Company: LNAI
Filing Date: 2025-02-19
Form Type: 10-Q
Source: 0001731122-25-000258
Chunk: 72

Company: Lunai Bioworks Inc.
Filing Date: 2025-02-19
Form: 10-Q
Item: Part I, Item 8
Chunk 72
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 a liability
in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance
establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

    ●
    Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; 

    ●
    Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and 

    ●
    Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 

There were no Level 1, 2 or 3 assets,
nor any Level 1 or 2 liabilities as of December 31, 2024.

Unless otherwise disclosed, the
fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, accounts payable, accrued
expenses, lease obligations and notes payable approximate their recorded values due to their short-term maturities.

Level 3 liabilities held as of
December 31, 2024, consisted of a contingent consideration liability related to the February 13, 2024 acquisition of Renovaro
Cube, (the “Acquisition”). As consideration for the Acquisition, the stockholders of Renovaro Cube received (i) 70,834,183
shares of Common Stock, and (ii) the right to receive up to 11,899,545 contingent shares pro rata upon the exercise of convertible notes,
options, and warrants, which were outstanding at closing. The contingent consideration liability was recorded at fair value of $20,557,500
at the time of the Acquisition and is subsequently remeasured to fair value at the end of each reporting period. As of December 31, 2024,
there were 7,613,301 contingent shares issuable in connection with the Acquisition.

The fair value of the contingent
consideration liability is estimated using a Black-Scholes option-pricing model and a Monte-Carlo option pricing model. The key inputs
to the model are all contractual or observable with the exception being volatility, which is computed based on the volatility of the Company’s
underlying stock. The key inputs to valuing the contingent consideration liability as of December 31, 2024, were: