Company: CPMV
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001683168-25-002584
Chunk: 406

Company: Mosaic ImmunoEngineering Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 2
Chunk 406
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 We record the derivative liability
at fair value (see Note 3). The convertible notes are initially recorded at their amortized cost and are accreted to their redemption
value over the estimated conversion period using the effective interest method (see Note 7).

Use of Estimates

The preparation of consolidated financial statements
in accordance with U.S. 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 financial statements and the reported amounts of expenses during
the reporting period. Significant estimates in these consolidated financial statements include those related to the fair value of the
anti-dilution issuance rights liability (derivative liability), the timing of conversion of the convertible notes, the provision or benefit
for income taxes and the corresponding valuation allowance on deferred tax assets. In addition, management’s assessment of the Company’s
ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing
basis, the Company evaluates its estimates, judgments, and methodologies. The Company bases its estimates on historical experience and
on various other assumptions believed to be reasonable. Due to the inherent uncertainty involved in making such accounting estimates and
assumptions, the actual financial statement results could differ materially from such accounting estimates and assumptions.

     F-9 

    Mosaic ImmunoEngineering, Inc.

    Notes to Consolidated Financial Statements
    For the Years Ended December 31, 2024 and 2023 (continued)

Convertible Notes

The Company follows FASB’s Accounting Standards
Codification (“ASC”) 480-10, “Distinguishing Liabilities from Equity” in its evaluation of the accounting for
share-settled debt. ASC 480-10-25-14 requires liability accounting for certain financial instruments, including shares that embody an
unconditional obligation to transfer a variable number of shares, provided that the monetary value of the obligation is based solely or
predominantly on one of the following three characteristics:

    a)
    A fixed monetary amount known at inception;

    b)
    Variations in something other than the fair value of the issuer’s equity shares; or

    c)
    Variations in the fair value of the issuer’s equity shares, but the monetary value to the counterparty moves in the opposite direction as the value of the issuer’s shares

Moreover, equity classification was not an appropriate
classification for the convertible notes because the underlying terms of