What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-05-10 · 187 added, 208 removed, 14 unchanged (97% of the section changed)

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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

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.

cost effective manufacturing of high-performance photodetector array circuits for imaging applications in mobile devices, as well as other

technologies.

Photodetector devices may be used as image sensors that generate an image by detecting light, in a manner similar to a digital

camera taking pictures.

Our devices may incorporate additional functionality for 3D image capture when integrated into various system

architectures.

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.

Aeluma has acquired

key manufacturing equipment, and has headquarters in Goleta, California with a manufacturing cleanroom to house this equipment.

Because we will leverage

compound semiconductor materials, our devices may operate out to longer wavelengths, 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.

Private Placement

Between December 2022 and May 2023, we entered

into subscription agreements (the “Subscription Agreement”) with certain accredited investors, pursuant to which we issued

an aggregate of 2,017,498 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 $6,052,500 (the “Offering”).

Pursuant to the Offering, we paid a cash placement

agent fee of $389,200 and issued placement agent warrants to purchase up to 85,653 shares of common stock at an exercise price of $3.00

We also agreed to pay certain expenses of the placement agent in connection with the Offering.

In connection with the Subscription Agreement,

we also entered into a Registration Rights Agreement with the Investors, pursuant to which we agreed to register all of the shares of

common stock issued in the Offering, including the shares of common stock underlying the warrant issued to the placement agent in this

registration statement.

The 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.

common stock in the Offering was sold to “accredited investors,” as defined in Regulation D, and was conducted on a “reasonable

best efforts” basis.

Departure and Appointment of Directors and Officers

On December 14, 2023, Palvi Mehta’s term

on the board of directors expired.

Mehta’s decision to not run for re-election was not the result of any disagreements with

us on any matter related to the operations, policies, or practices of us.

The Board nominated Mr.

Craig Ensley to fill the vacancy on

on December 14, 2023, the shareholders voted to elect Mr.

Ensley to the board.

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.

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

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

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.

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.

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.

has acquired key manufacturing equipment, and has headquarters in Goleta, California with a manufacturing cleanroom to house this equipment.

Government Contract

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

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.

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.

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.

conversion price is dependent upon the type of Conversion Event that occurs, the Note does carry a ceiling and floor price:

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”);

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

The Investors were granted piggyback registration rights for the shares of Common Stock underlying the Note.

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.

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.

of Operations

Our revenue currently

consists of commercial product sales and government contracts.

Operating Expenses

The 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.

addition, general and administrative expenses include third-party consulting, legal, insurance, audit and accounting services.

Other income, net of

other expenses, consists primarily of interest income and income generated from subleasing a portion of our research and development facility.

The sub-lease ended in March 2023

Income Tax Expense

Income tax expense consists primarily of income

taxes in certain state jurisdictions in which we conduct business.

Results of Operations

Nine months ended March 31, 2024 compared

to the nine months ended March 31, 2023

Our results of operations for the nine-month period

ended March 31, 2024, as compared to the nine-month period ended March 31, 2023, were as follows:

Nine Months Ended

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.

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.

Operating History

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.

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.

of Results of Operations

revenue currently consists of commercial product sales and government contracts.

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.

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.

expense research and development expenses as incurred.

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.

Income (Expense)

income consists primarily of interest earned in interest-bearing savings account in bank.

of discount on convertible notes represents the non-cash interest expense associated with the amortization of convertible notes issued

to our debtholders.

in the fair value of derivative liabilities reflect valuation changes in the derivatives held by the Company.

tax expense consists primarily of income taxes in certain state jurisdictions in which we conduct business.

of Operations

months ended September 30, 2024 compared to the three months ended September 31, 2023

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,

Operating expenses

Other income (expense)

Loss before income tax expense

1 unchanged sentence

$ (1,482,309 )

$ (4,071,391 )

Revenue increased 100% to $639,286,

of which $32,400 was from product sales for sampling purchases and $606,886 was from government contracts, for the nine months ended March

During the nine months ended March 31, 2023, we were pre-revenue and, accordingly recorded no revenues.

Operating expenses :

Operating expense decreased

$76,513 to $4,213,564 for the nine months ended March 31, 2024 from $4,290,077 for the same period in 2023, due primarily to a reduction

in consulting expenses, offset partially by increased salaries and stock-based compensation expenses.

Other income:

Other income decreased $217,888

to $798 for the nine months ended March 31, 2024 from $218,686 for the same period in 2023.

The decrease was due primarily to a $128,921

decrease in sub-lease income as the sublease ended in March 2023.

Income tax expense :

We did not record income

tax expense for either of the nine months ended March 31, 2024 and 2023.

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 nine months ended March 31, 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 $3,573,480 and $4,071,391 for the

nine months ended March 31, 2024 and 2023, respectively, and losses are expected to continue in the near term.

The accumulated deficit

was $12,635,546 at March 31, 2024.

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 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.

tax expense :

We did not record income tax expense for either of the three months ended September 30, 2024 and 2023.

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.

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

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

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 March 31, 2024, we had $1,874,565 of cash and cash equivalents.

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.

steps include (a) raising additional capital and/or obtaining financing;

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.

has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and

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 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 $1,495,903 and $4,576,807 at March 31, 2024 and June 30, 2023, respectively.

Current assets decreased $3,191,699 to $2,142,207 at March

31, 2024 from $5,333,906 at June 30, 2023, primarily due to a $3,197,125 decrease in cash.

Current liabilities decreased $110,794 to $646,304

at March 31, 2024 from $757,099 at June 30, 2023, due primarily to decreases in accounts payable.

The following table shows a summary of our cash

flows for the periods presented:

Nine Months Ended

Net cash (used in) provided by:

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.

can be no assurance that any additional financing will be available to us on satisfactory terms and conditions, if at all.

date of this Report, we have not entered into any formal agreements regarding the above.

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.

following table shows a summary of our cash flows for the periods presented:

Three Months Ended September 30,

Net cash provided by (used in)

Operating activities

$ (1,303,362 )

$ (2,699,033 )

Investing activities

Financing activities

(Decrease) increase in cash

$ (3,197,125 )

Increase (decrease) in cash

$ (1,314,463 )

Net cash used in our operating activities were

$2,876,190 and $2,699,033 for the nine months ended March 31, 2024 and 2023, respectively, due primarily to net losses of $3,573,480 and

$4,071,391 for the nine months ended March 31, 2024 and 2023, respectively.

Net cash used in our investing activities was

$316,934 and $255,579 for the nine months ended March 31, 2024 and 2023, respectively.

Investing activities include purchase of equipment

and payment for leasehold improvements.

Net cash used in our financing activities was

$4,001 for the nine months ended March 31, 2024 and net cash provided by our financing activities was $4,071,145 for the nine months ended

March 31, 2023.

We paid $4,001 to purchase Lee McCarthy’s unvested restricted shares for the nine months ended March 31, 2024

and received $4,071,145 from Private Placements, net of $270,855 offering cost.

Critical Accounting Policies

A summary of our other critical accounting policies

is included in our Annual Report on Form 10-K for the year ended June 30, 2023.

During the nine months ended March 31, 2024,

there were no significant changes in our critical accounting policies.

Quantitative and

Qualitative Disclosures about Market Risk

Not applicable.

$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.

cash used in our investing activities was $1,637 and $7,100 for the three months ended September 30, 2024 and 2023, respectively.

activities include purchase of equipment.

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.

Accounting Policies

the three months ended September 30, 2024, there were no significant changes in our critical accounting policies.

Quantitative and Qualitative Disclosures about Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis