Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

Amendment No. 1



þQUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March
31, 2020



☐ TRANSITION REPORT UNDER SECTION
13 OR 15 (d) OF THE EXCHANGE ACT



For the transition period from _________
to _________



Commission File Number: 000-12641



DALRADA FINANCIAL CORPORATION

(Name of Small Business Issuer in its charter)



|Wyoming                                                        | 38-3713274               
|-------------------------------------------------------------- | -------------------------
|(state or other jurisdiction of incorporation or organization) | (I.R.S. Employer ID. No.)



600 La Terraza Blvd., Escondido, California
92025

(Address of principal executive offices)



858-283-1253

Issuer’s telephone number



Securities registered pursuant to Section
12(b) of the Act:



|Title of each class | Trading Symbol(s) | Name of each exchange on which registered
|------------------- | ----------------- | -----------------------------------------
|N/A                 | N/A               | N/A                                      



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☐    Noþ



Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).   Yes  [_]    No  [X]



Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



|Large accelerated filer ☐ |                             | Accelerated filer ☐      
|------------------------- | --------------------------- | -------------------------
|                          |                             |                          
|Non-accelerated filer ☒   | Smaller reporting company ☒
|                          |                            
|                          |                             | Emerging growth company ☐



If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐    Noþ



As of June 29, 2020, the registrant’s outstanding
stock consisted of 63,999,128 common shares.

















DALRADA FINANCIAL CORPORATION.



Table of Contents





|PART I – FINANCIAL INFORMATION                                                                | 3 
|--------------------------------------------------------------------------------------------- | --
|Item 1. Financial Statements (unaudited)                                                      | 3 
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            | 24
|Item 4. Controls and Procedures                                                               | 24
|                                                                                              |   
|PART II – OTHER INFORMATION                                                                   | 27
|Item 1. Legal Proceedings                                                                     | 27
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Securities                | 27
|Item 3. Defaults Upon Senior Securities                                                       | 27
|Item 4. Mine Safety Disclosures                                                               | 27
|Item 5. Other Information                                                                     | 27
|Item 6. Exhibits                                                                              | 27
|SIGNATURES                                                                                    | 28
































EXPLANTORY NOTE



On May 22, 2020, Dalrada Financial
Corporation (the “Company”) filed a Current Report on Form 8-K, and is filing this Quarterly Report on Form 10-Q for
the quarter ended March 31, 2020 (the “Quarterly Report”), in reliance on the Securities and Exchange Commission’s
March 4, 2020 Order (Release No. 34-88318), as modified on March 25, 2020 (Release No. 34-88465) pursuant to Section 36 of the
Securities Exchange Act of 1934.



The COVID-19 virus pandemic, resulted
in certain “stay at home” orders including social distancing, travel bans and quarantine, which limited access to
our facilities, customers, management, support staff and professional advisors. These factors not only impacted our operations,
financial condition and demand for our goods and services but also hindered and delayed us in conducting the work required to
prepare the financial statements for the Quarterly Report. This has, in turn, impacted the Company’s ability to compile
and review certain information required to complete, review and file this Quarterly Report by its original due date, March 31,
2020.



























PART I - FINANCIAL INFORMATION



Item 1 - Financial Statements



DALRADA FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)



|                                                                                                                                                                                  |  | March 31, |              |   | June 30, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ------------ | - | -------- | -
|                                                                                                                                                                                  |  | 2020      |              |   | 2019     |  
|Assets                                                                                                                                                                            |  |           |              |   |          |  
|Current assets:                                                                                                                                                                   |  |           |              |   |          |  
|Cash and cash equivalents                                                                                                                                                         |  | $         | 104,093      |   |          | $
|Accounts receivable, net                                                                                                                                                          |  |           | 210,897      |   |          |  
|Other receivables                                                                                                                                                                 |  |           | 267,165      |   |          |  
|Inventories                                                                                                                                                                       |  |           | 239,273      |   |          |  
|Prepaid expenses and other current assets                                                                                                                                         |  |           | 109,610      |   |          |  
|Due from related party                                                                                                                                                            |  |           | 124          |   |          |  
|Total current assets                                                                                                                                                              |  |           | 931,162      |   |          |  
|Property and equipment, net                                                                                                                                                       |  |           | 264,114      |   |          |  
|Goodwill                                                                                                                                                                          |  |           | 143,152      |   |          |  
|Right of use asset, net                                                                                                                                                           |  |           | 112,116      |   |          |  
|Total assets                                                                                                                                                                      |  | $         | 1,450,544    |   |          | $
|                                                                                                                                                                                  |  |           |              |   |          |  
|Liabilities and Stockholders' Equity (Deficit)                                                                                                                                    |  |           |              |   |          |  
|Current liabilities:                                                                                                                                                              |  |           |              |   |          |  
|Accounts payable                                                                                                                                                                  |  | $         | 258,677      |   |          | $
|Accrued liabilities                                                                                                                                                               |  |           | 184,133      |   |          |  
|Accrued payroll taxes, penalties and interest                                                                                                                                     |  |           | 10,268,020   |   |          |  
|Accounts payable and accrued liabilities – related parties                                                                                                                        |  |           | 363,274      |   |          |  
|Deferred revenue                                                                                                                                                                  |  |           | 180,745      |   |          |  
|Notes payable – related parties                                                                                                                                                   |  |           | 2,483,844    |   |          |  
|Convertible notes payable – related party                                                                                                                                         |  |           | 1,875,000    |   |          |  
|Other current liabilities                                                                                                                                                         |  |           | 63,512       |   |          |  
|Total current liabilities                                                                                                                                                         |  |           | 15,677,205   |   |          |  
|Right of use liability                                                                                                                                                            |  |           | 113,542      |   |          |  
|Total liabilities                                                                                                                                                                 |  |           | 15,790,747   |   |          |  
|                                                                                                                                                                                  |  |           |              |   |          |  
|Commitments and contingencies (Note 8)                                                                                                                                            |  |           |              |   |          |  
|                                                                                                                                                                                  |  |           |              |   |          |  
|Stockholders' (deficit):                                                                                                                                                          |  |           |              |   |          |  
|Preferred stock, $0.01 par value, 100,000 shares authorized, 5,000 and no shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively                         |  |           | 50           |   |          |  
|Common stock, $0.005 par value, 1,000,000,000 shares authorized, 63,999,128 shares and 48,281,128 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively |  |           | 319,996      |   |          |  
|Additional paid-in capital                                                                                                                                                        |  |           | 91,709,595   |   |          |  
|Noncontrolling interests                                                                                                                                                          |  |           | 51,936       |   |          |  
|Accumulated deficit                                                                                                                                                               |  |           | (106,423,939 | ) |          |  
|Accumulated other comprehensive income                                                                                                                                            |  |           | 2,159        |   |          |  
|Total stockholders' deficit                                                                                                                                                       |  |           | (14,340,203  | ) |          |  
|Total liabilities and stockholders' deficit                                                                                                                                       |  | $         | 1,450,544    |   |          | $





(The accompanying notes are an integral
part of these condensed consolidated financial statements)







3







DALRADA FINANCIAL CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)



|                                                                             |  | Three Months Ended |            |   | Nine Months Ended |  
|---------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | -
|                                                                             |  | March 31,          |            |   | March 31,         |  
|                                                                             |  | 2020               |            |   | 2019              |  
|Revenues                                                                     |  | $                  | 292,418    |   |                   | $
|Revenues - related party                                                     |  |                    | 58,906     |   |                   |  
|Total revenues                                                               |  |                    | 351,324    |   |                   |  
|Cost of revenue                                                              |  |                    | 185,902    |   |                   |  
|Gross profit                                                                 |  |                    | 165,422    |   |                   |  
|                                                                             |  |                    |            |   |                   |  
|Operating expenses:                                                          |  |                    |            |   |                   |  
|Selling, general and administrative                                          |  |                    | 824,506    |   |                   |  
|Research and development                                                     |  |                    | 177,874    |   |                   |  
|Expenses incurred on terminated acquisition                                  |  |                    | (355       | ) |                   |  
|Total operating expenses                                                     |  |                    | 1,002,025  |   |                   |  
|Loss from operations                                                         |  |                    | (836,603   | ) |                   |  
|                                                                             |  |                    |            |   |                   |  
|Other income (expense):                                                      |  |                    |            |   |                   |  
|Interest expense                                                             |  |                    | (219,483   | ) |                   |  
|Gain on expiration of accrued tax liability                                  |  |                    | –          |   |                   |  
|Gain (loss) on foreign exchange                                              |  |                    | 16,583     |   |                   |  
|Total other income (expenses)                                                |  |                    | (202,900   | ) |                   |  
|Net income (loss) before taxes                                               |  |                    | (1,039,503 | ) |                   |  
|Income taxes                                                                 |  |                    | –          |   |                   |  
|Net income (loss)                                                            |  |                    | (1,039,503 | ) |                   |  
|Net income (loss) attributable to nonontrolling interests                    |  |                    | (11,064    | ) |                   |  
|Net income (loss) attributable to Dalrada Financial Corporation stockholders |  | $                  | (1,028,439 | ) |                   | $
|                                                                             |  |                    |            |   |                   |  
|Foreign currency translation                                                 |  |                    | 59         |   |                   |  
|Comprehensive income (loss)                                                  |  | $                  | (1,039,444 | ) |                   | $
|                                                                             |  |                    |            |   |                   |  
|Net income (loss) per common share to Dalrada stockholders - basic           |  | $                  | (0.02      | ) |                   | $
|Net income (loss) per common share to Dalrada stockholders - diluted         |  | $                  | (0.02      | ) |                   | $
|                                                                             |  |                    |            |   |                   |  
|Weighted average common shares outstanding  — basic                          |  |                    | 60,737,965 |   |                   |  
|Weighted average common shares outstanding  — diluted                        |  |                    | 60,737,965 |   |                   |  



(The accompanying notes are an integral
part of these condensed consolidated financial statements)









4









DALRADA FINANCIAL CORPORATION

Condensed Consolidated Statements of Stockholders’
Deficit

(unaudited)





|                                                       |  |                 |       |  |              |   |    |         |  |  |                |  |  |             |         |  |               |   |            |               |  |   | Accumulated |   |  |         |             
|------------------------------------------------------ |  | --------------- | ----- |  | ------------ | - | -- | ------- |  |  | -------------- |  |  | ----------- | ------- |  | ------------- | - | ---------- | ------------- |  | - | ----------- | - |  | ------- | ------------
|                                                       |  |                 |       |  |              |   |    |         |  |  |                |  |  | Additional  |         |  |               |   |            |               |  |   | Other       |   |  | Total   |             
|                                                       |  | Preferred Stock |       |  | Common Stock |   |    | Paid-in |  |  | Noncontrolling |  |  | Accumulated |         |  | Comprehensive |   |            | Stockholders' | 
|                                                       |  | Shares          |       |  | Amount       |   |    | Shares  |  |  | Amount         |  |  | Capital     |         |  | Interests     |   |            | Deficit       |  |   | Income      |   |  | Deficit |             
|                                                       |  |                 |       |  |              |   |    |         |  |  |                |  |  |             |         |  |               |   |            |               |  |   |             |   |  |         |             
|Balance at June 30, 2018                               |  |                 | –     |  |              | $ | –  |         |  |  | 47,281,128     |  |  | $           | 236,406 |  |               | $ | 91,052,594 |               |  | $ | –           |   |  | $       | (104,291,857
|Net loss                                               |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | (333,016    
|Balance at September 30, 2018                          |  |                 | –     |  |              |   | –  |         |  |  | 47,281,128     |  |  |             | 236,406 |  |               |   | 91,052,594 |               |  |   | –           |   |  |         | (104,624,873
|Net loss                                               |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | (359,389    
|Balance at December 31, 2018                           |  |                 | –     |  |              |   | –  |         |  |  | 47,281,128     |  |  |             | 236,406 |  |               |   | 91,052,594 |               |  |   | –           |   |  |         | (104,984,262
|Net income                                             |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | 1,803,319   
|Balance at March 31, 2019                              |  |                 | –     |  |              | $ | –  |         |  |  | 47,281,128     |  |  | $           | 236,406 |  |               | $ | 91,052,594 |               |  | $ | –           |   |  | $       | (103,180,943
|                                                       |  |                 |       |  |              |   |    |         |  |  |                |  |  |             |         |  |               |   |            |               |  |   |             |   |  |         |             
|Balance at June 30, 2019                               |  |                 | –     |  |              | $ | –  |         |  |  | 48,281,128     |  |  | $           | 241,406 |  |               | $ | 91,086,179 |               |  | $ | –           |   |  | $       | (104,963,229
|Net loss                                               |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | (620,731    
|Balance at September 30, 2019                          |  |                 | –     |  |              |   | –  |         |  |  | 48,281,128     |  |  |             | 241,406 |  |               |   | 91,086,179 |               |  |   | –           |   |  |         | (105,583,960
|Conversion of related party payable to preferred stock |  |                 | 5,000 |  |              |   | 50 |         |  |  | –              |  |  |             | –       |  |               |   | 120        |               |  |   | –           |   |  |         | –           
|Common stock issued pursuant to business combination   |  |                 | –     |  |              |   | –  |         |  |  | 6,118,000      |  |  |             | 30,590  |  |               |   | 243,496    |               |  |   | –           |   |  |         | –           
|Net income                                             |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | 188,460     
|Foreign currency translation                           |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | –           
|Balance at December 31, 2019                           |  |                 | 5,000 |  |              |   | 50 |         |  |  | 54,399,128     |  |  |             | 271,996 |  |               |   | 91,329,795 |               |  |   | –           |   |  |         | (105,395,500
|Common stock issued pursuant to acquisitions           |  |                 | –     |  |              |   | –  |         |  |  | 6,600,000      |  |  |             | 33,000  |  |               |   | 222,000    |               |  |   | 63,000      |   |  |         | –           
|Common stock issued for services                       |  |                 | –     |  |              |   | –  |         |  |  | 3,000,000      |  |  |             | 15,000  |  |               |   | 157,800    |               |  |   | –           |   |  |         | –           
|Net loss                                               |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | (11,064     | ) |  |         | (1,028,439  
|Foreign currency translation                           |  |                 | –     |  |              |   | –  |         |  |  | –              |  |  |             | –       |  |               |   | –          |               |  |   | –           |   |  |         | –           
|Balance at March 31, 2020                              |  |                 | 5,000 |  |              | $ | 50 |         |  |  | 63,999,128     |  |  | $           | 319,996 |  |               | $ | 91,709,595 |               |  | $ | 51,936      |   |  | $       | (106,423,939



(The accompanying notes are an integral
part of these condensed consolidated financial statements)







5









DALRADA FINANCIAL CORPORATION

Condensed Consolidated Statements of Cash
Flows

(unaudited)



|                                                                            |  | Nine Months Ended |           
|--------------------------------------------------------------------------- |  | ----------------- | ----------
|                                                                            |  | March 31,         |           
|                                                                            |  | 2020              |           
|Cash flows from operating activities:                                       |  |                   |           
|Net income (loss)                                                           |  | $                 | (1,471,774
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                   |           
|Research and development expenses associated with asset acquisition         |  |                   | 92,083    
|Common stock issued for services                                            |  |                   | 172,800   
|Changes in operating assets and liabilities:                                |  |                   |           
|Accounts receivable                                                         |  |                   | (25,394   
|Other receivables                                                           |  |                   | (108,779  
|Inventories                                                                 |  |                   | (110,443  
|Prepaid expenses and deposits                                               |  |                   | (54,905   
|Accounts payable                                                            |  |                   | 107,015   
|Related party advances                                                      |  |                   | 87,134    
|Accrued liabilities                                                         |  |                   | 38,918    
|Accrued payroll taxes                                                       |  |                   | (712,258  
|Other current liabilities                                                   |  |                   | 42,765    
|Net cash used in operating activities                                       |  |                   | (1,942,838
|Cash flows from investing activities:                                       |  |                   |           
|Cash acquired pursuant to business combinations                             |  |                   | 234,261   
|Purchase of property and equipment                                          |  |                   | (160,515  
|Net cash provided by (used in) investing activities                         |  |                   | 73,744    
|Cash flows from financing activities:                                       |  |                   |           
|Proceeds from related party notes payable                                   |  |                   | 1,975,200 
|Net cash provided by financing activities                                   |  |                   | 1,975,200 
|Net increase (decrease) in cash and cash equivalents                        |  |                   | 106,106   
|Effect of exchange rate changes on cash                                     |  |                   | (2,976    
|Cash at beginning of period                                                 |  |                   | 963       
|Cash at end of period                                                       |  | $                 | 104,093   
|                                                                            |  |                   |           
|Supplemental disclosure of cash flow information:                           |  |                   |           
|Cash paid for income taxes                                                  |  | $                 | –         
|Cash paid for interest                                                      |  | $                 | –         
|                                                                            |  |                   |           
|Supplemental disclosure of non-cash investing and financing activities:     |  |                   |           
|Common stock issued pursuant to business combinations                       |  | $                 | 436,086   
|Fair value of assets acquired and liabilities assumed in acquisitions       |  | $                 | 355,934   
|Fair value of noncontrolling interest acquired in acquisition               |  | $                 | 63,000    
|Transfer of related party advances to related party notes payable           |  | $                 | 37,469    
|Conversion of accounts payable - related parties to preferred stock         |  | $                 | 170       



(The accompanying notes are an integral
part of these condensed consolidated financial statements)







6









DALRADA FINANCIAL CORPORATION

Notes to the Condensed Consolidated Financial
Statements

(unaudited)





|1. | Organization and Nature of Operations
|-- | -------------------------------------



Dalrada Financial Corporation
(the “Company”) was incorporated in September 1982 under the laws of the State of California, and reincorporated in
May 1983 under the laws of the State of Delaware.



In June 2018, the Company created
a new subsidiary, Dalrada Precision Corp. (“Dalrada Precision”), a mechanical contract provider. It extends the client’s
engineering and operations team by helping devise bespoke manufacturing solutions tailored to its products. Dalrada Precision can
enter at any stage of the product lifecycle from concept and design to mass production and logistics. In October 2018, the Company
created a new subsidiary, Dalrada Health Products Corp (“Dalrada Health”). Dalrada Health will partner with client
companies for the distribution of medical disposables, hospital equipment and furniture, medical devices, laboratory and dental
products. In May 2019, Dalrada Health acquired a new subsidiary, C2C Life Sciences, Inc. (“C2C”). On November 1, 2019,
the acquisition was rescinded, as the Company never gained control over C2C. Such costs incurred in connection with this rescinded
acquisition, have been reflected in these condensed consolidated financial statements as expenses incurred on terminated acquisition.



On December 6, 2019, Dalrada,
via its wholly owned subsidiary, Dalrada Precision, acquired, by stock exchange agreement, 100% of Likido Ltd. (HQ) (“Likido”)
in exchange of 6,118,000 shares of the Company’s common stock. Likido, a United Kingdom engineering-design company, is based
in Edinburgh, Scotland. Likido is an international technology company developing advanced solutions for the harvesting and recycling
of energy. Using its novel, heat pump systems (patent pending), Likido is working to revolutionize the renewable energy sector
with the provision of innovative modular process technologies to maximize the capture and reuse of thermal energy for integrated
heating and cooling applications. With uses across industrial, commercial and residential sectors, Likido provides cost savings
and the minimized carbon emissions 	across global supply chains. Likido's technologies enable the effective recovery and recycling
of process energy, mitigating against climate change and enhancing quality of life through the provision of low-carbon heating
and cooling systems. In connection with the purchase of Likido, the Company is obligated to fund operations for a total up
to $600,000 (see Note 3).



On January 9, 2020, Dalrada purchased
seventy two percent (72%) of the issued and outstanding common equity shares of Prakat Solutions Inc. a Texas corporation, (“Prakat”).
The purchase was made by means of a Stock Purchase Agreement (“SPA”). The consideration for the share purchase was
three million six hundred thousand, (3,600,000) common equity shares of DFCO. Prakat has a wholly owned subsidiary based in India,
Prakat Solutions Private Limited, which provides global customers with software and technology solutions specializing in Test Engineering,
Accessibility Engineering, Product Engineering and Application Modernization. The Prakat India team provides end to end Product
Engineering services across various domains, including – Banking & Financial Services, Telecom, Retail, Healthcare, Manufacturing,
Legal and IT Infrastructure. Prakat India is an ISO 9001 Certified Company. The Company is still determining the impact of this
transaction on the financial statements including the purchase price and the allocation of such (see Note 3).



The Company's principal executive
offices are located at 600 La Terraza Blvd., Escondido, California 92025.



Going Concern



These condensed consolidated
financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. As of March 31, 2020, the Company has a working capital deficit
of $14,746,043 and an accumulated deficit of $106,423,939. The continuation of the Company as a going concern is dependent upon
the continued financial support from its management, related parties, and its ability to identify future investment opportunities
and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These condensed consolidated
financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.









7







|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------



| | (a) | Basis of Presentation
| | --- | ---------------------



These condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is June 30.



We have prepared the accompanying
condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the
“SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in our
opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of
our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are
not necessarily indicative of the results that may be expected for fiscal year 2020. Certain information and footnote disclosures
normally included in condensed consolidated financial statements prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed
consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes.



| | (b) | Principles of Consolidation
| | --- | ---------------------------



These condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiaries: Dalrada Precision, a company incorporated
in the State of California, since June 25, 2018 (date of incorporation), Dalrada Health, a company incorporated in the State of
California, since October 2, 2018 (date of incorporation) and Likido. All inter-company transactions and balances have been eliminated
on consolidation.



| | (c) | Use of Estimates
| | --- | ----------------



The preparation of these condensed
consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly
evaluates estimates and assumptions related to the valuation of inventory, valuation of accrued payroll tax liabilities, valuation
of acquired assets and liabilities, variables used in the computation of share-based compensation, and deferred income tax asset
valuation allowances.



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 and the accrual of
costs and expenses that are not readily apparent from other sources. 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.



| | (d) | Revenue Recognition
| | --- | -------------------



The Company recognizes and accounts
for revenue in accordance with ASC 606 as a principal on the sale of goods. Pursuant to ASC
606,revenue is measured based on a consideration specified in a contract with a customer, and excludes
any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance
obligation by transferring control over a product or service to a customer.









8







The Company’s revenue
is derived from the sales of its products, which represents net sales recorded in the Company’s condensed consolidated statements
of operations. Product sales are recognized when performance obligations under the terms of the contract with the customer are
satisfied. Typically, this would occur upon transfer of control, including passage of title to the customer and transfer of risk
of loss related to those goods. The Company measures revenue as the amount of consideration to which it expects to be entitled
in exchange for transferring goods (transaction price). The Company records reductions to revenue for estimated customer returns,
allowances, markdowns and discounts. The Company bases its estimates on historical rates of customer returns and allowances as
well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by the Company.
The actual amount of customer returns and allowances is inherently uncertain and may differ from the Company’s estimates.
If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it
established, it would record a reduction or increase, as appropriate, to net sales in the period in which it makes such a determination.
Reserves for returns, and markdowns are included within accrued expenses and other liabilities. Allowance and discounts are recorded
in accounts receivable, net and the value of inventory associated with reserves for sales returns are included within prepaid expenses
and other current assets on the condensed consolidated balance sheets.



The Company also earns revenue
from engineering and consulting services from its Prakat subsidiary. These services are recognized when performance obligations
have been satisfied and the services are complete. This is generally at a point of time upon written completion and client acceptance
of the project, which represents transfer of control to the customer.



The following table presents
revenue by type:



|                                                    |  | Nine Months Ended |        
|--------------------------------------------------- |  | ----------------- | -------
|                                                    |  | March 31,         |        
|                                                    |  | 2020              |        
|Product sales                                       |  | $                 | 155,054
|Engineering and consulting services - third parties |  |                   | 186,847
|Engineering and consulting services - related party |  |                   | 58,906 
|Total revenue                                       |  | $                 | 400,807



| | (e) | Stock-based Compensation
| | --- | ------------------------



The Company records stock-based
compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions
in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based
on the fair value of the equity instruments issued.



| | (f) | Business Combinations and Acquisitions
| | --- | --------------------------------------



The Company accounts for acquisitions
in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses
is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the
acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period,
which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined,
to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business,
the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for
transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase.









9







| | (g) | Impairment of Long-Lived Assets
| | --- | -------------------------------



The
Company reviews its long-lived assets (property and equipment) for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying
amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair
value.



Goodwill is tested annually
at June 30 for impairment and upon the occurrence of certain events or substantive changes in circumstances.



The annual goodwill impairment
test allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount. An entity may choose to perform the qualitative assessment on none, some
or all of its reporting units or an entity may bypass the qualitative assessment for any reporting unit and proceed directly to
step one of the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of
a reporting unit is, more likely than not, less than its carrying value, the quantitative impairment test is required. The quantitative
impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair
value, but not to exceed the carrying amount of goodwill. As of December 31, 2019, there were no qualitative factors that indicated
goodwill was impaired.



| | (h) | Foreign Currency Translation
| | --- | ----------------------------



The
functional currency of the Company is the United States dollar. The functional currency of the Likido subsidiary is the British
pound. The financial statements of the Company’s subsidiary were translated to United States dollars in accordance with ASC
830, Foreign Currency Translation Matters, using period-end rates of exchange for assets and liabilities, and average rates
of exchange for the year for revenues and expenses. Gains and losses arising on foreign currency denominated transactions are included
incondensed consolidated statements of operations.



| | (i) | Comprehensive Income
| | --- | --------------------



ASC
220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the
condensed consolidated financial statements. During the period ended December 31, 2019, the Company’s only component of comprehensive
income was foreign currency translation adjustments.



| | (j) | Basic and Diluted Net Loss per Share
| | --- | ------------------------------------



The Company computes net income
(loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted
earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding during the periods using the treasury stock method
and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the periods
is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.



The weighted average number
of common stock equivalents related to convertible notes payable was not included in diluted loss per share, because the effects
are antidilutive, for the three and nine months ended March 31, 2020. In accordance with ASC 260, “Earnings Per Share”,
the following table reconciles basic shares outstanding to fully diluted shares outstanding for the three and nine months ended
March 31, 2019:



|                                                                                                                  |  |  | Three Months Ended |  |  |  | Nine Months Ended | 
|----------------------------------------------------------------------------------------------------------------- |  |  | ------------------ |  |  |  | ----------------- | 
|                                                                                                                  |  |  | March 31, 2019     |  |  |  | March 31, 2019    | 
|Weighted average number of common shares outstanding - Basic                                                      |  |  | 47,281,128         |  |  |  | 47,281,128        | 
|Potentially
    dilutive common stock equivalents (convertible note payable - related party and accrued interest) |  |  | 51,323,529         |  |  |  | 49,397,810        | 
|Weighted average number of common shares outstanding - Diluted                                                    |  |  | 98,604,657         |  |  |  | 96,678,938        | 



There were no adjustments to
the numerator during the quarters ended March 31, 2020 and 2019.









10







| | (k) | Recent Accounting Pronouncements
| | --- | --------------------------------



In August 2018, the FASB issued
guidance to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements
and adding other requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019, with early adoption permitted. Certain amendments should be applied prospectively, while all other amendments
should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.



In February 2018, the FASB issued
guidance that permits the Company to reclassify disproportionate tax effects in accumulated other comprehensive income caused by
the Tax Cuts and Jobs Act of 2017 to retained earnings. The guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact
of the new guidance.



In July 2017, the FASB issued
ASU 2017-11 which simplifies the accounting for certain financial instruments with down round features. The new standard will reduce
income statement volatility for companies that issue warrants and convertible instruments containing such features. The guidance
is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating
the impact of the new guidance.



In June 2016, the FASB issued
a new credit loss standard that replaces the incurred loss impairment methodology in current GAAP. The new impairment model requires
immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It
is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods, with
early adoption permitted. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings
as of the beginning of the first effective reporting period. The Company is currently evaluating the impact of the new guidance.



In February 2016, the FASB issued
new lease accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project
with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of
financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating
leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify
all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition
of a defined “right-of-use” asset and a lease liability on the balance sheet. Lessor accounting under ASU No. 2016-02
would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies
in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted
and for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial
statements, lessees and lessors must apply a modified retrospective transition approach. The company adopted this standard in fiscal
year 2020 and it had a material impact on the Company’s condensed consolidated financial statements due to lease agreement
discussed in Note 7. The lease commenced October 1, 2019.



The Company has implemented
all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there
are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or
results of operations.









11







|3. | Business Combinations and Acquisition
        
        Likido
|-- | -------------------------------------------------------------



Effective December 6, 2019, the
Company acquired 100% of the interests of Likido. In consideration for the acquisition, the Company issued 6,118,000 shares of
its common stock at $0.0448 per share, or a total fair value of $274,086.



The Likido transaction was accounted
for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations(“ASC 805”). The Company has determined preliminary fair values of the assets acquired and liabilities assumed.
These values are subject to change as we perform additional reviews of our assumptions utilized. Goodwill is primarily attributable
to the go-to-market synergies that are expected to arise as a result of the acquisition. The goodwill is not deductible for tax
purposes.



The Company has made a provisional
allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of
the purchase date. The following table summarizes the preliminary purchase price allocation:



|                              |  | Preliminary    |         
|----------------------------- |  | -------------- | --------
|                              |  | Purchase Price |         
|                              |  | Allocation     |         
|Cash and cash equivalents     |  | $              | 172,362 
|Other receivables             |  |                | 36,196  
|Prepaid expenses and deposits |  |                | 10,000  
|Inventories                   |  |                | 110,062 
|Due from related party        |  |                | 131     
|Property and equipment, net   |  |                | 80,348  
|Goodwill                      |  |                | 143,152 
|Accounts payable              |  |                | (92,799 
|Accrued liabilities           |  |                | (7,651  
|Deferred revenue              |  |                | (177,715
|Purchase price consideration  |  | $              | 274,086 



The
Company has not completed the valuations necessary to finalize the acquisition fair values of the assets acquired and liabilities
assumed and related allocation of purchase price of the Likido acquisition. Once the valuation process is finalized, there could
be changes to the reported values of the assets acquired and liabilities assumed, including goodwill and identifiable intangible
assets and those changes could differ materially from what is presented above.



Prakat



Effective January 9, 2020, the
Company acquired 72% of the common equity shares of Prakat. In consideration for the acquisition, the Company issued 3,600,000
shares of its common stock at $0.0450 per share, or a total fair value of $162,000.









12







The Prakat transaction was accounted
for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations(“ASC 805”). The Company has determined preliminary fair values of the assets acquired, liabilities assumed and
the fair value of the noncontrolling interests. These values are subject to change as we perform additional reviews of our assumptions
utilized. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition.
The goodwill is not deductible for tax purposes.



The Company has made a provisional
allocation of the purchase price in regard to the acquisition related to the assets acquired, liabilities assumed and noncontrolling
interests as of the purchase date. The following table summarizes the preliminary purchase price allocation:





|                                          |  | Preliminary
                                                                               Purchase Price
                                                                               Allocation |          
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Cash and cash equivalents                 |  | $                                                                                                                                                                                                   | 61,899   
|Accounts receivable, net                  |  |                                                                                                                                                                                                     | 157,544  
|Other receivables                         |  |                                                                                                                                                                                                     | 122,190  
|Prepaid expenses and other current assets |  |                                                                                                                                                                                                     | 44,573   
|Property and equipment, net               |  |                                                                                                                                                                                                     | 7,189    
|Accounts payable                          |  |                                                                                                                                                                                                     | (33,614) 
|Accrued liabilities                       |  |                                                                                                                                                                                                     | (114,212)
|Other current liabilities                 |  |                                                                                                                                                                                                     | (20,569) 
|Noncontrolling interests                  |  |                                                                                                                                                                                                     | (63,000) 
|Purchase price consideration              |  | $                                                                                                                                                                                                   | 162,000  



The
Company has not completed the valuations necessary to finalize the acquisition fair values of the assets acquired and liabilities
assumed and related allocation of purchase price of the Prakat acquisition. Once the valuation process is finalized, there could
be changes to the reported values of the assets acquired and liabilities assumed, including goodwill and identifiable intangible
assets and those changes could differ materially from what is presented above.



Shark



On March 23, 2020, the Company
entered into a Stock Purchase Agreement to acquire Shark Innovative Technologies Corp. (“Shark”). The Company acquired
all of the issued and outstanding common shares, including business plans and access to contacts of Shark. In consideration for
the acquisition, the Company issued 3,000,000 shares of its common stock at $0.0310 per share, or a total fair value of $93,000.









13







The Company evaluated the acquisition
of the purchased assets under ASC 805 and concluded that as substantially all of the fair value of the gross assets acquired is
concentrated in an identifiable group of similar assets, the transaction did not meet the requirements to be accounted for as a
business combination and therefore was accounted for as an asset acquisition. The purchase price of the Shark assets are as follows:



|Cash and cash equivalents    |  | $ | 917    | 
|---------------------------- |  | - | ------ | 
|Research and development     |  |   | 92,083 | 
|Purchase price consideration |  | $ | 93,000 | 



The
acquired research and development was recorded as an expense in the consolidated statements of operations.



Unaudited Pro Forma Financial
Information



The following unaudited pro forma
financial information presents the Company’s financial results as if the Likido and Prakat’s acquisitions had occurred
as of July 1, 2018. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually
would have been had the acquisition been completed on this date. In addition, the unaudited pro forma financial information is
not indicative of, nor does it purport to project the Company’s future financial results. The pro forma information does
not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisitions:



|                                          |  | Nine Months Ended |           
|----------------------------------------- |  | ----------------- | ----------
|                                          |  | March 31,         |           
|                                          |  | 2020              |           
|Revenues                                  |  | $                 | 1,094,860 
|Net income (loss) attributable to Dalrada |  | $                 | (1,363,426
|Net income (loss) per common share        |  | $                 | (0.02     



|4. | Accrued Payroll Taxes
|-- | ---------------------



As of March 31, 2020, and June
30, 2019, the Company had $10,268,020 and $10,980,278, respectively, of accrued payroll taxes, penalties and interest relating
to calendar years 2004 - 2007. The total balance for accrued payroll taxes has accumulated on a quarterly basis beginning on their
respective quarterly filing dates. Accrued interest is compounded daily at an estimated effective interest rate of 7.33%. The quarterly
sub-totals that make up the $10,268,020 balance have a calculated expiration date of 10 years according to the Internal Revenue
Service statute of limitations. As the tax periods surpass their estimated expiration date, the Company removes the liability from
the condensed consolidated balance sheets, and an equivalent amount is recognized as “Gain on expiration of accrued payroll
taxes” within other income on the condensed consolidated statements of operations. For the nine months ended March 31, 2020
and 2019, the Company recognized $564,479 and $637,749, respectively, of penalties and interest within interest expense on the
condensed consolidated statements of operations. For the nine months ended March 31, 2020 and 2019, the Company recognized $1,276,837
and $2,243,523, respectively, within “Gain on expiration of accrued payroll taxes” as a result of quarterly tax liabilities
that expired during the fiscal periods The amount owing may be subject to additional late filing fees and penalties that are not
quantifiable as of the date of these condensed consolidated financial statements. In addition, the Company periodically reviews
the historical filings in determining if the statute has been paused or extended by the Internal Revenue Service.









14







|5. | Notes Payable – Related Parties
|-- | -------------------------------



a)       During
the year ended June 30, 2019, the Company issued a $38,615 promissory note to a related party for compensation paid by the related
party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum, and is
due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory note was $38,615
and the accrued interest is $869.



b)       During
the year ended June 30, 2019, the Company issued a $37,469 promissory note to a related party for legal services and other expenses
incurred to reinstate the Company to a current status with the state of Delaware. Under the terms of the note, the amount due is
unsecured, bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding
principal balance of the promissory note was $37,469 and the accrued interest is $843.



c)       As
of June 30, 2019, the Company owed $2,250 to a related party company controlled by the Chief Executive Officer of the Company for
management fees, which consists of accounting and administrative services. The Company is charged $4,500 on a monthly basis, $1,125
of which is allocated each month to Dalrada Health Products. Under the terms of the note, the amount due is unsecured, bears interest
at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the
promissory note was $2,250 and the accrued interest is $51.



d)       As
of June 30, 2019, the Company owed $1,630 to a related party for reimbursement of expenses paid by the related party on behalf
of the Company related to the proposed C2C acquisition which did not occur. Under the terms of the note, the amount due is unsecured,
bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal
balance of the promissory note was $1,630 and the accrued interest is $37.



e)       As
of June 30, 2019, the Company owed $262,197 to a related party for reimbursement of compensation to employees and payroll services
paid by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at
3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $262,197 and the accrued interest is $5,899.



f)       On
September 30, 2019, the Company issued a $131,265 promissory note to a related party for reimbursement of compensation to employees
and payroll services paid by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured,
bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal
balance of the promissory note was $131,265 and the accrued interest is $1,969.



g)       On
September 30, 2019, the Company issued a $2,075 promissory note to a related party for reimbursement of expenses paid by the related
party on behalf of the Company related to the proposed C2C acquisition which did not occur. Under the terms of the note, the amount
due is unsecured, bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding
principal balance of the promissory note was $2,075 and the accrued interest is $31.



h)      On
September 30, 2019, the Company issued a $3,375 promissory note to a related party company controlled by the Chief Executive Officer
of the Company for management fees, which consists of accounting and administrative services for which the Company is charged $1,125
on a monthly basis. Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum, and is due 360 days
from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory note was $3,375 and the accrued
interest is $51.



i)       On
September 30, 2019, the Company issued a $36,370 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per
annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $36,370 and the accrued interest is $546.









15







j)       On
September 30, 2019, the Company issued a $1,865 promissory note to a related party for reimbursement of expenses paid by the related
party on behalf of the Company related to the proposed C2C acquisition which did not occur. Under the terms of the note, the amount
due is unsecured, bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding
principal balance of the promissory note was $1,865 and the accrued interest is $42.



k)       On
September 30, 2019, the Company issued a $93,137 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per
annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $93,137 and the accrued interest is $1,397.



l)       On
December 31, 2019, the Company issued a $18,669 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per
annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $18,669 and the accrued interest is $140.



m)       On
December 31, 2019, the Company issued a $16,165 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per
annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $16,165 and the accrued interest is $121.



n)       On
December 31, 2019, the Company issued a $1,125 promissory note to a related party company controlled by the Chief Executive Officer
of the Company for management fees, which consists of accounting and administrative services. The Company is charged $4,500 on
a monthly basis, $1,125 of which is allocated each month to Dalrada Health Products. Under the terms of the note, the amount due
is unsecured, bears interest at 3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding
principal balance of the promissory note was $1,125 and the accrued interest is $8.



o)       On
December 31, 2019, the Company issued a $152,282 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Funds were used for medical device listing fees, computer software, travel expenses,
and professional consultant services Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory note was
$152,282 and the accrued interest is $1,142.



p)       On
December 31, 2019, the Company issued a $5,270 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Under the terms of the note, the amount due is unsecured, bears interest at 3% per
annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $5,270 and the accrued interest is $40.



q)       On
December 31, 2019, the Company issued a $720,914 promissory note to a related party for reimbursement of operating expenses paid
by the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software,
international shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at
3% per annum, and is due 360 days from the date of issuance. As of March 31, 2020, the outstanding principal balance of the promissory
note was $720,914 and the accrued interest is $5,407.



r)       On
March 31, 2020, the Company issued a $233,886 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.









16







s)       On
March 31, 2020, the Company issued a $1,120 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



t)       On
March 31, 2020, the Company issued a $175,742 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



u)       On
March 31, 2020, the Company issued a $14,655 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



v)       On
March 31, 2020, the Company issued a $1,165 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



w)       On
March 31, 2020, the Company issued a $417,996 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



x)       On
March 31, 2020, the Company issued a $79,866 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



y)       On
March 31, 2020, the Company issued a $55,868 promissory note to a related party for reimbursement of operating expenses paid by
the related party on behalf of the Company. Funds were used for travel expenses, professional consultant services, software, international
shipping charges, and office supplies Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum,
and is due 360 days from the date of issuance.



|6. | Convertible Note Payable – Related Parties
|-- | ------------------------------------------



As of June 30, 2019, the Company
issued a convertible note for $1,875,000 to the Chief Executive Officer of the Company for compensation. Under the terms of the
note, the amount due is unsecured, bears interest at 3% per annum, and is due 360 days from the date of issuance. On June 30, 2019,
the Company issued note agreement which included a conversion feature of the outstanding balance at $0.034 per share. As the conversion
price was equal to the fair value of the common shares on the date of the agreement, there was no beneficial conversion feature.
As of March 31, 2020, the outstanding principal balance of the promissory note was $1,875,000 and the accrued interest is $42,758.









17







|7. | Related Party Transactions
|-- | --------------------------



As of March 31, 2020, and June
30, 2019, the Company owed $363,274 and $479,512 respectively to related parties for reimbursement of various operating expenses,
which has been recorded in accounts payable and accrued liabilities – related parties. This amount includes $54,000 of management
fees, which consists of accounting and administrative services to Trucept Inc., a related party company controlled by the Chief
Executive Officer of the Company. The management fee agreement calls for monthly payments of $4,500. The agreement is ongoing until
terminated by either party.



During the three months end March
31, 2020, the Company’s Prakat subsidiary recorded revenues of $58,906 for engineering and consulting services provided to
Trucept.



In November 2019, the Chief Executive
Officer converted $170 in amounts owed from the Company into 5,000 shares of Series F Super Preferred Stock.



On July 1, 2019, the Company
formalized an employment agreement with its Chief Executive Officer, which entitles him to compensation of three hundred and ninety-three
thousand dollars ($393,000) per year. Annual increases will be up to 10% based performance criteria to be determined at a later
date. He will be issued common stock of the Company sufficient to provide a 10% ownership position post reverse split which shares
be maintained for a period of two years. In addition to all other benefits and compensation, he shall be eligible for a quarterly
bonus of $47,000 based on if the Company achieves a net profit for that quarter. As of March 31, 2020, the Company had $294,750
accrued within accounts payable and accrued liabilities – related parties.



On January 6, 2020, the Directors
affirmed and ratified the final agreement of the employment terms of Fawad Nisar as the Chief Operating Officer of Dalrada Financial
Corp. The Company and Mr. Nisar have agreed in the Employment Terms, to, among other items, the issuance, as consideration for
his accepting the position of COO of the Company, of 3,000,000 shares of the Company’s common stock. The fair value of $172,800
is included in selling, general and administrative expenses in the consolidated statements of operations.



See Notes 5 and 6 for additional
related party transactions.



|8. | Preferred Stock
|-- | ---------------



The Company has 100,000 shares
authorized of Series F Super Preferred Stock, par value, $0.01, of which 5,000 shares (at a fair value of $170) were issued to
the CEO as of December 31, 2019. Each share of Series F Super Preferred Stock entitles the holder to the greater of (i) one hundred
thousand votes for each share of Series F Super Preferred Stock, or (ii) the number of votes equal to the number of all outstanding
shares of Common Stock, plus one additional vote such that the holders of Series F Super Preferred Stock shall always constitute
a majority of the voting rights of the Corporation. In any vote or action of the holders of the Series F Super Preferred Stock
voting together as a separate class required by law, each share of issued and outstanding Series F Super Preferred Stock shall
entitle the holder thereof to one vote per share. The holders of Series F Super Preferred Stock shall vote together with the shares
of Common Stock as one class.



|9. | Commitments and Contingencies
|-- | -----------------------------



Lease Commitments



The Company determines if an
arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the
right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration.
Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain
substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease
and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying
assets. Lease expense for variable lease components are recognized when the obligation is probable.









18







Operating lease right of use
(“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments
over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The
Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount
its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental
borrowing rate. As an implicit interest rate is not readily determinable in the Company's leases, the incremental borrowing rate
is used based on the information available at commencement date in determining the present value of lease payments.



The lease term for all of the
Company's leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option
to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to
terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability)
for the majority of the Company's leases as the reasonably certain threshold is not met.



Lease payments included in the
measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts
probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.



Variable lease payments not dependent
on a rate or index associated with the Company's leases are recognized when the event, activity, or circumstance in the lease agreement
on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company's
income statement in the same line item as expense arising from fixed lease payments. As of and during the nine months ended March
31, 2020, management determined that there were no variable lease costs.



Right of Use Asset



In September 2019, the Company
entered into a three-year lease agreement to lease a commercial building in Escondido, California. The building is owned by a related
party.  The Company recognized a right of use asset and liability of $132,860 and used an effective borrowing rate of 3%
within the calculation. The lease agreements mature in September 2022. Minimum remaining rental payments in 2020, 2021 and 2022
are $34,109, $46,726 and $35,827, respectively, and the imputed interest is $6,316.



|10. | Subsequent Events
|--- | -----------------



Management has evaluated all activity and
concluded that no subsequent events have occurred that would require recognition in these financial statements or disclosure in
the notes to these financial statements.



























19







Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations



You should read the following discussion
and analysis in conjunction with our financial statements, including the notes thereto, included in this Report. Some of the information
contained in this Report may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act
of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from future results, performance or achievements expressed or implied by
any forward-looking statements. Forward-looking statements which involve assumptions and describe our future plans, strategies
and expectations, are generally identifiable by the use of the words “may,” “will,” “should,”
“expect,” “anticipate,” “estimate,” “believe,” “intend” or “project”
or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are
based on assumptions that may be incorrect, and there can be no assurance that the projections included in these forward-looking
statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking
statements as a result of various factors. We undertake no obligation to update publicly any forward-looking statements for any
reason, even if new information becomes available or other events occur in the future.



Our net loss and limited working capital
raise substantial doubt about our ability to continue as a going concern. We incurred a net loss of $1,471,774 during the nine
months ended March 31, 2020. We will be required to raise substantial capital to fund our capital expenditures, working capital,
and other cash requirements since our current cash assets are exhausted and we have generated no revenues to date to sustain our
operations. We will continue to rely on related parties to fund our operations. We will need to seek other financing to complete
our business plans. The successful outcome of future financing activities cannot be determined at this time and there are no assurances
that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operational results.



In addition to our current deficit, we
expect to incur additional losses during the foreseeable future. Until we are able to successfully execute our business plan. Consequently,
we will require substantial additional capital to continue our development and marketing activities. There is no assurance that
we will be able to obtain additional financing through private placements and/or public offerings necessary to support our working
capital requirements. To the extent that funds generated from any private placements and/or public offerings are insufficient,
we will have to raise additional working capital through other sources, such as bank loans and/or financings. No assurance can
be given that additional financing will be available, or if available, will be on acceptable terms.



We are incurring increased costs as a result
of being a publicly-traded company. As a public company, we incur significant legal, accounting and other expenses that we did
not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the
Securities and Exchange Commission, have required changes in corporate governance practices of public companies. These new rules
and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.
For example, as a result of becoming a public company, we have created additional board committees and have adopted policies regarding
internal controls and disclosure controls and procedures. In addition, we have incurred additional costs associated with our public
company reporting requirements. In addition, these new rules and regulations have made it more difficult and more expensive for
us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it
may become more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.
We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of
such costs.









20







RESULTS OF OPERATIONS



Three Months Ended March 31, 2020 and March 31, 2019



Operating Revenues



During the three months ended March 31,
2020, the Company recorded revenues of $351,324, including $245,753 attributable to the Prakat acquisition. Total cost of revenues
was $185,902, resulting in a gross profit of $165,422. The Company had revenues and gross profit of $34,407 and $24,452 during
the three months ended March 31, 2019, respectively.



Operating Expenses



Operating expenses for the three months
ended March 31, 2020 was $1,002,025 compared to operating expenses of $251,275 during the three months ended March 31, 2019. The
increase in operating expenses was due to an increase in the operating activity during the quarter, as most of fiscal 2019 was
spent on development of the Company’s proposed business operations whereas fiscal 2020 focused on the implementation of the
business operations. The increase was also attributable to the Likido acquisition in December 2019 and Prakat acquisition in January
2020.



Net Income (Loss)



Net loss for the three months ended March
31, 2020 was $1,039,503 compared to a net income of $1,803,319 for the three months ended March 31, 2019. The Company incurred
interest expense of $219,483 for interest on outstanding payroll tax liability and notes payables during the quarter. During the
three months ended March 31, 2019, the Company recorded a gain on expiration of accrued tax liability of $2,243,523.



Nine Months Ended March 31, 2020 and March 31, 2019



Operating Revenues



During the nine months ended March 31,
2020, the Company recorded revenues of $400,807, including $245,753 attributable to the Prakat acquisition. Total cost of revenues
was $200,006, resulting in a gross profit of $200,801. The Company had revenues and gross profit of $34,407 and $24,452 during
the nine months ended March 31, 2019, respectively.



Operating Expenses



Operating expenses for the nine months
ended March 31, 2020 was $2,308,505 compared to operating expenses of $519,312 during the nine months ended March 31, 2019. The
increase in operating expenses was due to an increase in the operating activity as most of fiscal 2019 was spent on development
of the Company’s proposed business operations whereas fiscal 2020 focused on the implementation of the business operations.
The increase was also partially attributable to the Likido acquisition in December 2019 and Prakat acquisition in January 2020.



Net Income (Loss)



Net loss for the nine months ended March
31, 2020 was $1,471,774 compared to a net income of $1,110,914 for the nine months ended March 31, 2019. The Company incurred interest
expense of $653,078 and $637,749 for interest on outstanding payroll tax liability and notes payables, respectively.. During the
nine months ended March 31, 2019, the Company recorded a gain on expiration of accrued tax liability of $2,243,523.









21







Liquidity and Capital Resources



As of March 31, 2020, the Company had a
working capital deficit of $14,746,043 and an accumulated deficit of $106,423,939. The Company has few revenues and significant
losses. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Cash presently
on hand is immaterial. We anticipate needing $1,000,000 over the next twelve months to fund operations for the production of our
VIA kits, development of our Likido heating & cooling units, and the manufacturing of our extraction machine. Management is
planning to support operations by raising capital, and by accelerating sales & marketing efforts to take pre-orders of our
extraction machines (resulting in down-payments), the sales of high-margin heating & cooling units, precision parts, and healthcare
VIA kits. The continuation of the Company as a going concern is dependent upon the continued financial support from its management,
its ability to obtain the necessary debt or equity financing, and generate profitable operations from the Company’s planned
future operations. We will continue to rely on equity sales of our common shares in order to continue to fund our business operations.
Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any
additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and activities and
there are no plans to induce conversion of existing debt. There are no assurances that our plans will be successful. These financial
statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern. Our audit firm included an
explanatory paragraph in their report regarding substantial doubt about our Company’s ability to continue as a going concern.



Working Capital



As of March 31, 2020, the Company had current
assets of $931,162 and current liabilities of $15,677,205 compared with current assets of $47,690 and current liabilities of $13,688,834
at June 30, 2019. The increase in the working capital deficit was mainly due to the increase in related party notes payable.



Cash Flows



|                                                    |  | Nine Months Ended |           
|--------------------------------------------------- |  | ----------------- | ----------
|                                                    |  | March 31,         |           
|                                                    |  | 2020              |           
|Net cash used in operating activities               |  | $                 | (1,942,838
|Net cash provided by (used in) investing activities |  |                   | 73,744    
|Net cash provided by financing activities           |  |                   | 1,975,200 
|Net increase (decrease) in cash during the period   |  | $                 | 103,130   







Cash flow from Operating Activities



During the nine months ended March 31,
2020, the Company used $1,942,838 of cash for operating activities compared to $201,242 used during the nine months ended March
31, 2019. The increase in the use of cash for operating activities was primarily due to the net loss due to an overall increase
in operations as the Company incurred more day-to-day operating costs.



Cash flow from Investing Activities



During the nine months ended March 31,
2020, the Company purchased equipment for $160,515. The Company also acquired $234,261 in cash pursuant to the Likido and Prakat
acquisitions. During the nine months ended March 31, 2019, the Company purchased equipment for $5,500.









22







Cash flow from Financing Activities



During the nine months ended March 31,
2020, the Company received proceeds of $1,975,200 from the issuance of related party notes payable compared to $204,689 received
from notes payable during the nine months ended March 31, 2019.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.



Critical Accounting Policies



Our financial statements and accompanying
notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.



We regularly evaluate the accounting policies
and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note (1) of
the notes to our financial statements. In general, management's estimates are based on historical experience, on information from
third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ from those estimates made by management.



Use of Estimates



The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes for the reporting period. Significant
areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain
final government permission to complete the project.



Stock-Based Compensation



The Company records stock-based compensation
in accordance with ASC 718, Compensation – Stock Compensation, using the fair value method. All transactions in which
goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value
of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity
instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the
fair value of the equity instruments issued.









23







Recently Issued Accounting Pronouncements



In August 2018, the FASB issued guidance
to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements and
adding other requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019, with early adoption permitted. Certain amendments should be applied prospectively, while all other amendments
should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.



In February 2016, the FASB issued new lease
accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the
International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial
information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases”
for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with
a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use”
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially
unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees
and lessors must apply a modified retrospective transition approach. The company adopted this standard in fiscal year 2020 with
a material impact on the Company’s condensed consolidated financial statements due to lease agreement discussed in footnote
7. The lease commenced October 1st 2019.



We have reviewed all the recently issued,
but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact
on the Company.



Contractual Obligations



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



Item 3. Quantitative and Qualitative Disclosures about Market
Risk



Not applicable to smaller reporting companies.



Item 4. Controls and Procedures



(a) Evaluation of disclosure controls and
procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of
the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), concluded that as of the Evaluation
Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required
to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and forms. The control weaknesses mentioned below were first
identified during the year ended June 30th 2019.



(b) Changes in internal control over financial
reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially
affected, or were reasonably likely to materially affect, our internal control over financial reporting.









24







Limitations on the Effectiveness of
Internal Controls



Disclosure controls and procedures, no
matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives.
The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include
the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human
failures such as simple errors or mistakes or intentional circumvention of the established process.



Management's Report on Internal Control
over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934
Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("2013 COSO Framework").



A material weakness is a deficiency or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.



Our management concluded we have a material
weakness due to the following:



Accounting and Financial Reporting Policies and Procedures



The Company does not currently have a comprehensive
and formalized accounting and financial reporting policies and procedures manual, nor do they have sufficient informal practices
in place to efficiently and effectively complete a majority of the aspects of financial reporting, including performing reconciliations
and preparing adequate and complete schedules. Management Plans to establish comprehensive financial reporting policies which include
performing reconciliations and preparing adequate and complete schedules during fiscal year 2020.



Tracking of Contracts and Agreements



The Company should keep a master file in
a centralized location of all executed contracts and agreements that the Company has entered into. In addition, the Company should
document any significant transaction in an agreement. Centralizing master documents and putting them with a responsible party that
is authorized to see all master documents should increase management’s ability to quickly track down important documents
in the course of business and during financial reporting periods. Management plans to keep a master file in a centralized location
of all executed contracts and agreements that the Company has entered into beginning fiscal year 2020.



Identification and Disclosure of Related Party Transactions



The Company does not have a formal process
for identification of related parties. The Company should prepare and maintain a listing of related parties, which should be used
a reference when processing transactions. The Company is currently dependent on capital from these related parties for whom make
payments directly to company vendors. These procedures have resulted in the Company missing or being unaware of payments. On a
go forward basis, the related party should advance the funds to the Company who in turn should make all vendor payments. This would
reduce the risk of omitting the accounting for and disclosures of transactions that are paid for by related parties on the Company’s
behalf. Management plans to prepare and maintain a listing of related parties, which will be used a reference when processing transactions
beginning fiscal year 2020.









25







Account Reconciliations



All necessary monthly account reconciliations
are not prepared and reviewed by management. The Company should make a listing of all reconciliations that need preparing at each
period’s end along, with the manager who will review such reconciliations. Management plans to review all monthly account
reconciliations during fiscal year 2020.



Evidence and Retention of Financial Data Review



The Company should document and retain
all management reviews related to financial data. This includes reviews of reconciliations, accounts receivable, accounts payable,
financial reports, budgets, etc. Management review procedures related to financial data should also be included in the accounting
policies and procedures manual. Management plans to retain reviews of reconciliations, accounts receivable, accounts payable, financial
reports, budgets, etc. during fiscal year 2020.



Accruing Liabilities and Cut-off Procedures for Accounts
Payable



The Company currently does not have procedures
in place to properly cut-off accounts payable and the accrual of un-invoiced liabilities. When services are performed that relate
to a particular reporting period, the expenses related to those services should be properly accrued. Management plans to establishing
proper cut-off procedures and will list all monthly accruals to more accurately track such liabilities during fiscal year 2020.



Based on this evaluation and because of
the material weaknesses, management has concluded that our internal control over financial reporting was not effective as of March
31, 2020.















































26







PART II – OTHER INFORMATION





ITEM 1.     LEGAL PROCEEDINGS



None



ITEM 2.      UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES



None



ITEM 3.      DEFAULTS UPON SENIOR
SECURITIES



None noted



ITEM 4.     MINE SAFETY DISCLOSURES



Not applicable to our Company.



ITEM 5.      OTHER INFORMATION



None noted



ITEM 6.     EXHIBITS



|Exhibit
        Number | Exhibit
        Description                                                                                                                                                             
|---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1                   | Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1                   | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002           
|101.INS                | XBRL Instance Document*                                                                                                                                                                 
|101.SCH                | XBRL Taxonomy Extension Schema*                                                                                                                                                         
|101.CAL                | XBRL Taxonomy Extension Calculation Linkbase*                                                                                                                                           
|101.LAB                | XBRL Taxonomy Extension Label Linkbase*                                                                                                                                                 
|101.PRE                | XBRL Taxonomy Extension Presentation Linkbase*                                                                                                                                          
|101.DEF                | XBRL Taxonomy Extension Definition Linkbase*                                                                                                                                            

________________________

*previously filed







27







SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     | Dalrada Financial Corporation
|-------------------- | -----------------------------
|                     |                              
|                     | By: /s/ Brian Bonar          
|Date:  July 14, 2020 | Brian Bonar                  
|                     | Chief Executive Officer      
|                     |                              



Pursuant to the requirements of the Exchange Act this Report
has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|Signature       | Title                   | Date             
|--------------- | ----------------------- | -----------------
|                |                         |                  
|/s/ Brian Bonar | Chief Executive Officer | July 14,
    2020
|Brian Bonar     | and Director            |                  



































28