UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _______ to _______
Commission
File Number:
(Exact Name of Registrant as Specified in Charter)
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Copies to:
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New York, NY 10005
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
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
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has been subject to such filing requirements for the past 90 days.
Indicate
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of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
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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 | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
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.
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As
of February 11 2023, there were
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Aeluma, Inc. and Subsidiary
Consolidated Balance Sheets
| December 31, 2022 | June 30, | |||||||
| (unaudited) | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Deferred compensation, current portion | ||||||||
| Prepaids & other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment: | ||||||||
| Equipment | ||||||||
| Leasehold improvements | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total fixed assets | ||||||||
| Intangible assets | ||||||||
| Right of use asset - facility | ||||||||
| Deferred compensation, long term portion | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses & other current liabilities | ||||||||
| Lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Lease liability, long term portion | ||||||||
| Commitments and contingencies | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value $ | ||||||||
| Common stock, par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
1
Aeluma, Inc. and Subsidiary
Consolidated Statements of Operations (unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research & development | ||||||||||||||||
| General & administrative | ||||||||||||||||
| Facility | ||||||||||||||||
| Insurance | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Sub-lease rental income & other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Total other income | ||||||||||||||||
| Loss before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these financial statements
2
Aeluma, Inc. and Subsidiary
Consolidated Statement of Stockholders’ Equity
For the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)
| Common Stock | Additional paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, October 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock, net of offering costs of $ | ||||||||||||||||||||
| Issuance of shares for services | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31. 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, October 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, July 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock, net of offering costs of $ | ||||||||||||||||||||
| Issuance of shares for services | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, July 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of shares of common stock for cash, net of $ | ||||||||||||||||||||
| Other offering costs | - | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements
3
Aeluma, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2022 and 2021 (unaudited)
| Six Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Issuance of shares for services | ||||||||
| Amortization of deferred compensation | ||||||||
| Partial refund of facility lease deposit | ||||||||
| Stock based compensation expense | ||||||||
| Depreciation and amortization expense | ||||||||
| Change in prepaids & other current assets | ( | ) | ( | ) | ||||
| Change in accounts payable | ||||||||
| Change in accrued expenses & other current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Payment for leasehold improvements | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from Private Placement | ||||||||
| Payment of other offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
4
Aeluma, Inc. and Subsidiary
Notes
to Consolidated Financial Statements (unaudited)
Note 1 – The Company
Aeluma is headquartered in Goleta, California. The Company is engaged in the research and development of infrared (IR) optical sensors to disrupt the market for IR sensors, and using its proprietary technology aims to produce a much higher performance alternative to today’s low-cost sensors at much lower prices than would otherwise be possible. The focus of the Company will be the image sensor market. Initial efforts hope to penetrate the 3D imaging and sensing (mobile and consumer, defense and aerospace, industrial, medical, auto) and LiDAR (robotic vehicles, advanced driver assistance systems vehicles (ADAS), topography, wind, industrial) markets.
We were originally incorporated as Parc Investments, Inc. in the State of Delaware on August 21, 2020. Prior to the Merger (as defined below), we were a “shell company” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
On June 22, 2021, our board of directors and all of our pre-Merger stockholders approved a restated certificate of incorporation, which was effective upon its filing with the Secretary of State of the State of Delaware on June 22, 2021 and through which we changed our name to “Aeluma, Inc.” On June 22, 2021, our board of directors also adopted restated bylaws.
On June 22, 2021, Biond Photonics, Inc., a privately held California corporation (“Biond Photonics”) merged with and into our wholly-owned subsidiary, Aeluma Operating Co., a corporation formed in the State of Delaware on June 22, 2021 (“Acquisition Sub”). Pursuant to this transaction (the “Merger”), Acquisition Sub was the surviving corporation and remained our whollyowned subsidiary, and all the outstanding stock of Biond Photonics was converted into shares of our common stock.
As a result of the Merger, we acquired the business of Biond Photonics and continued the existing business operations of Biond Photonics as a public reporting company under the name Aeluma, Inc. In conjunction with the merger transaction, the company changed its year end to June 30. Biond Photonics was incorporated in February 2019.
Merger Agreement
On June 22, 2021, Parc Investments, Inc., Acquisition Sub and Biond Photonics entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, on June 22, 2021 (the “Closing Date”), Biond Photonics merged with and into Acquisition Sub, with Acquisition Sub continuing as the surviving corporation and our wholly-owned subsidiary.
As
a result of the Merger, we acquired the business of Biond Photonics, a California corporation, doing business as Aeluma. At the time
the certificates of merger reflecting the Merger were filed with the Secretaries of State of California and Delaware (the “Effective
Time”), each of Biond Photonics’ shares of capital stock issued and outstanding immediately prior to the closing of the Merger
was converted into the right to receive (a)
The issuance of shares of our common stock to Biond Photonics’ former security holders are collectively referred to as the “Share Conversion.”
The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions.
5
As a condition to the Merger, we entered into an indemnity agreement with our former officer and directors (the “Pre-Merger Indemnity Agreement”), pursuant to which we agreed to indemnify such former officer and directors for actions taken by them in their official capacities relating to the consideration, approval and consummation of the Merger and certain related transactions.
The Merger was treated as a recapitalization and reverse acquisition for financial reporting purposes. Biond Photonics is considered the acquirer for accounting purposes, and our historical financial statements before the Merger will be replaced with the historical financial statements of Biond Photonics before the Merger in future filings with the SEC. The Merger is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.
Change of Fiscal Year
On June 30, 2021, we changed our fiscal year from the period beginning on January 1 and ending on December 31 to the period beginning on July 1 and ending on June 30 of each year.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The consolidated financial statements as of December 31, 2022 and 2021, are unaudited; however, in the opinion of management such interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2022. The results of operations for the period presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity.
Going Concern
The
Company incurred a net loss of $
These conditions may raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
6
Basic Net Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. The number of shares prior to the merger have been restated to consider the conversion into the shares of the legal acquirer.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Fair Value of Financial Instruments
As defined in Financial Accounting Standards Board (“FASB”) ASC Topic No. 820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses the market or income approach. Based on this approach, the Company utilizes certain assumptions about the risk inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and the reliability of the information used to determine fair values. As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.
Level 1 – Unadjusted quoted prices in active, accessible market for identical assets or liabilities
Level 2 – Other inputs that are directly or indirectly observable in the marketplace
Level 3 – Unobservable inputs which are supported by little or no market activity
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying values of the Company’s cash, accounts payable, and accrued expenses approximate their fair value due to the relatively short maturity of these items.
Concentration of Risk
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Property and Equipment
Property,
equipment and leasehold improvements are reported at historical cost, net of accumulated depreciation and amortization. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. Equipment is depreciated over
7
Intangible Assets
Intangible
assets are associated with the Aeluma.com domain name and are amortized on a straight-line basis over
Cash and Cash Equivalents
The Company considers cash in banks, deposits in transit, and highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. The Company’s accounts are insured by the FDIC but at times may exceed federally insured limits.
Income Taxes
The Company is expected to have net operating loss carryforwards that it can use to offset a certain amount of taxable income in the future. The Company is currently analyzing the amount of loss carryforwards that will be available to reduce future taxable income. The resulting deferred tax assets will be offset by a valuation allowance due to the uncertainty of its realization. The primary difference between income tax expense attributable to continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income before income taxes relates to the recognition of a valuation allowance for deferred income tax assets.
The
Company has adopted FASB ASC 740-10, “Income Taxes” which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements and prescribes a recognition threshold of more likely than not as a measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making
this assessment, a Company must determine whether it is more likely than not that a tax position will be sustained upon examination,
based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. The
Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and
penalties totaled $
The Company will file tax returns in the U.S. federal jurisdiction and the state of California. The Company’s federal and state return form are subject to review by the taxing authorities. The Company is not currently under examination by any taxing authority, nor has it been notified of an impending examination.
Stock-Based Compensation
The Company accounts for stock-based compensation arrangements in accordance with guidance issued by the FASB, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values.
The Company estimates the fair value of stock-based compensation awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s statements of operations. The Company estimates the fair value of stock-based compensation awards using the Black-Scholes model. This model requires the Company to estimate the expected volatility and value of its common stock and the expected term of the stock options, all of which are highly complex and subjective variables. For employees and directors, the expected life was calculated based on the simplified method as described by the SEC Staff Accounting Bulletin No. 110, Share-Based Payment. For other service providers, the expected life was calculated using the contractual term of the award. The Company’s estimate of expected volatility was based on the volatility of peers. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the expected term of the options. We account for forfeitures upon occurrence.
8
Note 3 – Stockholders’ Equity
Authorized Shares
The
Company’s Articles of Incorporation authorize the issuance of two classes of shares of stock. The total number of shares which
this corporation is authorized to issue is
Common Stock Offering
Immediately
following the Merger, we sold
The
aggregate gross proceeds from the Offering during the six months ended December 31, 2021 were $
In
December 2022, we sold an aggregate of
The Offering was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated by the SEC thereunder. The common stock in the Offering was sold to “accredited investors,” as defined in Regulation D, and was conducted on a “reasonable best efforts” basis.
Issued and Vested Shares to Officers
On October 27th, 2020,
Registration Rights Agreement
The
Company entered into a registration rights agreement that provides for certain liquidated damages upon the occurrence of a “Registration
Event,” which is defined as the occurrence of any of the following events: (a) the Company fails to file with the Commission the
Registration Statement on or before the Registration Filing Date; (b) the Registration Statement is not declared effective by the Commission
on or before the Registration Effectiveness Date; (c) after the SEC Effective Date, the Registration Statement ceases for any reason
to remain effective or the Holders of Registrable Securities covered thereby are otherwise not permitted to utilize the prospectus therein
to resell the Registrable Securities covered thereby, except for Blackout Periods permitted herein; or (d) following the listing or inclusion
for quotation on an Approved Market, the Registrable Securities, if issued and outstanding, are not listed or included for quotation
on an Approved Market, or trading of the Common Stock is suspended or halted on the Approved Market, which at the time constitutes the
principal markets for the Common Stock, for more than three (3) full, consecutive Trading Days (other than as a result of (A) actions
or inactions of parties other than the Company or its affiliates or of the Approved Market not reasonably in the control of the Company,
or (B) suspension or halt of substantially all trading in equity securities (including the Common Stock) on the Approved Market).
9
Note 4 – Stock-Based Compensation
Restricted Stock Awards
During
six months ended June 30, 2021, the Company sold
In
March 2022, the Company signed an agreement to issue
The following is a schedule summarizing restricted stock awards for the periods indicated:
| December 31, 2022 | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value per Price | Number of Shares | Weighted Average Grant Date Fair Value per Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Issued | $ | $ | ||||||||||||||
| Vested | ( | ) | $ | ( | ) | $ | ||||||||||
| Forfeited | ||||||||||||||||
| Ending balance | $ | $ | ||||||||||||||
| December 31, 2021 | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value per Price | Number of Shares | Weighted Average Grant Date Fair Value per Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Issued | ||||||||||||||||
| Vested | ( | ) | $ | ( | ) | $ | ||||||||||
| Forfeited | ||||||||||||||||
| Ending balance | $ | $ | ||||||||||||||
Stock Options
In
July of 2021,
In December of 2021, the Company issued options to purchase common stock to two directors in increments of 125,000 each. The options have an exercise price of $2.00, expire in 10 years, vest 12,500 options per quarter in the first year and 9,375 per quarter for the following two years. In February of 2022, the company granted 16,750 in options to one director and 15,500 to another director at a price of $2.00 per share, for committee service. These options are subject to quarterly vesting over four quarters and expire in 10 years.
10
On February 1, 2022, the Company entered into a consulting advisory agreement which grants 2,500 options with every patent filing. On February 4, 2022, the advisor was granted 2,500 options with an exercise price of $2.00 and an expiration date of ten years.
In April of 2022, the Company issued 513,000 options to purchase common stock to employees. The options have an exercise price of $2.00 and expire in 10 years with 25% vesting after one year and the remainder scheduled to vest each quarter for three years, subject to the continued status as an employee to the Company through each vesting date.
In December of 2022, the Company issued 161,000 options to purchase common stock to employees. The options have an exercise price of $2.00 or $2.10 and expire in 10 years with various vesting schedules from six months to 48 months, subject to the continued status as an employee to the Company through each vesting date.
The Company estimates the fair value of each option award using the Black-Scholes option-pricing model. The Company used the following assumptions for to estimate the fair value of stock options for directors issued for the six months ended December 31, 2022 and 2021:
| Six Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Weighted-average fair value | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Expected term | ||||||||
| Dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
For
the three months ended December 31, 2022, stock-based compensation expenses for options granted were $
11
The following is a schedule summarizing employee and non-employee stock option activity for the period presented:
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value (1) | ||||||||||
| Outstanding at October 1, 2022 | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | ||||||||||||
| Outstanding at December 31, 2022 | $ | $ | ||||||||||
| Exercisable at December 31, 2022 | $ | $ | ||||||||||
| (1) | Represents the excess of the fair value of $ |
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding at October 1, 2021 | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | ||||||||||||
| Outstanding at December 31, 2021 | $ | $ | ||||||||||
| Exercisable at December 31, 2021 | $ | $ | ||||||||||
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value (1) | ||||||||||
| Outstanding at July 1, 2022 | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | ( | ) | $ | |||||||||
| Outstanding at December 31, 2022 | $ | $ | ||||||||||
| Exercisable at December 31, 2022 | $ | $ | ||||||||||
| (1) | Represents the excess of the fair value of $ |
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Outstanding at July 1, 2021 | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | $ | |||||||||||
| Outstanding at December 31, 2021 | $ | $ | ||||||||||
| Exercisable at December 31, 2021 | $ | $ | ||||||||||
The aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock for each of the respective periods.
12
Note 5 – Facility Operating Lease
The following table presents maturities of operating lease liabilities on an undiscounted basis as of December 31, 2022:
| Fiscal 2023 | $ | |||
| Fiscal 2024 | ||||
| Fiscal 2025 | ||||
| Fiscal 2026 | ||||
| Total | ||||
| Less imputed interest | ( | ) | ||
| Total operating lease liability | ||||
| Less: current portion | ||||
| Lease liability, long term | $ |
The
lease term and the discount rate for the lease at December 31, 2022 is
Beginning
April 1, 2021, the Company began subleasing a portion of their facility.
Note 6 – Warrants to Purchase Common Stock
In connection with the Offering in June 2021, the Company issued 360,000 warrants to purchase common stock to the Placement Agents. The warrants carry a term of 5 years and an exercise price of $2.00.
In connection with the Offering in December 2022 and January 2023, the Company issued warrants of 29,067 and 4,933, respectively, to purchase common stock to the Placement Agents. The warrants carry a term of 5 years and an exercise price of $3.00.
Note 7 – Subsequent Events
On
January 10, 2023, we sold
13
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
The following information should be read in conjunction with Aeluma, Inc. and its subsidiaries (“we”, “us”, “our”, or the “Company”) unaudited financial statements and the notes thereto contained elsewhere in this report. Information in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q that does not consist of historical facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as “may,” “will,” “should,” “believes,” “expects,” “intends,” “plans,” “projects,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume,” and “assume” constitute forward-looking statements, and as such, are not a guarantee of future performance.
Forward-looking statements are subject to risks and uncertainties, certain of which are beyond our control. Actual results could differ materially from those anticipated as a result of the factors described in the “Risk Factors” and detailed in our other Securities and Exchange Commission (“SEC”) filings. Risks and uncertainties can include, among others, international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to obtain sufficient financing to continue and expand business operations; the ability to develop technology and products; changes in technology and the development of technology and intellectual property by competitors; the ability to protect technology and develop intellectual property; and other factors referenced in this and previous filings. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results.
Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report or incorporated by reference might not transpire. You should review the disclosure under the heading “Risk Factors” in other filings we make with the SEC for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
The Company disclaims any obligation to update the forward-looking statements in this report.
Overview
On June 22, 2021, the Company, Acquisition Sub and Biond Photonics entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, on June 22, 2021 (the “Closing Date”), Biond Photonics merged with and into Acquisition Sub, with Acquisition Sub continuing as the surviving corporation and our wholly-owned subsidiary.
As a result of the Merger, we acquired the business of Biond Photonics, a California corporation, doing business as Aeluma. At the time the certificates of merger reflecting the Merger were filed with the Secretaries of State of California and Delaware (the “Effective Time”), each of Biond Photonics’ shares of capital stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive (a) 1.299135853 shares of our common stock (the “Common Share Conversion Ratio”) , with the maximum number of shares of our common stock issuable to the former holders of Biond Photonics’ capital stock equal to 4,100,002 after adjustments due to rounding for fractional shares. Immediately prior to the Effective Time, an aggregate of 2,500,000 shares of our common stock owned by our stockholders prior to the Merger were forfeited and cancelled (the “Stock Forfeiture”).
The issuance of shares of our common stock to Biond Photonics’ former security holders are collectively referred to as the “Share Conversion.”
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The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions.
As a condition to the Merger, we entered into an indemnity agreement with our former officer and directors (the “Pre-Merger Indemnity Agreement”), pursuant to which we agreed to indemnify such former officer and directors for actions taken by them in their official capacities relating to the consideration, approval and consummation of the Merger and certain related transactions.
The Merger was treated as a recapitalization and reverse acquisition for us for financial reporting purposes. Biond Photonics is considered the acquirer for accounting purposes, and our historical financial statements before the Merger were replaced with the historical financial statements of Biond Photonics before the Merger in future filings with the SEC. The Merger is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.
The issuance of securities pursuant to the Share Conversion was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Rule 506 of Regulation D promulgated by the SEC thereunder. These securities may not be offered or sold in the U.S. absent registration or an applicable exemption from the registration requirement and are subject to further contractual restrictions on transfer.
Prior to the Merger, the sole business purpose of the Company was to seek the acquisition of or merger with, an existing company.
As a result of the consummation of the Merger, on June 22, 2021, Biond Photonics, Inc. became our wholly-owned subsidiary and the business of Biond Photonics, Inc. became the business of the Company going forward. Accordingly, at the closing, the Company ceased to be a shell company.
We develop novel optoelectronic devices for sensing and communications applications. Aeluma has pioneered a technique to manufacture devices using high performance compound semiconductor materials on large diameter silicon wafers that are commonly used to manufacture mass market microelectronics. This enables cost effective manufacturing of high performance photodetector array circuits for imaging applications in mobile devices. These devices may be used as image sensors that generate an image by detecting light, in a manner similar to a digital camera taking a picture. Our devices may incorporate additional functionality and enhanced performance to enable 3D image capture when integrated into various system architectures. This technology has the potential to greatly enhance the performance and capability of camera image sensors, LiDAR, augmented reality, facial recognition, and other applications. Aeluma has acquired a key piece of manufacturing equipment and has headquarters in Goleta, CA with a manufacturing cleanroom to house this equipment.
Private Placement Offerings
2021 Offering
Immediately following the Merger, we sold 3,482,500 shares of our common stock pursuant to an initial closing of a private placement offering at a purchase price of $2.00 per share (the “Offering Price”). We held a second closing on June 28, 2021 for an additional 402,500 shares of our common stock and a third and final close on July 1, 2021 for an additional 115,000. Accordingly, we sold a total of 4,000,000 shares of our common stock. The private placement offering is referred to herein as the “Offering.”
The aggregate gross proceeds from the three closings of the Offering were $8,000,000 (before deducting placement agent fees and expenses of the Offering of $1,082,575).
The three closings of the Offering were exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated by the SEC thereunder. The common stock in the Offering was sold to “accredited investors,” as defined in Regulation D, and was conducted on a “reasonable best efforts” basis.
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In connection with the Offering and subject to the closing of the Offering, we agreed to pay the placement agent, GP Nurmenkari Inc. (the “Placement Agent”), a U.S. registered broker-dealer, a cash placement fee of 10% of the gross proceeds raised from investors in the Offering (other than the first $630,000 of common stock sold to pre-Merger Biond Photonics shareholders and their friends and family, for which the Placement Agent received a 3% cash fee, and $170,000 of common stock sold to pre-Merger Biond Photonics friends and family for which the Placement Agent received no cash fee) and to issue to it 50,000 shares of our common stock and warrants to purchase a number of shares of our common stock equal to 10% of the number of shares of common stock sold in the Offering (other than the first $800,000 of common stock sold to pre-Merger Biond Photonics shareholders and their friends and family), with a term of five years and an exercise price of $2.00 per share (the “Placement Agent Warrants”). We also agreed to pay certain expenses of the Placement Agent in connection with the Offering.
As a result of the foregoing, we paid the Placement Agent an aggregate commission of $748,900 and issued to it 50,000 shares of our common stock and Placement Agent Warrants to purchase 360,000 shares of our common stock in connection with the two closings of the Offering. We have also reimbursed the Placement Agent for approximately $265,000 of legal and other expenses incurred in connection with the Offering.
A note payable to an officer of Parc Investments, Inc. in the amount of $50,000 was repaid directly from the proceeds from the Offering.
Subject to certain customary exceptions, we agreed to indemnify the Placement Agent to the fullest extent permitted by law against certain liabilities that may be incurred in connection with the Offering, including certain civil liabilities under the Securities Act, and, where such indemnification is not available, to contribute to the payments the Placement Agent and their sub-agents may be required to make in respect of such liabilities.
2022 Offering
On December 22, 2022, we entered into subscription agreements (the “2022 Subscription Agreement”) with 21 accredited investors (“Investors”), pursuant to which the Investors purchased an aggregate of 517,000 shares of our common stock, par value $0.0001 per share at a per share purchase price of $3.00, for aggregate gross proceeds of $1,551,000 before deducting placement agent fees and expenses of the Offering of $124,385 (the “2022 Offering”). We held a second closing of the 2022 Offering on January 10, 2023, pursuant to which we issued 214,667 shares of common stock for aggregate gross proceeds of $644,000.
In connection with the 2022 Subscription Agreement, the Company also entered into a Registration Rights Agreement with the Investors, pursuant to which the Company agreed to register all of the shares of common stock issued in the 2022 Offering, including the shares of common stock underlying the warrant issued to the placement agent.
Pursuant to the 2022 Offering, the Company paid a cash placement agent fee of $134,600 and issued placement agent warrants (“2022 Placement Agent Warrants”) to purchase up to 34,000 shares of common stock at an exercise price of $3.00 per share. We also agreed to pay certain expenses of the placement agent in connection with the 2022 Offering.
Plan of Operations
We have been developing our materials and characterization capabilities at our headquarters in Goleta, CA, in connection with the further development of our business and the implementation of our plan of operations. We have installed some key manufacturing equipment at our headquarters and will continue to develop relationships with manufacturing partners to carry out certain steps of our manufacturing processes externally. We have gained access to a rapid prototyping facility and are leveraging this access to fabricate early-stage prototypes. In the future, we intend to implement appropriate quality and manufacturing controls. Some equipment was procured previously, and other equipment is being procured through purchase orders with equipment vendors. The COVID-19 pandemic has adversely disrupted, and may further disrupt, the operations at certain of our suppliers and other third-party providers. Lead times for certain materials and parts ordered have been longer than anticipated and on-site support for equipment maintenance has been challenging to schedule. Spare parts have been procured to minimize disruption to our development. The rapid prototyping facility that we access for development was closed for a brief period of time at the start of the COVID-19 pandemic. It has been open for unlimited access since Aeluma has first gained access.
The primary sources of funding for equipment procurement and installation are the seed funding raised prior to becoming a public company and the funding raised from our financing during June/July of 2021. We have also leveraged funds to continue strengthening our intellectual property including patent applications, trademarks, and development of trade secrets and manufacturing process recipes. We will continue to develop our manufacturing and product development strategy by further engaging customers and strategic partners.
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Limited Operating History
We cannot guarantee that the proceeds from the Offering will be sufficient to carry out all of our business plans. Our business is subject to risks inherent in growing an enterprise, including limited capital resources, risks inherent in the research and development process and possible rejection of our products in development.
If financing is not available on satisfactory terms, we may be unable to carry out all of our operations. Equity financing will result in dilution to existing stockholders.
Change of Fiscal Year
On June 30, 2021, we changed our fiscal year from the period beginning on January 1 and ending on December 31 to the period beginning on July 1 and ending on June 30 of each year.
Results of Operations
Six months ended December 31, 2022 compared to the six months ended December 31, 2021
Our results of operations for the six-month period ended December 31, 2022, as compared to the six-month period ended December 31, 2021, were as follows (some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation):
| Six Months Ended December 31, | ||||||||||||
| 2022 | 2021 | Change ’22 vs. ’21 | ||||||||||
| Revenue | $ | - | $ | - | $ | - | ||||||
| Operating expenses | 2,721,581 | 1,399,590 | 1,321,991 | |||||||||
| Other income | 110,991 | 173,245 | (62,254 | ) | ||||||||
| Loss before income tax expense | (2,610,590 | ) | (1,226,345 | ) | (1,384,245 | ) | ||||||
| Income tax expense | - | - | - | |||||||||
| Net loss | $ | (2,610,590 | ) | $ | (1,226,345 | ) | $ | (1,384,245 | ) | |||
Net revenue: We are pre-revenue and, accordingly recorded no revenues for either the six months ended December 31, 2022 or 2021.
Operating expenses: During the six months ended December 31, 2022 and 2021, we incurred $2,721,581 and $1,399,590, respectively, of operating expenses. This increase was due to the start-up of operations and stock compensation expenses related to advisor and consulting agreements.
Sub-lease rental income and other income: During the six months ended December 31, 2022 and 2021, the Company recorded net rental and other income of $110,991 and $173,245, respectively. The decrease was due to the reduced rental space to a sub-lease to our tenant.
Income tax expense: The Company did not record income tax expense for either of the six months ended December 31, 2022 and 2021, as such amounts are insignificant.
Net Loss: Net loss increased to $2,610,590 for the six months ended December 31,2022, as compared to $1,226,345 for the same period of 2021 for start-up of operations and stock compensation expenses related to advisor and consulting agreements.
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Capital Resources and Liquidity
Our financial statements have been presented on the basis that are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As presented in the financial statements, we incurred a net loss of $2,610,590 for the six months ended December 31, 2022 and losses are expected to continue in the near term. The accumulated deficit was $6,293,074. We have been funding our operations through private loans and the sale of common stock in private placement transactions.
Management anticipates that significant additional expenditures will be necessary to develop and expand our business before significant positive operating cash flows can be achieved. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At December 31, 2022, we had $3,062,316 of cash on hand. These funds are insufficient to complete our business plan and, as a consequence, we will need to seek additional funds, primarily through the issuance of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.
Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) controlling overhead and expenses; and (c) executing material sales or research contracts. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. As of the date of this Report, we have not entered into any formal agreements regarding the above.
In the event the Company is unable to continue as a going concern, the Company may elect or be required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.
We had net working capital of $3,334,489 and $4,058,409 at December 31, 2022 and June 30, 2022, respectively. Current assets decreased $667,688 to $3,741,004 at December 31, 2022 from $4,430,848 at June 30, 2022, primarily due to funding operating expenses of $574,580 for the six months ended December 31, 2022. Current liabilities increased $60,232 to $432,671 at December 31, 2022 from $372,439 at June 30, 2022, due primarily to a $57,283 increase in spending activities in accounts payable.
The following table shows a summary of our cash flows for the periods presented:
| Six Months Ended December 31, | ||||||||||||
| 2022 | 2021 | Change ’22 vs. ’21 | ||||||||||
| Net cash (used in) provided by | ||||||||||||
| Operating activities | $ | (2,001,195 | ) | $ | (895,184 | ) | $ | (1,106,011 | ) | |||
| Investing activities | (103,826 | ) | (570,248 | ) | 466,422 | |||||||
| Financing activities | 1,426,615 | 161,930 | 1,264,685 | |||||||||
| Decrease in cash | $ | (678,406 | ) | $ | (1,303,502 | ) | $ | 625,096 | ||||
Net cash used in our operating activities were $2,001,195 and $895,184 for the six months ended December 31, 2022 and 2021, respectively. The increase of $1,106,011 was due mainly to a $1,321,991 increase in net loss.
Net cash used in our investing activities was $103,826 and $570,248 for the six months ended December 31, 2022 and 2021, respectively. Investing activity for the six months ended December 31, 2021was related to the setup of our new facility.
Our financing activities generated a cash inflow of $1,426,615 and $161,930 for the six months ended December 31, 2022 and 2021, respectively, due to the offering described above.
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Critical Accounting Policies
The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.
A summary of our other critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended June 30, 2022. During the six months ended December 31,2022, there were no significant changes in our critical accounting policies.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the six-month period ended December 31, 2022, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon those evaluations, management concluded that our disclosure controls and procedures were not effective as of December 31, 2022 to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Going forward from this filing, the Company intends to work on maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
During the quarter covered by this Report, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
From time to time, the Company may become a party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. To the best of our knowledge, the Company is not currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations; however, the Company may become involved in material legal proceedings in the future.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the period covered by this report, the Company has not issued unregistered securities to any person, except as described below. None of these transactions involved any underwriters, underwriting discounts or commissions, except as specified below, or any public offering, and, unless otherwise indicated below, the Registrant believes that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder, and/or Regulation S promulgated thereunder regarding offshore offers and sales. All recipients had adequate access, though their relationships with the Registrant, to information about the Registrant.
On November 7, 2022, the Company issued 150,000 shares of common stock to a consultant for providing consulting services to the Company.
On December 22, 2022, we issued an aggregate of 517,000 shares of our common stock to 21 accredited investors, for aggregate gross proceeds of $1,551,000 (the “2022 Private Offering”).
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
| a) | None. |
| b) | None. |
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ITEM 6. EXHIBITS
EXHIBIT INDEX
| + | Indicates a management contract or any compensatory plan, contract or arrangement. |
| ** | Incorporated by reference to the Current Report on Form 8-K filed on June 28, 2021. |
| *** | Incorporated by reference to the Current Report on Form 8-K filed on July 1, 2021. |
| **** | Incorporated by reference to the Registration Statement on Form S-1/A filed on October 15, 2021. |
| (1) | Incorporated by reference to the Current Report on Form 8-K filed on December 23, 2022. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized.
| Aeluma, Inc. | ||
| (Registrant) | ||
| Date: February 13, 2023 | By: | /s/ Jonathan Klamkin |
| Jonathan Klamkin | ||
| President, Chief Executive Officer and Principal Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
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