UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from _______ to _______
Commission
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Securities registered pursuant to Section 12(b) of the Act:
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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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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
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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.
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| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
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an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
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As
of November 6, 2024, there were
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Aeluma, Inc. and Subsidiary
Consolidated Balance Sheets
| September 30, 2024 (unaudited) | June 30, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deferred compensation, current portion | ||||||||
| Prepaids and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment: | ||||||||
| Equipment | ||||||||
| Leasehold improvements | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Intangible assets | ||||||||
| Right of use asset - facility | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Lease liability, current portion | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Lease liability, long term portion | ||||||||
| Convertible notes (Note 3) | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| 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 September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue (Note 2) | $ | $ | ||||||
| Operating expenses: | ||||||||
| Cost of revenue | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Amortization of discount on convertible notes | ( | ) | ||||||
| Changes in fair value of derivative liabilities | ||||||||
| Total other income (expense) | ||||||||
| Loss before income tax expense | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these financial statements
2
Aeluma, Inc. and Subsidiary
Consolidated Statement of Stockholders’ Equity (unaudited)
Three Months Ended September 30, 2024 and 2023
| Common Stock | Additional paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, July 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30. 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements
3
Aeluma, Inc. and Subsidiary
Consolidated Statements of Cash Flows (unaudited)
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of deferred compensation | ||||||||
| Stock-based compensation expense | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of discount on convertible notes | ||||||||
| Changes in fair value of derivative liabilities | ( | ) | ||||||
| Change in accounts receivable | ( | ) | ||||||
| Change in prepaids and other current assets | ( | ) | ( | ) | ||||
| Change in accounts payable | ( | ) | ( | ) | ||||
| Change in accrued expenses and 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: | ||||||||
| Repurchase of common stock | ( | ) | ||||||
| Proceeds from convertible notes issuance | ||||||||
| Net cash provided by (used in) 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
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Aeluma, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited)
Note 1 – The Company
Aeluma, Inc., headquartered in Goleta, California, 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 Aeluma, Inc. (“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.
Going Concern
The Company incurred a net loss of $
These conditions raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“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.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been presented in accordance with GAAP. 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 the Company’s integrity and objectivity.
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. These reclassifications had no effect on the reported consolidated financial statements.
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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.
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. The Company’s accounts are insured by the FDIC but at times may exceed federally insured limits.
Convertible Debt Instruments
The Company evaluates agreements, including any convertible debt instruments to determine if those agreements or any embedded components of those agreements qualify as derivative financial instruments to be separately accounted for in accordance with FASB ASC Topic 815 “Derivatives and Hedging” (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record any bifurcated embedded features at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings as non-operating, non-cash income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the agreement is reclassified as of the date of the event that caused the reclassification. Bifurcated embedded features are recorded at their initial fair values which create additional debt discount to the host instrument. The Company amortizes the respective debt discount over the term of the notes, using the effective interest method.
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 receivable, accounts payable, accrued expenses and other current liabilities approximate their fair value due to the relatively short maturity of these items. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.
6
For recurring fair value measurement categorized within Level 3 assets and liabilities include those whose value is determined using market standard valuation technique described below. When observable inputs are not available, the market standard techniques for determining the estimated fair value of certain securities that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Management believes these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing similar assets and liabilities. The Company’s embedded derivatives are classified in Level 3 using Black-Scholes option-pricing model since their values include significant unobservable inputs.
| Fair Value of Embedded Derivatives | ||||
| Beginning balance at July 1, 2024 | $ | |||
| New derivative liabilities | ||||
| Change in fair value of derivative liabilities | ( | ) | ||
| Ending balance at September 30, 2024 | $ | |||
| September 30, 2024 | ||||
| Stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
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. Leasehold improvements are amortized over the less of the remaining lease term or the estimated useful lie of the improvements. Repairs and maintenance to these assets are charged to expenses as incurred; major improvements enhancing the function and/or the asset’s useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized.
Intangible Assets
Intangible
assets are associated with the Aeluma.com domain name and are amortized on a straight-line basis over
Revenue Recognition
The Company follows a five-step approach for recognizing revenue, consisting of the following: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when, or as, the entity satisfies a performance obligation. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expenses. The Company does not have any significant financing components associated with its revenue contracts, as payment is received within one year.
| ● | Commercial product and service contracts: Revenue is currently generated from multiple customers for research and development related services and small-volume orders |
| ● | Government contracts: Revenue is principally generated under research and development contracts with agencies of the U.S. government or with prime contractors. These contracts may include cost reimbursement and fixed firm price terms. |
7
For
the three months ended September 30, 2024, the Company was awarded
For
the three months ended September 30, 2024, the Company recognized its revenue of $
Loss Per Share
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding plus potential dilutive common shares outstanding during the period. Potential dilutive securities, comprised of stock warrants and stock options, are not reflected in diluted loss per share because such shares are anti–dilutive. Dilutive impact of potential common shares resulting from common stock equivalents is determined by applying the treasury stock method.
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 consolidated 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. The Company accounts for forfeitures upon occurrence.
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 $
8
The Company will file tax returns in the U.S. federal jurisdiction and the state of California. The Company’s federal and state return forms 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.
Recent Accounting Pronouncements
The Company has evaluated all issued but not yet effective accounting pronouncements and determined that they are either immaterial or not relevant to the Company.
Note 3 – Convertible Notes
Between
August 5, 2024 and August 27, 2024, we issued convertible promissory notes in the aggregate principal amount of $
The Note Purchase Agreement also contains customary representation and warranties of the Company and the Investors, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties.
The Company analyzed the embedded features of the convertible notes and the debt discount is being amortized over the term of the convertible notes using the effective interest method and the derivative liabilities are marked-to-market at each reporting date. See Fair Value of Financial Instruments in Note 2 – Summary of Significant Accounting Policies for additional information.
| Principal amounts of convertible notes | $ | |||
| Less: unamortized debt discount | ( | ) | ||
| Convertible notes, net of discount | $ |
9
Note 4 – 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
Issued and Vested Shares to Officers
On
October 27, 2020, the Company issued
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). The
maximum amount of liquidated damages that may be paid by the Company shall be an amount equal to eight percent (
Note 5 – Stock-Based Compensation
Restricted Stock Awards
In
June 2021, the Company sold
In
March 2022, the Company signed an agreement to issue
10
For
the three months ended September 30, 2024 and 2023, $
| Number of Shares | Weighted Average Grant Date Fair Value per Price | |||||||
| Beginning balance at July 1, 2024 | $ | |||||||
| Issued | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Ending balance at September 30, 2024 | $ | |||||||
| Number of Shares | Weighted Average Grant Date Fair Value per Price | |||||||
| Beginning balance at July 1, 2023 | $ | |||||||
| Issued | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Ending balance at September 30, 2023 | $ | |||||||
Stock Options
During
the three months ended September 30, 2023, the Company issued
During
the three months ended December 31, 2023, the Company issued
During
the three months ended March 31, 2024, the Company issued
During
the three months ended September 30, 2024, the Company issued
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted-average fair value | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Expected term | ||||||||
| Dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
11
For
the three months ended September 30, 2024 and 2023, stock-based compensation expenses for options granted were $
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value (1) | ||||||||||
| Outstanding at July 1, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | ( | ) | ||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||
| Exercisable at September 30, 2024 | $ | $ | ||||||||||
| (1) |
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value (1) | ||||||||||
| Outstanding at July 1, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired/cancelled | ( | ) | ||||||||||
| Outstanding at September 30, 2023 | $ | $ | ||||||||||
| Exercisable at September 30, 2023 | $ | $ | ||||||||||
| (1) |
Note 6 – Facility Operating Lease
On
April 1, 2021, the Company commenced a
12
| For the years ending June 30, | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | ||||
| Less imputed interest | ( | ) | ||
| Total lease liability | ||||
| Less: lease liability, current portion | ||||
| Lease liability, long term portion | $ | |||
The
lease term and the discount rate for the lease at September 30, 2024 is
Note 7 – Warrants to Purchase Common Stock
In
connection with the Offering held from December 2022 through May 2023, the Company issued warrants of
| Number of Shares | Exercise Price | Expiration Date | ||||||
| $ | ||||||||
Note 8 – Concentration of Credit Risk and Significant Customers
The Company manages its credit risk associated with exposure to its direct customers on outstanding accounts receivable through the application of credit approvals and other monitoring procedures. The Company closely monitors the aging of accounts receivable from its direct customers. Significant customers are those that represent 10% or more of revenue or accounts receivable.
13
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Customer A | % | |||||||
| Customer B | % | |||||||
| Customer C | % | |||||||
| Customer D | % | |||||||
| Customer E | % | |||||||
| Customer F | % | |||||||
| Customer G | ||||||||
| * |
| As of September 30, | ||||||||
| 2024 | 2023 | |||||||
| Customer A | % | |||||||
| Customer B | ||||||||
| Customer C | % | |||||||
| Customer D | % | |||||||
| Customer E | % | |||||||
| Customer F | ||||||||
| Customer G | % | |||||||
| * | Less than 10% of total |
Customer A, B, C and D are government agencies.
Note 9 – Subsequent Event
The Company has evaluated subsequent events through the filing date or the issuance of these financial statements and is not aware of any material items that would require disclosure in the notes to the financial statements or would be required to be recognized as of September 30, 2024.
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise stated or the context otherwise indicates, references to “Aeluma,” the “Company,” “we,” “our,” “us,” or similar terms refer to Aeluma, Inc. and Subsidiary.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. 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. You should not place undue reliance on forward-looking statements as predictive of future results.
Overview
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 substrates that are commonly used to manufacture mass market microelectronics. This enables cost-effective manufacturing of high-performance photodetectors and photodetector array circuits for imaging applications in mobile devices, as well as other technologies. This technology has the potential to enhance the performance and capability of camera image sensors, light detection and ranging (LiDAR), augmented reality/virtual reality (AR/VR), facial recognition, and other applications.
Because we will leverage compound semiconductor materials, our devices may operate at longer wavelengths than traditional silicon-based image sensors, up to at least 1600 nm, which is advantageous for a number of reasons including eye safety. Beyond 1400 nm is considered eye safe at significantly higher optical power levels relative to that at shorter wavelengths. Therefore, for LiDAR sensing systems, the range (the detectable object distance) can be increased significantly. Operating at specific longer wavelengths (for example, near 1550 nm) also enables imaging both in low light (dark) conditions, as well as in direct sunlight. Therefore, images could be captured outdoors and in various conditions.
Additionally, Aeluma’s technology may be used to manufacture other electronic and optoelectronic devices in the future including lasers, transistors, and solar cells.
Aeluma has acquired key manufacturing equipment, and has headquarters in Goleta, California with a manufacturing cleanroom to house this equipment.
Recent Government Contract
On September 6, 2024, the Company won $11.717 million DARPA contract for nano-scale semiconductors to develop heterogeneous integration technology compatible with leading edge and future advanced-node semiconductors. Technology applications include AI, mobile devices and 5G/6G. This DARPA contract to Aeluma is structured with $5.974 million provided over 18 months, and the $5.743 million balance provided over the following 18 months as Aeluma meets certain milestones. Teledyne Scientific Company, the Central Research Laboratory of Teledyne, is a proposed subcontractor to assist with defining target materials and with developing strategies for demonstrating program metrics. The University of California Santa Barbara is also a proposed subcontractor to support the implementation of test devices.
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Private Placements
Between August 5, 2024 and August 27, 2024, we issued convertible promissory notes in the aggregate principal amount of $3,145,000 to 10 accredited investors, pursuant to a private note financing. The Notes mature in June 2026 and do not carry any interest. The Notes are convertible into shares of the Company’s common stock par value $0.0001 per share (the “Common Stock”) upon the occurrence of certain events, (i.e., qualified financing resulting in at least $5,000,000 to the Company, if the Common Stock is uplisted to a national securities exchange or if neither of those such events occur prior to the maturity date, (together with Sale of the Company (as hereinafter defined), a “Conversion Event”)). In the event the Company does not complete qualified financing or uplist at or before the maturity date, the outstanding balance of the Notes shall automatically convert without any further action by the Holder into shares of the Company’s common stock equal to eighty-five percent (85%) to the VWAP of the Common Stock on the OTC Markets for the five trading days immediately prior to maturity date. The Note also provides that if there is a Sale of the Company, as defined in the Note, the Holder may elect to receive a cash payment equal to the aggregate amount of principal then outstanding under such Holder’s Note or convert the Note into shares of Common Stock equal to 85% of the VWAP of the Common Stock on the OTC Markets for the five trading days immediately prior to the Sale of the Company. Although the conversion price is dependent upon the type of Conversion Event that occurs, the Note does carry a ceiling and floor price: the applicable conversion price will not be lower than 85% of the 5-day VWAP on the applicable Closing Date (the “Floor Price”) nor will the applicable conversion price be higher than $3.50 per share (the “Ceiling Price”); the Floor Price and Ceiling Price shall automatically adjust in the event of a stock split or consolidation by the Company. The Floor Price for the investors who participated in this initial closing is equal to $2.68 per share. Since the Floor Price is tied to the Closing Date, the Floor Price may be different for investors that are part of a different closing, should the Company hold additional closings. The Investors were granted piggyback registration rights for the shares of Common Stock underlying the Note.
The Note Purchase Agreement (“NPA”) also contains customary representation and warranties of the Company and the Investors, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties.
The foregoing description of the NPA and the Note is qualified by reference to the full text of the forms of NPA and Note, which are filed as Exhibits hereto and incorporated herein by reference.
Plan of Operations
We have been developing our materials and characterization capabilities at our headquarters in Goleta, California, in connection with the further development of our business and the implementation of our plan of operations. We have installed 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 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 financings. 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.
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.
Components of Results of Operations
Revenue
Our revenue currently consists of commercial product sales and government contracts.
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Operating Expenses
Cost of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide deliverables that resulted in payment of our success fee and wafers delivered. We anticipate that our cost of revenue will vary substantially depending on the nature of products and/or services delivered in each customer engagement.
Research and development expenses consist primarily of compensation and related costs for personnel, including stock-based compensation and employee benefits, costs associated with design, fabrication, packaging and testing of our devices, and facility lease and utility expenses. We expense research and development expenses as incurred.
General and administrative expenses consist primarily of compensation and related costs for personnel, including stock-based compensation and employee benefits. In addition, general and administrative expenses include third-party consulting, legal, insurance, audit and accounting services, and office lease and utility expenses.
Other Income (Expense)
Interest income consists primarily of interest earned in interest-bearing savings account in bank.
Amortization of discount on convertible notes represents the non-cash interest expense associated with the amortization of convertible notes issued to our debtholders.
Changes in the fair value of derivative liabilities reflect valuation changes in the derivatives held by the Company.
Income Tax Expense
Income tax expense consists primarily of income taxes in certain state jurisdictions in which we conduct business.
Results of Operations
Three months ended September 30, 2024 compared to the three months ended September 31, 2023
Our results of operations for the three ended September 30, 2024, as compared to the same period of 2023, were as follows:
| Three Months Ended September 30, | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Revenue | $ | 480,735 | $ | 32,400 | $ | 448,335 | n/m | |||||||||
| Operating expenses | (1,212,115 | ) | (1,515,111 | ) | 302,996 | -20.0 | % | |||||||||
| Other income (expense) | 1,761 | 402 | 1,359 | n/m | ||||||||||||
| Loss before income tax expense | (729,619 | ) | (1,482,309 | ) | 752,690 | -50.8 | % | |||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| Net loss | $ | (729,619 | ) | $ | (1,482,309 | ) | $ | 752,690 | -50.8 | % | ||||||
Revenue: Revenue increased $448,335 to $480,735, of which $430,735 was from government contracts and $50,000 was from commercial product and service contract, for the three months ended September 30, 2024 from $32,400, all of which was from commercial product and service contracts for the same period in 2023.
Operating expenses: Operating expense decreased $302,996, or 20.0%, to $1,212,115 for the three months ended September 30, 2024 from $1,515,111 for the same period in 2023, due primarily to decreases in consulting and professional expenses, offset partially by increases in cost of revenue associated with increased revenue and higher seasonal utility charges.
Other income (expense): Other income (expense) consists of amortization of discount on convertible notes of ($144,776), changes in fair value of derivative liabilities of $146,435 and interest income of $102 for the three months ended September 30, 2024.
Income tax expense: We did not record income tax expense for either of the three months ended September 30, 2024 and 2023.
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Impact of COVID-19
With the exception of some lingering supply chain challenges, the residual effects of the COVID-19 pandemic did not have a significant impact on the Company’s results of operations or financial condition for the three months ended September 30, 2024.
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 $729,619 and $1,482,309 for the three months ended September 30, 2024 and 2023, respectively, and losses are expected to continue in the near term. The accumulated deficit was $14,353,980 at September 30, 2024. We have been funding our operations through 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 September 30, 2024, we had $3,502,520 of cash and cash equivalents. 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; (c) executing material sales or research contracts; and (d) pursuing additional sales and contracts. There can be no assurance that we can successfully accomplish these steps and it is uncertain that we will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to us 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 we are 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 working capital of $1,395,817 and $766,160 at September 30, 2024 and June 30, 2024, respectively. Current assets increased $2,634,144 to $4,026,990 at September 30, 2024 from $1,392,846 at September 30, 2024, primarily due to a $2,211,448 increase in cash. Current liabilities increased $2,004,487 to $2,631,173 at September 30, 2024 from $626,686 at June 30, 2024, due primarily to increases in derivative liabilities.
The following table shows a summary of our cash flows for the periods presented:
| Three Months Ended September 30, | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Net cash provided by (used in) | ||||||||||||||||
| Operating activities | $ | (931,915 | ) | $ | (1,303,362 | ) | $ | 371,447 | -28.5 | % | ||||||
| Investing activities | (1,637 | ) | (7,100 | ) | 5,463 | -76.9 | % | |||||||||
| Financing activities | 3,145,000 | (4,001 | ) | 3,149,001 | n/m | |||||||||||
| Increase (decrease) in cash | $ | 2,211,448 | $ | (1,314,463 | ) | $ | 3,525,911 | -268.2 | % | |||||||
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Net cash used in our operating activities were $931,915 and $1,303,362 for the three months ended September 30, 2024 and 2023, respectively, due primarily to net losses of $729,619 and $1,482,309 for the three months ended September 30, 2024 and 2023, respectively.
Net cash used in our investing activities was $1,637 and $7,100 for the three months ended September 30, 2024 and 2023, respectively. Investing activities include purchase of equipment.
Net cash provided by our financing activities was $3,145,000 for the three months ended September 30, 2024 and net cash used in our financing activities was $4,001 for the same period of 2023. We received $3,145,000 from issuing convertible notes for the three months ended September 30, 20214 and paid $4,001 to purchase Lee McCarthy’s unvested restricted shares for the same period of 2023.
Critical Accounting Policies
During the three months ended September 30, 2024, there were no significant changes in our critical accounting policies. (not needed)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. 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. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance.
Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on this evaluation, management, including our chief executive officer and our chief financial officer, concluded that as of September 30, 2024, our disclosure controls and procedures were not effective. Our current staffing resources in our finance department are insufficient to support the complexity of our financial reporting requirements. As a result, we have had an inadequate level of precision, evidence or timeliness in the performance of review controls.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as the term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
From time to time, we 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, we are 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, we 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
We did not sell any equity securities which were not registered under the Securities Act during the quarter ended September 30, 2024 that were not otherwise disclosed in our Current Reports on Form 8-K.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
ITEM 6. EXHIBITS
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| + | Indicates a management contract or compensatory plan, contract, or arrangement. |
| * | In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32.1 herewith are deemed to accompany this Form 10-K and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act. |
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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. | ||
| Date: November 8, 2024 | By: | /s/ Jonathan Klamkin |
| Name: | Jonathan Klamkin | |
| Title: | President, Chief Executive Officer and Principal Financial Officer (Principal Executive Officer and Principal Financial Officer) | |
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