Company: CPMV
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001683168-25-002584
Chunk: 335

Company: Mosaic ImmunoEngineering Inc.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 1C
Chunk 335
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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 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 accreted to their redemption value over the estimated conversion period
using the effective interest method (see Note 7).

Assessment of Contingent Liabilities

We may be involved in various legal matters, disputes,
and patent infringement claims which arise in the ordinary course of our business. We accrue for any estimated losses at the time when
we can make a reliable estimate of such loss and it is probable that it has been incurred. By their very nature, contingencies are difficult
to estimate. We continually evaluate information related to all contingencies to determine that the basis on which we have recorded our
estimated exposure is appropriate.

Patent Costs

Patent fees and patent related costs in connection
with filing and prosecuting patent applications are expensed as incurred and are classified as general and administrative expenses in
the accompanying consolidated financial statements.

Share-Based Compensation

We account for restricted stock units (“RSUs”)
and other share-based awards granted under our equity compensation plan in accordance with the authoritative guidance for share-based
compensation. The fair value of RSUs is measured at the grant date based