{"url_path":"/sec/lnai/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Legal Proceedings.**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1527728/0001731122-26-000749-index.html","accession_number":"0001731122-26-000749","cik":"0001527728","ticker":"LNAI","issuer_name":"Lunai Bioworks Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1527728/0001731122-26-000749-index.html","primary_entity_key":"0001527728","primary_entity_name":"Lunai Bioworks Inc."},"word_count":2650,"has_tables":true,"body_markdown":"**Item 1. Legal Proceedings.**\n\n \n\n*Securities Class Action Litigation.* On July\n26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici\nAction”) were filed by purported stockholders of the Company in the United States District Court for the Central District of California\nagainst the Company and certain of the Company’s current and former officers and directors. The complaints allege, among other things,\nthat the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by\nmaking false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat\nGümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November\n22, 2022, the Manici Action was voluntarily dismissed without prejudice. The Chow Action (also referred to as the “Securities Class\nAction Litigation”) remains pending. On October 22, 2023, the Court appointed a lead plaintiff in the Chow Action. The lead plaintiff\nfiled an amended complaint on December 15, 2023. The Company filed a motion to dismiss the amended complaint on March 15, 2024. The Court\ndenied the Company’s motion to dismiss on June 28, 2024. A mediation was held on September 17, 2024, after which the parties signed\na stipulation of settlement that, subject to final approval by the United States District Court for the Central District of California,\nprovides for resolution of the Securities Class Action Litigation. The Court granted the lead plaintiff’s motion for preliminary\napproval of the settlement on August 18, 2025. Plaintiff filed a motion for final approval of the settlement on October 21, 2025. On November\n25, 2025, the court held a hearing on lead plaintiff’s motion for final approval of the settlement, and it is currently pending\nbefore the court.\n\n \n\n*Federal Derivative Litigation.*On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central\nDistrict of California (the “Koenig Matter”). The Koenig Matter, filed on behalf of the Company, names Serhat Gümrükcü\nand certain of the Company’s current and former directors as defendants, and also names the Company as a nominal defendant. The\nKoenig Matter alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and also sets out claims for breach\nof fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged\ninjury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court\nfor the Central District of California stayed the Koenig Matter pending resolution of the defendants’ anticipated motion to dismiss\nin the Securities Class Action Litigation. On June 28, 2024, the United States District Court for the Central District of California denied\ndefendants’ motion to dismiss the Securities Class Action Litigation. The parties in the Koenig Matter, the Solak Matter (defined\nbelow), and the Midler Matter (defined below) have entered into a stipulation of settlement that, subject to final approval by the United\nStates District Court for the Central District of California, provides for resolution of the Koenig Matter, Solak Matter, and Midler Matter\n(the “Koenig-Solak-Midler Settlement”). On November 3, 2025, plaintiff in the Koenig Matter filed a motion for preliminary\napproval of the Koenig-Solak-Midler Settlement with the United States District Court for the Central District of California. The court\nheld a hearing on the motion for preliminary approval on November 25, 2025, and it is currently pending before the court. The defendants\nhave not yet responded to the complaint.\n\n \n\nOn January 19, 2023, John Solak\nfiled a shareholder derivative action in the United States District Court for the District of Delaware (the “Solak Matter”).\nThe Solak Matter, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and\nformer directors as defendants, and also names the Company as a nominal defendant. The Solak Matter alleges violations of Section 14(a)\nof the Securities Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder, and also sets out claims for breach of fiduciary duty\nand contribution and indemnification. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and\nother costs and expenses. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak Matter pending\nresolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On June 28, 2024, the United\nStates District Court for the Central District of California denied defendants’ motion to dismiss the Securities Class Action Litigation.\nOn November 3, 2025, plaintiff in the Koenig Matter filed a motion for preliminary approval of the Koenig-Solak-Midler Settlement in the\nUnited States District Court for the Central District of California. The Solak Matter is stayed pending approval of the Koenig-Solak-Midler\nSettlement. The defendants have not yet responded to the complaint. Management is unable to determine the likelihood of a loss, including\na possible range of losses, if any, arising from this matter as of the reporting date.\n\n \n\n36\n\n \n\n \n\n*State Derivative Litigation.*\nOn October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County (the “Midler\nMatter”). The Midler Matter, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s\ncurrent and former directors as defendants. The Midler Matter also names the Company as a nominal defendant. The Midler Matter sets out\nclaims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does\nnot quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the\nCourt stayed the Midler Matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action\nLitigation. On June 28, 2024, the United States District Court for the Central District of California denied defendants’ motion\nto dismiss the Securities Class Action Litigation. On July 31, 2025, the court stayed the Midler Matter for 120 days. On November 3, 2025,\nplaintiff in the Koenig Matter filed a motion for preliminary approval of the Koenig-Solak-Midler Settlement in the United States District\nCourt for the Central District of California. The Midler Matter is stayed pending approval of the Koenig- Solak-Midler Settlement. The\ndefendants have not yet responded to the complaint. Management is unable to determine the likelihood of a loss, including a possible range\nof losses, if any, arising from this matter as of the reporting date.\n\n \n\nOn October\n21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat\nGümrükcü (“Gumrukcu”), William Anderson Wittekind (“Wittekind”), G Tech Bio, SG & AW Holdings,\nLLC, and SRI (collectively, the “Defendants”). The Complaint alleges that the Defendants engaged in a “concerted, deliberate\nscheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its Hepatitis B and SARS-CoV-2/influenza\npipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and\neven fabricated studies out of whole cloth.” As a result of the Defendants’ conduct, the Company claims that it “paid\napproximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants\nWittekind, G Tech, SG & AW Holdings, LLC, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims,\nas well as a motion to strike. On September 6, 2023, the court denied in part and granted in part the pending motions.\n\n \n\nOn December 4, 2023, the Defendants answered the Company’s First Amended\nComplaint and G Tech and SRI filed a Cross-Complaint. In the Cross-Complaint, G Tech and SRI seek declaratory and injunctive relief related\nto certain agreements between G Tech, SRI, and the Company, including, *inter alia*, a declaration that the Framework Agreement,\neffective as of November 15, 2019, the Statement of Work & License Agreement, effective as of January 31, 2020, and the Statement\nof Work and License Agreement for Influenza and Coronavirus Indications, effective as of April 18, 2021, have been terminated and the\nCompany has no rights to any license under such agreements. Trial was scheduled to begin on March 3, 2025. On November 14, 2024, the court\nvacated the March 3, 2025, trial date and set a trial setting conference for May 1, 2025. At the May 1, 2025, trial setting conference,\nthe court reset the trial to begin on November 30, 2026. Discovery remains ongoing. The Company denies the allegations in Defendants’\ncross claims and intends to vigorously defend against them while pursuing its claims against the Defendants. A hearing regarding the status\nof the case is scheduled on June 12, 2026.\n\n \n\nOn June\n7, 2023, Weird Science LLC (“Weird Science”), Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson\nWittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust (collectively, the “Trusts”)\n(collectively, “Plaintiffs”) filed a Verified Complaint against the Company in the Court of Chancery of Delaware. In the Verified\nComplaint, Plaintiffs alleged that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science,\nand RS Group ApS (the “Investor Rights Agreement”). According to the Verified Complaint, the Investor Rights Agreement required\nthe Company to (i) notify all “Holders” of “Registrable Securities” at least 30 days prior to filing a registration\nstatement and (ii) afford such Holders an opportunity to have their Registrable Securities included in such registration statement. Plaintiffs\nalleged that the Company breached these registration rights by failing to provide the required notice in connection with S-3 registration\nstatements filed by the Company on July 13, 2020 and February 11, 2022. The Company moved to dismiss the Verified Complaint on September\n15, 2023.\n\n \n\nOn December\n4, 2023, in lieu of opposing the motion to dismiss, Plaintiffs filed a Verified First Amended Complaint (“FAC”). In the FAC,\nPlaintiffs assert claims against the Company and others for purported breaches of the Investor Rights Agreement, fraud, tortious interference\nwith a contract, and several other torts. Plaintiffs seek compensatory, exemplary, and punitive damages, as well as certain declaratory\nrelief, specific performance, and pre- and post-judgment interest, costs, and attorneys’ fees. The Company filed a motion to dismiss\nthe FAC on December 18, 2023 and the court held a hearing on November 15, 2024. At the hearing, the court dismissed (1) all claims brought\non behalf of Wittekind and the Trusts, (2) the fraudulent concealment claim against the Company and others (without prejudice), and (3)\nthe breach of contract claim against the Company related to a registration statement that was not filed in 2023. At the hearing, the court\nalso found that punitive damages were not available to Plaintiffs. The court took the remaining issues briefed on the Company’s\nmotion to dismiss under advisement.\n\n \n\n37\n\n \n\n \n\nOn February 26, 2025, the Court ruled on the balance of the claims against\nthe Company and (1) denied the Company’s motion to dismiss Weird Science’s breach of contract claims related to registration\nstatements filed in 2020 and 2022; (2) dismissed the fraudulent inducement claim as time barred; and (3) dismissed the declaratory judgment\nclaim. The Company denies Plaintiffs’ allegations and remaining claims and intends to vigorously defend against these claims. The\nparties have agreed to schedule a mediation to address a global resolution of the parties’ claims and counterclaims. The mediation\nhas not yet been scheduled.\n\n \n\nOn August\n24, 2023, counsel on behalf of Weird Science, Wittekind, individually, and Wittekind, as trustee of the Trusts served a demand to inspect\nthe Company’s books and records (the “Demand”) pursuant to Delaware General Corporation Law, § 220 (“Section\n220”). The Demand seeks the Company’s books and records in connection with various issues identified in the Demand. The Company\ntakes its obligations under Section 220 seriously and, to the extent that the requests are proper under Section 220, intends to comply\nwith those obligations.\n\n \n\nOn January 19, 2024, Weird Science\nand Wittekind sent the Board of Directors a letter demanding it take corrective actions with respect to twenty-one issues identified therein.\nOn February 27, 2024, Weird Science and Wittekind sent the Board of Directors a supplemental letter that expanded their demand for corrective\nactions to twenty-six issues. In response to these demand letters, the Board of Directors initially formed a Special Committee (“Special\nCommittee”) of independent directors on February 29, 2024. The Special Committee retained Stradling Yocca Carlson & Rauth LLP\nas its counsel to investigate the issues identified in the demand letters.\n\n \n\nOn January 23, 2024, Weird Science\nand Wittekind filed a shareholder derivative action in the United States District Court for the Central District of California against\ncertain officers, directors, and investors of the Company, as well as other defendants, in connection with, *inter alia*, Weird Science\nand Wittekind’s demand for corrective action. Plaintiffs filed an amended complaint on June 21, 2024. The First Amended Verified\nStockholder Derivative Complaint (“Derivative Complaint”) alleges, among other claims, violations of Section 13(d) and 14(a)\nand Rules 10b-5(a), 10b-5(c) and 14a-9 of the Exchange Act of 1934. The Derivative Complaint also includes claims of breach of fiduciary\nduty, corporate waste, unjust enrichment, and contribution/indemnification. Weird Science and Wittekind seek unspecified compensatory,\nexemplary, and punitive damages and certain injunctive relief. The Derivative Complaint names the Company as a nominal defendant. On July\n19, 2024, certain of the director defendants, who had agreed to waive service of the summons and Derivative Complaint, filed a motion\nto dismiss the Derivative Complaint on a variety of procedural and substantive grounds. A hearing on the motion to dismiss was held on\nOctober 3, 2024 and the court subsequently took the motion under submission. On October 22, 2024, the plaintiffs filed a notice of certain\nsubsequent events that they allege relate to their pending motion to dismiss. On October 29, 2024, the court granted the director defendants’\nmotion to dismiss and dismissed the Derivative Complaint without prejudice, but also without leave to amend.\n\n \n\nOn November 27, 2024, Weird Science\nand Wittekind filed a notice of appeal of the court’s decision granting the director defendants’ motion to dismiss. The appeal\nremains pending.\n\n \n\nOn June 21, 2024, the Company filed suit against Weird Science, Gumrukcu,\nWittekind, and certain trusts in connection with the February 16, 2018 merger involving the Company and two companies closely associated\nwith Gumrukcu. In the complaint, the Company alleges that Gumrukcu and others deliberately and fraudulently concealed a murder-for-hire\nscheme from the Company in order to induce the Company to enter into the merger agreement, which resulted in the defendants receiving\nshares and compensation. The Company asserts claims for fraudulent concealment, equitable fraud, unjust enrichment, and civil conspiracy\nand seeks, *inter alia*, equitable relief, including, but not limited to, return to the Company any shares received in connection\nwith the merger, and damages. On October 1, 2024, the defendants moved to dismiss the complaint. A hearing took place on June 25, 2025,\nand on November 7, 2025, the Court granted defendants’ motion and dismissed the complaint. The only remaining claim is against Mr.\nGumrukcu. The Company intends to pursue that claim to judgment. Chancellor Zum has issued an order providing that the Company new counsel\nhas until March 8, 2027 to retain new counsel.\n\n \n\nLunai commenced an action against\nPredictive Oncology, Inc. (“POAI”) in the Delaware Court of Chancery claiming that POAI breached a “definitive”\nJanuary 2025 Letter Agreement pursuant to which Lunai was going to acquire POAI. As a result of its breach, POAI made that acquisition\nimpossible and dramatically devalued the share price of stock Lunai had already acquired as well as the value of the company it was contractually\nentitled to acquire. Lunai sought specific performance or, in the alternative, money damages. The parties have exchanged paper discovery\nand noticed depositions. The action has been held in abeyance while the parties attempt to negotiate a settlement.\n\n \n\n38"}