Aeluma Inc(ALMU) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Aeluma, Inc.'s unaudited consolidated financial statements for the periods ended December 31, 2024, and June 30, 2024, including detailed notes on accounting policies and financial instruments Consolidated Balance Sheets The balance sheets provide a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheets | Metric | Dec 31, 2024 (unaudited) | Jun 30, 2024 | | :-------------------------------- | :----------------------- | :----------- | | Cash and cash equivalents | $3,063,059 | $1,291,072 | | Total current assets | $4,530,169 | $1,392,846 | | Total assets | $6,757,858 | $3,844,047 | | Total current liabilities | $488,806 | $626,686 | | Total liabilities | $7,789,946 | $1,567,886 | | Total stockholders' equity | $(1,032,088) | $2,276,161 | - Total assets increased significantly from $3,844,047 at June 30, 2024, to $6,757,858 at December 31, 2024, primarily driven by an increase in cash and cash equivalents and accounts receivable[8] - Total liabilities saw a substantial increase from $1,567,886 to $7,789,946, mainly due to the recognition of derivative liabilities ($5,048,174) and convertible notes ($1,379,690) as of December 31, 2024[8] - Stockholders' equity shifted from a positive $2,276,161 at June 30, 2024, to a deficit of $(1,032,088) at December 31, 2024, largely due to the accumulated deficit increasing to $(17,248,804)[8] Consolidated Statements of Operations The statements of operations detail the company's revenues, expenses, and net loss over specific reporting periods Consolidated Statements of Operations | Metric (Unaudited) | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2024 | Six Months Ended Dec 31, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $1,612,519 | $262,992 | $2,093,254 | $295,392 | | Total operating expenses | $1,222,921 | $1,391,791 | $2,435,036 | $2,906,902 | | Income (loss) from operations | $389,598 | $(1,128,799) | $(341,782) | $(2,611,510) | | Total other income (expense), net | $(3,284,422) | $279 | $(3,282,661) | $681 | | Net loss | $(2,894,824) | $(1,128,520) | $(3,624,443) | $(2,610,829) | | Loss per share - basic and diluted | $(0.24) | $(0.09) | $(0.30) | $(0.21) | - Revenue for the three months ended December 31, 2024, increased significantly to $1,612,519 from $262,992 in the prior year, and for the six months, it rose to $2,093,254 from $295,392[10] - Despite increased revenue, the net loss widened for both the three-month and six-month periods, primarily due to substantial 'Changes in fair value of derivative liabilities' and 'Amortization of discount on convertible notes' recognized as other expenses[10] Consolidated Statements of Stockholders' Equity These statements track changes in the company's equity, including net loss and stock-based compensation, over time Consolidated Statements of Stockholders' Equity | Metric (Unaudited) | Dec 31, 2024 (3 Months) | Dec 31, 2023 (3 Months) | Dec 31, 2024 (6 Months) | Dec 31, 2023 (6 Months) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Balance, Oct 1 / July 1 | $1,713,633 | $4,864,557 | $2,276,161 | $6,110,290 | | Stock-based compensation | $149,103 | $135,919 | $316,194 | $376,496 | | Net loss | $(2,894,824) | $(1,128,520) | $(3,624,443) | $(2,610,829) | | Balance, Dec 31 | $(1,032,088) | $3,871,956 | $(1,032,088) | $3,871,956 | - The company's total stockholders' equity decreased significantly, moving from a positive balance to a deficit of $(1,032,088) by December 31, 2024, primarily due to the net losses incurred during the periods[12][13] - Stock-based compensation contributed positively to additional paid-in capital, totaling $149,103 for the three months and $316,194 for the six months ended December 31, 2024[12][13] Consolidated Statements of Cash Flows The cash flow statements categorize cash movements into operating, investing, and financing activities, showing liquidity changes Consolidated Statements of Cash Flows | Cash Flow Activity (Unaudited) | Six Months Ended Dec 31, 2024 | Six Months Ended Dec 31, 2023 | | :----------------------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(1,332,216) | $(2,480,345) | | Net cash used in investing activities | $(40,797) | $(164,290) | | Net cash provided by (used in) financing activities | $3,145,000 | $(4,001) | | Net change in cash | $1,771,987 | $(2,648,636) | | Cash, end of period | $3,063,059 | $2,423,054 | - Net cash used in operating activities decreased by 46.3% to $(1,332,216) for the six months ended December 31, 2024, compared to $(2,480,345) in the prior year, despite a higher net loss[15][98] - Financing activities provided significant cash of $3,145,000 in the six months ended December 31, 2024, primarily from the issuance of convertible notes, a stark contrast to the cash used in financing activities in the prior year[15][100] - The company experienced a net increase in cash of $1,771,987 for the six months ended December 31, 2024, reversing the net decrease of $2,648,636 in the same period of 2023[15] Notes to Consolidated Financial Statements These notes provide essential details and explanations supporting the consolidated financial statements Note 1 – The Company This note describes Aeluma's business, technology, and highlights going concern uncertainties due to accumulated losses - Aeluma develops novel optoelectronic and electronic devices using high-performance compound semiconductors on large diameter substrates for cost-effective manufacturing[17] - The technology is applicable across mobile, automotive, AI, defense & aerospace, communication, AR/VR, high-performance computing, and quantum computing[17] - The company incurred net losses of $3,624,443 and $2,610,829 for the six months ended December 31, 2024 and 2023, respectively, and has an accumulated deficit of $17,248,804, raising substantial doubt about its ability to continue as a going concern[18] Note 2 – Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with GAAP, with interim data being unaudited and including only normal recurring adjustments[20] - The company uses estimates and assumptions in financial reporting, which may differ materially from actual results[21] - Derivative financial instruments, including embedded features in convertible debt, are recorded at fair value, with changes recognized in earnings. The company uses the Black-Scholes option-pricing model for Level 3 measurements[25][30][32] Fair Value of Embedded Derivatives (Dec 31, 2024) | Metric | Amount | | :-------------------------------- | :----------- | | Beginning balance at July 1, 2024 | $ - | | New derivative liabilities | $2,193,129 | | Change in fair value of derivative liabilities | $2,855,045 | | Ending balance at December 31, 2024 | $5,048,174 | - Revenue is recognized following a five-step approach, with significant revenue from government contracts ($1,892,259 for six months ended Dec 31, 2024) and product sales ($200,995)[35][37] - Stock-based compensation is measured at fair value using the Black-Scholes model and expensed over the service period[39][40] Note 3 – Convertible Notes This note details the terms and accounting treatment of the company's convertible promissory notes - Between August 5 and August 27, 2024, the company issued $3,145,000 in convertible promissory notes to 10 accredited investors[46] - These notes mature in June 2026, carry no interest, and are convertible into common stock upon specific events (qualified financing, uplisting, or maturity) at 85% of VWAP, with a ceiling price of $3.50 and floor prices of $2.47 or $2.68 per share[46] Convertible Notes as of December 31, 2024 | Metric | Amount | | :-------------------------- | :----------- | | Principal amounts of convertible notes | $3,145,000 | | Less: unamortized debt discount | $(1,765,310) | | Convertible notes, net of discount | $1,379,690 | Note 4 – Stockholders' Equity This note provides information on authorized and issued shares, vesting of common stock, and registration rights - The company is authorized to issue 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, with no preferred shares issued as of December 31, 2024[50] - All 1,623,920 shares of common stock issued to the CEO, Jonathan Klamkin, on October 27, 2020, have fully vested as of December 31, 2024[51] - The company has a registration rights agreement covering 11,010,002 shares, which includes provisions for liquidated damages if certain registration events are not met, though no liability is currently expected[52] Note 5 – Stock-Based Compensation This note explains the accounting for stock options and restricted stock awards, including related expenses - The company recorded deferred compensation of $1,372,435 for restricted stock awards issued in June 2021 for management advisory services, expensed over 2-4 year vesting periods[53] - For the six months ended December 31, 2024, $13,962 of deferred compensation was amortized, with $6,171 remaining to be expensed within six months[55] Stock Option Activity Summary | Metric | Dec 31, 2024 (3 Months) | Dec 31, 2023 (3 Months) | Dec 31, 2024 (6 Months) | Dec 31, 2023 (6 Months) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Outstanding at Oct 1 / July 1 | 1,056,487 | 995,500 | 1,068,000 | 1,034,000 | | Granted | 54,000 | 7,000 | 66,000 | 13,500 | | Exercised | (155,666) | - | (155,666) | - | | Outstanding at Dec 31 | 954,821 | 961,125 | 954,821 | 961,125 | | Exercisable at Dec 31 | 665,348 | 481,560 | 665,348 | 481,560 | - Stock-based compensation expenses for options granted were $149,103 and $316,194 for the three and six months ended December 31, 2024, respectively[59] Note 6 – Facility Operating Lease This note describes the company's operating lease for its facility and related liabilities - The company has a 5-year operating lease for a facility in Santa Barbara, California, commenced April 1, 2021, with total lease payments of $781,813[62] - On July 1, 2023, the company remeasured its Right of Use (ROU) asset and lease liability to $1,189,606 after considering one of two 60-month extension options as reasonably certain to be exercised[62] Operating Lease Liabilities Maturities (Undiscounted) as of Dec 31, 2024 | For the years ending June 30, | Amount | | :---------------------------- | :----------- | | Remainder of 2025 | $85,138 | | 2026 | $173,454 | | 2027 | $177,791 | | 2028 | $182,235 | | 2029 | $186,791 | | Thereafter | $337,732 | | Total | $1,143,141 | | Less imputed interest | $(136,405) | | Total lease liability | $1,006,736 | | Less: lease liability, current portion | $133,460 | | Lease liability, long term portion | $873,276 | Note 7 – Warrants to Purchase Common Stock This note provides details on warrants issued, including exercise prices and expiration dates - The company issued 85,653 warrants to purchase common stock to Placement Agents in connection with an offering from December 2022 through May 2023, with a 5-year term and an exercise price of $3.00[64] Outstanding Warrants to Purchase Common Stock as of December 31, 2024 | Number of Shares | Exercise Price | Expiration Date | | :--------------- | :------------- | :-------------- | | 286,672 | $2.00 | June 22, 2026 | | 37,433 | $2.00 | June 28, 2026 | | 11,500 | $2.00 | July 1, 2026 | | 27,032 | $3.00 | December 22, 2027 | | 4,588 | $3.00 | January 10, 2028 | | 6,720 | $3.00 | March 31, 2028 | | 44,933 | $3.00 | May 10, 2028 | | Total: 418,878 | | | Note 8 – Concentration of Credit Risk and Significant Customers This note identifies major customers contributing to revenue and accounts receivable concentrations Revenue Concentration by Customer (10% or more) | Customer | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2024 | Six Months Ended Dec 31, 2023 | | :------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Customer A | * | 46.8% | 11.4% | 41.6% | | Customer B | * | 53.2% | * | 47.4% | | Customer E | 76.2% | * | 58.7% | * | | Customer F | * | * | * | 11.0% | Accounts Receivable Concentration by Customer (10% or more) | Customer | As of Dec 31, 2024 | As of Jun 30, 2023 | | :------- | :----------------- | :----------------- | | Customer C | * | 18.3% | | Customer D | * | 27.7% | | Customer E | 80.2% | * | | Customer G | 11.4% | 53.9% | - Customer E became a significant revenue source in Q4 2024, accounting for 76.2% of revenue for the three months and 58.7% for the six months ended December 31, 2024, and 80.2% of accounts receivable[66] - Customers A, B, C, D, and E are identified as government agencies[66] Note 9 – Subsequent Event This note confirms the absence of material subsequent events requiring disclosure as of the reporting date - The company is not aware of any material subsequent events through the filing date that would require disclosure or recognition as of December 31, 2024[67] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Aeluma's financial condition and operational results, highlighting business strategy, recent contracts, financing, and ongoing challenges Overview This section provides a high-level description of Aeluma's core business, technology, and operational facilities - Aeluma specializes in high-performance optoelectronic and electronic devices, utilizing a pioneering technique for semiconductor materials and chips on large diameter substrates for cost-effective mass market manufacturing[71] - The company's technology has broad applications in mobile, automotive, AI, defense & aerospace, communication, AR/VR, high-performance computing, and quantum computing[72] - Aeluma operates an R&D/manufacturing facility in Goleta, California, and partners with production-scale foundries and packaging companies[71] Recent Government Contract This section details a significant DARPA contract win, its structure, and technology applications - On September 6, 2024, Aeluma secured an $11.717 million DARPA contract for nano-scale semiconductors to develop heterogeneous integration technology compatible with advanced-node semiconductors[74] - The contract is structured with $5.974 million provided over 18 months and the remaining $5.743 million over the subsequent 18 months, contingent on meeting milestones[74] - Technology applications for this contract include AI, mobile devices, and 5G/6G, with Teledyne Scientific Company and the University of California Santa Barbara as proposed subcontractors[74] Private Placements This section describes the company's recent issuance of convertible promissory notes to accredited investors - Between August 5 and August 27, 2024, the company issued $3,145,000 in convertible promissory notes to 10 accredited investors through a private note financing[75] - The notes mature in June 2026, are non-interest bearing, and convertible into common stock upon specific events (qualified financing, uplisting, or maturity) at 85% of VWAP, with a ceiling of $3.50 and floor prices of $2.68 per share for initial investors[75] - Investors were granted piggyback registration rights for the underlying common stock[75] Plan of Operations This section outlines Aeluma's strategic focus on developing and commercializing high-performance semiconductor technologies - The company's strategy focuses on developing and commercializing high-performance semiconductor technologies that scale for mass markets, based on heterogeneous integration of compound semiconductor materials on large-diameter substrates[77][78] - Aeluma plans to continue performing on existing customer and government contracts, expand business development and marketing, engage with manufacturing partners, and mature manufacturing processes for volume production[78] Limited Operating History This section discusses the inherent risks of a growing enterprise, including capital constraints and R&D challenges - The company cannot guarantee that current proceeds will be sufficient to execute all business plans, facing risks inherent in growing an enterprise, including limited capital resources and R&D challenges[79] - Lack of satisfactory financing terms could hinder operations, and equity financing would result in dilution for existing stockholders[80] Components of Results of Operations This section breaks down the various revenue and expense categories that constitute the company's financial performance - Revenue is generated from commercial product sales and government contracts[81] - Operating expenses include cost of revenue (materials, direct compensation), research and development (personnel, design, fabrication, testing, facility costs), and general and administrative (personnel, consulting, legal, insurance, audit, office costs)[82][83][84] - Other income (expense) primarily consists of interest income, non-cash amortization of discount on convertible notes, and changes in the fair value of derivative liabilities[85][86] Results of Operations This section analyzes the company's financial performance for the reporting period, comparing key metrics year-over-year Key Financial Results (Six Months Ended December 31) | Metric | 2024 | 2023 | $ Change | % Change | | :------------------------ | :------------ | :------------ | :------------ | :------- | | Revenue | $2,093,254 | $295,392 | $1,797,862 | n/m | | Operating expenses | $(2,435,036) | $(2,906,902) | $471,866 | 16.2% | | Other income (expense) | $(3,282,661) | $681 | $(3,283,342) | n/m | | Loss before income tax expense | $(3,624,443) | $(2,610,829) | $(1,013,614) | -38.8% | | Net loss | $(3,624,443) | $(2,610,829) | $(1,013,614) | -38.8% | - Revenue increased by $1,797,862 to $2,093,254 for the six months ended December 31, 2024, primarily driven by government contracts ($1,892,261) and commercial product sales ($200,993)[89] - Operating expenses decreased by $471,866 (16.2%) to $2,435,036, mainly due to reduced consulting, professional expenses, and R&D purchases[90] - Other income (expense) significantly worsened by $3,283,342, primarily due to the amortization of discount on convertible notes ($427,819) and changes in the fair value of derivative liabilities ($2,855,045)[91] Capital Resources and Liquidity This section assesses the company's financial resources, cash position, and ability to meet its ongoing obligations - The company's ability to continue as a going concern is dependent on raising additional capital and achieving sustainable revenues and profitability, given net losses and an accumulated deficit of $17,248,804[93][94] - As of December 31, 2024, cash and cash equivalents were $3,063,059, which is insufficient to complete the business plan, necessitating further debt or equity financing[94] - Management's plan to improve operations includes raising capital, controlling expenses, executing sales/research contracts, and pursuing additional sales, though no assurance of success can be given[95] Cash Flow Summary (Six Months Ended December 31) | Cash Flow Activity | 2024 | 2023 | $ Change | % Change | | :----------------- | :------------ | :------------ | :------------ | :------- | | Operating activities | $(1,332,216) | $(2,480,345) | $1,148,129 | -46.3% | | Investing activities | $(40,797) | $(164,290) | $123,493 | -75.2% | | Financing activities | $3,145,000 | $(4,001) | $3,149,001 | n/m | | Increase (decrease) in cash | $1,771,987 | $(2,648,636) | $4,420,623 | -166.9% | Critical Accounting Policies This section confirms that there were no significant changes to the company's critical accounting policies during the period - There were no significant changes in the company's critical accounting policies during the three and six months ended December 31, 2024[101] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that the company has no applicable quantitative and qualitative disclosures about market risk - The company states that this item is not applicable[102] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective due to insufficient finance staffing, impacting review controls - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024[105] - The ineffectiveness is attributed to insufficient staffing resources in the finance department, leading to inadequate precision, evidence, or timeliness in review controls[105] - There were no changes in internal control over financial reporting during the six months ended December 31, 2024, that materially affected or are reasonably likely to materially affect internal control over financial reporting[106] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business[108] - The company may become involved in material legal proceedings in the future[108] Item 1A. Risk Factors As a smaller reporting company, Aeluma, Inc. is not required to provide specific risk factor disclosures under this item - As a smaller reporting company, Aeluma, Inc. is not required to provide risk factor information under this item[109] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not report any unregistered sales of equity securities during the quarter ended December 31, 2024, that were not previously disclosed - No unregistered sales of equity securities were made during the quarter ended December 31, 2024, that were not already disclosed[110] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[111] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[112] Item 5. Other Information During the three months ended December 31, 2024, none of the company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2024[113] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements, certificates, plans, and certifications, many incorporated by reference - The report includes a comprehensive list of exhibits, such as merger agreements, certificates of incorporation, bylaws, registration rights agreements, equity incentive plans, and various certifications[115] - Many exhibits are incorporated by reference from prior filings, including Form 8-K, Form 10-K, and Form S-1/A[115] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed on February 11, 2025, by Jonathan Klamkin, in his capacity as President, Chief Executive Officer, and Principal Financial Officer[120]