Company: LNAI
Filing Date: 2025-02-19
Form Type: 10-K/A
Source: 0001731122-25-000252
Chunk: 119

Company: Lunai Bioworks Inc.
Filing Date: 2025-02-19
Form: 10-K/A
Chunk 119
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 assumed at fair value
as of the transaction date. The consideration consisted of common stock with a fair value of $136,001,631 and contingent consideration
of approximately $20,557,500. The contingent consideration represents contingent shares to be issued to the seller upon the exercise of
conversion of common stock equivalents in the Company that existed at the acquisition date. The Company utilized a third-party valuation
specialist to assist in determining the fair value of contingent consideration issued. The fair value of the contingent consideration
liability was estimated using a Black-Scholes option-pricing model and a Monte-Carlo option pricing model. We identified the estimation
of the fair value of the contingent consideration granted to be a critical audit matter.

<div align='center'>F-3</div>

We identified the estimation of the fair value of the contingent consideration
granted to be a critical audit matter because of the significant estimates and assumptions management made to determine the fair value
of certain of this element. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures
to evaluate the reasonableness of valuation methodologies applied and the assumptions used, such as stock price, exercise price and volatility
assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the following:

| ● | Testing                                                                                        
 management’s process for developing the fair value measurements for contingent consideration.  |
| ● | Evaluating                                                                                     
 significant assumptions used by management in this fair value estimates including stock price, 
 exercise price and volatility assumptions related to outstanding common stock equivalents.     |
| ● | Testing                                                                                        
 the accuracy and completeness of the common stock equivalents utilized in determining the      
 fair value of the contingent consideration.                                                    |
| ● | Obtaining                                                                                      
 the valuation report prepared by valuation specialist engaged by management to assist in       
 the determination of fair values assigned to acquired contingent consideration and evaluating  
 the qualifications of the specialist.                                                          |

In addition, the audit effort involved the use of
professionals with specialized skills and knowledge to assist in evaluating the valuation methodologies deployed and the reasonableness
of the significant assumptions used.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2018.

Draper, UT

October 10, 2024, (February 18, 2025, as to the effect of the restatement described in Note 2)