Castellum, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2023 and 2022
Note 1: Nature of Operations
Castellum, Inc. (the “Company”) is focused on acquiring and growing technology companies in the areas of cybersecurity, information technology, electronic warfare, and information warfare with businesses in the governmental and commercial markets. Services include intelligence analysis, software development, software engineering, Model Based Systems Engineering ("MBSE"), 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 works with multiple business brokers and contacts within its 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”). See Note 3, “Acquisitions” for greater details on the acquisitions of the Company since January 1, 2022.
On October 13, 2022, the Company effected a $3,000,000 public offering, a 1-for-20 Reverse Stock Split of its common shares, and an uplisting to the NYSE American. All share and per share figures related to the common stock have been retroactively adjusted in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 4C.
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, 2022 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.


10

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 maintains one 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 consolidated financial statements in conformity with accounting principles generally accepted in the U.S. 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 consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, the acquired value of the intangible assets and goodwill, impaired value of intangible assets, liabilities to accrue, cost incurred in the satisfaction of performance obligations, fair value for consideration elements of business combinations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards. Actual results could differ from those estimates.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.
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 contracts (“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.
11

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 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. 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 manpower.
Revenue generated by contract support service contracts is recognized over time as services are provided, based on the transfer of control. Revenue generated by FFP contracts is recognized over time as performance obligations are satisfied. 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 the 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 up to five years.
Contract accounting requires judgment relative to assessing risks and estimating contract revenue and 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 ASC Topic 340-40, Contracts with Customers. The Company recognizes the cost of sales of a contract as 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:
20232022
Revenue:  
Time and material$19,481,565 $17,924,100 
Firm fixed price2,452,726 3,607,597 
Cost plus fixed fee12,219,688 10,634,407 
Total$34,153,979 $32,166,104 
Accounting for Income Taxes

Accounting for 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
12

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 if 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. 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 up on ultimate settlement with the related tax authority. Management evaluates its tax positions on a quarterly basis.

The Company files income tax returns in the US 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.
Recent Accounting Pronouncements
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows, or disclosures. There have been no recently issued accounting pronouncements as of September 30, 2023 that would materially impact the Company.
Balance Sheet Reclassification Adjustment
The Company identified an immaterial error in its annual and interim financial statements for the year ended December 31, 2022 and the first and second quarters of 2023, whereby additional paid in capital was overstated by $304,500 and the obligation to issue common shares account and the accumulated deficit account were understated by $274,500 and $30,000 respectively. These immaterial amounts have been adjusted and the corrected balances are reflected in the Company's Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and the Consolidated Statement of Changes in Stockholders' Equity.
Note 3: Acquisitions
The Company has completed the following acquisitions to achieve its business purposes as discussed in Note 1. As the acquisitions made by the Company in 2022 and 2023 were of the common stock or membership interests of the companies, certain assets in some of the acquisitions (intangible assets and goodwill) are not considered deductible for tax purposes. For the LSG acquisition goodwill is deductible for tax.
GTMR
On March 22, 2023, the Company entered into an agreement and plan of merger with GTMR. This acquisition was accounted for as a business combination whereby GTMR became a 100% owned subsidiary of the Company. The Company acquired GTMR to expand our capabilities, increase market share, gain access to new contracts, and achieve cost efficiencies through synergies and economies of scale.
The following represents the preliminary assets and liabilities acquired in this acquisition:
13

March 31, 2023AdjustmentsSeptember 30, 2023
Cash$475,000 $ $475,000 
Accounts receivable other receivables1,380,203 (9,384)1,370,819 
Income tax receivable155,449 (127,992)27,457 
Prepaid expenses116,892 (30,856)86,036 
Other asset17,182  17,182 
Furniture and equipment163,301 103,760 267,061 
Right of use asset – operating lease 641,392 641,392 
Customer relationships2,426,000  2,426,000 
Right of use asset - finance lease 17,456 17,456 
Tradename517,000  517,000 
Backlog1,774,000  1,774,000 
Goodwill1,822,466 279,571 2,102,037 
Deferred tax liability(1,244,368)(242,093)(1,486,461)
Lease liability – operating lease(17,608)(603,799)(621,407)
Lease liability – finance lease (12,549)(12,549)
Accounts payable and accrued expenses$(1,030,957)$141,341 $(889,616)
Net assets acquired$6,554,560 $156,847 $6,711,407 
The consideration paid for GTMR was as follows:
Cash$470,233 
Due to Seller350,000 
Other consideration17,791 
Cash from factoring411,975 
Common stock5,304,561 
Accounts receivable note156,847 
Total consideration paid$6,711,407 
The GTMR acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the GTMR acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. To determine the fair values of tangible and intangible assets acquired and liabilities assumed for GTMR, we have engaged a third-party independent valuation specialist. On the date of the acquisition, the Company simultaneously factored $411,975 of the accounts receivable from GTMR to finance the acquisition.
The Company had received a preliminary valuation from its specialist and recorded the value of the assets and liabilities acquired based on historical inputs and data as of March 22, 2023. The allocation of the purchase price is based on the best information available. The Company paid $185,896 in transaction costs of GTMR, which was excluded from the purchase price.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. The measurement period for the GTMR acquisition is currently open and may remain open until March 22, 2024.
14

During the measurement period, the Company recorded several adjustments to goodwill as a result of GTMR's adoption of ASC 842, tax adjustments, and an update to the fair value of acquired furniture and equipment. These measurement period adjustments were subsequently identified as a result of the completion of third party accounting assistance.
The Company also recorded a measurement period adjustment to goodwill as a result of finalizing the transaction price. The Company entered into an accounts receivable note payable due to the sellers four months after the closing date of the transaction, subject to the adjustment of any net working capital deficiencies. This amount was determined to be $156,847.
LSG
On April 15, 2022, the Company entered into Amendment No. 1 to Business Acquisition Agreement (“LSG Business Acquisition Agreement”) with LSG to acquire the assets of LSG. The Company acquired LSG to expand our capabilities, increase market share, gain access to new contracts, and achieve cost efficiencies through synergies and economies of scale. This LSG Business Acquisition Agreement superseded the Business Acquisition Agreement originally entered into on February 11, 2022. Under the terms of the LSG Business Acquisition Agreement, the Company acquired assets and assumed liabilities of LSG for consideration as follows: (a) 625,000 shares of common stock (600,000 shares paid at closing (issued on May 4, 2022) and 25,000 shares to be held and due within three business days of payment of the second tranche of cash described below); and (b) cash payments as follows: $250,000 due at closing (“initial cash payment”); $250,000 plus or minus any applicable post-closing adjustments paid on the date that is six months after the closing date (“second tranche”) (paid in October 2022); and $280,000 that was due no later than 10 months after the closing date of the acquisition (paid in January 2023).
The following represents the assets and liabilities acquired in this acquisition:
Receivable from seller$413,609 
Due from employee/travel advance5,000 
Miscellaneous license2,394 
Customer relationships785,000 
Non-compete agreements10,000 
Backlog489,000 
Goodwill1,471,000 
Net assets acquired$3,176,003 
The consideration paid for the acquisition of LSG was as follows:
Common stock (600,000 shares issued May 4, 2022)
$2,280,000 
Holdback shares (25,000 shares due six months after the closing date)
95,000 
Cash250,000 
Due to seller (cash)551,003 
$3,176,003 
The LSG acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the LSG acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. To determine the fair values of tangible and intangible assets acquired and liabilities assumed for LSG, we engaged a third-party independent valuation specialist.
The Company had received a valuation from its specialist and recorded the value of the assets and liabilities acquired based on historical inputs and data as of April 15, 2022. The allocation of the purchase price is based on the best information available. The Company paid $44,752 in transaction costs of LSG, which was excluded from the purchase price.
15

During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. There have been no adjustments in the nine months ended September 30, 2023 and the measurement period is closed as of June 30, 2023.
For all acquisitions disclosed, there were no transaction costs that were not recognized as an expense.
The following table shows unaudited pro-forma results for the nine months ended September 30, 2023 and 2022, as if the acquisitions of LSG and GTMR had occurred on January 1, 2022. These unaudited pro forma results of operations are based on the historical financial statements of each of the companies.
For the nine months ended September 30, 2023
Revenues$36,521,201 
Net loss$(15,523,013)
Net loss per share - basic$(0.32)
For the nine months ended September 30, 2022
Revenues$41,519,606 
Net loss$(8,692,978)
Net loss per share - basic$(0.37)
Note 4: Fixed Assets
Fixed assets consisted of the following as of September 30, 2023 and December 31, 2022:
September 30, 2023December 31, 2022
Equipment$239,348 $141,732 
Furniture43,119 32,574 
Software62,671 - 
Leasehold improvements192,962 83,266 
Total fixed assets538,100 257,572 
Accumulated depreciation (184,284)(84,222)
Fixed assets, net$353,816 $173,350 
Depreciation expense for the three and nine months ended September 30, 2023 was $40,822 and $107,121 and depreciation expense for the three and nine months ended September 30, 2022 was $34,105 and $47,589, respectively.
16

Note 5: Intangible Assets and Goodwill
Intangible assets consisted of the following as of September 30, 2023 and December 31, 2022:
September 30,
2023
December 31,
2022
Customer relationships
4.515 years
$11,961,000 $9,535,000 
Tradename4.5 years783,000 266,000 
Trademark
10-15 years
533,864 533,864 
Backlog
2-5 years
3,210,000 1,436,000 
Non-compete agreement
3-5 years
684,000 684,000 
17,171,864 12,454,864 
Accumulated amortization(7,579,415)(5,820,697)
Intangible assets, net$9,592,449 $6,634,167 
The intangible assets with the exception of the trademarks were recorded as part of the acquisitions of Corvus, MFSI, Merrison, SSI, LSG, and GTMR. Amortization expense for the three and nine months ended September 30, 2023 was $634,043 and $1,758,718, respectively, and amortization expense for the three and nine months ended September 30, 2022 was $497,693 and $1,472,740, respectively, and 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 are as follows:
2023$621,585 
20242,074,686 
20251,453,000 
20261,242,863 
20271,034,302 
Thereafter3,166,013 
Total$9,592,449 
Impairment of Goodwill
The Company performs its annual testing of goodwill and intangible assets in the fourth quarter of each year. Between annual testing dates, the Company monitors factors such as its market capitalization, comparable company market multiples and macroeconomic conditions to identify conditions that could impact the Company’s assumptions utilized in the determination of the estimated fair values of the Company’s reporting units and intangible assets significantly enough to trigger an impairment.

The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgments and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. The Company has identified SSI, Corvus, and MFSI as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate revenue growth rates, gross profit, and comparable company market multiples.

As a result of a decrease in the Company’s market capitalization, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of September 30, 2023. The impairment test indicated a non-cash goodwill impairment charge related to all three reporting units of $6,919,094 which the Company recorded during the three months ended September 30, 2023. Future declines in estimated after tax cash flows or a decline in market capitalization could result in an additional indication of impairment in one or more of the Company’s reporting units.
17


The activity of goodwill (including impairment) for the nine months ended September 30, 2023, is as follows:
CorvusSSIMFSITotal
December 31, 2022$6,387,741 $8,461,150 $685,073 $15,533,964 
Goodwill acquired through acquisitions 2,102,037  2,102,037 
Impairment loss(4,429,000)(1,845,094)(645,000)(6,919,094)
September 30, 2023$1,958,741 $8,718,093 $40,073 $10,716,907 
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. The additions of goodwill in the respective periods relate to the acquisitions made by the Company. The Company has not disposed of any entities.
Note 6: Convertible Promissory Notes – Related Parties
The Company entered into convertible promissory notes – related parties as follows as of September 30, 2023 and December 31, 2022:
September 30,
2023
December 31,
2022
Convertible note payable with a trust related to one of the Company’s directors, convertible at $0.26 per share, at 5% interest (amended April 4, 2022, maturity date September 30, 2024)
3,209,617 3,209,617 
Less: Beneficial conversion feature discount(1,289,492)(2,210,187)
$1,920,125 $999,430 
Interest expense which includes amortization of discount for the three and nine months ended September 30, 2023 was $354,230 and $1,030,552, respectively, and $404,906 and $1,205,123 for the three and nine months ended September 30, 2022, respectively. There was no accrued interest on the note payable as of September 30, 2023. The amount of the BCF discount recorded was evaluated for characteristics of liability or equity and was determined to be equity under ASC 470 and ASC 480. The Company recognized this as additional paid in capital, and the discount is being amortized over the life of the note.
The entire convertible promissory note – related parties balance is reflected in current liabilities.
18

Note 7: Notes Payable
The Company entered into notes payable as follows as of September 30, 2023 and December 31, 2022:
September 30, 2023December 31,
2022
Note payable at 7% originally due November 2023, maturing September 30, 2024
$5,600,000 $5,600,000 
Note payable at 10% interest dated February 28, 2022 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note including the successful completion of an equity offering of at least $15,000,000 (a)
400,000 400,000 
Note payable at 12% interest dated April 6, 2023 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note (b)
400,000 - 
Convertible note payable, convertible at $1.60 per share, at 7%, maturing April 4, 2023 (c)
 890,000 
Convertible note payable, convertible at $1.20 per share, at 10%, maturing February 13, 2024 (c)
840,000  
Term note payable, at prime plus 3% interest, applied on a deferred basis (7.75% at September 30, 2023 and 6.25% at December 31, 2022) maturing August 11, 2024
1,330,835 2,324,236 
Total Notes Payable 8,570,835 9,214,236 
Less: Debt Discount(347,944)(840,398)
$8,222,891 $8,373,838 
(a)On February 28, 2022, the Company was obligated to issue 125,000 shares of common stock as further consideration for making this loan to the Company. The shares were issued in April 2022.
(b)On April 6, 2023, the Company entered into a promissory note with principal balance of $400,000 bearing interest at 12% per annum. This promissory note matures at the earlier of September 30, 2024 or at the acceleration of the obligations under the promissory note. Interest is paid in monthly installments and the total principal is due upon maturity.
(c)On February 13, 2023, the Company entered into a series of transactions with Crom Cortana Fund LLC (“Crom”), the primary purpose of which is related to the GTMR acquisition entered into on March 22, 2023. In connection therewith, the Company and Crom entered into an agreement to pay off the amount owed to Crom under the terms of the convertible promissory note in the original principal amount of $1,050,000 due April 4, 2023 ("Prior Crom Note"). In consideration of a $300,000 cash payment and 556,250 shares of common stock representing conversion of the remaining principal balance of the Company’s obligations under the Prior Crom Note are deemed satisfied reducing the balance to zero; we induced conversion of the debt, which effectively extinguished the debt. Simultaneously therewith, the parties entered into the Securities Purchase Agreement (the “2023 SPA”) pursuant to which Crom purchased (a) a convertible promissory note in the principal amount of $840,000 (the “2023 Note Payable”), which matures February 13, 2024 and bears interest at a per annum rate equal to 10% to be paid monthly, and (b) a warrant pursuant to which Crom has the right to purchase up to 700,000 shares of the Company’s common stock (the “2023 Warrant”) at an exercise price of $1.38 which expires 60 months from the date of issuance. The proceeds of the 2023 Note Payable were used primarily to fund the GTMR acquisition, as well as fund the aforementioned debt repayment.
Interest expense which includes amortization of discount for the three and nine months ended September 30, 2023 was $486,079 and $1,444,540, respectively, and $538,666 and $1,325,885 for the three and nine months ended September 30, 2022, respectively. Accrued interest on the notes payable as of September 30, 2023 was $0.
Each note discussed above will reach maturity during 2024. Future principal payments are scheduled to be $358,090 and $8,212,745 in 2023 and 2024, respectively.
19

Note 8: Note Payable – Related Party
The Company entered into a note payable with a related party in August 2021 with balances as of September 30, 2023 (unaudited) and December 31, 2022, as follows:
September 30,
2023
(unaudited)
December 31,
2022
Note payable at 5% due December 31, 2024, in connection with the acquisition of SSI
$400,000 $400,000 
Interest expense for the three and nine months ended September 30, 2023 was $5,092 and $15,004, respectively, and $5,047 and $14,959 for the three and nine months ended September 30, 2022, respectively. The entire note payable – related party balance is reflected in noncurrent liabilities.
Note 9: Revolving Credit Facility
On April 4, 2022, the Company secured a $950,000 revolving credit facility with Live Oak Bank (“Revolving Credit Facility”). The Revolving Credit Facility matures on March 28, 2029, and draws on it are charged interest at the rate of prime plus 2.75% per annum. Interest is payable monthly. On April 12, 2022, the Company was advanced $300,025 and on January 19, 2023, the Company was advanced an additional $325,000 under the Revolving Credit Facility. The Company currently has $625,025 outstanding on the Revolving Credit Facility. The Company incurred $42,701 in interest in the nine months ended September 30, 2023, none of which is accrued as of September 30, 2023.
Note 10: Due to Seller
In the acquisition of GTMR, the Company was obligated to pay $1,250,000 which included $350,000 held back to satisfy any net working capital deficiencies. This balance was originally scheduled to be paid six months following the closing date, however, payment has been postponed and the unpaid balance of $350,000 will accrue interest at an annual rate of 11.05% until it is paid in full. The $350,000 is recorded in current liabilities on the Company's Consolidated Balance Sheets as of September 30, 2023.
In the acquisition of GTMR, the Company also issued an Accounts Receivable Note to the sellers of GTMR whereby the Company is obligated to pay the sellers a principal amount of $206,587, adjusted for deficiencies in net working capital, for four months following the closing date of the acquisition. The Company determined a net working capital deficiency of $49,740 resulting in an amount due to the sellers of $156,847. This amount was paid in full during the three months ended September 30, 2023.
Note 11: Stockholders’ Equity
On October 13, 2022, the Company effected a 1-for-20 reverse split ("Reverse Stock Split") of our authorized and outstanding shares of common stock. As a result of the Reverse Stock Split, all authorized and outstanding common stock and per share amounts in this Quarterly Report on Form 10-Q, including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
Preferred Stock
The Company has 50,000,000 shares of preferred stock authorized. The Company has designated a Series A Preferred Stock, 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, 2023 and December 31, 2022, 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.
20

For the nine months ended September 30, 2023, the Company recognized $55,078 in Series A dividends, all of which has been paid as of September 30, 2023.
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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the Company has 770,000 shares of Series C Preferred Stock issued and outstanding, which is convertible into 481,250 shares of the Company's common stock.
For the nine months ended September 30, 2023, the Company recognized $35,150 in Series C dividends, all of which has been paid as of September 30, 2023.
Common Stock
The Company has 3,000,000,000 shares of common stock, par value $0.0001 authorized. The Company has 47,579,402 and 41,699,363 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. Shares issued during the nine months ended September 30, 2023 were as follows:
The Company issued 369,219 shares for services;
4,866,570 shares issued in the acquisition of GTMR;
556,250 shares issued to partially extinguish the Prior Crom Note;
63,000 shares issued to an existing shareholder in a private placement at $2.00 per share.
25,000 shares issued to Crom as commitment shares for the 2023 Note Payable.
During the nine months ended September 30, 2023, the Company issued 314,600 restricted shares of common stock, that vest ratably over a period of one year, to its Board of Directors for their service. Any unvested restricted shares of common stock are forfeited upon termination of the Board members position on the Board of Directors prior to the end of 2023. As of September 30, 2023, there were 251,554 total restricted shares of common stock that have vested and 63,046 that are expected to vest during the remainder of 2023.