Castellum, Inc.

Item 1A. Risk Factors

In the course of conducting our business operations, we are exposed to a variety of risks. Any of the risk factors we described in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 21, 2024 have affected or could materially adversely affect our business, prospects, operating results, and financial condition. Certain statements in Risk Factors are forward-looking statements. See Explanatory Note Regarding Forward-Looking Statements.

We have added the following risk factor to those disclosed in Part I, Item 1A., Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023:

Risks Related to our Business, Industry and Operations

Our self-insurance program may expose us to significant and unexpected costs and losses.

To help control our overall long-term costs associated with employee health benefits, we began maintaining our employee medical insurance benefits on a self-insured basis effective June 1, 2024. To limit our exposure, we have third party stop-loss insurance coverage which sets a limit on our liability for both individual and aggregate claim costs. We record a liability for our estimated cost of claims incurred but unpaid as of each balance sheets date. Our estimated liability is based on assumptions we believe to be reasonable under the current circumstances and will be adjusted as warranted based on changing circumstances. It is possible, however, that our actual liabilities may exceed our estimates of losses. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, which could cause us to record additional expenses. Our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance. If a successful claim is made against us and is not covered by our insurance or exceeds our policy limits, our business may be negatively and materially impacted. These fluctuations could have a material adverse effect on our business, operating results, and financial condition.

We have modified the following risk factors disclosed in Part I, Item 1A., Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023:

We rely upon a few, select key employees who are instrumental to our ability to conduct and grow our business. In the event any of those key employees would no longer be affiliated with the Company, and we did not replace them with equally capable replacements, it may have a material detrimental impact on our ability to successfully operate our business.

Our future success will depend in large part on our ability to attract, retain, and motivate high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors. The loss of qualified executives and key employees, or our inability to attract, retain, and motivate high-quality executives and employees required for the planned expansion of our business, may harm our operating results and impair our ability to grow.

Effective July 1, 2024, Glen R. Ives, the Company's former chief operating officer, was appointed as President and Chief Executive Officer ("CEO") after which, on September 1, 2024 Andrew Merriman was promoted to Chief Operating Officer ("COO"). We depend on the continued services of our key personnel, including our CEO; David T. Bell, our CFO; our COO; and Jay O. Wright, our Executive Vice-President of Strategy and General Counsel. Our work with each of these key personnel is subject to changes and/or termination, and our

44

inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.

We have deleted the following risk factor from those disclosed in Part I, Item 1A., Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023:

Inflation may cause the Fed to increase interest rates thereby increasing our interest expense.

Sustained inflation can cause the Federal Reserve Board and its Open Market Committee (Fed) to raise the target for the federal funds rate or keep it at a high level which normally translates into an increase in most banks prime rate. Because our notes with Live Oak Banking Company are both variable interest rate instruments tied to the prime rate, actions by the Fed to increase the federal funds rate or keep it high may increase our cost of debt and our interest expense thereby reducing our pre-tax income and net income. Our borrowing costs have recently increased and would increase with future Fed interest rate increases, although the impacts have been and are expected to continue to be immaterial. Our contracts with U.S. federal, state, and local government customers do not permit us to pass along our increased financing costs. The increases to our borrowing costs have not impacted (and are not expected to impact) our ability to make timely payments.