Company: CPMV
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001683168-25-002584
Chunk: 509

Company: Mosaic ImmunoEngineering Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 4
Chunk 509
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 is due and payable upon closing a financing
of at least $10.0 million or convertible into shares of common stock of the Company, at the sole discretion of the accredited investor.
The number of shares of common stock to be issued, if converted, would be equal to the unpaid principal amount and accrued and unpaid
interest thereon divided by the closing price of our common stock on the date that is one day prior to such election. As of December 31,
2024, the Company has accrued $740 in interest that is included in other accrued expenses within the accompanying consolidated balance
sheet.

Critical
Accounting Policies and Estimates 

Our consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and judgments
that significantly affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. Actual results could differ from those estimates, and such differences could affect the results of operations reported
in future periods. We believe the following critical accounting policies affect our most significant estimates and judgments used in the
preparation of our consolidated financial statements.

1.Convertible Notes

The Company follows Financial Accounting Standards
Board (“FASB’s”) Accounting Standards Codification (“ASC”) 480-10, “Distinguishing Liabilities from
Equity” in its evaluation of the accounting for share-settled debt (Convertible Notes). 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 the convertible notes do not expose the investors to risks and
rewards similar to those of an owner and, therefore, do not create a shareholder relationship. Pursuant to ASC 835-30, the convertible
notes were initially recorded at their amortized cost and are being accreted to their redemption value over the estimated conversion period
using the effective interest method.