UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
(Mark
One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended June 30, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period
Commission
file number 000-56218
Aeluma,
Inc.
(Exact
name of registrant as specified in its charter)
27
Castilian Drive
Goleta,
California93117
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (805)351-2707
Securities
registered pursuant to Section 12(b) of the Act: None
Title of each class Trading Symbol(s) Name of each exchange on which registered
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
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 required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s
common stock, par value $0.001 per share, held by non-affiliates of the registrant as of December 31, 2021, as computed by reference to
$2.00, the price at which the common stock was last sold, was approximately $8,748,514.
The number of the registrant’s shares of common
stock, no par value, outstanding on September 27, 2022, was 10,650,002.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Table
of Contents
Page
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 5
Item 1B. Unresolved Staff Comments 5
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Mine Safety Disclosure 5
PART II 6
Item 6. [Reserved] 7
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 11
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 12
Item 9B. Other Information 12
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 12
PART III 13
Item 10. Directors, Executive Officers and Corporate Governance 13
Item 11. Executive Compensation 18
Item 14. Principal Accounting Fees and Services 23
Item 15. Exhibit and Financial Statement Schedules 24
Signatures 26
i
PART
I
Item
1. Business.
Overview
Aeluma
develops novel optoelectronic devices for sensing and communications applications. Aeluma has pioneered a technique to manufacture devices
using high performance compound semiconductor materials on large diameter silicon wafers that are commonly used to manufacture mass market
microelectronics. This enables cost effective manufacturing of high performance photodetector array circuits for imaging applications
in mobile devices. This technology has the potential to enhance the performance and capability of camera image sensors, LiDAR (Light
Detection and Ranging), AR/VR (augmented reality/virtual reality), facial recognition, and other applications.
Corporate
Structure
We
were incorporated as Parc Investments, Inc. in the State of Delaware on August 21, 2020. Prior to the Merger (as defined below), we were
a “shell company” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)).
On
June 22, 2021, our board of directors and all of our pre-Merger stockholders approved a restated certificate of incorporation, which
was effective upon its filing with the Secretary of State of the State of Delaware on June 22, 2021 and through which we changed our
name to “Aeluma, Inc.” On June 22, 2021, our board of directors also adopted restated bylaws.
On
June 22, 2021, Biond Photonics, Inc., a privately held California corporation (“Biond Photonics”) merged with and into our
wholly owned subsidiary, Aeluma Operating Co., a corporation formed in the State of Delaware on June 22, 2021 (“Acquisition Sub”).
Pursuant to this transaction (the “Merger”), Acquisition Sub was the surviving corporation and remained our wholly owned
subsidiary, and all of the outstanding stock of Biond Photonics was converted into shares of our common stock.
As
a result of the Merger, we acquired the business of Biond Photonics and will continue the existing business operations of Biond Photonics
as a public reporting company under the name Aeluma, Inc.
In
accordance with “reverse merger” or “reverse acquisition” accounting treatment, our historical financial statements
as of period ends, and for periods ended, prior to the Merger were replaced with the historical financial statements of Biond Photonics
prior to the Merger, in all the filings with the U.S. Securities and Exchange Commission (the “SEC”).
Our
Business
We
develop novel optoelectronic devices for sensing and communications applications. Aeluma has pioneered a technique to manufacture devices
using high performance compound semiconductor materials on large diameter silicon wafers that are commonly used to manufacture mass market
microelectronics. This enables cost effective manufacturing of high performance photodetector array circuits for imaging applications
in mobile devices. These devices may be used as image sensors that generate an image by detecting light, in a manner similar to a digital
camera taking 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, LiDAR, AR/VR, facial
recognition, and other applications. Aeluma has acquired a key piece of manufacturing equipment and has its headquarters in Goleta, CA
with a manufacturing cleanroom to operate this equipment.
Because
we will leverage compound semiconductor materials including indium gallium arsenide (InGaAs), our devices may operate out to longer wavelengths,
up to at least 1,600 nm, which is advantageous for a number of reasons including eye safety. Beyond 1,400 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 1,550 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.
1
Our
Strategy
Aeluma
will continue to develop its technology that includes novel materials and devices based on those novel materials. Our primary focus is
to manufacture high performance photodetector array circuits for image sensors. Initial efforts aim to penetrate the 3D imaging and sensing
(mobile and consumer, defense and aerospace, industrial, medical, auto) and LiDAR (robotic vehicles, advanced driver assistance systems
(ADAS), topography, wind, industrial) markets. As we are currently operating in a research and development (R&D) phase, we do not
have any commercial products at this time.
Our
Technology
Our
technology is based on heterogeneous integration of compound semiconductor materials on silicon. This heterogeneous integration enables
the subsequent device fabrication and manufacturing in silicon manufacturing environments that are suited to large-volume production.
Manufacturing on silicon also enables unique device configurations that are either not possible, challenging, or cost prohibitive relative
to manufacturing on traditional compound semiconductor substrates.
Competition
There
are two primary classes of image sensors currently in the market: low-cost silicon sensors for mass market applications, and high performance
InGaAs sensors deployed primarily in specialty applications. The major suppliers of silicon CMOS (complementary metal-oxide semiconductor)
image sensors include Sony, Samsung, Omnivision, On Semi, STM, Panasonic, Canon, SK Hynix, and others (Source: Yole Development, www.yole.fr).
The major suppliers of InGaAs sensors include Hamamatsu, Sumitomo, FLIR/Teledyne, Princeton Lightwave/Argo AI, Sensors Unlimited, Excelitas,
and others (Source: Markets and Markets, www.marketsandmarkets.com).
We
believe that our technology will be able to compete effectively because we are uniquely positioned to outperform silicon CMOS image sensors
while achieving a cost of manufacturing that is lower than that for traditional InGaAs sensors. Compared to silicon, InGaAs demonstrates
higher detection sensitivity and a broader wavelength absorption spectrum. Silicon absorbs or detects light in the visible spectral region
(400-750 nm) and partially in the near infrared (NIR) spectral region (greater than 750 nm), cutting off near 940 nm. InGaAs not only
demonstrates higher absorption in the visible and NIR, but also extends well into the shortwave infrared (SWIR) spectrum (1,000-2,500
nm), cutting off near 1,700 nm, with the ability to extend beyond 2,000 nm using strained InGaAs material.
We
believe that we are also positioned to win on price in competing with current InGaAs sensors while having the ability to realize much
larger area photodetector arrays because of our ability to manufacture on up to 12-inch silicon wafers, whereas competing InGaAs photodetectors
are manufactured on indium phosphide (InP) wafers that are typically 2-4 inches in size. Therefore, in addition to realizing many more
sensor chips per wafer, we have the ability to realize array sizes that are larger than what is possible with traditional InGaAs manufacturing
on InP wafers.
Existing
and potential competitors have or could have advantages such as greater name recognition, longer operating histories, broader and deeper
product portfolios, larger customer bases, substantially greater financial and other resources, and larger scale manufacturing operations.
However, we believe that our products will have the potential to compete because of our unique ability to manufacture high performance
devices at low cost.
Customers
Aeluma
does not currently have customers. We have, however, engaged with potential customers that wish to procure materials or sensor devices.
Aeluma’s technology is broadly applicable. Potential markets include automotive LiDAR, industrial LiDAR, robotics, mobile, communications,
defense and aerospace. Our current strategy is to pursue partnerships with system integrators, including LiDAR companies and Tier 1 automotive
suppliers, or semiconductor manufacturing companies. Aeluma is also pursuing direct sales relationships.
2
Markets
The
CMOS image sensors market was approximately $19 billion in 2020 and is projected to be $30 billion in 2026 (Source: Yole Development).
During 2018, the revenue breakdown by market was 68% mobile, 7% consumer, 8% computing, 6% automotive, 6% security, 3% industrial, 1%
medical, 1% defense and aerospace (Source: Yole Development, CMOS Image Sensor Industry 2020 report, www.yole.fr).
In
terms of total market unit sales, the following are projected for 2024: 1.73 billion mobile phones, 131 million tablets, and 113 automotive
vehicles (Source: www.idc.com). Manufacturers of mobile phones, tablets, and LiDAR for automotive vehicles may be prospective customers
for Aeluma. In the mobile market, Apple arguably leads in terms of deploying advanced capabilities such as LiDAR sensing in their devices;
Apple does not use our technology. Apple leverages VCSEL (vertical-cavity surface-emitting laser) emitters in conjunction with SPAD (single-photon
avalanche diode) detectors for a LiDAR scanner in smartphones and tablets and such technology “helps to deliver faster, more realistic
augmented reality experiences and improves autofocus in low-light scenes in photos and videos” (https://www.apple.com/newsroom/2021/05/apple-awards-an-additional-410-million-from-its-advanced-manufacturing-fund-to-ii-vi/).
Other major smartphone suppliers include Samsung, Xiaomi, OPPO, vivo, Huawei, and realme (Source: www.counterpointresearch.com).
In
addition to smartphone and tablet, other image sensor markets include: defense and aerospace, industrial, medical, automotive, robotic
vehicles, machine vision, camera, motion detection, smart building and people counting, military, thermal imaging (Source: Yole Development).
Research
and development will be key to our success, enabling us to differentiate from competitors. The goal of our research and development efforts
is to maintain leadership in heterogeneous integration of compound semiconductors on silicon for scaling the manufacturing of high performance
optoelectronic devices. To support research and development, we will pursue government funded programs, although there are no assurances
that such programs will be awarded. Such programs could not only offset research and development costs, but should provide pathways to
customers, thereby supporting commercialization efforts.
Intellectual
Property
Aeluma
has filed five patent applications with the United States Patent and Trademark Office (USPTO). We have filed trademarks for the name
“Aeluma” and the slogan “Sensing Reimagined” with the USPTO. We maintain protection of trade secrets that include
“know-how” and process recipes.
Our
Intellectual Property Approach
Our
strategy for the protection of our proprietary technology is to seek worldwide patent protection with a focus on jurisdictions that represent
significant global semiconductor markets. However, we will assess on a case-by-case basis whether it is strategically more favorable
to maintain trade secret protection for our inventions and “know-how” rather than pursue patent protection. Generally, patents
have a term of twenty years from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has
been terminally disclaimed and the patent has not been invalidated. In certain jurisdictions, and in certain circumstances, patent terms
can be extended or shortened.
Governmental
& Environmental Regulations
Our
primary products are anticipated to be compound semiconductor optoelectronic devices manufactured on silicon substrates, including InGaAs
photodetectors and photodetector arrays. To the extent that our products are or become subject to U.S. export controls and regulations,
these regulations may limit the export of our products and technology, and provision of our services outside of the United States, or
may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions,
including annual or semi-annual reporting. Export control and economic sanctions laws may also include prohibitions on the sale or supply
of certain of our products to embargoed or sanctioned countries, regions, governments, persons, and entities. In addition, various countries
regulate the importation of certain products, through import permitting and licensing requirements, and have enacted laws that could
limit our ability to distribute our products. The exportation, re-exportation, and importation of our products and technology and the
provision of services, including by our partners, must comply with these laws or else we may be adversely affected, through reputational
harm, government investigations, penalties, and a denial or curtailment of our ability to export our products and technology. Complying
with export control and sanctions laws may be time-consuming and may result in the delay or loss of sales opportunities. Although we
take precautions to prevent our products and technology from being provided in violation of such laws, our products and technology may
have previously been, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take.
If we are found to be in violation of U.S. sanctions or export control laws, it could result in substantial fines and penalties for us
and for the individuals working for us. Export or import laws or sanctions policies are subject to rapid change and have been the subject
of recent U.S. and non-U.S. government actions. Changes in export or import laws or sanctions policies, may adversely impact our operations,
delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products
and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business,
financial condition and results of operations.
3
We
seek to comply with all applicable statutory and administrative requirements concerning environmental quality. Expenditures for compliance
with federal state and local environmental laws have not had, and are not expected to have, a material effect on our capital expenditures,
results of operations or competitive position.
In
addition, to the extent that our facilities and operations are or become subject to the plant and laboratory safety requirements of various
environmental and occupational safety and health laws in the U.S. we believe we are in compliance with all such laws and regulations,
and to date, those regulations have not materially restricted or impeded operations. Further, we believe our processes to be highly efficient,
generating very low levels of waste and emissions. For this reason, we do not view issues surrounding climate change and any currently
foreseeable related regulations as materially impacting our business and financial statements, beyond any inestimable impact on the macro-economic
environment.
We
are also generally subject to other industry and environmental regulations for electronic and semiconductor products such as the Restriction
of Hazardous Substances Directive 2002/95/EC.
Manufacturing
We
have established a manufacturing and R&D facility at our headquarters in Goleta, CA. We have installed key equipment and we plan
to control our core materials manufacturing and development. In addition to our facility, we work with a variety of vendors and are establishing
relationships with industrial foundries to build out our manufacturing supply chain.
Sales
We
currently do not have revenue or sales contracts.
Marketing
Marketing
activities include direct relationships with potential customers and partners. We are under nondisclosure agreement (NDA) with a number
of potential customers and partners, several of which have either visited Aeluma or hosted a visit by Aeluma representatives at their
sites.
Employees
Aeluma
currently has nine employees, eight that are full time and one that is part time. The majority of employees work in engineering. One
employee supports business development. We plan to hire additional persons on an as-needed basis. On a case by case basis, Aeluma may
offer stock options to employees for attraction and retention.
Legal
Proceedings
There
is no material litigation, arbitration, governmental proceeding or any other legal proceeding currently pending or known to be contemplated
against us or any members of our management team in their capacity as such, and we and the members of our management team have not been
subject to any such proceeding in the 10 years preceding the date of this report. We may however be involved, from time to time, in claims
and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts as we believe
to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We
do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position,
cash flows or results of operations, but cannot guarantee same.
4
Item
1A. Risk Factors.
As
a smaller reporting company, we are not required to provide the information called for by this Item. However, we encourage you to review
the risk factors included in our registration statement on Form S-1 (File No. 333-259179) that was declared effective by the SEC on January
19, 2022.
Item
1B. Unresolved Staff Comments.
None.
Item
2. Properties.
Our
principal executive office is located at 27 Castilian Dr., Goleta, CA. We pay an annual rent of $161,070.
Effective
February 22, 2021, we entered into a triple-net lease agreement with SBR Associates LP for the commercial building at 27 Castilian Dr.
Goleta, CA for a term of five years, that began on April 1, 2021. The base rent for this property is $13,013.75 per month, with a CPI
escalation over the initial base rent over the term of the lease. The lease expires on March 31, 2026 with the option to renew the lease
with reasonable notice.
On
March 15, 2021, we entered into a month-to-month agreement to sublease a portion of this property to the previous tenant at a base rental
rate of $13,013.75 per month. The sublease was amended on May 17, 2021 to sublease a smaller portion of the property at a base rental
rate of $8,400 per month effective June 1, 2021. The sublease was amended again on February 7, 2022 to sublease a smaller portion of
the property at a base rental rate of $6,930 per month effective March 1, 2022. The sublease was amended again on May 17, 2022 to sublease
a smaller portion of the property at a base rental rate of $5,200 per month effective June 1, 2022.
Item
3. Legal Proceedings.
We
are not currently involved in any material legal proceedings. From time-to-time we are, and we anticipate that we will be, involved in
legal proceedings, claims, and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve
any such matters could have a material adverse effect on our financial statements. We could be forced to incur material expenses with
respect to these legal proceedings, and in the event that there is an outcome in any that is adverse to us, our financial position and
prospects could be harmed.
Item
4. Mine Safety Disclosures
Not
applicable.
5
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information
Our
common stock trades on the OTCQB system under the symbol “ALMU.” Our CUSIP number is 00776X.
You
should be aware that over-the-counter market quotations may reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions. The high and low bid quotations for our shares of our common stock for each full
quarterly period within the two most recent fiscal years are (prices set forth below represent inter-dealer quotations, without retail
markup, markdown or commission and may not be reflective of actual transactions):
High Low
Quarter ended September 30, 2021 $ N/A $ N/A
Quarter ended December 31 2021 $ N/A $ N/A
Quarter ended March 31, 2022 $ N/A $ N/A
Quarter ended June 30, 2022 $ N/A $ N/A
Quarter ended September 30, 2020 $ N/A $ N/A
Quarter ended December 31 2020 $ N/A $ N/A
Quarter ended March 31, 2021 $ N/A $ N/A
Quarter ended June 30, 2021 $ N/A $ N/A
As
of September 27, 2022, the last reported sale price of our Common Stock on the OTCQB was $N/A per share.
As
of September 27, 2022, we had 10,650,002 shares of our common stock outstanding held by approximately 87 stockholders of record.
Dividend
Policy
We
have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable
future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay
cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations,
capital requirements and such other factors as the board of directors deems relevant.
Recent
Sales of Unregistered Securities
During
the period covered by this annual report, the Company has not issued unregistered securities to any person, except as described below.
None of these transactions involved any underwriters, underwriting discounts or commissions, except as specified below, or any public
offering, and, unless otherwise indicated below, the Registrant believes that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder, and/or Regulation
S promulgated thereunder regarding offshore offers and sales. All recipients had adequate access, though their relationships with the
Registrant, to information about the Registrant.
On
July 1, 2021, we sold an additional 115,000 common stock shares at a purchase price of $2.00 per share in a private placement
offering for net proceeds (after deducting offering costs of $23,070) of $206,930 and issued 11,500 warrants to purchase common
stock to GP Nurmenkari Inc., who acted as the placement agent for this private placement offering.
6
Item
6. [Reserved].
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this filing.
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 as described under the heading “Forward-Looking
Statements” elsewhere in this report. 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.
Overview
On
June 22, 2021, the Company, Acquisition Sub and Biond Photonics entered into an Agreement and Plan of Merger and Reorganization (the
“Merger Agreement”). Pursuant to the terms of the Merger Agreement, on June 22, 2021 (the “Closing Date”), Biond
Photonics merged with and into Acquisition Sub, with Acquisition Sub continuing as the surviving corporation and our wholly owned subsidiary.
As
a result of the Merger, we acquired the business of Biond Photonics, a California corporation, doing business as Aeluma. See “Description
of Business”above. At the time the certificates of merger reflecting the Merger were filed with the
Secretaries of State of California and Delaware (the “Effective Time”), each of Biond Photonics’ shares of capital
stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive (a) 1.299135853 shares
of our common stock (the “Common Share Conversion Ratio”), with the maximum number of shares of our common stock issuable
to the former holders of Biond Photonics’ capital stock equal to 4,100,002 after adjustments due to rounding for fractional shares.
Immediately prior to the Effective Time, an aggregate of 2,500,000 shares of our common stock owned by the stockholders of Parc Investments,
Inc. prior to the Merger were forfeited and cancelled (the “Stock Forfeiture”).
The
issuance of shares of our common stock to Biond Photonics’ former security holders are collectively referred to as the “Share
Conversion.”
The
Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing
conditions.
As
a condition to the Merger, we entered into an indemnity agreement with our former officer and directors (the “Pre-Merger Indemnity
Agreement”), pursuant to which we agreed to indemnify such former officer and directors for actions taken by them in their official
capacities relating to the consideration, approval and consummation of the Merger and certain related transactions.
The
Merger was treated as a recapitalization and reverse acquisition for us for financial reporting purposes. Biond Photonics is considered
the acquirer for accounting purposes, and our historical financial statements before the Merger were replaced with the historical financial
statements of Biond Photonics before the Merger in filings with the SEC. The Merger is intended to be treated as a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended.
The
issuance of securities pursuant to the Share Conversion was not registered under the Securities Act, in reliance upon the exemption from
registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public
offering, and Rule 506 of Regulation D promulgated by the SEC thereunder. These securities may not be offered or sold in the
U.S. absent registration or an applicable exemption from the registration requirement and are subject to further contractual restrictions
on transfer.
7
Prior
to the Merger, the sole business purpose of the Company was to seek the acquisition of or merger with, an existing company.
As
a result of the consummation of the Merger, on June 22, 2021, Biond Photonics, Inc. became our wholly owned subsidiary and the business
of Biond Photonics, Inc. became the business of the Company going forward. Accordingly, at the closing, the Company ceased to be a shell
company.
We
develop novel optoelectronic devices for sensing and communications applications. Aeluma has pioneered a technique to manufacture devices
using high performance compound semiconductor materials on large diameter silicon wafers that are commonly used to manufacture mass market
microelectronics. This enables cost effective manufacturing of high performance photodetector array circuits for imaging applications
in mobile devices. These devices may be used as image sensors that generate an image by detecting light, in a manner similar to a digital
camera taking a picture. Our devices may incorporate additional functionality and enhanced performance to enable 3D image capture when
integrated into various system architectures. This technology has the potential to greatly enhance the performance and capability of
camera image sensors, LiDAR, augmented reality, facial recognition, and other applications. Aeluma has acquired a key piece of manufacturing
equipment and has headquarters in Goleta, CA with a manufacturing cleanroom to house this equipment.
The
Private Placement Offering
Immediately
following the Merger, we sold 3,482,500 shares of our common stock pursuant to an initial closing of a private placement offering at
a purchase price of $2.00 per share. We held a second closing on June 28, 2021 for an additional 402,500 shares of our common stock and
a third and final close on July 1, 2021 for an additional 115,000. Accordingly, we sold a total of 4,000,000 shares of our common stock.
The private placement offering is referred to herein as the “Offering.”
The aggregate gross proceeds from the three closings
of the Offering were $8,000,000 (before deducting placement agent fees and expenses of the Offering).
The
three closings of the Offering were exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D
promulgated by the SEC thereunder. The common stock in the Offering was sold to “accredited investors,” as defined in Regulation D,
and was conducted on a “reasonable best efforts” basis.
In
connection with the Offering and subject to the closing of the Offering, we agreed to pay the placement agent, GP Nurmenkari Inc. (the
“Placement Agent”), a U.S. registered broker-dealer, a cash placement fee of 10% of the gross proceeds raised from investors
in the Offering (other than the first $630,000 of common stock sold to pre-Merger Biond Photonics shareholders and their friends and
family, for which the Placement Agent received a 3% cash fee, and $170,000 of common stock sold to pre-Merger Biond Photonics friends
and family for which the Placement Agent received no cash fee) and to issue to it 50,000 shares of our common stock and warrants to purchase
a number of shares of our common stock equal to 10% of the number of shares of common stock sold in the Offering (other than the first
$800,000 of common stock sold to pre-Merger Biond Photonics shareholders and their friends and family), with a term of five years and
an exercise price of $2.00 per share (the “Placement Agent Warrants”). We also agreed to pay certain expenses of the Placement
Agent in connection with the Offering.
As a result
of the foregoing, we paid the Placement Agent an aggregate commission of $725,900 during the six months ended June 30, 2021 and issued
to it 50,000 shares of our common stock and Placement Agent Warrants to purchase 348,500 shares of our common stock
in connection with the Offering during the six months ended June 30, 2021. We have also reimbursed the Placement Agent and paid for legal
fees totaling $233,605 out of the proceeds from the capital raise in connection with the Offering.
A note payable
to an officer of Parc Investments, Inc. in the amount of $50,000 was repaid directly from the proceeds from the Offering.
The aggregate gross proceeds from the Offering
during the twelve months ended June 30, 2022 were $206,930, which is net of offering placement agent fees and expenses of $23,070. We
also paid additional offering costs totaling $45,000 during the twelve months ended June 30, 2022.
Subject
to certain customary exceptions, we have agreed to indemnify the Placement Agent to the fullest extent permitted by law against
certain liabilities that may be incurred in connection with the Offering, including certain civil liabilities under the Securities Act,
and, where such indemnification is not available, to contribute to the payments the Placement Agent and their sub-agents may be required
to make in respect of such liabilities.
8
Plan
of Operations
We have been developing our materials and characterization
capabilities at our headquarters in Goleta, CA, in connection with the further development of our business and the implementation of our
plan of operations. We have installed some key manufacturing equipment at our headquarters and will continue to develop relationships
with manufacturing partners to carry out certain steps of our manufacturing processes externally. We have gained access to a rapid prototyping
facility and are leveraging this access to fabricate early-stage prototypes. In the future, we intend to implement appropriate quality
and manufacturing controls. Some equipment was procured previously, and other equipment is being procured through purchase orders with
equipment vendors. The COVID-19 pandemic has adversely disrupted, and may further disrupt, the operations at certain of our suppliers
and other third-party providers. Lead times for certain materials and parts ordered have been longer than anticipated and on-site support
for equipment maintenance has been challenging to schedule. Spare parts have been procured to minimize disruption to our development.
The rapid prototyping facility that we access for development was closed for a brief period of time at the start of the COVID-19 pandemic.
It has been open for unlimited access since Aeluma has first gained access.
The
primary sources of funding for equipment procurement and installation are the seed funding raised prior to becoming a public company
and the funding raised from our financing during June/July of 2021. We have also leveraged funds to continue strengthening our intellectual
property including patent applications, trademarks, and development of trade secrets and manufacturing process recipes. We will continue
to develop our manufacturing and product development strategy by further engaging customers and strategic partners.
Limited
Operating History
We
cannot guarantee that the proceeds from the Offering will be sufficient to carry out all of our business plans. Our business is subject
to risks inherent in growing an enterprise, including limited capital resources, risks inherent in the research and development process
and possible rejection of our products in development.
If
financing is not available on satisfactory terms, we may be unable to carry out all of our operations. Equity financing will result in
dilution to existing stockholders.
Change
of Fiscal Year
On
June 30, 2021, we changed our fiscal year from the period beginning on January 1 and ending on December 31 to the period beginning on
July 1 and ending on June 30 of each year, effective immediately. Accordingly, we filed a Transition Report on Form 10-K/T on September
27, 2021, to include audited consolidated financial information for the transition period from January 1, 2021 through June 30, 2021.
Results
of Operations
Twelve
months ended June 30, 2022, the six months ended June 30, 2021, and twelve months ended December 31, 2020
Our
results of operations for the twelve months ended June 30, 2022, as compared to the six months ended June 30, 2021, and twelve months
ended December 31, 2020, were as follows (some of the balances on the prior period’s combined financials statements have been reclassified
to conform to the current period presentation):
Revenue $ - $ - $ - $ - $ -
9
Net
Revenues: We are pre-revenue and, accordingly recorded no revenues for the twelve months ended June 30, 2022, the six months ended
June 30, 2021, or the twelve months ended December 31, 2020.
Operating
Expenses: During the twelve months ended June 30, 2022, the six months ended June 30, 2021, and the twelve months ended December
31, 2020, we incurred $3,733,522, $255,853 and $11,670 of operating expenses, respectively. This increase was due to the start-up of
operations and stock compensation expenses related to advisor and consulting agreements.
Sub-lease
rental income and other income: During the twelve months ended June 30, 2022, the six months ended June 30, 2021, and the twelve
months ended December 31, 2020, the company recorded $281,823, $39,450, and $1,000 of rental and other income, respectively. The year
over year increases were due to the rental of our new facility and a related sub-lease to our tenant.
Provision
for income tax: The Company recorded no provision for income tax for the twelve months ended June 30, 2022, $800 for the six months
ended June 30, 2021, and the twelve months ended December 31, 2020.
Net
Loss: Net loss increased to $3,451,699 for the twelve months ended June 30, 2022, as compared to $217,203 for the six months ending
June 30, 2021 and $13,470 for the twelve months ended December 31, 2020. The year over year increase was due to the start-up of operations
and stock-based compensation expenses related to advisor and consulting agreements.
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 $3,451,699, $217,203
and $13,470 for the twelve months ended June 30, 2022, the six months ended June 30, 2021 and the twelve months ended December 31, 2020,
respectively, and losses are expected to continue in the near term. The accumulated deficit was $3,586,435 at June 30, 2022. We have
been funding our operations through private loans and the sale of common stock in private placement transactions. Refer to Notes 4 through
6 in the financial statements for our discussion of notes payable and shares issued.
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 June 30, 2022, we had $3,740,722 of cash on hand. These
funds are insufficient to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the
issuance of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available
or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain
undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of
equity financing.
Management
has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and
beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) controlling overhead and expenses; and (c)
executing material sales or research contracts. There can be no assurance that the Company can successfully accomplish these steps and
it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance
that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. As of the date of this
Report, we have not entered into any formal agreements regarding the above.
In
the event the Company is unable to continue as a going concern, the Company may elect or be required to seek protection from its creditors
by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not
considered this alternative, nor does management view it as a likely occurrence.
10
Cash,
total current assets, total assets, total current liabilities and total liabilities as of June 30, 2022, June 30, 2021 and December 31,
2020, were as follows:
We
had working capital (deficit) of $4,058,409, $7,185,135 and ($109,607) at June 30, 2022, June 30, 2021 and December 31, 2020, respectively.
Current assets decreased $3,041,387 to $4,430,848 at June 30, 2022 from $7,472,235 at June 30, 2021, primarily due to $3,451,699 net
loss for the twelve months ended June 30, 2022. Current assets increased $7,433,933 to $7,472,235 at June 30, 2021 from $38,302 at December
31, 2020, primarily as a result of the private placement described above. Current liabilities increased $85,339 to $372,439 at June 30,
2022 from $287,100 at June 30, 2021, due to increases in accounts payable and accrued expenses. Current liabilities increased $139,191
to $287,100 at June 30, 2021 from $147,909 at December 31, 2020, primarily as a result of the facility lease agreement the Company entered
into.
Net cash (used in) provided by:
Net
cash used in our operating activities were $2,252,791, $68,394 and $1,377 for the twelve months ended June 30, 2022, the six months ended
June 30, 2021 and the twelve months ended December 31, 2020, respectively, primarily due to net losses of $3,451,699, $217,203 and $13,470
for the twelve months ended June 30, 2022, the six months ended June 30, 2021 and the twelve months ended December 31, 2020, respectively,
Net
cash used in our investing activities were $955,667, $27,253 and $106,228 for the twelve months ended June 30, 2022, the six months ended
June 30, 2021 and the twelve months ended December 31, 2020, respectively. Investing activity for the periods presented related to the
setup of our new facility.
Our
financing activities resulted in a cash inflow of $161,930, $6,844,595 and $145,701 for the twelve months ended June 30, 2022, the six