What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-09-25 compared with 2022-09-28 · 489 added, 448 removed, 117 unchanged (89% of the section changed)

Financial Statements and Supplementary Data.

to Consolidated Financial Statements

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB No.

Consolidated Balance Sheets as of June 30, 2022, June 30, 2021, and December 31, 2020 F-3

Consolidated Statements of Income for the Twelve Months Ended June 30, 2022, Six Months Ended June 30, 2021 and Twelve Months Ended December 31, 2020 F-4

Consolidated Statements of Changes in Shareholders’ Equity for the Twelve Months Ended June 30, 2022, the Six Months Ended June 30, 2021 and the Twelve Months Ended December 31, 2020 F-5

Consolidated Statements of Cash Flows for the Twelve Months Ended June 30, 2022, the Six Months Ended June 30, 2021 and the Twelve Months Ended December 31, 2020 F-6

Consolidated Balance Sheets as of June 30, 2023 and 2022 F-3

Consolidated Statements of Operations for the Years Ended June 30, 2023 and 2022 F-4

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended June 30, 2023 and 2022 F-5

Consolidated Statements of Cash Flows for the Years Ended June 30, 2023 and 2022 F-6

Notes to Consolidated Financial Statements F-7

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Aeluma, Inc.

and Subsidiary (the Company) as of June 30, 2022, June 30,

2021 and December 31, 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the

twelve months ended June 30, 2022, the six months ended June 30, 2021 and the twelve months ended December 31, 2020, and the related

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Aeluma, Inc.

and Subsidiary (the Company) as of June 30, 2023 and 2022, and the related consolidated statements of

operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2023, and the related

notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2022, June 30, 2021 and December

31, 2020, and the results of its operations and its cash flows for the twelve months ended June 30, 2022, the six months ended June 30,

2021 and the twelve months ended December 31, 2020, in conformity with accounting principles generally accepted in the United States

Paragraph – Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 2 to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from

operations, and has not started generating revenue.

These conditions raise substantial doubt about the Company’s ability to continue

as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) “PCAOB” and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2023 and 2022, and the results of

its operations and its cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with accounting principles

generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements,

the Company has incurred significant operating losses and negative cash flows from operations, and has generated limited revenue.

conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard

to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) “PCAOB” and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an

understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of

the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required

to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical

audit matters.

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

Rose, Snyder & Jacobs LLP

have served as the Company’s auditor since 2021

We have served as the Company’s auditor

Encino, California

September 22, 2023

and Subsidiary

1 unchanged sentence

Current assets:

Cash and cash equivalents

Accounts receivable

Deferred compensation, current portion

Prepaids & other current assets

Prepaids and other current assets

Total current assets

Fixed assets:

Property and equipment:

Leasehold improvements

Accumulated depreciation

Total fixed assets

Property and equipment, net

Intangible assets

4 unchanged sentences

Accounts payable

Accrued expenses & other current liabilities

Advances from officers

Accrued expenses and other current liabilities

Lease liability, current portion

Notes payable to officers

Total current liabilities

3 unchanged sentences

Stockholders’ equity:

Preferred stock, par value $ 0.0001 , 10,000,000 authorized, none issued and outstanding.

Common stock, par value $ 0.0001 , and 50,000,000 shares authorized, 10,650,002 shares issued and outstanding at June 30, 2022, 10,535,002 at June 30, 2021, and 3,247,840 at December 31, 2020.

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized, and none issued and outstanding at June 30, 2023 and 2022

Common stock, $ 0.0001 par value;

50,000,000 shares authorized at June 30, 2023 and 2022, and 12,817,500 and 10,650,002 shares issued and outstanding at June 30, 2023 and 2022, respectively

Additional paid-in capital

1 unchanged sentence

( 9,062,066 )

( 3,682,484 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these financials

The accompanying notes are an integral part of

consolidated financial statements.

and Subsidiary

Consolidated Statements of Operations

Twelve Months

Year Ended June 30,

Operating expenses:

Research & development

General & administrative

Cost of revenue

Research and development

General and administrative

Total expenses

Sub-lease rental income & other income

Change in value of liability

Interest expense (income)

Loss from operations

( 5,509,685 )

( 3,733,522 )

Other income:

Sub-lease rental income and other income

Interest income

Total other income

1 unchanged sentence

( 5,379,582 )

Provision for income tax

( 3,451,699 )

Income tax expense

$ ( 5,379,582 )

$ ( 3,451,699 )

Basic and diluted loss per share

Weighted average common shares outstanding - basic and diluted

accompanying notes are an integral part of these financials

The accompanying notes are an integral part of

consolidated financial statements.

and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

1, 2020 through June 30, 2022

Additional paid-in

Total Stockholders’

Balance, January 1, 2020

Issuance of shares of common stock

Balance, December 31, 2020

Recapitalization

Issuance of shares of common stock for cash (net of $ 1,059,505 in offering costs)

Shares issued to placement agent

Shares issued upon conversion of SAFE notes

Shares issued to advisors

Balance, June 30, 2021

Issuance of shares of common stock for cash, net of $ 23,070 in offering costs

Consolidated Statements of Changes in Stockholders’

Stockholders’

Balance, July 1, 2021

$ ( 230,922 )

Issuance of common stock, net of offering cost of $ 1,059,505 (Note 3)

Other offering costs

4 unchanged sentences

( 3,682,484 )

accompanying notes are an integral part of these financials

Issuance of common stock, net of offering cost of $ 411,015 (Note 3)

Issuance of common stock for service (Note 4)

Stock-based compensation

( 5,379,582 )

Balance, June 30 2023

$ ( 9,062,066 )

The accompanying notes are an integral part of

consolidated financial statements.

and Subsidiary

Consolidated Statements of Cash Flows

Twelve Months

Year Ended June 30,

Operating activities:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Issuance of shares for services

Amortization of deferred compensation

2 unchanged sentences

Stock-based compensation expense

Change in value of liability

Depreciation and amortization expense

Change in prepaids & other current assets

Change in deposits

Change in accounts receivable

Change in prepaids and other current assets

Change in accounts payable

Change in accrued expenses & other current liabilities

Change in accrued expenses and other current liabilities

Net cash used in operating activities

( 3,637,972 )

( 2,252,791 )

Investing activities:

Purchase of equipment & CIP

Purchase of equipment

Payment for leasehold improvements

Purchase of domain name

Net cash used in investing activities

Financing activities:

Proceeds from sales of shares to advisors

Proceeds from sale of common stock

Proceeds from loans and advances

Cash from acquisition

Proceeds from SAFE Notes

Proceeds from Private Placement, net of offering costs

Payment of other offering costs

Repayment of shareholder loans and advances

Net cash provided by financing activities

3 unchanged sentences

Cash, end of period

Supplemental disclosures:

Conversion of SAFE agreements into equity

Expenses paid by officers

Equipment paid by officers

accompanying notes are an integral part of these financials

The accompanying notes are an integral part of

consolidated financial statements.

and Subsidiary

to Consolidated Financial Statements

1 – The Company

is headquartered in Goleta, California.

The Company is engaged in the research and development of infrared (IR) optical sensors to disrupt

the market for IR sensors, and using its proprietary technology aims to produce a much higher performance alternative to today’s

low-cost sensors at much lower prices than would otherwise be possible.

The focus of the Company will be the image sensor market.

efforts hope to penetrate the 3D imaging and sensing (mobile and consumer, defense and aerospace, industrial, medical, auto) and LiDAR

(robotic vehicles, advanced driver assistance systems vehicles (ADAS), topography, wind, industrial) markets.

were originally 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”)).

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.

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

Pursuant to this transaction (the “Merger”), Acquisition Sub was the surviving corporation and remained our

wholly owned subsidiary, and all the outstanding stock of Biond Photonics was converted into shares of our common stock.

a result of the Merger, we acquired the business of Biond Photonics and continued the existing business operations of Biond Photonics

as a public reporting company under the name Aeluma, Inc.

In conjunction with the merger transaction, the company changed its year end

Biond Photonics was incorporated in February 2019.

June 22, 2021, Parc Investments, Inc., 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

a result of the Merger, we acquired the business of Biond Photonics, a California corporation, doing business as Aeluma.

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 our stockholders prior to the Merger were forfeited and cancelled (the “Stock Forfeiture”).

issuance of shares of our common stock to Biond Photonics’ former security holders are collectively referred to as the “Share

Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing

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.

Merger was treated as a recapitalization and reverse acquisition 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 our 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.

2 – Summary of Significant Accounting Policies

of Presentation

accompanying consolidated financial statements have been presented in accordance with generally accepted accounting principles in the

United States (“GAAP”).

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.

Company incurred a net loss of $ 3,451,699 for the twelve months ended June 30, 2022 has accumulated deficit of $ 3,586,435 at June

In addition, the Company is in the research and development stage and has not generated revenue to date.

In order to support

its operations, the Company will require additional infusions of cash from the sale of equity instruments or the issuance of debt instruments,

Notes to Consolidated Financial Statements

Note 1 – Business

Aeluma, Inc., headquartered in Goleta, California,

is engaged in the research and development of infrared (IR) optical sensors to disrupt the market for IR sensors, and using its proprietary

technology aims to produce a much higher performance alternative to today’s low-cost sensors at much lower prices than would otherwise

The focus of Aeluma, Inc.

(“the Company”) will be the image sensor market.

Initial efforts hope to penetrate

the 3D imaging and sensing (mobile and consumer, defense and aerospace, industrial, medical, auto) and LiDAR (robotic vehicles, advanced

driver assistance systems vehicles (ADAS), topography, wind, industrial) markets.

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 the outstanding

stock of Biond Photonics was converted into shares of our common stock.

As a result of the Merger, the Company acquired the business

of Biond Photonics and continued the existing business operations of Biond Photonics as a public reporting company under the name Aeluma,

Going Concern

The Company incurred a net loss of $ 5,379,480

and $ 3,451,699 for the years ended June 30, 2023 and 2022, respectively, and has accumulated deficit of $ 9,062,066 at June 30, 2023.

In addition, the Company is in the research and development stage and has generated limited revenue to date.

In order to support its

operations, the Company will require additional infusions of cash from the sale of equity instruments or the issuance of debt instruments,

or the commencement of profitable revenue generating activities.

3 unchanged sentences

Such limitations could require the Company to curtail, suspend or discontinue parts of its business plan.

conditions raise doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements have been

prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.

The financial statements do not include

any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities

that could result from the outcome of this uncertainty.

The financial statements do not include any adjustments that might be necessary

should the Company be unable to continue as a going concern.

Net Loss Per Share

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.

The number of shares prior to the merger have been restated to consider the conversion into the shares of the legal

of Estimates and Assumptions

preparation of financial statements in conformity with GAAP 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 period.

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

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

Value of Financial Instruments

defined in Financial Accounting Standards Board (“FASB”) ASC Topic No.

820, “Fair Value Measurements and Disclosures”

(“ASC 820”), fair value 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.

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.

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

2 – Other inputs that are directly or indirectly observable in the marketplace

3 – Unobservable inputs which are supported by little or no market activity

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.

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 items.

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

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.

and Equipment

equipment and leasehold improvements are reported at historical cost, net of accumulated depreciation and amortization.

is computed using the straight-line method over the estimated useful lives of the assets.

Leasehold improvements are amortized over the

remaining lease term.

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.

assets are associated with the Aeluma.com domain name and are amortized on a straight-line basis over 10 years .

and Cash Equivalents

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.

These conditions raise doubt about the Company’s

ability to continue as a going concern.

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate

continuation of the Company as a going concern.

The financial statements do not include any adjustments relating to the recoverability

and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this

The financial statements do not include any adjustments that might be necessary should the Company be unable to continue

as a going concern.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements

have been presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

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 the Company’s integrity and objectivity.

Use of Estimates and Assumptions

The preparation of financial statements in conformity

with GAAP 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 period.

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.

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.

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.

The Company’s accounts are insured by the FDIC but

at times may exceed federally insured limits.

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.

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.

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.

Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.

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.

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 authorities.

The Company is not currently under examination by any taxing authority, nor has

it been notified of an impending examination.

Company accounts for stock-based compensation arrangements in accordance with guidance issued by the FASB, which requires the measurement

and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated

Company estimates the fair value of stock-based compensation awards on the date of grant using an option-pricing model.

the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s

consolidated statements of operations.

The Company estimates the fair value of stock-based compensation awards using the Black-Scholes

This model requires the Company to estimate the expected volatility and value of its common stock and the expected term of the

stock options, all of which are highly complex and subjective variables.

For employees and directors, the expected life was calculated

based on the simplified method as described by the SEC Staff Accounting Bulletin No.

The Company’s

accounts are insured by the FDIC but at times may exceed federally insured limits.

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 value

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 receivable, accounts payable, accrued expenses and other current liabilities approximate their fair value due to the relatively

short maturity of these items.

Property and Equipment

Property, equipment and leasehold 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.

Leasehold improvements are amortized over the remaining lease term.

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

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.

Intangible Assets

Intangible assets are associated with the Aeluma.com

domain name and are amortized on a straight-line basis over 10 years.

Revenue Recognition

The Company follows a five-step approach for

recognizing revenue, consisting of the following:

(1) identifying the contract with a customer;

(2) identifying the performance obligations

in the contract;

(3) determining the transaction price;

(4) allocating the transaction price to the performance obligations in the contract;

and (5) recognizing revenue when, or as, the entity satisfies a performance obligation.

Sales and other taxes the Company collects concurrent

with revenue-producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are

recognized as expense.

The Company does not have any significant financing components associated

with its revenue contracts, as payment is received within one

Revenue will be recognized at a point in time when the product is shipped or is delivered

to the customer’s location.

Revenue is principally generated under research and development contracts with

agencies of the U.S.

government or with prime contractors.

These contracts may include cost

reimbursement and fixed firm price terms.

company recogni zed its revenue of $ 193,339 , consisting of $ 15,000 from product sales and $ 178,339 from a government contract,

primarily for sampling purchases and research and development, for the year ended June 30, 2023.

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.

Diluted loss per

share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares

outstanding plus potential dilutive common shares outstanding during the period.

Potential dilutive securities, comprised of stock warrants

and stock options, are not reflected in diluted loss per share because such shares are anti–dilutive.

Dilutive impact of potential

common shares resulting from common stock equivalents is determined by applying the treasury stock method.

Stock-Based Compensation

The Company accounts for stock-based compensation

arrangements in accordance with guidance issued by the FASB, which requires the measurement and recognition of compensation expense for

all share-based payment awards made to employees, consultants, and directors based on estimated fair values.

The Company estimates the fair value of stock-based

compensation awards on the date of grant using an option-pricing model.

The value of the portion of the award that is ultimately expected

to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.

Company estimates the fair value of stock-based compensation awards using the Black-Scholes model.

This model requires the Company to

estimate the expected volatility and value of its common stock and the expected term of the stock options, all of which are highly complex

and subjective variables.

For employees and directors, the expected life was calculated based on the simplified method as described by

the SEC Staff Accounting Bulletin No.

110, Share-Based Payment.

For other service providers,

the expected life was calculated using the contractual term of the award.

The Company’s estimate of expected volatility was based

on the volatility of peers.

The Company has selected a risk-free rate based on the implied yield available on U.S.

Treasury securities

with a maturity equivalent to the expected term of the options.

We account for forfeitures upon occurrence.

Accounting Pronouncements

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.

The Company entered into a lease agreement

during the six months period ended June 30, 2021.

The Company adopted ASU 2016-02 on January 1, 2021.

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.

3 – Advances from Officers

the twelve months ended December 31, 2020, in an effort to carry the Company forward with limited cash flow, two officers provided advances

to pay for miscellaneous Company expenses.

The amounts recorded for December 31, 2020 were $ 16,616 and were repaid during the six

months ended June 30, 2021.

4 – Notes Payable

Company entered into two $ 60,000 promissory notes on October 27, 2020 from Jonathan Klamkin, Cofounder, Director and CEO;

McCarthy, Cofounder, Director, interim CFO and COO.

The notes bear simple interest at an annual rate of 5 % and mature December

As of December 31, 2020, the notes have incurred $ 1,000 in interest and another $ 3,000 during the six months ended

June 30, 2021.

The purpose of the notes was to provide working capital for the business to bridge the Company through the financing transaction.

These were repaid upon the financing in June, 2021.

5 – Safe Agreements

February, 2021, the Company issued Simple Agreement For Equity (SAFE) agreements to certain shareholders of the Company in exchange for

$ 210,000 in cash.

The SAFE agreements were converted to common stock on June 22, 2021 for 129,154 shares.

the SAFE instruments increased in value by $ 48,308 upon conversion on June 22, 2021.

Such increase in value was reported in the

consolidated statements of operations for the six months ended June 30, 2021.

6 – Stockholders Equity

Company’s Articles of Incorporation authorize the issuance of two classes of shares of stock.

The total number of shares which

this corporation is authorized to issue is 50,000,000 shares of $ 0.0001 par value common stock and 10,000,000 of $ 0.0001 par value preferred

For other service providers, the expected life was calculated using the

contractual term of the award.

The Company’s estimate of expected volatility was based on the volatility of peers.

The Company has

selected a risk-free rate based on the implied yield available on U.S.

Treasury securities with a maturity equivalent to the expected

term of the options.

The Company accounts for forfeitures upon occurrence.

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 the 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 forms 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

The Company has evaluated all issued but not yet effective accounting

pronouncements and determined that they are either immaterial or not relevant to the Company.

Note 3 – Stockholders’ Equity

The Company’s

Articles of Incorporation authorize the issuance of two classes of shares of stock.

The total number of shares which this corporation

is authorized to issue is 50,000,000 shares of $ 0.0001 par value common stock and 10,000,000 of $ 0.0001 par

value preferred stock.

No preferred shares were issued as of June 30, 2023.

Stock Offering

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 (the “Offering”) at a purchase price of $ 2.00 per share (the “Offering Price”).

second and third closing on June 28 and July 1 2021, for an additional 402,500 and 115,000 , respectively, of shares of common

Accordingly, we sold a total of 4,000,000 shares of our common stock through June 30, 2022.

The private placement offering is

following the Merger, on June 22, 2021, the Company sold 3,482,500 shares of common stock pursuant to an initial closing of

a private placement offering at a purchase price of $ 2.00 per share, with gross proceed of $ 6,965,000 (before deducting placement

agent fees and expenses of $ 949,736 ).

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

common stock, with gross proceed of $ 805,000 (before deducting placement agent fees and expenses of $ 109,769 ), and a third and final

close on July 1, 2021 for an additional 115,000 , with gross proceed of $ 230,000 (before deducting placement agent fees and expenses

of $ 23,070 ).

Accordingly, the Company sold a total of 4,000,000 shares of common stock with total gross proceeds of $ 8,000,000 (before

deducting total placement agent fees and expenses of $ 1,082,577 ).

December 12, 2022, the Company sold an aggregate of 517,000 shares of common stock in a private placement offering at a price

of $ 3.00 per share, with gross proceeds of $ 1,551,000 (before deducting placement agent fees and expenses of $ 124,385 ).

10, 2023, the Company held a second closing for an additional 214,667 shares of common stock, with gross proceeds of $ 644,000 (before

deducting placement agent fees and expenses of $ 28,640 ).

On March 31, 2023, the Company held a third closing for an additional 715,665 shares

of common stock, with gross proceeds of $ 2,147,000 (before deducting placement agent fees and expenses of $ 117,830 ).

10, 2023, the Company held a fourth and final close for additional 570,166 shares of its common, with gross proceeds of $ 1,710,500

(before deducting placement agent fees and expenses of $ 140,160 ) .

the Company sold a total of 2,017,498 shares of common stock with a total gross proceeds of $ 6,052,500 (before deducting

total placement agent fees and expenses of $ 411,015 ) in this private placement.

The two private placement offerings held above are together

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).

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 (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”).

We also agreed to pay certain expenses

of the Placement Agent in connection with the Offering.

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.

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 .

also paid additional offering costs totaling $ 45,000 during the twelve months ended June 30, 2022.

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.

was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated by the SEC

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.

and Vested Shares to Officers

October 27 th , 2020, the Company issued 1,623,920 shares of common stock to Director and CEO Jonathan Klamkin and 1,623,920

shares of common stock to Director, interim CFO and COO, Lee McCarthy for an aggregate sum of $10,000 each.

The stock purchase agreement

contains a repurchase option whereby unvested shares may be repurchased by the Company, at the Company’s option, within 90 days

after employee termination.

324,784 shares vested on October 27, 2020 and the remaining 1,299,136 shares vest in equal amounts,

monthly over the subsequent 4 years.

On June 30, 2022, each of these officers had 866,090 vested shares, and 757,830 unvested shares.

On October 27,

2020, the Company issued 1,623,920 shares of common stock to Jonathan Klamkin, Director and Chief Executive Officer, and 1,623,920

shares of common stock to Lee McCarthy, Director, interim Chief Financial Officer and Chief Operations Officer, for an aggregate sum of

$10,000 each.

Initially 20% or 324,784 shares vested on October 27, 2020, and the remaining 1,299,136 shares vest in equal amounts, monthly

over the subsequent 4 years.

The stock purchase agreement contains a repurchase option whereby unvested shares may be repurchased by the

Company, at the Company’s option, within 90 days after employee termination.

At June 30 2023, Jonathan Klamkin had 1,190,875 vested

shares and 433,045 unvested shares, and Lee McCarthy had 974,350 vested shares and 649,570 unvested shares.

Lee McCarthy left the Company in November 2022.

Rights Agreement

Company entered into a registration rights agreement that provides for certain liquidated damages upon the occurrence of a “Registration

entered into a registration rights agreement that provides for certain liquidated damages upon the occurrence of a “Registration

Event,” which is defined as the occurrence of any of the following events:

3 unchanged sentences

on or before the Registration Effectiveness Date;

to remain effective or the Holders of Registrable Securities covered thereby are otherwise not permitted to utilize the prospectus therein

remain effective or the Holders of Registrable Securities covered thereby are otherwise not permitted to utilize the prospectus therein

to resell the Registrable Securities covered thereby, except for Blackout Periods permitted herein;

or (d) following the listing or inclusion

for quotation on an Approved Market, the Registrable Securities, if issued and outstanding, are not listed or included for quotation

on an Approved Market, or trading of the Common Stock is suspended or halted on the Approved Market, which at the time constitutes the

principal markets for the Common Stock, for more than three (3) full, consecutive Trading Days (other than as a result of (A) actions

or inactions of parties other than the Company or its affiliates or of the Approved Market not reasonably in the control of the Company,

or (B) suspension or halt of substantially all trading in equity securities (including the Common Stock) on the Approved Market).

maximum amount of liquidated damages that may be paid by the Company shall be an amount equal to eight percent (8%) of the shares covered

by the registration rights agreement.

for quotation on an Approved Market, the Registrable Securities, if issued and outstanding, are not listed or included for quotation on

an Approved Market, or trading of the Common Stock is suspended or halted on the Approved Market, which at the time constitutes the principal

markets for the Common Stock, for more than three (3) full, consecutive Trading Days (other than as a result of (A) actions or inactions

of parties other than the Company or its affiliates or of the Approved Market not reasonably in the control of the Company, or (B) suspension

or halt of substantially all trading in equity securities (including the Common Stock) on the Approved Market).

The maximum amount of

liquidated damages that may be paid by the Company shall be an amount equal to eight percent ( 8 %) of the shares covered by the registration

rights agreement.

This filing covered 11,010,002 shares.

The Company currently expects to satisfy all of its obligations

under the Registration Agreement and does not expect to pay any damages pursuant to this agreement;

therefore, no liability has been

7 – Stock-Based Compensation

the six months ended June 30, 2021, the Company sold 723,008 shares of common stock to certain individuals in exchange for

future management advisory services, for discounted prices price ranging from $.0104 to $.0195 per share.

The shares are subject

to restrictions that allow for repurchase of the shares by the Company due to a termination of the service agreement or other certain

This repurchase right declines on a pro-rata basis over vesting periods (corresponding to the service period) ranging from 2 - 4 years.

Related to these issuances, the Company has recorded deferred stock-based compensation of $ 1,372,435 for the value of the shares

in excess of the purchase price paid by the advisors.

The stock-based compensation will be expensed over the service period.

twelve months ended June 30, 2022 and the six months ended June 30, 2021, $ 662,464 and $ 36,473 , respectively, have been amortized in

the consolidated statements of operations, and $ 673,498 is presented as deferred compensation on the consolidated balance sheets at June

30, 2022, of which $ 662,464 is expected to be expensed in the next twelve months.

following is a schedule summarizing restricted stock awards for the periods indicated:

Number of Shares

Weighted Average Grant Date Fair Value Per Share

Outstanding at January 1, 2021

The Company currently expects to satisfy all of its obligations under

the Registration Agreement and does not expect to pay any damages pursuant to this agreement;

therefore, no liability has been recorded.

Note 4 – Stock-Based Compensation

Restricted Stock Awards

During the six months ended June 30, 2021, the

Company sold 723,008 shares of common stock to certain individuals in exchange for future management advisory services, for

discounted prices price ranging from $ .0104 to $ .0195 per share.

The shares are subject to restrictions that allow for repurchase

of the shares by the Company due to a termination of the service agreement or other certain provisions.

This repurchase right declines

on a pro-rata basis over vesting periods (corresponding to the service period) ranging from 2 - 4 years.

Related to these issuances,

the Company has recorded deferred compensation of $ 1,372,435 for the value of the shares in excess of the purchase price paid by

the advisors.

The deferred compensation will be expensed as consulting expense in the consolidated statements of operation over the service

For each of the years ended June 30, 2023 and 2022, $ 662,464 has been amortized in the consolidated statements of operations,

and $ 11,034 is presented as part of the current portion of deferred compensation on the consolidated balance sheets at June 30, 2023.

2022, the Company signed an agreement to issue 150,000 shares of common stock valued at $ 300,000 to a consultant for providing

consulting services to the Company for eighteen months.

Related to these issuances, the Company has recorded deferred compensation

of $ 300,00 which will be expensed as consulting expense in the consolidated statements of operation over the eighteen months.

the year ended June 30, 2023, $ 258,000 has been amortized in the consolidated statements of operations and $ 42,000 is presented

as part of the current portion of deferred compensation on the consolidated balance sheet at June 30, 2023.

The following is a schedule summarizing restricted

stock awards for the periods indicated:

Outstanding at July 1, 2021

Outstanding at June 30, 2022

Outstanding at June 30, 2023

July of 2021, the Company issued an option to purchase 10,000 shares of common stock to a director at a price of $2.00 per share, expiring

in 10 years, and an option to purchase 10,000 shares of common stock to an advisor at a price of $2.00 per share expiring in 5 years.

Stock Options

2021, the Company issued an option to purchase 10 ,000 shares of common stock to a director at a price of $ 2.00 per share,

expiring in 10 years, and an option to purchase 10,000 shares of common stock to an advisor at a price of $ 2.00 per

share expiring in 5 years.

These options vested over periods ranging from one month to three months.

December of 2021, the Company issued options to purchase common stock to two directors in increments of 125,000 each.

The options have

an exercise price of $2.00, expire in 10 years, vest 12,500 options per quarter in the first year and 9,375 per quarter for the following

In February of 2022, the company granted 16,750 in options to one director and 15,500 to another director at a price of $2.00

per share, for committee service.

2021, the Company issued options to purchase common stock to two directors in increments of 125,000 each.

The options have an exercise

price of $2.00, expire in 10 years, vest 12,500 options per quarter in the first year and 9,375 per quarter for the following two years.

2022, the company granted 16,750 in options to one director and 15,500 to another director at a price of $2.00 per share, for committee

These options are subject to quarterly vesting over four quarters and expire in 10 years.

February 1, 2022, the Company entered into a consulting advisory agreement which grants 2,500 options with every patent filing.

On February 4, 2022, the advisor was granted 2,500 options with an exercise price of $2.00 and an expiration date of ten years.

In April of 2022, the Company issued 513,000 options

to purchase common stock to employees.

The options have an exercise price of $2.00 and expire in 10 years with 25% vesting after one

year and the remainder scheduled to vest each quarter for three years, subject to the continued status as an employee to the

On February 1, 2022, the

Company entered into a consulting advisory agreement which grants 2,500 options with every patent filing.

On February 4,

2022, the advisor was granted 2,500 options with an exercise price of $ 2.00 and an expiration date of ten years .

2022, the Company issued 513,000 options to purchase common stock to employees.

The options have an exercise price of $ 2.00 and

expire in 10 years with 25 % vesting after one year and the remainder scheduled to vest each quarter for three

years, subject to the continued status as an employee to the Company through each vesting date.

2022, the Company issued 161,000 options to purchase common stock to employees.

The options have an exercise price of $ 2.00 or $2.

expire in 10 years with various vesting schedules from six months to 48 months, subject to the continued status as an employee to the

Company through each vesting date.

estimated weighted average fair value of the options granted during the twelve months ended June 30, 2022 were approximately $1.50 per

Company estimates the fair value of each option award using the Black-Scholes option-pricing model.

The Company used the following assumptions

for to estimate the fair value of stock options issued in the twelve months ended June 30, 2022:

three months ended March 31, 2023, the Company issued 109,750 options to purchase common stock to employees and directors.

options have an exercise price of $ 3.00 and expire in 10 years with various vesting schedules from 12 months to 48 months.

Stock options granted to employees are subject to the continued status as an employee to the Company through each vesting date.

the three months ended March 31, 2023, the Company also issued 37,500 conditional options to purchase common stock to non-employee

The options have an exercise price of $ 3.00 and expire in 10 years, vesting on the date when certain vesting

conditions are met.

During the three months ended

June 30, 2023, the Company issued 163,000 options to purchase common stock to employees.

The options expire in 10 years and

have an exercise price of $ 2.60 with immediate vesting or $ 3.00 with a vesting schedule of 48 months.

Stock options granted to employees

are subject to the continued status as an employee to the Company through each vesting date.

The Company estimates the fair value of each option

award using the Black-Scholes option-pricing model.

The Company used the following assumptions for to estimate the fair value of stock

options for directors issued for the years ended June 30, 2023 and 2022:

Year Ended June 30,

Weighted-average fair value

Expected volatility

100 % - 134 %

Expected term

5.0 years - 7.0 years

Dividend yield

1 unchanged sentence

1.26 % - 4.24 %

the twelve months ended June 30, 2022, stock-based compensation expenses for options granted were $ 204,011 .

Unrecognized stock-based

compensation expense was $ 1,018,014 and average expected recognition period was 3.2 years as of June 30, 2022.

following is a schedule summarizing employee and non-employee stock option activity for the twelve months ended June 30, 2022:

1.15 % - 2.41 %

For the years ended June 30, 2023 and 2022,

stock-based compensation expenses for options granted were $ 448,444 and $ 204,011 , respectively.

Unrecognized stock-based compensation

expense was $ 1,342,964 and average expected recognition period was 1.6 years as of June 30, 2023.

The following is a schedule summarizing stock

option activities for the periods presented:

Number of Options

Weighted Average Exercise Price

Aggregate Intrinsic Value

Exercise Price

Outstanding at July 1, 2022

Expired/cancelled

Outstanding at June 30, 2023

Exercisable at June 30, 2023

(1) Represents the excess of the fair value on the last day of period (which was $ 2.90 as of June 30, 2023) over the exercise price, multiplied by the number of options.

Number of Options

Weighted Average

Exercise Price

Aggregate Intrinsic

Outstanding at July 1, 2021

Expired/cancelled

1 unchanged sentence

Exercisable at June 30, 2022

aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s

common stock for each of the respective periods.

8 – Facility Operating Lease

April 1, 2021, the Company commenced a 5-year operating lease for a facility in Santa Barbara, California with total lease payments of

The Company determined the lease constitutes a Right of Use (ROU) asset and has recorded the present value of the lease

payments as an asset and liability per ASC 842.

The Company subsequently received $ 134,625 as a lease incentive during the twelve ended

June 30, 2022.

The value of the asset will be amortized on a straight-line basis over the 60-month period and amortization began at the

start of the lease.

Additionally, the lease agreement waived the first three months of rent with payments commencing July 2021.

commencement of the lease, the net present value of the lease payments was $ 767,553 .

In addition to these lease payments, the Company

is also responsible for its shares of common area operating expenses and electricity.

Such expenses are considered variable costs and

are not included in the measurement of the lease liability.

The lease agreement also provides for the option to extend the lease for

two additional sixty-month periods.

The lease payments for these additional periods are not included in the lease liability amount presented

on the consolidated balance sheets.

following table presents maturities of operating lease liabilities on an undiscounted basis as of June 30, 2022:

Note 5 – Facility Operating Lease

On April 1, 2021, the Company commenced a 5-year

operating lease for a facility in Goleta, California with total lease payments of $781,813.

The Company determined the lease constitutes

a Right of Use (ROU) asset and has recorded the present value of the lease payments as an asset and liability per ASC 842.

the asset will be amortized on a straight-line basis over the 60-month period and amortization began at the start of the lease.

Additionally,

the lease agreement waived the first three months of rent with payments commencing July 2021.

At the commencement of the lease, the net

present value of the lease payments was $ 767,553 .

In addition to these lease payments, the Company is also responsible for its shares

of common area operating expenses and electricity.

Such expenses are considered variable costs and are not included in the measurement

of the lease liability.

The lease agreement also provides for the option to extend the lease for two additional sixty-month periods.

lease payments for these additional periods are not included in the lease liability amount presented on the balance sheet.

The following table presents maturities of operating

lease liabilities on an undiscounted basis as of June 30, 2023:

Less imputed interest

2 unchanged sentences

Lease liability, long term

remaining lease term and the discount rate for the lease at June 30, 2022 is 3.75 years and 0.75 %, respectively.

The total lease payments

were $ 157,141 , $ 39,090 and $ 0 for the twelve months ended June 30, 2022, the six months ended June 30, 2021 and the twelve months ended

December 31, 2020, respectively.

The variable costs for common area operating expenses and electricity were $ 240,421 , $ 30,783 and $ 0

for the twelve months ended June 30, 2022, the six months ended June 30, 2021 and the twelve months ended December 31, 2020, respectively.

April 1, 2021, the Company began subleasing a portion of their facility.

The sub-lease provides for base monthly rent of $13,013

through May 31, 2021 and $8,400 starting June 1, 2021 plus common area operating and utility costs.

The sublease was amended

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.

the twelve months ended June 30, 2022 and the six months ended June 30, 2021, the Company recognized $ 279,727 and $ 84,743 , respectively,

of rental income, including reimbursement of common area operating and utility costs.

9 – Warrants to Purchase Common Stock

connection with the Offering, the Company issued 360,000 warrants to purchase common stock to the Placement Agents.

The warrants carry

a term of 5 years and an exercise price of $2.00.

10 – Related Parties

Company’s advances and notes payable are from the officers/cofounders.

At the time when the Company needed funds for working capital,

the business decided it would be easier to look internally for these funds rather than through banks.

Such advances and notes payable

were repaid during the six months ended June 30, 2021.

The lease term and the discount rate for the lease

at June 30, 2023 is 2.8 years and 0.75 %, respectively.

The total lease payments were $ 129,437 and $ 157,141 for the years ended June 30,

2023 and 2022, respectively.

The variable costs for common area operating expenses and electricity were $ 264,280 , and $ 240,421 for the

years ended June 30, 2023 and 2022, respectively.

Beginning April 1, 2021, the Company began

subleasing a portion of their facility.

The sub-lease provided for base monthly rent of $13,013 through May 31, 2021 and $8,400 starting

June 1, 2021 plus common area operating and utility costs.

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.

Of rental income, including reimbursement of common

area operating and utility costs, the Company recognized $ 128,921 and $ 279,727 for the years ended June 30, 2023 and 2022, respectively.

The sub-lease ended in March 2023.

Note 6 – Warrants to Purchase Common

In connection with the Offering held from December

2022 through May 2023, the Company issued warrants of 85,653 to purchase common stock to the Placement Agents.

The warrants carry a term

of 5 years and an exercise price of $ 3.00 .

The following

warrants to purchase common stock were outstanding as of June 30, 2023:

Number of Shares

Exercise Price

Expiration Date

June 28, 2026

December 22, 2027

January 10, 2028

March 31, 2028

Note 7 – 401(k) Plan

has a 401(k) savings plan (the 401(k) plan).

The 401(k) plan is a defined contribution plan intended to qualify under Section 401(k) of

the Internal Revenue Code.

All full-time employees of the Company are eligible to participate pursuant to the terms of the 401(k) plan.

The Company made c ontributions of $ 50,034 and $ 15,484 for the years ended June 30, 2023 and 2022, respectively.

8 – Subsequent Events

Management evaluated subsequent events up to September

27, 2022 the date the financial statements were issued.

None were noted.

On September 10, 2023, the Company exercised its

option to purchase 649,750 unvested restricted shares of Lee McCarthy for a total consideration of $ 4,001 , the initial purchase price

of these shares.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure.

we did change accountants on June 22, 2021, as disclosed under I tem 4.01 Changes In Registrant’s Certifying Accountant, i ncluded

in our Current Report on Form 8-K filed on June 28, 2021 and our Current Report on Form 8-K/A filed on July 1, 2021, there was no disagreement

of the type described in paragraph (a)(1)(iv) or any reportable event as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data