What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-23 · 206 added, 345 removed, 78 unchanged (88% of the section changed)

4 unchanged sentences

with Aeluma, Inc.

and its subsidiaries (“we”, “us”, “our”, or the “Company”) condensed

unaudited financial statements and the notes thereto contained elsewhere in this report.

Information in this Item 2, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q that does not consist

of historical facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as

“may,” “will,” “should,” “believes,” “expects,” “intends,” “plans,”

“projects,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,”

“anticipates,” “presume,” and “assume” constitute forward-looking statements, and as such, are not

a guarantee of future performance.

and its subsidiaries (“we”, “us”, “our”, or the “Company”) unaudited

financial statements and the notes thereto contained elsewhere in this report.

Information in this Item 2, “Management’s Discussion

and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q that does not consist of historical

facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as “may,”

“will,” “should,” “believes,” “expects,” “intends,” “plans,” “projects,”

“estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,”

“presume,” and “assume” constitute forward-looking statements, and as such, are not a guarantee of future performance.

Forward-looking statements are subject to risks

28 unchanged sentences

forward-looking events and circumstances discussed in this report or incorporated by reference might not transpire.

Factors that cause

actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described

elsewhere in this report and in the “Risk Factors” section of our Current Report on Form 8-K filed on June 28, 2021 and the

other filings we make with the SEC.

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.

The Company disclaims any obligation to update

the forward-looking statements in this report.

On June 22, 2021, the Company, Acquisition Sub

and Biond Photonics entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”).

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.

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 4,100,000 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 PUBCO 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 will be replaced with the historical financial statements of Biond Photonics before

the Merger in future 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.

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.

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 PUBCO 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 future 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.

Immediately following the Effective Time of 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 (the “Offering Price”).

We held a second closing on June 28, 2021 for an additional 402,500 shares of our

common stock and a third closing on July 1, 2021 for an additional 115,000 shares of our common stock.

Accordingly, we sold a total of

4,000,000 shares of our common stock.

absent registration or

an applicable exemption from the registration requirement and are subject to further contractual restrictions on transfer.

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, augmented reality,

facial recognition, and other applications.

Aeluma has acquired a key piece of manufacturing equipment, an MOCVD tool, and has headquarters

in Goleta, CA with a manufacturing cleanroom to house this equipment.

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 (the “Offering Price”).

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.”

aggregate gross proceeds from the Offering were $8,000,000 (before deducting placement agent fees and expenses of the Offering.

The Offering was 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.

broker-dealer, a cash placement fee of 10% of the gross proceeds raised from investors in the Offering (or 3% of the first $800,000 of

gross proceeds raised from pre-Merger Biond Photonics shareholders and their friends and family) 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,

for which the placement agent will not receive any warrants), with a term of five years and an exercise price of $2.00 per share (the

“Placement Agent Warrants”).

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 of $1,027,575).

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”),

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 $748,900 and issued to it 50,000 shares of our common stock and Placement Agent Warrants to purchase

360,000 shares of our common stock in connection with the Offering.

We have also reimbursed the Placement Agent for approximately $35,000

of expenses incurred in connection with the Offering.

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.

Departure and Appointment of Directors and Officers

Our board of directors is authorized to and consists

of 5 members.

As of the Effective Time, Mr.

Ian Jacobs and Mr.

Mark Tompkins resigned from our board of directors, and Mr.

Jonathan Klamkin,

Lee McCarthy and Mr.

Steven DenBaars were appointed to our board of directors.

as of the Effective Time, Mr.

Jacobs resigned from all officer positions with us, and Jonathan Klamkin was appointed as our President

and Chief Executive Officer, Lee McCarthy was appointed as our interim Chief Financial Officer and Chief Operating Officer.

August 18, 2021, Mr.

McCarthy resigned as our interim Chief Financial Officer.

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.

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.

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.

As a result of the foregoing,

we paid the Placement Agent an aggregate commission of $748,900 and issued to it 50,000 shares of our common stock and Placement Agent

Warrants to purchase 360,000 shares of our common stock in connection with the two closings of the Offering.

We have also reimbursed the

Placement Agent for approximately $265,000 of legal and other expenses incurred in connection with the Offering.

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.

Plan of Operations

During the next twelve months, we expect to take

the following steps in connection with the further development of our business and the implementation of our plan of operations.

currently preparing the facility for equipment installation.

Soon thereafter, equipment will be installed and then brought online, meaning

power will be supplied to the equipment and various connections will be made including gas supply lines, exhaust, and other connections.

When fully installed, the equipment will be checked through various test operations to verify that the systems are performing to requirements

and we will begin to perform development runs to realize epitaxial wafers, which is the combination of the compound semiconductor materials

grown on the silicon wafer.

Thereafter, we hope to finalize the purchase agreements for epitaxial wafers with the two customers with whom

we currently have support letters, as mentioned elsewhere in this Report, and then we will work to deliver on such orders, which would

be our first.

We will also be performing internal research and development on materials and devices for our planned photodetector array

As part of this effort, we will be engaging foundries to develop a path toward building engineering samples and future production.

In parallel, we will continue to develop our manufacturing and product development strategy by further engaging customers and strategic

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.

the next twelve months, we expect to take the following steps in connection with the further development of our business and the implementation

of our plan of operations.

We are currently preparing the facility for equipment installation, which includes the performance of minor

HVAC (heating, ventilating, and air conditioning) modifications in our cleanroom manufacturing area, electrical work in order to provide

proper power to equipment and the repositioning of some nonstructural walls to customize the space layout for equipment.

Soon thereafter,

equipment will be installed and then brought online, meaning power will be supplied to the equipment and various connections will be made

including gas supply lines, exhaust, and other connections.

Equipment installation will be performed by Company employees, and, in some

cases, together with field service engineers from the equipment manufacturers or consultants.

Some equipment was procured previously,

and other equipment is being procured through purchase orders with equipment manufactures.

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 alternative

public offering.

When fully installed, the equipment will be checked through various test operations to verify that the systems are performing

to requirements and we will begin to perform development runs to realize epitaxial wafers, which is the combination of the compound semiconductor

materials grown on the silicon wafer.

Thereafter, we plan to finalize the purchase agreements for epitaxial wafers with potential customers

with whom we currently have support letters, as mentioned elsewhere in this document, and then we will work to deliver on such orders.

We will also be performing internal research and development on materials and devices for our planned photodetector array products.

part of this effort, we will be engaging foundries to develop a path toward building engineering samples and future production.

we will continue to develop our manufacturing and product development strategy by further engaging customers and strategic partners.

Limited Operating

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.

Impact of COVID-19 Outbreak

On January 30, 2020,

the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on

March 10, 2020, declared it to be a pandemic.

Actions taken around the world to help mitigate the spread of the coronavirus include restrictions

on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses.

The coronavirus and

actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of

many countries, including the geographical area in which the Company operates.

While the closures and limitations on movement, domestically

and internationally, are expected to be temporary, if the outbreak continues on its current trajectory the duration of the supply chain

disruption could reduce the availability, or result in delays, of materials or supplies to and from the Company, which in turn could materially

interrupt the Company’s business operations.

Given the speed and frequency of the continuously evolving developments with respect

to this pandemic, the Company cannot reasonably estimate the magnitude of the impact to its consolidated results of operations.

Additionally, it is reasonably possible that estimates

made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions,

including losses on inventory;

impairment losses related to goodwill and other long-lived assets and current obligations.

Six months ended June 30, 2021 compared

to the six months ended June 30, 2020

Our revenue, operating expenses, and net loss

from operations for the six month period ended June 30, 2021 as compared to the six month period ended June 30, 2020, were as follows

– some balances on the prior period’s combined financial statements have been reclassified to conform to the current period

presentation:

Six Months Ended

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.

Results of Operations

Three months ended

September 30, 2021 compared to the three months ended September 30, 2020

Our results of operations

for the three month period ended September 30, 2021 as compared to the three month period ended September 30, 2020, were as follows –

some balances on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:

Three Months Ended

September 30,

Operating Expenses:

1 unchanged sentence

Sub-lease rental income & other income

Change in value of liability

Interest expense

Loss Before Provision for Income Tax

Provision for income tax

Net Revenues :

no revenues for either the six months ended June 30, 2021 or June 30, 2020.

During the six months ended June 30, 2021, we incurred $ 255,803 of

operating expenses.

During the six months ended June 30, 2020, we incurred $2,992 of operating expenses.

This increase was due to the

start up of operations and stock compensation expenses related to advisor agreements.

rental income:

During the six months ended June 30, 2021, the Company recorded net rental income of $ 90,758 and

none for the six months ended June 30, 2020.

We are pre-revenue and, accordingly recorded no revenues for either the three months ended September 30, 2021 or September

During the three months ended September 30, 2021 and 2020, we incurred $694,776 and $715 of operating expenses, respectively.

This increase was due to the start-up of operations and stock compensation expenses related to advisor agreements

rental income and other income:

During the three months ended September 30, 2021 and 2020, the Company recorded net rental and

other income of $91,126 and none, respectively.

The increase was due the rental of our new facility and a related sub-lease to our tenant.

During the six months ended June 30, 2021, we incurred $ 3,000 of

interest expenses, from none for the six months ended June 30, 2020.

This increase was due to net write-off of accrued interest expense.

Provision for income tax :

Provision for income tax was $800 and $816 for the six months ended June 30, 2021 and 2020, respectively.

These expenses related to minimum

income tax requirements in California.

Net loss increased to $ 217,203 for the six months ended June

30, 2021 as compared to $3,808 for the six months ended June 30, 2020 for the reasons described above.

Capital Resources and Liquidity

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 $ 217,203 and

$3,808 for the six months ended June 30, 2021 and June 30, 2020, respectively, and losses are expected to continue in the near term.

accumulated deficit is $ 230,922 and $3,760 at June 30, 2021 and June 30,

2020, respectively.

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.

for income tax :

The Company recorded no provision for income tax for either the three months ended September 30, 2021 or the three

months ended September 30, 2020.

Net loss increased to $603,650 for the three months ended September 30, 2021, as compared to $715 for the three months ended

September 30, 2020 for the reasons described above.

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 $603,650 for the three months ended

September 30, 2021 and losses are expected to continue in the near term.

The accumulated deficit was $834,572.

We have been funding our

operations through private loans and the sale of common stock in private placement transactions.

Management anticipates

3 unchanged sentences

achieve sustainable revenues and profitable operations.

At June 30, 2021, we had $6,787,250 of cash on hand;

at June 30, 2020, we had

$38,302 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.

At September 30, 2021, we had $6,198,218 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

16 unchanged sentences

Cash, total current assets,

total assets, total current liabilities and total liabilities as of June 30, 2021 as compared to June 30, 2020, were as follows:

total assets, total current liabilities and total liabilities as of September 30, 2021 as compared to June 30, 2021, were as follows:

September 30,

Total current assets

1 unchanged sentence

Total liabilities

June 30, 2021, we had working capital of $ 7,185,135 compared to a working

capital deficit of $109,607 at June 30, 2020.

Current assets increased to $ 7,472,235 at

June 30, 2021 from $38,302 at June 30, 2020, primarily as a result of the private placement described above.

At September 30, 2021,

we had working capital of $6,735,416 compared to working capital of $7,185,135 at June 30, 2021.

Current assets decreased to $7,093,825

at September 30, 2021 from $7,472,235 at June 30, 2021, primarily as a result of the start-up of operations.

Current liabilities increased

to $ 287,100 at June 30, 2021 from $147,909 at June 30, 2020, primarily

as a result of the facility lease agreement the Company entered into.

the six months ended June 30, 2021, net cash used in operations of $ 68,394

was the result of the net loss in operations with a change in prepaids , offset

by a change in accounts payable and accrued expenses.

For the six months ended June 30, 2020, net cash used in operations of $3,808 was

the result of bank charges on the business checking account.

cash used in our investing activities were $ 27,253 and none for the six

months ended June 30, 2021 and June 30, 2020, respectively.

Investing activity for the 2021 period related to the setup of our new facility.

financing activities resulted in a cash inflow of $ 6,844,595 for the six

months ended June 30, 2021, due to the offering described above.

Financing activities generated $6,500 in cash for the six months ended

June 30 2020 due to shareholder loans,

Critical Accounting Policies

Basis of Presentation

The accompanying financial statements have been

prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America

The financial statements reflect all adjustments, which in the opinion of management, are necessary to present

fairly the financial position at December 31, 2019, and December 31, 2020 and the results of operations and cash flows of the Company

for the calendar years ended December 31, 2019 and December 31, 2020.

The summary of significant accounting policies

presented below is designed to assist in understanding the Company’s financial statements.

Such financial statements and accompanying

notes are the representations of the Company’s management, who is responsible for their integrity and objectivity.

Basic Net Loss Per Share

Basic loss per share is computed by dividing net

loss available to common shareholders by the weighted average number of common shares outstanding during the period.

Use of Estimates and Assumptions

The preparation of financial statements in conformity

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting

The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes

to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets

and liabilities.

The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.

To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Fair Value of Financial Instruments

As defined in Financial Accounting Standards Board

(“FASB”) ASC Topic No.

820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair values is

the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market participants

at the measurement date.

In determining fair value, the Company uses the market or income approach.

Based on this approach, the Company

utilizes certain assumptions about the risk inherent in the inputs to the valuation technique.

These inputs can be readily observable,

market-corroborated or generally unobservable inputs.

The Company utilizes valuation techniques that maximize the use of observable inputs

and minimize the use of unobservable inputs.

Based on the observability of the inputs used in the valuation techniques, the Company is

required to provide the following information according to the fair value hierarchy.

The fair value hierarchy ranks the quality and the

reliability of the information used to determine fair values.

As a basis for considering these assumptions, ASC 820 defines a three-tier

value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

Level 1 – Unadjusted

quoted prices in active, accessible market for identical assets or liabilities

Level 2 – Other inputs

that are directly or indirectly observable in the marketplace

Level 3 – Unobservable

inputs which are supported by little or no market activity

The fair value hierarchy also requires an entity

to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying values of the Company’s cash,

accounts payable, accrued expenses and advances from officers approximate their fair value due to the relatively short maturity of these

The carrying amounts reported for debt obligations approximate fair value due to the effective interest rate of these obligations

reflecting the Company’s current borrowing rate.

Concentration of Risk

The Company maintains its cash in bank deposit

accounts which, at times, may exceed federally insured limits.

The Company has not experienced any losses in such accounts.

Property and Equipment

Property, equipment and improvements are reported

at historical cost, net of accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the

estimated useful lives of the assets.

Repairs and maintenance to these assets are charged to expense as incurred;

major improvements enhancing

the function and/or the asset’s useful life are capitalized.

When items are sold or retired, the related cost and accumulated depreciation

are removed from the accounts and any gains or losses arising from such transactions are recognized.

As of June 30, 2021, the Company has one capitalized

construction in progress asset which will be used for the production of their sensors.

The asset is not currently in use and will continue

to receive capitalized improvements until it is ready to use.

Once commissioned and properly setup, the property and equipment will be

depreciated using the straight-line method over their estimated useful life.

Cash and Cash Equivalents

The Company considers cash in banks, deposits

in transit, and highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

The Company has not experienced

any losses in such accounts.

The Company’s accounts are insured by the FDIC but at times may exceed federally insured limits.

The Company is expected to have net operating

loss carryforwards that it can use to offset a certain amount of taxable income in the future.

The Company is currently analyzing the

amount of loss carryforwards that will be available to reduce future taxable income.

The resulting deferred tax assets will be offset

by a valuation allowance due to the uncertainty of its realization.

The primary difference between income tax expense attributable to

continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income

before income taxes relates to the recognition of a valuation allowance for deferred income tax assets.

The Company has adopted FASB ASC 740-10, “ Income

Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements

and prescribes a recognition threshold of more likely than not as a measurement process for financial statement recognition and measurement

of a tax position taken or expected to be taken in a tax return.

In making this assessment, a Company must determine whether it is more

likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must

assume that the tax position will be examined by taxing authorities.

The Company’s policy is to include interest and penalties related

to unrecognized tax benefits in income tax expense.

Interest and penalties totaled $0 for periods presented.

The Company’s net operating

loss carryforwards are subject to IRS examination until they are fully utilized, and such tax years are closed.

The Company will file tax returns in the U.S.

federal jurisdiction and the state of California.

The Company’s federal and state return form are subject to review by the taxing

The Company is not currently under examination by any taxing authority, nor has it been notified of an impending examination.

Recent Accounting Pronouncements

Changes to accounting principles are established

by the FASB in the form of ASU’s to the FASB’s Codification.

We consider the applicability and impact of all ASU’s on

our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof.

In February 2016, the FASB issued ASU 2016-02, Leases

(Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires

all leases to be recognized in the balance sheet.

In April 2016, the FASB issued ASU 2016-10, Revenue

from Contracts with Customers (Topic 606), which amends certain aspects of the Board’s new revenue standard, ASU 2014-09, Revenue

from Contracts with Customers.

The Company does not currently generate revenue.

All other newly issued accounting pronouncements

but not yet effective have been deemed either immaterial or not applicable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements,

financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”

to $358,409 at September 30, 2021 from $287,100 at June 30, 2021, primarily as a result of the timing of accounts payable.

For the three months

ended September 30, 2021, net cash used by operations was $492,052 and was the result of the net loss from operations with a change in

prepaids , offset by a change in accounts payable and accrued expenses and non-cash expenses.

For the three months ended September 30,

2020, net cash used in operations was $715.

Net cash used in our

investing activities were $258,910 and none for the three months ended September 30, 2021 and September 30, 2020, respectively.

activity for the 2021 period related to the setup of our new facility.

Our financing activities

generated a cash inflow of $161,930 for the three months ended September 30, 2021, due to the offering described above.

There were no

financing activities for the three months ended September 30, 2020.

Critical Accounting

The preparation of financial statements in

accordance with U.S.

GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the

date of the financial statements and the reported amounts of net revenues and expenses in the reporting period.

We base our estimates

and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs

and expenses that are not readily apparent from other sources.

We continually review the estimates and underlying assumptions to ensure

they are appropriate for the circumstances.

Accounting assumptions and estimates are inherently uncertain and actual results may differ

materially from our estimates.

A summary of our other

critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations

contained in our Transition Report on Form 10-KT for the period ended June 30, 2021.

During the three months ended September 30, 2021,

there were no significant changes in our critical accounting policies.

Off-Balance Sheet

We do not have any off-balance

sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose

entities” (SPEs).

Quantitative and Qualitative Disclosures

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What changed 10-Q

Item 2. Management’s Discussion and Analysis