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Item 8. Financial Statements and Supplementary Data

2025-09-09 compared with 2024-09-27 · 526 added, 379 removed, 247 unchanged (79% of the section changed)

Financial Statements and Supplementary

Index to Consolidated

Financial Statements

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB No.

Consolidated Balance Sheets as of June 30, 2025 and 2024 F-3

Consolidated Statements of Operations for the Years Ended June 30, 2024 and 2023 F-4

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended June 30, 2024 and 202 3 F-5

Consolidated Statements of Cash Flows for the Years Ended June 30, 2024 and 202 3 F-6

Consolidated Statements of Operations for the Fiscal Years Ended June 30, 2025 and 2024 F-4

Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended June 30, 2025 and 2024 F-5

Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2025 and 2024 F-6

Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

and Stockholders of

Opinion on the Consolidated

Financial Statements

We have audited the accompanying

consolidated balance sheets of Aeluma, Inc.

and Subsidiary (the Company) as of June 30, 2024 and 2023, and the related consolidated statements

of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2024, and the related

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

In our opinion, the consolidated financial statements present

fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2024 and 2023, and the results of

its operations and its cash flows for each of the years in the two-year period ended June 30, 2024, in conformity with accounting principles

generally accepted in the United States of America.

Explanatory Paragraph

– Going Concern

The accompanying consolidated

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

As discussed in Note 1 to the consolidated

financial statements, the Company has incurred significant operating losses and negative cash flows from operations, and has generated

limited revenue.

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

plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Aeluma, Inc.

and Subsidiary (the Company) as of June 30, 2025 and 2024, and the related consolidated statements of operations,

stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2025, and the related notes (collectively

referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the consolidated financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash

flows for each of the years in the two-year period ended June 30, 2025, in conformity with accounting principles generally accepted in

the United States of America.

Basis for Opinion

These consolidated financial

statements are the responsibility of the Company’s management.

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

consolidated financial statements based on our audit.

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

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

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

We conducted our audit

in accordance with the standards of the PCAOB.

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

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

The Company is not

required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we

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

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

These consolidated financial statements are the

responsibility of the Company’s management.

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

statements based on our audit.

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

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

federal securities laws

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

We conducted our audit in accordance with the

standards of the PCAOB.

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

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

The Company is not required to have, nor were we

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

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

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

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing

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

procedures that respond to those risks.

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

in the consolidated financial statements.

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

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

We believe that our audit

provides a reasonable basis for our opinion.

Our audit included performing procedures to assess

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

that respond to those risks.

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

consolidated financial statements.

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

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

We believe that our audit provides

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters

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

to the audit committee and that:

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

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

The critical audit matters are matters arising

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

committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved

our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

Snyder & Jacobs LLP

Rose, Snyder &

We have served as the

Company’s auditor since 2021

/s/ Rose, Snyder & Jacobs LLP

Rose, Snyder & Jacobs LLP

We have served as the Company’s auditor

Encino, California

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Consolidated Balance Sheets

($ in thousands, except per share data)

Current assets:

Cash and cash equivalents

Certificate of deposit

Accounts receivable

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Property and equipment, net

Intangible assets, net

Intangible assets

Right of use asset - operating

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Accrued expenses and other current liabilities

Lease liability, current portion

Lease liability - operating, current portion

Total current liabilities

Lease liability, long term portion

Lease liability - operating, long-term portion

Total liabilities

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Common stock, $ 0.0001 par value:

50,000,000 shares authorized, and 12,178,424 and 12,817,500 shares issued and outstanding at June 30, 2024 and 2023, respectively

50,000,000 shares authorized as of June 30, 2025 and 2024, and 15,864,360 and 12,178,424 shares issued and outstanding as of June 30, 2025 and 2024, respectively

Additional paid-in capital

Accumulated deficit

( 13,624,361 )

( 9,062,066 )

Total stockholders’ equity

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Consolidated Statements of Operations

Revenue (Note 2)

($ in thousands, except per share data)

Year Ended June 30,

Operating expenses:

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Loss from operations

( 4,563,308 )

( 5,509,685 )

Other income:

Sub-lease rental income and other income

Other income (expense):

Interest income

Total other income, net

Amortization of discount on convertible notes

Changes in fair value of derivative liabilities

Total other income (expense), net

Loss before income tax expense

( 4,562,295 )

( 5,379,582 )

Income tax expense

$ ( 4,562,295 )

$ ( 5,379,582 )

Loss per share - basic and diluted

Net loss per share - basic and diluted

Weighted average common shares outstanding - basic and diluted

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and Subsidiary

Consolidated Statement of Stockholders’

Consolidated Statements of Stockholders’

($ in thousands)

Stockholders’

Balance, July 1, 2023

$ ( 3,682,484 )

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

Issuance of common stock for services (Note 4)

Repurchase of common stock (Note 4)

Stock warrants exercised

Stock-based compensation

( 5,379,582 )

Balance, June 30, 2024

$ ( 9,062,066 )

Repurchase of common stock (Note 3)

Stock warrant exercised

Issuance of common stock, net of offering costs (Note 4)

Conversion of convertible notes (Note 3)

Conversion of derivative liabilities (Note 2)

Stock options exercised

Stock warrants exercised

Stock-based compensation

( 4,562,295 )

Balance, June 30, 2025

$ ( 13,624,361 )

The accompanying notes are an integral part of

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Consolidated Statements of Cash Flows

($ in thousands)

Year Ended June 30,

Operating activities:

$ ( 4,562,295 )

$ ( 5,379,582 )

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

Issuance of shares for services

Amortization of deferred compensation

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Depreciation and amortization expense

Change in accounts receivable

Change in prepaids and other current assets

Change in accounts payable

Change in accrued expenses and other current liabilities

Amortization of discount on convertible notes

Changes in fair value of derivative liabilities

Changes in operating assets and liabilities:

Accounts receivable

Prepaids and other current assets

Accounts payable

Accrued expenses and other current liabilities

Net cash used in operating activities

( 3,454,779 )

( 3,637,972 )

Investing activities:

Purchase of equipment

Payment for leasehold improvements

Net cash used in investing activities

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Repurchase of common stock

Proceeds from Private Placement, net of offering costs

Net cash (used in) provided by financing activities

Net change in cash

( 3,780,618 )

Cash, beginning of period

Cash, end of period

Proceeds from stock option exercise

Proceeds from convertible notes issuance

Proceeds from Public Offering, net of offering costs

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents, and certificate of deposit

Cash and cash equivalents, and certificate of deposit, beginning of period

Cash and cash equivalents, and certificate of deposit, end of period

Supplemental non-cash disclosures:

Conversion of convertible notes to stockholders’ equity

Conversion of derivative liabilities to stockholders’ equity

The accompanying notes are an integral part of

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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

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.

Going Concern

The Company incurred a net loss of $ 4,562,295

and $ 5,379,582 for the years ended June 30, 2024 and 2023, respectively, and has accumulated deficit of $ 13,624,361 at June 30, 2024.

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.

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.

(the “Company”) develops novel optoelectronic

and electronic devices for sensing, communication, and computing applications.

Aeluma has pioneered a technique to produce semiconductor

materials and chips using high-performance compound semiconductors on large-diameter substrates commonly used to manufacture mass-market

microelectronics.

This enables cost-effective manufacturing of high-performance photodetectors and photodetector arrays for imaging applications

in mobile devices and other applications.

Aeluma’s technology is broadly applicable across mobile, automotive, artificial intelligence

(AI), defense & aerospace, communication, augmented reality (AR), virtual reality (VR), high-performance computing, and quantum computing.

Aeluma is based in Goleta, California, where the Company operates in a 9,000 sq.

facility with a state-of-the-art research and development

(“R&D”)/manufacturing cleanroom and access to world-class rapid prototyping capabilities.

The facility houses unique equipment

for scalable manufacturing.

Aeluma also partners with production-scale fabrication foundries and packaging companies.

Aeluma maintains

extensive patent protection and trade secrets related to its materials, manufacturing technology, and applications.

Note 2 – Summary of Significant Accounting Policies

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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.

have been presented in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The summary of significant

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

Such financial statements

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

and objectivity.

Use of Estimates and Assumptions

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These reclassifications had no effect on the reported consolidated financial statements

Cash and Cash Equivalents

Cash and Cash Equivalents, and Certificate of Deposit

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 invests its excess cash in certificates of deposit issued by financial institutions with high credit ratings.

As of June 30,

2025, the Company held a certificate of deposit with a carrying value of $ 12.1 million, including $ 112 thousand of interest income.

certificate of deposit bears interest at a rate of 3.74 %.

Concentration of Risk

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

The Company manages its credit risk associated

with exposure to its direct customers on outstanding accounts receivable through the application of credit approvals and other monitoring

The Company closely monitors the aging of accounts receivable from its direct customers.

Significant customers are those that

represent 10 % or more of revenue or accounts receivable.

For the fiscal year ended June 30, 2025, 71 % of our revenue was derived from

Customer E and, for the fiscal year ended June 30, 2024, 36 %, 31 % and 17 % of our revenue was derived from Customer A, B and C, respectively.

As of June 30, 2025, 100 % of accounts receivable was attributable to Customer E and, as of June 30, 2024, 18 %, 28 % and 54 %.

receivable were attributable to Customer C, D and F, respectively.

Customers A, B, C, D and E are government agencies

Our chief operating decision maker (“CODM”),

the Chief Executive Officer , manages the Company’s business activities as one single operating and reportable segment

at the consolidated level.

Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and

assess performance.

Further, the CODM reviews and utilizes revenue, operating expenses, and other income (expense) at the consolidated

level to manage the Company’s operations.

Convertible Debt Instruments

The Company evaluates agreements, including any convertible debt instruments,

to determine if those agreements or any embedded components of those agreements qualify as derivative financial instruments to be

separately accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification(“ASC”)

Topic 815 “ Derivatives and Hedging ” (“ASC 815” ).

The accounting treatment

of derivative financial instruments requires that the Company record any bifurcated embedded features at their fair values as of the inception

date of the agreement and at fair value as of each subsequent balance sheet date.

Any change in fair value is recorded in earnings as

non-operating, non-cash income or expense.

The Company reassesses the classification of its derivative instruments at each balance sheet

If the classification changes as a result of events during the period, the agreement is reclassified as of the date of the

event that caused the reclassification.

Bifurcated embedded features are recorded at their initial fair values, which creates an additional

debt discount to the host instrument.

The Company amortizes the respective debt discount over the term of the notes, using the effective

interest method.

See Note 3 – Convertible Notes.

Fair Value of Financial Instruments

As defined in Financial Accounting Standards Board

(“FASB”) ASC Topic No.

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

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

at the measurement date.

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

Based on this approach, the Company

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

These inputs can be readily observable,

market-corroborated or generally unobservable inputs.

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

and minimize the use of unobservable inputs.

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

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

The fair value hierarchy ranks the quality and the

reliability of the information used to determine fair values.

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

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

As defined in FASB ASC Topic No.

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.

Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

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

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

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

Level 2 – Other inputs

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short maturity of these items.

Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair

value when a significant event occurs.

The Company had no financial assets or liabilities carried and measured on a nonrecurring basis

during the reporting periods.

Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value

each time a financial statement is prepared.

For recurring fair value measurement categorized

within Level 3, assets and liabilities whose value is determined using a market standard valuation technique are included and described

When observable inputs are not available, the market standard techniques for determining the estimated fair value of certain securities

that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that

are not observable in the market or cannot be derived principally from or corroborated by observable market data.

Management believes

these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would

use when pricing similar assets and liabilities.

The Company’s embedded derivatives are classified in Level 3 using the Black-Scholes

option-pricing model since their values include significant unobservable inputs.

On March 25, 2025, holders of convertible promissory

notes elected to convert the convertible notes into common stock.

As part of the conversion, the Company remeasured the fair value of

the embedded derivative liabilities immediately prior to conversion.

The fair value of the embedded derivatives in our convertible notes

as of the conversion date was determined based on a fair market value of $ 6.25 as of March 25, 2025.

All derivative liabilities were exercised, and

as of June 30, 2025, the Company had no remaining outstanding derivative liabilities.

Value of Embedded Derivatives ($ in thousands)

Beginning balance at July 1, 2024

New derivative liabilities

Change in fair value of derivative liabilities

Conversion of derivative liabilities

Ending balance at June 30, 2025

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.

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 lesser of the remaining lease term or the estimated useful life of

the improvements.

Repairs and maintenance to these assets are charged to expenses 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

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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

(3) determining the transaction price;

(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

The Company does not have any significant financing components associated with its revenue contracts, as payment is received

within one year.

and (5) recognizing revenue when,

or as, the entity satisfies a performance obligation.

Revenue is recognized when control of the promised goods or services is transferred

to the customer.

For performance obligations that are satisfied at a single point in time, the Company recognizes revenue at the point

when control transfers, which is typically upon delivery, customer acceptance, or another specified milestone defined in the contract.

For performance obligations satisfied over time, revenue is recognized as progress is made toward completion, using a measure that best

depicts the transfer of control to the customer.

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 expenses.

does not have any significant financing components associated with its revenue contracts, as payment is received within one year.

Company currently draws revenue from two primary sources:

Commercial product and service contracts:

Revenue is currently generated from multiple customers for research and development related services and small-volume orders

Revenue is currently generated from multiple customers for R&D-related services and small-volume orders.

Government contracts:

Revenue is principally generated under research and development contracts with agencies of the U.S.

Revenue is principally generated under R&D contracts with agencies of the U.S.

government or with prime contractors.

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

the year ended June 30, 2024, the Company was awarded six government contracts of $ 1,323,237 for

providing services and delivering materials.

The awards are firm fixed contracts that shall be paid upon completion of performance and

recognized as revenue over an expected term of 12 months.

For the year ended June 30, 2024, the Company

recognized its revenue of $ 918,554 , of which $ 853,798 was from government contracts and $ 64,756 was from product sales for sampling purchases.

As of June 30, 2024, the aggregate amount to remaining performance obligations for the government contracts was $ 690,825 .

Loss Per Share

Basic loss per share is computed by dividing net

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

Diluted loss per

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

outstanding plus potential dilutive common shares outstanding during the period.

Potential dilutive securities, comprised of stock warrants

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

Dilutive impact of potential

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

These contracts may include cost-reimbursement or fixed-price terms.

The Company capitalizes certain incremental costs

incurred to obtain or fulfill a contract when such costs are expected to be recoverable.

Prepaid costs, such as advance payments to vendors

or subcontractors directly related to a customer contract, are recorded as assets and subsequently expensed consistent with the transfer

of goods or services to the customer.

Government contracts include both cost-reimbursement

and fixed-price contracts.

Cost-reimbursement contracts provide for the reimbursement of allowable costs plus the payment of a fee.

contracts fall into four basic types:

(i) cost-sharing contract under which government reimburses only a portion of the incurred costs,

(ii) cost plus fixed fee contracts which provide for the payment of a fixed fee irrespective of the final cost of performance, (iii) cost

plus incentive fee contracts which provide for increases or decreases in the fee, within specified limits, based upon actual results as

compared to contractual targets relating to such factors as cost, performance and delivery schedule, and (iv) cost plus award fee contracts

which provide for the payment of an award fee determined at the discretion of the customer based upon the performance of the contractor

against pre-established criteria.

Under cost-reimbursement type contracts, the contractor is reimbursed periodically for allowable costs

and is paid a portion of the fee based on contract progress.

Fixed-price contracts establish a set price for goods or services, which

may be firm or adjustable under specific conditions.

Adjustable fixed-price contracts can include elements such as ceiling or target prices,

which are only subject to change through contract clauses that allow for equitable adjustments.

Firm-fixed-price contracts do not permit

any price changes based on the contractor’s actual costs, placing full financial risk and responsibility on the contractor.

fixed-price contracts with economic price adjustments allow for price changes either increases or decreases based on predefined events

or conditions.

For the fiscal year ended June 30, 2025, the Company was awarded six

government contracts totaling $ 13.8 million for the provision of services and delivery of materials.

These awards are cost-reimbursement

and firm-fixed-price contracts, under which payments are made upon completion of specified performance milestones.

Revenue associated

with these contracts will be recognized upon achievement of designated milestones.

For the fiscal year ended June 30, 2025, the Company

recognized total revenue of $ 4.7 million, consisting of $ 4.4 million from all obligated government contracts and $ 266 thousand from product

sales related to sampling or development activities.

For the fiscal year ended June 30, 2024, the Company recognized total revenue of

$ 919 thousand, consisting of $ 854 thousand from government contracts and $ 65 thousand from product sales related to sampling or development

As of June 30, 2025, total remaining performance

obligations under all obligated government contracts amounted to $ 10.2 million.

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.

income (loss) per share is computed by dividing the net income (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.

The dilutive impact of potential common shares resulting from common stock equivalents is determined by applying the treasury stock method.

For the fiscal year ended June 30, 2025, 1,546,675 stock options were excluded from the calculation of diluted income per share as their

inclusion would have been anti-dilutive.

Stock-Based Compensation

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

the SEC Staff Accounting Bulletin No.

the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No.

110, Share-Based Payment.

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

contractual term of the award.

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

The Company has

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

Treasury securities with a maturity equivalent to the expected

term of the options.

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.

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The resulting deferred tax assets will be offset

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

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

The primary difference between income tax expense attributable to

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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.

New Accounting Pronouncements Adopted

FASB Accounting Standards Updates (“ASU”)

2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This expands disclosures about

a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim

segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information

in assessing segment performance and allocating resources.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023

and interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively.

The Company adopted ASU

2023-07 in 2025 and it did not have an impact on the Company’s financial position or results of operation as it impacts disclosures only.

Recent Accounting Pronouncements under Evaluation

In December 2023, the FASB issued ASU No.

2023-09, Income

Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU amends the disclosure requirements for income taxes, including

the requirement for further disaggregation of the income tax rate reconciliation and income taxes paid disclosures.

The amendments in

this guidance must be applied prospectively, with the option to apply retrospectively.

This guidance is effective for fiscal years beginning

after December 15, 2024.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements,

and the adoption is not expected to have a significant impact on the consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03, Disaggregation

of Income Statement Expenses (DISE) .

The ASU requires additional disclosure regarding specific types of expenses included in the income

This guidance applies to all public business entities and is effective for annual reporting periods beginning after December

15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027.

The requirements will be applied

prospectively with the option for retrospective application.

The Company is currently evaluating the impact of this new standard on its

consolidated financial statements, and the adoption is not expected to have a significant impact on the consolidated financial statements.

Note 3 – Convertible Notes

Between August 5, 2024 and August 27, 2024, we

issued convertible promissory notes in the aggregate principal amount of $ 3.1 million to 10 accredited investors, pursuant to a private

note financing.

The Notes were set to mature in June 2026 and did not carry any interest.

The Notes were convertible into shares of the

Company’s common stock par value $ 0.0001 per share (the “Common Stock”) upon the occurrence of certain events, (i.e.,

qualified financing resulting in at least $ 5.0 million to the Company, if the Common Stock was uplisted to a national securities exchange

or if neither of those such events occurred prior to the maturity date, (together with Sale of the Company (as hereinafter defined), a

“Conversion Event”)).

In the event the Company did not complete a qualified financing or uplist at or before the maturity

date, the outstanding balance of the Notes shall automatically convert without any further action by the Holder into shares of the Company’s

common stock at a conversion price equal to eighty-five percent ( 85 %) to the VWAP of the Common Stock on the OTC Markets for the five

trading days immediately prior to maturity date.

The Note also provided that if there was a Sale of the Company, as defined in the Note,

the Holder could elect to receive a cash payment equal to the aggregate amount of principal then outstanding under such Holder’s

Note or convert the Note into shares of Common Stock equal to 85 % of the VWAP of the Common Stock on the OTC Markets for the five trading

days immediately prior to the Sale of the Company.

Although the conversion price was dependent upon the type of Conversion Event that

occurred, the Note carried a ceiling and floor price:

the applicable conversion price was not lower than 85 % of the 5-day VWAP on the

applicable Closing Date (the “Floor Price”) nor was the applicable conversion price be higher than $ 3.50 per share (the “Ceiling

the Floor Price and Ceiling Price shall automatically adjust in the event of a stock split or consolidation by the Company.

Since the Floor Price was tied to the Closing Date, the Floor Price differed for investors who were part of different closings.

Price for the investors who participated in the closings was equal to $ 2.47 or $ 2.68 per share.

The Investors were granted piggyback registration

rights for the shares of Common Stock underlying the Note.

The Note Purchase Agreement also contained customary

representations and warranties of the Company and the Investors, indemnification obligations of the Company, termination provisions, and

other obligations and rights of the parties.

The Company analyzed the embedded features of

the convertible notes and the debt discount is being amortized over the term of the convertible notes using the effective interest

method and the derivative liabilities are marked-to-market at each reporting date.

See Fair Value of Financial Instruments

in Note 2 – Summary of Significant Accounting Policies for additional information.

On March 25, 2025, the Company determined that

a Conversion Event had occurred pursuant to the terms of the Notes.

As a result, certain holders elected to convert their Notes at the

applicable Ceiling Price of $ 3.50 per share, resulting in the issuance of an aggregate of 898,573 shares of Common Stock in exchange for

$ 3.1 million in outstanding principal under the Notes.

Following the conversion, the Company has no further obligations under the converted

The shares issued upon conversion are subject to piggyback registration rights previously granted to the investors.

Offering of Common Stock in Note 4 – Stockholders’ Equity

For the fiscal year ended June 30, 2025, the Company

recorded amortization of discount on convertible notes of $ 715 thousand.

The carrying amount of convertible notes, totaling $ 1.7 million,

including unamortized debt discount of $ 1.5 million, was reclassed to equity.

As of June 30, 2025, the Company’s convertible

notes are as follows ($ in thousands):

Principal amounts of convertible notes

unamortized debt discount

Convertible notes, net of discount

Conversion of convertible notes

Principal amounts of convertible notes

Note 4 – Stockholders’ Equity

6 unchanged sentences

were issued as of June 30, 2025.

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 ).

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

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 June 30 2024, Jonathan Klamkin had 1,515,659 vested shares and 108,261 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 October 27, 2020, the Company issued 1,623,920 shares

of common stock each to Jonathan Klamkin, Director and Chief Executive Officer, and Lee McCarthy, Director, Interim Chief Financial Officer

and Chief Operations Officer, for $ 10 thousand from 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.

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 thousand, the initial purchase price of these shares.

At June 30, 2025, all of Jonathan

Klamkin’s shares vested.

Registration Rights Agreement

21 unchanged sentences

therefore, no liability has been recorded.

The Company filed the Registration Statement on

Form S-1 with the SEC, and it was declared effective on March 26, 2025.

As a result, the Company has satisfied the applicable filing and

effectiveness obligations under the Registration Rights Agreement and does not expect to pay any damages pursuant to this agreement.

no liability has been recorded.

Public Offering of Common Stock

On March 26, 2025, the Company entered into an

Underwriting Agreement (“UA”) with Craig-Hallum Capital Group LLC in connection with a public offering of 2,285,714 shares

of its common stock at a price of $ 5.25 per share.

The Company also granted the Underwriter a 30-day option to purchase up to an additional

342,857 shares to cover over-allotments, which was exercised in full on March 27, 2025.

The offering closed on March 28, 2025.

The offering was conducted pursuant to the Company’s

registration statements on Form S-1 (File No.

333-285469), declared effective by the SEC on March 25, 2025, and on Form S-1MEF filed under

Rule 462(b), effective March 26, 2025.

Total gross proceeds from the offering, including

the over-allotment option, were $ 13.8 million.

Net proceeds, after underwriting discounts and offering expenses, were $ 12.6 million.

Company intends to use the proceeds for business development, scaling manufacturing operations, and general corporate purposes.

Under the terms of the UA, the Company provided

a 7.0 % underwriting discount per share and issued to the Underwriter warrants to purchase up to 5.0 % of the total shares sold in the offering

(including the over-allotment shares), with an exercise price equal to 115 % of the public offering price.

See Note 7 - Warrants

In connection with the offering, the Company,

as well as its directors and officers, agreed to a 90-day lock-up period restricting sales or transfers of Company securities, subject

to customary exceptions.

The Underwriter has the discretion to release these restrictions at any time.

Note 5 – Stock-Based Compensation

Restricted Stock Awards

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.

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

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 years ended June 30, 2024 and 2023, $ 32,900

and $ 920,464 , respectively, have been amortized in the consolidated statements of operations.

At June 30, 2024, $ 20,133 of deferred compensation

included in the balance sheets is expected to be expensed within 12 months.

The following is a schedule summarizing restricted

stock awards for the periods indicated:

The Company has entered into various consulting

agreements that involved the issuance of common stock in exchange for future services.

These agreements included time-based vesting provisions

and repurchase rights tied to service terms.

In connection with these agreements, the Company recorded deferred compensation for the fair

value of the shares in excess of the amounts paid.

The deferred compensation is recognized as consulting expense in the consolidated statements

of operations over the respective service periods.

For the fiscal years ended June 30, 2025 and 2024,

$ 20 thousand and $ 33 thousand, respectively, have been amortized in the consolidated statements of operations.

As of June 30, 2025, there

was no deferred compensation included in the consolidated balance sheets, as all deferred compensation had been fully expensed.

The following is a schedule summarizing restricted stock awards for

the periods indicated:

Outstanding at July 1, 2023

1 unchanged sentence

Outstanding at June 30, 2025

Stock Options

During the three months ended December 31, 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 nine 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 that ranges from $ 2.50 to $ 3.43 with immediate vesting.

During the three months ended March 31, 2024,

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 $ 2.99 to $ 3.50 with immediate vesting.

During the three months ended March 31, 2024, the Company issued 100,821

options to purchase common stock to board of directors.

The options expire 10 year and vest in nine months with an exercise price of $ 2.99 .

Common Stock Options

For the fiscal year ended June 30, 2024, the Company granted stock

options of 20,000 and 100,821 to consultants and members of the board of directors, respectively.

The stock options granted to consultants

expire in 10 years have exercise prices ranging from $ 2.50 to $ 3.90 , and vest immediately.

Stock options granted to members of the board

of directors expire in 10 years have an exercise price of $ 2.99 , and vest in nine months.

For the fiscal year ended June 30, 2025, the Company granted stock

options of 78,000 and 723,354 to consultants, and employees and members of the Company’s board of directors, respectively.

options granted to consultants expire in 10 years, have exercise prices ranging from $ 2.97 to $ 3.51 and vest in six months to 2 years.

Stock options granted to employees and members of board of the Company’s directors expire in 10 years, have exercise prices ranging

from $ 5.93 to $ 18.99 , and vest in one month to forty-eight 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 the period presented:

granted using the Black-Scholes option-pricing model.

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

for the period presented:

Year Ended June 30,

10 unchanged sentences

3.94 % - 4.92

For the years ended June 30, 2024 and 2023, stock-based

compensation expenses for options granted were $ 732,167 and $ 448,444 , respectively.

Unrecognized stock-based compensation expense was

$ 857,026 and average expected recognition period was 1.1 years as of June 30, 2024.

The following is a schedule summarizing stock

option activities for the periods presented:

For the fiscal years ended June 30, 2025 and 2024,

stock-based compensation expenses for options granted were $ 1.9 million and $ 732 thousand, respectively.

Unrecognized stock-based compensation

expense was $ 4.1 million, and the average expected recognition period was 1.5 years as of June 30, 2025.

The following is a schedule summarizing stock option activities for

the periods presented ($ in thousands, except per share data):

Exercise Price

Outstanding at July 1, 2024

Expired/cancelled

Reversal of Expired/forfeited

Outstanding at June 30, 2025

Exercisable at June 30, 2025

(1) Represents the excess of the fair value on the last day of

period (which was $ 3.59 as of June 30, 2024) over the exercise price, multiplied by the number of options.

Exercise Price

Outstanding at July 1, 2023

Expired/cancelled

Expired/forfeited

Outstanding at June 30, 2024

Exercisable at June 30, 2024

(1) Represents the excess of the fair value on the last day of

period (which was $ 2.90 as of June 30, 2023) over the exercise price, multiplied by the number of options.

(1) Represents

the excess of the fair value on the last day of the period (which was $ 16.37 and $ 3.59 as of June 30, 2025 and 2024, respectively) over

the exercise price, multiplied by the number of options.

Note 6 – Facility Operating Lease

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

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

The Company determined the lease

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

operating lease for a facility in Santa Barbara, California with total lease payments of $782 thousand.

The Company determined the

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

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.

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.

At the commencement of the lease,

the net present value of the lease payments was $ 768 thousand.

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

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 $ 1.2 million 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 June 30, 2024:

lease liabilities on an undiscounted basis as of June 30, 2025 ($ in thousands):

For the years ending June 30,

Less imputed interest

Total lease liability

lease liability, current portion

Lease liability, long term portion

Total lease liability - operating

lease liability - operating, current portion

Lease liability - operating, long-term portion

The lease term and the discount rate for the lease

at June 30, 2024 is 6.8 years and 4.00 %, respectively.

The total lease expenses were $ 167,097 and $ 129,437 for the years ended June 30,

2024 and 2023, respectively.

The variable costs for common area operating expenses and electricity were $ 240,431 and $ 264,280 for the

years ended June 30, 2024 and 2023, 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 sub-lease income of $ 128,921 , including

reimbursement of common area operating and utility costs, for the year ended June 30, 2023.

The sub-lease ended in March 2023.

at June 30, 2025 are 5.8 years and 4.00 %, respectively.

The total lease expenses were $ 168 thousand and $ 167 thousand for the years ended

June 30, 2025 and 2024, respectively.

The variable costs for common area operating expenses and electricity were $ 231 thousand and $ 240

thousand for the years ended June 30, 2025 and 2024, respectively.

Note 7 – Warrants to Purchase Common

In connection with the Offering held from December

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

The warrants carry a term

of 5 years and an exercise price of $ 3.00 .

In connection with the public offering completed

on March 26, 2025, the Company issued warrants to the underwriter to purchase up to 131,427 shares, representing 5.0 % of the total shares

sold in the offering (including any shares issued pursuant to the underwriter’s over-allotment option).

The warrants are exercisable

at a price of $ 6.04 per share, which is equal to 115 % of the public offering price of $ 5.25 per share.

The following warrants to purchase common stock

8 unchanged sentences

44,933 3.00 May 10, 2028

Note 7 – Concentration of Credit Risk and Significant Customers

The Company manages its credit risk associated

with exposure to its direct customers on outstanding accounts receivable through the application of credit approvals and other monitoring

The Company closely monitors the aging of accounts receivable from its direct customers.

Significant customers are those that

represent 10% or more of revenue or accounts receivable.

Total revenues, by percentage, from individual

customers representing 10% or more of total revenues in the respective periods were as follows:

Year Ended June 30,

* Less than 10% of total

Accounts receivable, by percentage, from individual

customers representing 10% or more of accounts receivable are set forth in the following table:

As of June 30,

* Less than 10% of total

Customer A, B, C and D are government agencies.

Note 8 – Subsequent Event

The Company has evaluated subsequent events through

the issuance of these financial statements, and determined that there have been no events that have occurred that would require adjustments

to our disclosures in the consolidated financial statements except for the following:

Note Purchase Agreements

On August 5, 2024, the Company entered into note

purchase agreements (the “NPA”) for an aggregate financing of $ 1.8 million with five accredited investors (“Investors”).

At the first closing under the NPA, which occurred on August 5, 2024, the Company issued to the investor’s convertible promissory

notes in the aggregate principal amount of $ 1,800,000 (the “Notes”) to purchase shares of the Company’s common stock,

par value $ 0.0001 per share.

At a second closing under the NPA, which occurred on August 27, 2024, the Company issued convertible promissory

notes to five additional accredited Investors in the aggregate principal amount of $ 1,345,000 for aggregate proceeds of $ 3,145,000 .

Company may hold additional closings, but there is no guarantee as to how much additional proceeds, if any, it will receive.

September 6, 2024, the Company won $ 11.717 million DARPA contract for nano-scale semiconductors to develop heterogeneous integration technology

compatible with leading edge and future advanced-node semiconductors.

Technology applications include AI, mobile devices and 5G/6G.

DARPA contract to Aeluma is structured with $ 5.974 million provided over 18 months, and the $ 5.743 million balance provided over the following

18 months as Aeluma meets certain milestones.

Teledyne Scientific Company, the Central Research Laboratory of Teledyne ,

is a proposed subcontractor to assist with defining target materials and with developing strategies for demonstrating program metrics.

The University of California Santa Barbara is also a proposed subcontractor to support the implementation of test devices.

131,427 6.04 March 26, 2030

Note 8 – Income Taxes

The Company reported a pre-tax loss of $ 3.0 million

and $ 4.5 million for the years ended June 30, 2025 and 2024, respectively.

There is no federal or state provision

for income taxes because the Company has incurred operating losses since inception and is in a full valuation allowance position.

income taxes reflect the net tax effects primarily of the net operating losses and the temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of June 30, 2025, the Company

has approximately $ 7.6 million in federal net operating loss carryforwards available to offset future taxable income.

Deferred tax assets are calculated using combined

federal and state statutory tax rates.

For federal purposes, the statutory corporate tax rate is 21 %, as set by the Tax Cuts and Jobs

Act of 2017 and effective through 2025.

The California state income tax rate is 7 %, net of federal deduction.

Accordingly, the combined

effective rate applied to statutory income tax rates is offset by a change in the deferred income tax valuation allowance of approximately

Note 9 – Subsequent Events

On August 4, 2025, the Company appointed

Christopher Stewart as its Chief Financial Officer.

Pursuant to Mr.

Stewart’s employment agreement, was granted 110,000 stock

options and 55,000 restricted stock units (“RSUs”).

The stock options have an exercise price of $ 21.04 , with 25 % of the stock options

vesting on the twelve (12) month anniversary of Mr.

Stewart’s employment with the Company.

The balance of the stock options

will vest in equal monthly increments, on each monthly anniversary of Mr.

Stewart’s employment start date with the Company,

over the next thirty-six (36) months.

The stock options expire on the 10-year anniversary of their vesting date.

25 % of the shares

underlying the RSUs will vest at the end of the fiscal quarter following the twelve (12) month anniversary of Mr.

employment start date with the Company, with a pro-rated amount for any partial quarter preceding the twelve (12) month anniversary.

The balance of the RSUs will vest in equal quarterly increments, with a pro-rated amount for any partial final quarter.

restricted stock unit represents the contingent right to receive, at settlement, one share of common stock.

On June 6, 2025, the Company entered into a lease agreement for additional

corporate office space in Goleta, California.

The lease was cancellable unless certain conditions were met by the lessor.

5, 2025, those conditions were met and the lease became non-cancellable.

The lease has a term of 5 years commencing in September 2025,

with a total lease commitment of approximately $ 476 thousand.

The Company is currently evaluating the accounting impact of this agreement

under ASC 842, Leases.

Changes in and Disagreements with Accountants on Accounting

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data