What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-05-15 · 312 added, 393 removed, 217 unchanged (76% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable

Deferred compensation, current portion

Prepaids & other current assets

Prepaids and other current assets

Total current assets

2 unchanged sentences

Accumulated depreciation

Total fixed assets

Intangible assets, net

Property and equipment, net

Intangible assets

Right of use asset - facility

3 unchanged sentences

Accounts payable

Accrued expenses & other current liabilities

Accrued expenses and other current liabilities

Lease liability, current portion

1 unchanged sentence

Lease liability, long term portion

Commitments and contingencies

Total liabilities

Commitments and contingencies

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, 12,247,334 and 10,650,002 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively.

Preferred stock, $ 0.0001 par value;

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

Common stock, $ 0.0001 par value;

50,000,000 shares authorized at September

30, 2023 and June 30, 2023, and 12,167,930 and 12,817,500 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 7,753,875 )

( 3,682,484 )

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

Research & development

General & administrative

Cost of revenue

Research and development

General and administrative

Total expenses

Loss from operations

( 1,568,496 )

( 4,290,077 )

( 2,370,005 )

Other income:

Sub-lease rental income & other income

Sub-lease income and other income

Interest income

1 unchanged sentence

Loss before income tax expense

( 1,460,801 )

( 4,071,391 )

( 2,140,722 )

Income tax expense

$ ( 1,460,801 )

$ ( 914,377 )

$ ( 4,071,391 )

$ ( 2,140,722 )

Basic and diluted loss per share

Loss per share -basic and diluted

Weighted average common shares outstanding - basic and diluted

3 unchanged sentences

Consolidated Statement of Stockholders’

For the Three and Nine Months Ended March 31,

2023 and 2022 (unaudited)

Equity (unaudited)

Three Months Ended September 30, 2023

Stockholders’

Balance, January 1, 2023

Balance at July 1, 2023

$ ( 9,062,066 )

Issuance of common stock, net of offering costs of $ 146,470

Repurchase of commons stock

Stock-based compensation

1 unchanged sentence

( 1,482,309 )

Balance, March 31.

$ ( 7,753,875 )

Balance, January 1, 2022

$ ( 1,457,267 )

Stock-based compensation

Balance, March 31, 2022

Balance at September 30, 2023

$ ( 10,544,375 )

Three Months Ended September 30, 2022

Additional paid-in

Total Stockholders’

Balance, July 1, 2022

$ ( 3,682,484 )

Issuance of common stock, net of offering costs of $ 270,855

Issuance of shares for services

Stock-based compensation

( 4,071,391 )

Balance, March 31, 2023

$ ( 7,753,875 )

Balance, July 1, 2021

Balance at July 1, 2022

$ ( 3,682,484 )

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

Other offering costs

Stock-based compensation

1 unchanged sentence

( 1,530,041 )

Balance, March 31, 2022

Balance at September 30, 2022

$ ( 5,212,525 )

2 unchanged sentences

and Subsidiary

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2023 and

2022 (unaudited)

Nine Months Ended

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended

September 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

Partial refund of facility lease deposit

Stock-based compensation expense

Depreciation and amortization expense

Change in prepaids & other current assets

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

6 unchanged sentences

Financing activities:

Proceeds from Private Placement

Payment of other offering costs

Net cash provided by financing activities

Repurchase of common stock

Net cash used in financing activities

Net change in cash

( 1,314,463 )

( 1,369,399 )

Cash, beginning of period

Cash, end of period

The accompanying notes are an integral part of

these financial statements

The accompanying notes are an integral part

of these financial statements

and Subsidiary

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements

Note 1 – The Company

Aeluma 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.

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.

We were originally incorporated as Parc Investments,

in the State of Delaware on August 21, 2020.

Prior to the Merger (as defined below), we were a “shell company” (as

defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

On June 22, 2021, our board of directors

and all of our pre-Merger stockholders approved a restated certificate of incorporation, which was effective upon its filing with the

Secretary of State of the State of Delaware on June 22, 2021 and through which we changed our name to “Aeluma, Inc.”

On June 22, 2021, our board of directors also adopted restated bylaws.

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.,

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

As a result of the Merger, we acquired the business

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,

In conjunction with the merger transaction, the company changed its year end to June 30.

Biond Photonics was incorporated in

February 2019.

Merger Agreement

On 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 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 our stockholders 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 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.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated

financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”)

for interim financial information and the instructions to Article 8 of Regulation S-X.

Accordingly, the financial statements do not include

all of the information and notes required by GAAP for complete financial statements.

The consolidated financial statements as of March

31, 2023 and 2022, are unaudited;

however, in the opinion of management such interim condensed consolidated financial statements reflect

all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.

The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in the Company’s

most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on September 28,

The results of operations for the period presented are not necessarily indicative of the results that might be expected for future

interim periods or for the full year.

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.

Going Concern

The Company incurred a net loss of $ 1,482,309

and $ 4,071,391 for the year ended June 30, 2022 and the nine months ended March 31, 2023, respectively.

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, or the commencement of profitable

revenue generating activities.

If adequate funds are not available or are not available on acceptable terms, the Company’s ability

to fund its operations, develop or enhance its sensors in the future or respond to competitive pressures would be significantly limited.

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

These conditions may raise substantial 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.

Basic Net Income (Loss) Per Share

Basic income (loss) per share is computed by dividing

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

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

and $ 1,530,041 for the three months ended September 30, 2023 and 2022, respectively, and has accumulated deficit of $ 10,544,375

at September 30, 2023.

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

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.

If adequate funds are not available or are not

available on acceptable terms, the Company’s ability to fund its operations, develop or enhance its sensors in the future or respond

to competitive pressures would be significantly limited.

Such limitations could require the Company to curtail, suspend or discontinue

parts of its business plan.

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 U.S.

Generally Accepted

Accounting Principles (“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.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements

have been presented in accordance with 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.

Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, should be read in conjunction with our Annual Report on Form

10-K for the fiscal year ended June 30, 2023.

The accompanying consolidated financial statements and footnotes have been condensed and

therefore do not contain all disclosures required by GAAP.

The interim financial data are unaudited;

however, in the opinion of Aeluma,

Inc., the interim data include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of

the results for the interim periods.

Results for interim periods are not necessarily indicative of those to be expected for the full

Use of Estimates and Assumptions

9 unchanged sentences

the estimates and the actual results, future results of operations will be affected.

Reclassification of Prior Year Presentation

For the three and nine months ended March 31,

2022, research & development expenses of $ 165,956 and $ 350,195 , respectively, have been reclassified for consistency with the current

year presentation.

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.

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

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.

21 unchanged sentences

The carrying values of the Company’s cash,

accounts payable, and accrued expenses approximate their fair value due to the relatively short maturity of these items.

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.

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.

Equipment is depreciated over five years , and leasehold improvements are amortized over

the remaining lease term.

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 less of the remaining lease term or the estimated useful lie of the

improvements.

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.

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.

Intangible Assets

Intangible assets are associated with the Aeluma.com

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

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

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 year.

Product sales:

Revenue is currently generated from multiple customers

for small-volume orders

Government contracts:

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.

The company recognized its revenue of $ 32,400

from product sales for sampling purchases for the three months ended September 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.

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.

The 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.

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

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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’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 form are subject to review by the taxing

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.

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 statements of operations.

The 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

110, Share-Based Payment.

For other service providers, the expected life was calculated using the contractual term of the

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.

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

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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 March 31, 2023.

Common Stock Offering

Immediately following the Merger, on June 22,

2021, 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, with gross proceed of $ 6,965,000 (before deducting placement agent fees and expenses of $ 949,736 ).

We held a second

closing on June 28, 2021 for an additional 402,500 shares of our 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, we sold a total of 4,000,000 shares of our common stock

with a total gross proceeds of $ 8,000,000 (before deducting total placement agent fees and expenses of $ 1,082,577 ).

The private placement

offering is referred to herein as the “Offering.”

On December 12, 2022, we 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

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 September 30, 2023.

On December 12, 2022, the Company sold an aggregate

of 517,000 shares of common stock in a private placement offering (the “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 ).

On January 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 January 10, 2023, we sold an aggregate of 214,667 shares of common stock,

with gross proceeds of $ 644,000 (before deducting placement agent fees and expenses of $ 28,640 ), pursuant to that same private placement.

On March 31, 2023, we sold an aggregate of 715,665 shares of common stock, with gross proceeds of $ 2,147,000 (before deducting placement

agent fees and expenses of $ 117,830 ), pursuant to the same private placement.

Accordingly, as of March 31, 2023, we sold a total of 1,447,332

shares of our common stock with a total gross proceeds of $ 4,342,000 (before deducting total placement agent fees and expenses of $ 270,855 )

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 ).

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 ).

Accordingly, 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.

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On October 27, 2020, the Company issued

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.

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 March 31, 2023,

Jonathan Klamkin had 1,109,679 vested shares and 514,241 unvested shares, and Lee McCarthy had 974,350 vested shares and 649,570 unvested

Lee McCarthy left the Company in November 2022.

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

The stock purchase agreement contains a repurchase option whereby unvested shares may be repurchased by the Company, at the Company’s

At September 30 2023, Jonathan Klamkin had 1,272,071 vested shares and 351,849 unvested shares, and Lee

McCarthy had 974,350 vested shares.

On November 17, 2022, Lee McCarthy left the Company and, on September 10, 2023, the Company

exercised its option to purchase 649,570 unvested restricted shares Lee McCarthy held for a total consideration of $ 4,001 , the

initial purchase price of these shares.

Registration Rights Agreement

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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.

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;

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 recorded.

1 unchanged sentence

Restricted Stock Awards

During 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 stock-based compensation for the value of the shares in excess of the purchase price paid by the advisors.

The stock-based compensation is expensed over

the service period.

For the three months ended March 31, 2023 and 2022, $ 163,347 and $ 163,348 , respectively, have been amortized in the

statements of operations and, for the nine months ended March 31, 2023 and 2022, $ 497,302 and $ 497,303 , respectively, have been amortized

in the statement of operations.

At March 31, 2023, $ 176,196 included in the deferred compensation amount on the balance sheets is expected

to be expensed in the next four months.

In March 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.

For the three and nine months ended March 31, 2023, $ 50,000 and $ 208,000 , respectively, has been

expensed in general and administrative in the statements of operations.

At March 31, 2023, $ 92,000 included in the deferred

compensation amount on the balance sheets is expected to be expensed in the next six months.

The 150,000 shares of common stock were

issued during nine months ended March 31, 2023.

In June 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.

compensation was expensed as consulting expense in the consolidated statements of operation over the service period.

In March 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 $ 300,000 which was expensed as consulting

expense in the consolidated statements of operation over the eighteen months.

For the three months ended September 30, 2023

and 2022, $ 11,957 and $ 274,977 , respectively, have been amortized in the consolidated statements of operations.

At September 30, 2023,

$ 41,077 of deferred compensation included in the balance sheets is expected to be expensed in next two years.

The following is a schedule summarizing restricted

stock awards for the periods indicated:

March 31, 2023

Three Months Ended

Nine Months Ended

Beginning balance

Ending balance

March 31, 2022

Three Months Ended

Nine Months Ended

Beginning balance

Ending balance

Outstanding at July 1, 2023

Outstanding at September 30, 2023

Outstanding at July 1, 2022

Outstanding at September 30, 2022

Stock Options

In July 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.

In December 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.

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.

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

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 .

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

Company through each vesting date.

In December of 2022, the Company issued 161,000

In December 2022, the Company issued 161,000

options to purchase common stock to employees.

The options have an exercise price of $2.00 or $2.10 and expire in 10 years with various

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

10 and 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.

1 unchanged sentence

the Company issued 109,750 options to purchase common stock to employees and directors.

The 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.

During the three months ended March 31, 2023, the Company also

issued 37,500 conditional options to purchase common stock to non-employee advisors.

The options have an exercise price of $ 3.00 and expire

in 10 years, vesting on the date when certain vesting conditions are met.

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 nine months ended March 31, 2023 and 2022:

Nine Months Ended

The 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.

During the three months ended March 31,

2023, the Company also issued 37,500 conditional options to purchase common stock to non-employee advisors.

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.

During the three months ended September 30, 2023,

the Company issued 5,000 options to purchase common stock to a consultant.

The options expire in 10 years and have an exercise

price of $ 3.00 or $ 3.90 with immediate vesting.

During the three months ended September 30, 2023 the Company issued 1,500 options to

purchase common stock to an employee.

The options, subject to the continued status as an employee to the Company through each vesting

date, expire in 10 years and have an exercise price of $ 2.90 with a vesting schedule of 48 months.

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 period presented:

Three Months Ended

September 30, 2023

Weighted-average fair value

4 unchanged sentences

Risk-free interest rate

1.15 % - 2.41 %

For the three months ended March 31, 2023

and 2022, stock-based compensation expenses for options granted were $ 127,102 and $ 41,114 , respectively.

For the nine months ended March

For the three months ended September 30,

2023 and 2022, stock-based compensation expenses for options granted were $ 240,577 and $ 70,090 , respectively.

Unrecognized stock-based

compensation expense was $ 1,292,801 and average expected recognition period was 2.8 years as of March 31, 2023.

The following is a schedule summarizing employee

and non-employee stock option activity for the period presented:

Number of Options

Exercise Price

Outstanding at January 1, 2023

Expired/cancelled

Outstanding at March 31, 2023

Exercisable at March 31, 2023

(1) Represents the excess of the fair value on the last day of period (which was $ 3.00 and $ 3.60 as of December 31, 2022 and March 31, 2023, respectively) over the exercise price, multiplied by the number of options.

compensation expense was $ 1,126,882 and average expected recognition period was 1.5 years as of September 30, 2023.

The following is a schedule summarizing stock

option activities for the periods presented:

Number of Options

Weighted Average

Exercise Price

Aggregate Intrinsic

Outstanding at January 1, 2022

Outstanding at July 1, 2023

Expired/cancelled

Outstanding at March 31, 2022

Exercisable at March 31, 2022

Outstanding at September 30, 2023

Exercisable at September 30, 2023

(1) Represents the excess of the fair value on the last day of period (which was $ 3.30 as of September 30, 2023) over the exercise price, multiplied by the number of options.

Number of Options

1 unchanged sentence

Exercise Price

Aggregate Intrinsic

Outstanding at July 1, 2022

Expired/cancelled

Outstanding at March 31, 2023

Exercisable at March 31, 2023

(1) Represents the excess of the fair

value on the last day of the period (which was $ 3.60 as of March 31, 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

Outstanding at March 31, 2022

Exercisable at March 31, 2022

Outstanding at September 30, 2022

Exercisable at September 30, 2022

Note 5 – Facility Operating Lease

3 unchanged sentences

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 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

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

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

The lease agreement waived the first three months of rent with payments commencing July 1, 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.

On July 1, 2023, one of the two options to extend was considered reasonably certain of exercise and the Company remeasured the ROU asset

and lease liability.

The Company recorded the net present value of $ 1,189,606 for both the ROU asset and lease liability on July 1, 2023.

The following table presents maturities of operating

lease liabilities on an undiscounted basis as of March 31, 2023:

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

For the year ended September 30,

Less imputed interest

Total operating lease liability

current portion

Lease liability, long term

The lease term and the discount rate for the lease

at March 31, 2023 is 3.0 years and 0.75 %, respectively.

The total lease payments were $ 24,360 and $ 39,041 for the three months ended March

31, 2023 and 2022, respectively and $ 97,078 and $ 117,124 for the nine months ended March 31, 2023 and 2022, respectively.

costs for common area operating expenses and electricity were $ 54,643 and $ 55,516 for the three months ended March 31, 2023 and 2022,

respectively, and $ 228,454 , and $ 173,488 for the nine months ended March 31, 2023 and 2022, respectively.

Beginning 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 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 $ 23,405 and $ 55,689 for the three months ended March 31, 2023 and 2022, respectively,

and $ 128,921 and $ 227,589 for the nine months ended March 31, 2023 and 2022, respectively.

Total lease liability

lease liability, current portion

Lease liability, long term portion

The lease term and the discount rate for the

lease at September 30, 2023 is 7.5 years and 4.00 %, respectively.

The total lease payments were $ 44,914 and $ 40,359 for the three months

ended September 30, 2023 and 2022, respectively.

The variable costs for common area operating expenses and electricity were $ 93,046 ,

and $ 103,795 for the three months ended September 30, 2023 and 2022, respectively.

In April 1, 2021, the Company subleased

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.

The Company recognized $ 31,351 sub-lease income, including

reimbursement of common area operating and utility costs, for the three months ended September 30, 2022.

The sub-lease ended in March

Note 6 – Warrants to Purchase Common

In connection with the Offering on December 22,

2022, the Company issued warrants of 29,067 to purchase common stock to the Placement Agents.

The warrants carry a term of 5 years and

an exercise price of $ 3.00 .

In connection with the Offering on January 10 and March 31, 2023, the Company issued warrants of 4,933 and

6,720 , respectively, 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 March 31, 2023:

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 September 30, 2023:

Number of Shares

6 unchanged sentences

Note 7 – Subsequent Events

One May 10, 2023, the Company held the final

closing of the Offering, pursuant to which they issued an aggregate of 570,166 shares of its common stock for aggregate gross proceeds

of $ 1,710,500 .

Pursuant to the final closing, the Company paid a cash placement agent fee in the amount of $ 136,840 and will issue placement

agent warrants to purchase up to 44,933 shares of common stock at an exercise price of $ 3.00 per share.

The Company has evaluated subsequent events and transactions that occurred after March 31, 2023 up through the date the Company issued

these unaudited consolidated financial statements on May 15, 2023.

All subsequent events requiring recognition as of March 31, 2023 have

been incorporated into these unaudited consolidated financial statements and there are no other subsequent events that require disclosure

in accordance with FASB ASC Topic 855, “Subsequent Events.”

On October 12, 2023,

the Company was awarded a government funding from U.S.

Navy for providing services and delivering materials in silicon photonics integration.

The award is a firm fixed price contract that shall be paid upon completion of performance for planned deliveries until October 21, 2024.

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

What changed 10-Q

Item 1. Financial Statements