What changed in this filing

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Item 1. Financial Statements

2024-02-12 compared with 2023-11-09 · 350 added, 341 removed, 188 unchanged (79% of the section changed)

1 unchanged sentence

and Subsidiary

Consolidated Balance Sheets

September 30,

Balance Sheets

Current assets:

22 unchanged sentences

Preferred stock, $ 0.0001 par value;

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

10,000,000 shares authorized, and none issued and outstanding at December 31, 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

50,000,000 shares authorized at December 31, 2023 and June 30, 2023, and 12,167,930 and 12,817,500 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 11,672,895 )

( 9,062,066 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of

these financial statements

accompanying notes are an integral part of these financial statements

and Subsidiary

Consolidated Statements of Operations (unaudited)

Statements of Operations (unaudited)

Three Months Ended

September 30,

Six Months Ended

Operating expenses:

4 unchanged sentences

Loss from operations

( 1,128,799 )

( 1,154,894 )

( 2,611,510 )

( 2,721,581 )

Other income:

Sub-lease income and other income

Sub-lease income & other income

Interest income

1 unchanged sentence

Loss before income tax expense

( 1,128,520 )

( 1,080,549 )

( 2,610,829 )

( 2,610,590 )

Income tax expense

$ ( 1,128,520 )

$ ( 1,080,549 )

$ ( 2,610,829 )

$ ( 2,610,590 )

Loss per share - basic and diluted

Weighted average common shares outstanding - basic and diluted

The accompanying notes are an integral part of

these financial statements

accompanying notes are an integral part of these financial statements

and Subsidiary

Consolidated Statement of Stockholders’

Equity (unaudited)

Three Months Ended September 30, 2023

Statement of Stockholders’ Equity (unaudited)

Months Ended December 31, 2023 and 2022

Stockholders’

Balance at July 1, 2023

Balance, October 1, 2023

$ ( 10,544,375 )

Repurchase of commons stock

Stock-based compensation

1 unchanged sentence

( 1,128,520 )

Balance at September 30, 2023

Balance, December 31, 2023

$ ( 11,672,895 )

Three Months Ended September 30, 2022

Additional paid-in

Total Stockholders’

Balance at July 1, 2022

Stockholders’

Balance, October 1, 2022

$ ( 5,212,525 )

Issuance of common stock, net of $ 124,385 offering costs

Issuance of common stock for services

Stock-based compensation

1 unchanged sentence

( 1,080,549 )

Balance at September 30, 2022

Balance, December 31, 2022

$ ( 6,293,074 )

The accompanying notes are an integral part of

these financial statements

Months Ended December 31, 2023 and 2022

Stockholders’

Balance, July 1, 2023

$ ( 9,062,066 )

Repurchase of common stock

Stock-based compensation

( 2,610,829 )

Balance, December 31, 2023

$ ( 11,672,895 )

Stockholders’

Balance, July 1, 2022

$ ( 3,682,484 )

Issuance of common stock, net of $ 124,385 offering costs

Issuance of common stock for services

Stock-based compensation

( 2,610,590 )

Balance, December 31, 2022

$ ( 6,293,074 )

accompanying notes are an integral part of these financial statements

and Subsidiary

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended

September 30,

Statements of Cash Flows (unaudited)

Six Months Ended

Operating activities:

18 unchanged sentences

Repurchase of common stock

Net cash used in financing activities

Proceeds from Private Placement, net of $ 124,385 offering costs

Net cash (used in) provided by financing activities

Net change in cash

( 2,648,636 )

( 1,369,399 )

Cash, beginning of period

Cash, end of period

The accompanying notes are an integral part

of these financial statements

accompanying notes are an integral part of these financial statements

and Subsidiary

Notes to Consolidated Financial Statements

Note 1 – The Company

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

to Consolidated Financial Statements (unaudited)

1 – The Company

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 be possible.

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 $ 1,482,309

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

(“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.

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.

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, Inc.

Company incurred a net loss of $ 2,610,829 and $ 2,610,590 for the six months ended December 31, 2023 and 2022, respectively, and

has accumulated deficit of $ 11,672,895 at December 31, 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.

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.

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.

financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

2 – Summary of Significant Accounting Policies

of Presentation

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.

This Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, should be read in conjunction with our Annual Report on Form

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

6 unchanged sentences

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

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.

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.

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

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.

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.

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

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.

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 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.

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:

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 receivable, accounts payable, accrued expenses and other current liabilities approximate

their fair value due to the relatively short maturity of these items.

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

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.

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

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;

(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;

(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.

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

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.

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.

These contracts may include cost reimbursement and fixed firm price terms.

The Company was awarded two government contracts

of $ 237,071 and $ 239,998 for providing services and delivering materials during the second quarter of 2024.

The awards are firm fixed

contracts that shall be paid upon completion of performance and recognized as revenue for next 12 months.

For the three months ended December 31, 2023, the Company recognized

its revenue of $ 262,992 from government contracts.

For the six months ended December 31, 2023, the company recognized its revenue of

$ 295,392 , of which $ 32,400 was from product sales for sampling purchases and $ 262,992 was from government contracts.

As of December 31,

2023, the aggregate amount to remaining performance obligations for the government contracts was $ 435,463 , which is expected to be recognized

as revenue within next 12 months.

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.

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.

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.

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.

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 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.

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

Authorized Shares

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 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 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

The Company’s federal and state return

forms 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.

Accounting Pronouncements

Company has evaluated all issued but not yet effective accounting pronouncements and determined that they are either immaterial or not

relevant to the Company.

3 – 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 stock.

No preferred shares were issued as of December 31, 2023.

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 ).

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.

The Offering was exempt from registration under

Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated by the SEC thereunder.

The common stock in the

Offering was sold to “accredited investors,” as defined in Regulation D, and was conducted on a “reasonable best efforts”

Issued and Vested Shares to Officers

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

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.

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 ).

On May 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 ).

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.

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.

and Vested Shares to Officers

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.

At December 31, 2023, Jonathan Klamkin had 1,353,267 vested

shares and 270,653 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.

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;

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;

therefore, no liability has been recorded.

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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.

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 was expensed

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

In March 2022, the Company signed an agreement

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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,

For the three months ended December 31, 2023 and

2022, $ 6,981 and $ 216,977 , respectively, have been amortized in the consolidated statements of operations, and, for the six months ended

December 31, 2023 and 2022, $ 18,938 and $ 491,954 , respectively, have been amortized in the consolidated statements of operations.

31, 2023, $ 34,096 of deferred compensation included in the balance sheets is expected to be expensed in next two years.

1 unchanged sentence

stock awards for the periods indicated:

Outstanding at July 1, 2023

Outstanding at September 30, 2023

Outstanding at July 1, 2022

Outstanding at September 30, 2022

December 31, 2023

Three Months Ended

Six Months Ended

Beginning balance

Ending balance

December 31, 2022

Three Months Ended

Six Months Ended

Beginning balance

Ending balance

Stock Options

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

vesting schedules from six months to 48 months, 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 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.

During the three months ended June 30, 2023,

During the three months ended December 31, 2022,

the Company issued 161,000 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 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.

During the three months ended June 30, 2023, the Company issued 163,000 options

to purchase common stock to a consultant and 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 6,500 options to purchase common stock to consultants.

The options expire in 10 years and have an exercise

price that range from $ 2.90 to $ 3.90 with immediate vesting.

During the three months ended December 31, 2023,

the Company issued 7,000 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

price that range from $ 2.50 to $ 3.43 with immediate vesting.

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 the period presented:

Six Months Ended

Weighted-average fair value

Expected volatility

104.9 % – 106.6 %

Expected term

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Risk-free interest rate

For the three months ended September 30,

3.94 % – 4.92 %

For the three months ended December 31, 2023

and 2022, stock-based compensation expenses for options granted were $ 135,919 and $ 107,361 , respectively.

For the six months ended December

31, 2023 and 2022, stock-based compensation expenses for options granted were $ 376,496 and $ 177,451 , respectively.

Unrecognized stock-based

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

compensation expense was $ 942,146 and average expected recognition period was 1.5 years as of December 31, 2023.

The following is a schedule summarizing stock

option activities for the periods presented:

Number of Options

Three Months Ended

Exercise Price

Outstanding at July 1, 2023

Expired/cancelled

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

Weighted Average

Outstanding at October 1, 2023

Expired/forfeited

Outstanding at December 31, 2023

Exercisable at December 31, 2023

Outstanding at October 1, 2022

Expired/forfeited

Outstanding at December 31, 2022

Exercisable at December 31, 2022

(1) Represents the excess of the

fair value on the last day of period (which was $ 2.90 and $ 3.00 as of December 31, 2023 and 2022, respectively) over the exercise price,

multiplied by the number of options.

Six Months Ended

Exercise Price

Outstanding at July 1, 2023

Expired/cancelled

Outstanding at September 30, 2022

Exercisable at September 30, 2022

Expired/forfeited

Outstanding at December 31, 2023

Exercisable at December 31, 2023

Outstanding at July 1, 2022

Expired/forfeited

Outstanding at December 31, 2022

Exercisable at December 31, 2022

(1) Represents the excess of the

fair value on the last day of period (which was $ 2.90 and $ 3.00 as of December 31, 2023 and 2022, respectively) over the exercise price,

multiplied by the number of options.

Note 5 – Facility Operating Lease

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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

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.

1 unchanged sentence

The following table presents maturities of operating

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

For the year ended September 30,

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

For the year ending June 30,

Remainder of 2024

Less imputed interest

2 unchanged sentences

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 lease term and the discount rate for the lease

at December 31, 2023 is 7.3 years and 4.00 %, respectively.

The total lease payments were $ 49,344 and $ 32,359 for the three months ended

December 31, 2023 and 2022, respectively, and $ 94,258 and $ 64,719 for the six months ended December 31, 2023 and 2022, respectively.

variable costs for common area operating expenses and electricity were $ 58,800 , and $ 70,016 for the three months ended December 31, 2023

and 2022, respectively and $ 151,846 and $ 173,811 for the six months ended December 31, 2023 and 2022.

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,

2 unchanged sentences

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

The Company recognized sub-lease income of $ 74,165 and $ 110,516 ,

including reimbursement of common area operating and utility costs, for the three and six months ended December 31, 2022.

The sub-lease

ended in March 2023.

Note 6 – Warrants to Purchase Common

4 unchanged sentences

The following warrants to purchase common stock

were outstanding as of September 30, 2023:

were outstanding as of December 31, 2023:

Number of Shares

2 unchanged sentences

June 22, 2026

June 28, 2026

December 22, 2027

1 unchanged sentence

March 31, 2028

Note 7 – 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