Company: LNAI
Filing Date: 2025-10-15
Form Type: DEF 14A
Source: 0001731122-25-001378
Chunk: 58

Company: Lunai Bioworks Inc.
Filing Date: 2025-10-15
Form: DEF 14A
Chunk 58
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Federal Income Tax Consequences

The following is a brief summary
of certain federal income tax consequences relating to the transactions described under the Amended Incentive Plan as set forth below.
This summary does not purport to address all aspects of federal income taxation and does not describe any potential state, local, or foreign
tax consequences. This discussion is based upon provisions of the Code and the Treasury Regulations issued thereunder, and judicial and
administrative interpretations under the Code and Treasury Regulations, all as in effect as of the date hereof, and all of which are subject
to change (possibly on a retroactive basis) or different interpretation.

Law Affecting Deferred Compensation.
In 2004, Section 409A was added to the Code to regulate all types of deferred compensation. If the requirements of Section 409A of the
Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest charge at the
then current underpayment rate plus 1% and a 20% penalty tax. Certain Awards are subject to Section 409A of the Code.

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Incentive Stock Options.
A participant will not recognize income at the time an ISO is granted. When a participant exercises an ISO, the participant also generally
will not be required to recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value
(determined as of the date of grant) of the shares with respect to which the participant’s ISOs are exercisable for the first time
during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not ISOs, for
federal tax purposes, and the participant will recognize income as if the ISOs were nonqualified stock options. In addition to the foregoing,
if the fair market value of the shares received upon exercise of an ISO exceeds the exercise price, then the excess may be deemed a tax
preference adjustment for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce
significant tax repercussions depending upon the participant’s particular tax status.

The tax treatment of any shares
acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares prior to the later of: (i) two years
after the date the ISO was granted or (ii) one year after the shares were transferred to the participant (re