Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This report contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "ongoing," "pending," "perceive," "plan," "potential," "predict," "project," "seek," "should," "views," "will," and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those discussed in Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended June 30, 2026, and in this Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

You should read the following discussion and analysis of our financial condition and results of operations, together with our consolidated financial statements and the related notes and other financial information included in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the disclosure under the heading "Risk Factors" in other filings we make with the SEC for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not place undue reliance on forward-looking statements as predictive of future results.

Overview

Aeluma, Inc. (together with our subsidiary, "we," "our," "us," or the "Company") develops high-performance photonic and electronic technologies for communications and sensing in telecom, artificial intelligence ("AI") datacom, mobile, defense and aerospace, robotics, automotive, augmented reality/virtual reality ("AR/VR"), and quantum applications. Our proprietary platform combines compound semiconductor materials with large-diameter substrates to leverage manufacturing infrastructure used in high-volume microelectronics. Our technology and product development activities have focused on photodetectors, photodetector arrays, lasers, optical amplifiers, and other technologies. Our photodetectors and photodetector arrays can detect near-infrared ("NIR") and shortwave infrared ("SWIR") light. Our lasers and optical amplifiers are primarily based on quantum dot technology. Aeluma's platform may also be applied to other photonic and electronic devices, including transistors and solar cells.

Our headquarters are in Goleta, California. Our principal research and development ("R&D") and manufacturing facility is approximately 9,000 square feet and includes a cleanroom and equipment used for epitaxy wafer production, process development, prototyping, wafer-scale testing, and validation. During fiscal year 2026, we expanded our internal test and prototyping capabilities through the acquisition of automated and semi-automated wafer probers, packaging and prototyping equipment, test and validation instruments, and related facility infrastructure. We have extended the lease for our principal facility through March 2031 to support anticipated growth, and we also lease approximately 2,400 square feet of additional office space near our headquarters. We may require additional space in the future to support continued growth.

We leverage a capital-efficient manufacturing model that combines internal materials production, process-development, prototyping, and test capabilities with external fabrication, packaging, and integration. We have relationships with production-scale foundries and other supply-chain partners, including relationships announced during fiscal year 2026 with Tower Semiconductor and Sumitomo Chemical Advanced Technologies for wafer production and fabrication. We expect these external capabilities to be important to our ability to qualify manufacturing processes and increase production capacity if substantial customer demand develops.

We are transitioning from a predominantly R&D-stage business toward commercialization. Our revenue currently consists of government development contracts, with emerging commercial development and product revenue. We have delivered wafers, chips, and engineering samples, performed non-recurring engineering projects, and have begun accepting initial commercial sales orders. These initial commercial orders have been relatively small, and commercial customers generally require extensive evaluation and qualification before committing to production volumes.

Plan of Operations

Our operating priorities are to advance product development, complete customer and manufacturing qualifications, deliver on existing commercial and government contracts, increase manufacturing readiness, and convert qualified customer engagements into recurring product revenue. We expect to continue investing in engineering, materials growth, wafer fabrication, packaging, testing, quality systems, sales, and business development.

We intend to continue supplying engineering samples, prototype wafers and chips, small volume products, and development services while customers evaluate our technology. We plan to work directly with prospective customers and with system integrators, module manufacturers, Tier-1 suppliers, component suppliers, semiconductor companies, and government prime contractors. We also intend to continue working with external foundries, packaging providers, and integration partners to establish repeatable, qualified production flows that can support large volumes.

The timing and scale of commercialization will depend on several factors, including technical performance, reliability testing, customer qualification, product design decisions, supply chain readiness, and market demand. We may continue to derive a substantial portion of our revenue from government and customer development programs while commercial products progress through qualification.

Results of Operations

Our results of operations for the three months ended September 30, 2026, as compared to the same period of 2025, were as follows ($ in thousands):

Revenue: Revenue decreased $0.8 million to $0.6 million for the three months ended September 30, 2026, compared to $1.4 million for the same period in 2025. The decrease was primarily attributable to the completion of the first phase of one large government contract, partially offset by revenue generated from four new government contracts.

Operating expenses: Operating expenses increased $1.8 million, or 61%, to $4.8 million for the three months ended September 30, 2026, compared to $3.0 million for the same period in 2025. The increase was primarily driven by an increase in compensation and related costs, including salaries, stock-based compensation and employee benefits driven by new employees as well as increased general and administrative, and R&D expenses to support the expansion of the business and scaling of operations.

Other income (expense): Other income, consisting entirely of interest income, totaled $0.5 million for the three months ended September 30, 2026, compared to $0.1 million for the same period in 2025.

Income tax expense: No income tax expense was recorded for the three months ended September 30, 2026 and 2025.

Liquidity and Capital Resources

As of September 30, 2026, we had cash and cash equivalents totaling $53.9 million, compared to $56.0 million as of June 30, 2026. These funds are primarily held in cash on deposit and money market funds that invest 100% of their assets in short-term U.S. Treasury obligations.

Prior to the public offerings of common stock in March 2025 and September 2025, our operations were primarily financed through the issuance of convertible notes and sales of common stock in private placement transactions. We intend to continue to use the net proceeds from the offerings to support operational growth, invest in product development, and fund working capital and general corporate purposes.

On March 20, 2026, we entered into a sales agreement under which we may, from time to time, offer and sell shares of our common stock, par value $0.0001 per share, for aggregate gross proceeds of up to $50.0 million, through an "at-the-market" offering program (the "ATM Program"). During the fourth quarter of fiscal year 2026, we sold 830,484 shares of our common stock under the ATM program, resulting in net proceeds of $20.1 million, after deducting commissions and other offering expenses. We did not sell any shares under the ATM program or raise any proceeds during the first quarter of fiscal year 2027.

On July 29, 2026, we entered into a letter of intent with the U.S. Department of Commerce for up to $30 million in proposed funding under the CHIPS and Science Act. The proposed funding is intended to support R&D of our semiconductor manufacturing platform. The contemplated award remains subject to further due diligence, required governmental approvals, and the execution of definitive award documents. If finalized and received, the funding could serve as a potential source of capital to support our R&D activities and strengthen our liquidity position; however, until the applicable conditions are satisfied and definitive agreements are executed, the funding is not a committed source of liquidity.

We continue to assess our capital requirements and may pursue additional financing opportunities to support long-term growth initiatives or respond to changes in market conditions.

As of September 30, 2026, we had net working capital, defined as total current assets less total current liabilities, of $53.0 million, compared to $55.4 million at June 30, 2026. The decrease was primarily driven by a $2.2 million decrease in current assets, which decreased to $55.1 million from $57.3 million over the same period, largely due to a $2.1 million decrease in cash and cash equivalents since June 30, 2026. Current liabilities totaled $2.1 million and $1.9 million as of September 30, 2026 and June 30, 2026, respectively, and the balances primarily consisted of accounts payable, along with accrued expenses and other short-term obligations expected to be settled within one year. We believe that our current cash and cash equivalents balances, cash generated from operations and our ability to raise additional funds pursuant to the ATM program will be sufficient to fund our business operations and capital expenditures for the next twelve months and beyond.

The following table shows a summary of our cash flows for the periods presented ($ in thousands):

Net cash used in our operating activities was $1.7 million and $0.8 million for the three months ended September 30, 2026 and 2025, respectively. For the three months ended September 30, 2026, the net cash used in operating activities primarily resulted from a net loss of $4.3 million, primarily offset by non-cash stock-based compensation expense of $1.4 million, a decrease in prepaids and other current assets of $0.3 million and an increase in accrued expenses and other current liabilities of $0.4 million. For the three months ended September 30, 2025, the net cash used in operating activities primarily resulted from a net loss of $1.5 million, and increases in accounts receivable of $0.3 million and prepaids and other current assets of $0.2 million, primarily offset by non-cash stock-based compensation expense of $1.1 million.

Net cash used in our investing activities totaled $0.3 million for each of the three months ended September 30, 2026 and 2025. These investing activities primarily consisted of purchases of equipment.

Net cash used in our financing activities was $0.1 million for the three months ended September 30, 2026, compared to net cash provided by financing activities of $23.4 million for the same period in 2025. For the three months ended September 30, 2026, we received $0.2 million from the exercise of stock options and paid $0.3 million in taxes related to net share settlement of stock options and restricted stock units. For the same period in 2025, we received $23.4 million, net of offering costs, from the public offering.

Critical Accounting Estimates

The accompanying discussion and analysis of our financial condition and results of operations is based upon our audited condensed consolidated financial statements, which have been prepared in accordance with GAAP. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. Our significant accounting policies and estimates are discussed in Note 1 to the Condensed Consolidated Financial Statements "The Company and Basis of Presentation."