Castellum, Inc. Announces Closing of $4 Million Revolver with Live Oak Bank

Rhea-AI Summary

Castellum, Inc. (CTM) announces the closing of a $4 million financing with Live Oak Bank, securing a revolving credit facility. The company pays down debts, eliminates potential share dilution, and strengthens its financial position.

Positive

• Castellum secures a $4 million revolving credit facility with Live Oak Bank.
• The company pays down debts owed to various creditors, reducing financial liabilities.
• Over 12 million potential shares of dilution are eliminated by restructuring the BCR Trust note.
• Castellum's debt restructuring and refinancing improve its financial health and provide additional borrowing capacity.
• The company's debt/cash operating profit ratio improves, positioning it for a brighter future.

Negative

• None.

Financial Analyst

The restructuring of Castellum's debt and the securing of a new $4 million revolving credit facility is a significant financial maneuver that could have a positive impact on the company's liquidity and capital structure. The repayment and reorganization of debt obligations, particularly the conversion of the BCR Trust note into a non-convertible structure, effectively removes the possibility of share dilution and could be viewed favorably by existing shareholders. The extended maturity dates for debts owed to various creditors, including Robert Eisiminger and the BCR Trust, provide Castellum with a more manageable repayment schedule, potentially improving its debt servicing capability.

Furthermore, the elimination of the 'debt wall' in 2024 is crucial as it reduces the risk of default or financial distress that could have arisen from the inability to meet short-term obligations. The company's statement about improving its debt-to-cash operating profit ratio suggests a strategic focus on enhancing financial stability and efficiency. This could lead to a more favorable perception among investors and analysts, potentially impacting the company's stock valuation positively.

Market Research Analyst

In the context of the cybersecurity and software services industry, where companies often require significant capital for research, development and expansion, Castellum's financial restructuring could provide it with a competitive advantage. The additional borrowing capacity with the new revolving credit facility might enable the company to invest in growth opportunities or to better manage cash flow fluctuations, which is particularly important in an industry characterized by rapid technological changes and intense competition.

By addressing its short-term debt obligations and restructuring its finances, Castellum may also become a more attractive partner for government contracts. The federal government, which is a major client in this sector, typically favors financially stable companies for long-term projects. This financial restructuring could therefore enhance Castellum's business prospects and market position.

Legal Expert

The legal implications of the debt restructuring, including the amendment of the terms for the BCR Trust note to eliminate the conversion to common stock, are significant. This change not only prevents dilution of current shareholders' equity but also simplifies the company's capital structure, which can be a positive signal to the market. From a legal standpoint, the company's forthcoming filing of a Form 8-K with the Securities and Exchange Commission will provide transparency and ensure regulatory compliance, offering stakeholders a detailed view of the transaction's terms and the company's amended financial obligations.

It is worth noting that in such financial restructurings, the terms of agreements and compliance with financial covenants are critical to avoid potential future disputes or litigation. The clear communication of these changes to shareholders and creditors, along with adherence to SEC reporting requirements, is crucial for maintaining corporate governance standards and investor confidence.

BETHESDA, Md., Feb. 23, 2024 (GLOBE NEWSWIRE) -- Castellum, Inc. (NYSE-American: CTM), a cybersecurity and software services company focused on the federal government, announces that it has closed its previously announced $4 million financing with Live Oak Bank.

Castellum, Inc. ("Castellum") now has a $4 million revolving credit facility secured by cash, receivables, and the Company's other assets. As part of the transaction, Castellum rolled over approximately $625,000 drawn down on its existing revolver with Live Oak Bank, paid down $400,000 owed to Robert Eisiminger, and paid down approximately $809,000 owed to the Buckhout Charitable Remainder Trust (the "BCR Trust"). The remaining $6.0 million balance owed to Mr. Eisiminger is now due in Q3 2026. The balance of $2.4 million owed to the BCR Trust will be fully amortized over 24 months starting September 2024, with the final payment due in August 2026. $400,000 owed to another creditor in 2024 is now due in July 2025, at which point it will amortize over 8 months. Importantly, the amount owed to the BCR Trust is no longer convertible into Castellum's common stock, eliminating over 12 million shares of potential dilution from the Company's cap table. Outside the amortization of the remaining six payments on the term loan owed to Live Oak Bank, and the initial four (4) amortization payments to the BCR Trust in September – December of this year, the Company now has no debt maturities remaining in 2024.

"This debt restructuring and refinancing is a milestone event for Castellum and our shareholders. We have eliminated the debt wall, which was facing us in 2024, significantly reduced our diluted share count by restructuring the BCR Trust note into a non-convertible structure, and provided additional borrowing capacity with our new revolver," said Mark Fuller, President and Chief Executive Officer of Castellum. "As we continue to amortize our existing term loan with Live Oak Bank, our debt/cash operating profit ratio keeps improving, and we position ourselves for a much brighter future. Together with our recent equity take down from our universal shelf registration and cash from operations, this financing puts Castellum on a much stronger financial footing."

The Company expects to file a Form 8-K later today with the Securities and Exchange Commission which provides more information about the Live Oak Bank financing and restructuring of the notes payable to Robert Eisiminger, the BCR Trust, and the additional creditor referred to above.

About Castellum, Inc.

Castellum, Inc. (NYSE-American: CTM) is a defense-oriented technology company executing strategic acquisitions in the cybersecurity, MBSE, and information warfare areas - http://castellumus.com/.

Cautionary Statement Concerning Forward-Looking Statements:  

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company's expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as "estimate," "project," "believe," "anticipate," "shooting to," "intend," "plan," "foresee," "likely," "will," "would," "appears," "goal," "target" or similar words or phrases. Forward-looking statements include, but are not limited to, statements regarding the Company's expectations for revenue growth and new customer opportunities, improvements to cost structure, and profitability. These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of the Company's control, that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including, among others: the Company's ability to compete against new and existing competitors; its ability to effectively integrate and grow its acquired companies; its ability to identify additional acquisition targets and close additional acquisitions; the impact on the Company's revenue due to a delay in the U.S. Congress approving a federal budget; and the Company's ability to maintain the listing of its common stock on the NYSE American LLC. For a more detailed description of these and other risk factors, please refer to the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission ("SEC") which can be viewed at www.sec.gov. All forward-looking statements are inherently uncertain, based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. The Company expressly disclaims any intent or obligation to update any of the forward-looking statements made in this release or in any of its SEC filings except as may be otherwise stated by the Company.

Contact:

Mark Fuller, President and CEO
Contact: Info@castellumus.com
Phone: (301) 961-4895

FAQ

What financing deal did Castellum, Inc. (CTM) close recently?

Castellum closed a $4 million financing deal with Live Oak Bank, securing a revolving credit facility.

How much debt did Castellum pay down as part of the transaction?

Castellum paid down approximately $625,000 on its existing revolver with Live Oak Bank, $400,000 owed to Robert Eisiminger, and approximately $809,000 owed to the Buckhout Charitable Remainder Trust.

What is the remaining balance owed to Mr. Eisiminger and the BCR Trust?

The remaining $6.0 million balance owed to Mr. Eisiminger is due in Q3 2026, while the $2.4 million owed to the BCR Trust will be fully amortized over 24 months starting September 2024.

How does the restructuring affect potential share dilution for Castellum?

The restructuring eliminates over 12 million shares of potential dilution from the Company's cap table.

What additional benefits does the debt restructuring provide for Castellum?

The debt restructuring improves the company's debt/cash operating profit ratio, strengthens its financial position, and provides additional borrowing capacity.