Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, references to the "Company," the "combined company," "Mosaic," "we," "our," or "us" in this Annual Report on Form 10-K ("Report") refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this Report.

Cautionary Note Regarding Forward-Looking Statements

This Report, including all documents incorporated by reference herein, includes certain statements constituting "forward-looking" statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, including statements concerning our beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, operations, future results and prospects, and we rely on the "safe harbor" provisions in those laws. We are including this statement for the express purpose of availing ourselves of the protections of such safe harbors with respect to all such forward-looking statements. The forward-looking statements in this Report reflect our current views with respect to future events and financial performance. In this report, the words "anticipates," "believes," "expects," "intends," "future," "estimates," "may," "could," "should," "would," "will," "shall," "propose," "continue," "predict," "plan" and similar expressions are generally intended to identify certain of the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Any forward-looking statement is not a guarantee of future performance. Please see Part I, Item 1A. Risk Factors for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur for any future period. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Overview

We are a development-stage biotechnology company focused on advancing and eventually commercializing immunotherapies for the treatment of cancer. We have historically advanced early-stage product candidates and we are pursuing new product candidates and platforms to build a new pipeline based on a deep understanding of immunotherapies.

Summary of Significant Events

Private Mosaic, a Delaware corporation, was formed on March 30, 2020. On July 1, 2020, we signed a Material Transfer, Evaluation, and Exclusive Option Agreement ("License Option Agreement") with Case Western Reserve University ("CWRU"), granting us the exclusive right to license the cowpea mosaic virus ("CPMV") platform technology to treat and prevent cancer and infectious diseases in humans and for veterinary use. On May 4, 2022, we entered into the license agreement with CWRU ("License Agreement") pursuant to our rights granted under the License Option Agreement (see Note 5 to the accompanying audited consolidated financial statements). On March 22, 2024, we received a notice of termination from CWRU (see Note 5 to the accompanying consolidated financial statements). On August 19, 2020, Patriot Scientific Corporation (now known as Mosaic ImmunoEngineering, Inc.) and Private Mosaic entered into a reverse merger transaction, as further described below.

Reverse Merger

On August 19, 2020, Patriot Scientific Corporation, a corporation organized under Delaware law on March 24, 1992 (now known as Mosaic ImmunoEngineering, Inc.) and Private Mosaic entered into a stock purchase agreement ("Stock Purchase Agreement"), whereby one of the wholly owned subsidiaries of Patriot Scientific Corporation ("PTSC") merged with and into Private Mosaic, with Private Mosaic surviving as wholly owned subsidiary of PTSC (the "Reverse Merger"). The transaction closed on August 21, 2020 ("Closing Date") in accordance with the terms of the Stock Purchase Agreement.

On the Closing Date, Patriot Scientific Corporation acquired 100% of the issued and outstanding common stock of Private Mosaic, representing 630,000 shares of its Class A common stock ("Class A Stock") and 70,000 shares of its Class B common stock ("Class B Stock") (collectively referred to as "Target Common Stock"). In exchange for the Target Common Stock, the holders of the Class A Stock received 630,000 shares of the Company's Series A Convertible Voting Preferred Stock ("Series A Preferred") and holders of the Class B Stock received 70,000 shares of the Company's Series B Convertible Voting Preferred Stock ("Series B Preferred"). Each share of Series A Preferred converted into 10.194106 shares of common stock as defined in the Series A Certificate of Designation. Each share of Series B Preferred converts into 11.46837 shares of common stock of the Company, possesses full voting rights, on an as-converted basis, as the common stock of the Company and contains certain anti-dilution rights, as defined in the Series B Certificate of Designation. On a fully diluted, as converted basis, the holders of Series A Preferred and Series B Preferred, in aggregate, owned 90% of the issued and outstanding common stock of the Company as of the Closing Date.

The Reverse Merger was treated by the Company as a reverse merger in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). For accounting purposes, Private Mosaic was considered to have acquired PTSC as the accounting acquirer because: (i) Private Mosaic stockholders owned 90% of the combined company, on an as-converted basis, immediately following the Closing Date, (ii) Private Mosaic directors held a majority of board seats in the combined company and (iii) Private Mosaic management held all key positions in the management of the combined company. Accordingly, Private Mosaic's historical results of operations replaced PTSC's historical results of operations for all periods prior to the Closing Date of the Reverse Merger and, for all periods following the Closing Date of the Reverse Merger, the results of operations of the combined company are included in the Company's financial statements.

Other Key Corporate Events

On November 30, 2020, we filed amended and restated articles of incorporation with the Secretary of State of the State of Delaware ("Amended and Restated Certificate") to change the name of the Company to Mosaic ImmunoEngineering, Inc. ("Name Change") to align the Company's corporate name with its new strategic direction, to implement a 1-for-500 reverse stock split ("Reverse Stock Split"), and to reduce the number of authorized shares of common stock from 600 million to 100 million. The Reverse Stock Split was effective on December 2, 2020. All share numbers and preferred stock conversion numbers included herein have been retroactively adjusted to reflect the 1-for-500 Reverse Stock Split. On December 30, 2020, we changed our fiscal year end from May 31 to December 31.

Our funding has primarily come from the issuance of convertible notes. On May 7, 2021 and February 18, 2022, we issued unsecured convertible promissory notes in the aggregate principal amount of $575,000 and $341,632, respectively (see Note 6 to the accompanying consolidated financial statements).

On April 26, 2024, we entered into a binding term sheet ("Binding Term Sheet") with Oncotelic Therapeutics, Inc.("Oncotelic") pursuant to which we intend to acquire (i) certain rights to Oncotelic's clinical stage necroptosis cancer therapies associated with its vascular disruptive agents ("VDAs") and related regulatory and clinical packages, and (ii) non-exclusive access to its proprietary Artificial Intelligence ("AI") technologies for identifying immunotherapy combinations, in exchange for shares of our common stock valued at $15.0 million upon execution of the definitive agreement, or a combination of common stock and preferred stock to be determined by the parties, along with additional milestones allowing Oncotelic to earn up to an additional $15.0 million in shares of common stock that would be valued at the time of issuance, if earned. Pursuant to the Binding Term Sheet, we and Oncotelic agreed to negotiate in good faith towards the execution of a definitive agreement and the closing of the transaction, which is subject to customary due diligence and other conditions, including obtaining shareholder approval for the transaction and receiving waivers from our holders of Convertible Notes representing at least 90% of the principal amount outstanding from any payment that would become due and payable upon a corporate transaction as contemplated under the Binding Term Sheet. The Binding Term Sheet expired on June 30, 2025.

On November 18, 2024, we entered into an unsecured convertible promissory note ("Note Purchase Agreement") with an accredited investor ("Investor") for proceeds of up to $200,000 to be used for general corporate purposes. On December 4, 2024, the Company received $200,000 under the note purchase agreement and issued an unsecured convertible note bearing interest at a rate of 5% per annum that 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, 2025 and 2024, the Company has accrued $10,741 and $740, respectively, 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.

2.	Income Taxes

We follow authoritative guidance in accounting for uncertainties in income taxes. This authoritative guidance prescribes a recognition threshold and measurement requirement for the financial statement recognition of a tax position that has been taken or is expected to be taken on a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under this guidance, we may only recognize tax positions that meet a "more likely than not" threshold.

We follow authoritative guidance to evaluate whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a "more likely than not" standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We assess our deferred tax assets annually under more likely than not scenarios in which they may be realized through future income.

In addition, utilization of our net operating loss carryforwards may be subject to an annual limitation due to ownership change limitations that may have occurred as a result of the Reverse Merger that closed in August 2020, or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). These ownership changes may limit the amount of the net operating loss carry forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an "ownership change" as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a Company by certain stockholders. Moreover, since we will need to raise substantial additional funding to finance our operations, we may undergo further ownership changes in the future, which could further limit our ability to use net operating loss carryforwards. As a result, if we generate taxable income, our ability to use some of our net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could result in increased future tax liability to us.

With the exception of refundable income taxes, we have determined that it was more likely than not that all of our deferred tax assets will not be realized in the future due to our continuing pre-tax and taxable losses in addition to the potential loss of deferred tax assets as a result of the change in control (see Note 1 to the accompanying consolidated financial statements). As a result of this determination, and with the exception for the aforementioned refundable income taxes, we have recorded a full valuation allowance against our deferred tax assets.

Results of Operations

Years Ended December 31, 2025 and 2024

Research and Development Expenses

Research and development expenses of approximately $64,000 for the year ended December 31, 2025 are primarily related to salaries and related costs for personnel in research and development functions totaling $63,000. The decrease in research and development expenses of approximately $120,000 for the year ended December 31, 2025 as compared to the same prior year period was primarily due to a (i) decrease in payroll and related costs of approximately $113,000 due to a reduced time commitment by certain employees and (ii) a decrease in technology license maintenance fees of $7,000.

General and Administrative Expenses

General and administrative expenses of approximately $552,000 for the year ended December 31, 2025 consist principally of salaries and related costs for personnel and consultants in executive and administrative functions of approximately $438,000, accounting and filing fees of approximately $73,000, director and officer insurance of approximately $29,000, investor and public relation fees of approximately $3,000, and other expenses of approximately $9,000. The decrease in general and administrative expenses of approximately $144,000 for the year ended December 31, 2025 as compared to the same prior year period was primarily due to (i) decrease in payroll and related costs of approximately $143,000 due to a reduced time commitment by certain employees, (ii) a decrease in director and officer insurance of approximately $6,000, and (iii) a decrease of $5,000 in other miscellaneous corporate expenses offset by an increase in accounting and filing fees of $10,000.

Other Income (Expense)

Master Services Agreement with Oncotelic

On July 1, 2024, we entered into a Master Services Agreement with Oncotelic whereby we perform advisory and related services in connection with studies and projects. During the years ended December 31, 2025 and 2024, we earned $14,000 and $42,000, respectively, for advisory and related services which is recorded in other income in the accompanying consolidated statements of operations. The Master Services Agreement expired effective February 28, 2025.

Interest Expense and Accretion to Redemption Value on Convertible Notes

Interest expense of approximately $83,000 and $81,000 for the years ended December 31, 2025 and 2024, respectively, represents interest expense on convertible notes and loan payables.

Accretion to redemption value on convertible notes of approximately $0 and $1,000 for the years ended December 31, 2025 and 2024, respectively, pertains to the accretion of the convertible notes to their redemption value using the effective interest method. The Convertible Notes have been accreted to their full redemption value as of March 31, 2024.

Liquidity and Capital Resources

As of December 31, 2025, we had cash and cash equivalents of approximately $4,000. Our ability to continue our operations is highly dependent on our ability to raise capital to fund future operations. We anticipate, based on currently proposed plans and assumptions, that our cash on hand will not satisfy our operational and capital requirements through twelve months from the filing date of this Annual Report.

Our primary uses of capital to date are primarily related to payroll, consulting and related costs, corporate formation and ongoing public company expenses, audit fees, fees associated with license agreements, including patent-related expenses, and costs of the reverse merger. Pending our ability to identify new product candidates and license or acquire those rights, then on a go forward basis, we will need significant additional capital to support our research and development efforts, compensation and related expenses, and hiring additional staff (including clinical, scientific, operational, financial, and management personnel) and to reduce our current liabilities. Pending our ability to identify new product candidates and license or acquire those rights, we would expect to incur substantial expenditures in the foreseeable future for the research and development of new potential product candidates, provided we are able to raise sufficient capital to advance these technologies and technologies under the Binding Term Sheet, as noted below.

On May 8, 2024, we entered into a convertible note purchase agreement with Oncotelic for up to $70,000 in funding with interest at 16% per annum. Amounts totaling $70,000 were received at various times throughout the year ended December 31, 2024. On December 12, 2024, we repaid the entire outstanding principal of $70,000 along with accrued interest of $6,214. As of December 31, 2024, there are no amounts due or outstanding under the convertible note purchase agreement with Oncotelic.

On July 1, 2024, we entered into a Master Services Agreement with Oncotelic whereby we perform advisory and related services in connection with studies and projects. During the years ended December 31, 2025 and 2024, we earned $14,000 and $42,000, respectively, for advisory and related services which is recorded in other income in the accompanying consolidated statements of operations. The Master Services Agreement expired effective February 28, 2025.

On November 18, 2024, we entered into an unsecured convertible promissory note ("Note Purchase Agreement") with an accredited investor ("Investor") for proceeds of up to $200,000 to be used for general corporate purposes. On December 4, 2024, the Company received $200,000 under the note purchase agreement and issued an unsecured convertible note bearing interest at a rate of 5% per annum that 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, 2025 and 2024, the Company has accrued $10,741 and $740, respectively, in interest that is included in other accrued expenses within the accompanying consolidated balance sheet.

We plan to continue to fund losses from operations and future funding needs through our cash on hand and future potential equity and/or debt offerings. There are a number of uncertainties associated with our ability to raise additional capital and we have no current arrangements with respect to any additional financing. If we raise funds from the issuance of equity securities (which will be challenging in light of current market conditions combined with our limited technologies), substantial dilution to our existing stockholders would likely result. If we raise additional funds by incurring debt financing (also challenging in light of current market conditions combined with our limited technologies), the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business. Since the closing date of the Reverse Merger, our limited cash position has required us to perform only limited development activities and to delay and scale back our development programs and other activities to remain afloat. If we continue to have insufficient funds, we may be required to cease our operations altogether.

In addition, the continuation of disruptions caused by COVID-19 or other related variants, broad-based inflation, and various economic indicators that the United States economy may be entering a recession in upcoming quarters may cause investors to slow down or delay their decision to deploy capital which will adversely impact our ability to fund future operations. Consequently, there can be no assurance that any additional financing on commercially reasonable terms, or at all, will be available when needed. If we are unable to raise additional capital and continue to have insufficient funds, we may be required to cease our operations altogether. The above matters raise substantial doubt regarding our ability to continue as a going concern.

Cash Flow Summary

The following table provides a summary of our net cash flow activity for the years ended December 31, 2025 and 2024:

		Year Ended December 31, 2025				Year Ended December 31, 2024
Net cash used in operating activities		$	(111,397	)		$	(241,159	)
Net cash provided by financing activities			-				200,000
Net decrease in cash and cash equivalents		$	(111,397	)		$	(41,159	)

Cash Flows From Operating Activities

Net cash used in operating activities for the year ended December 31, 2025 consisted of our net loss of $687,846 offset by (i) non-cash interest expense of $73,332, and (ii) a net change in operating assets and liabilities of $503,117 primarily due to an increase in accrued compensation of $486,556, prepaid expenses of $10,332 and accrued payables of $8,310.

Net cash used in operating activities for the year ended December 31, 2024 consisted of our net loss of $921,983 offset by (i) non-cash interest expense of $73,533, (ii) non-cash share-based compensation expense of $4,867, (iii) the accretion to redemption value on convertible notes of $1,446, and (iv) a net change in operating assets and liabilities of $604,215 primarily due to an increase in accrued compensation of $582,741 and accounts payable of $16,387.

Cash Flows From Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 consisted of proceeds received from loan payable with an accredited investor totaling $200,000 (see Note 7 to the accompanying consolidated financial statements) and loan payable from Oncotelic totaling $70,000. The loan payable from Oncotelic totaling $70,000 was paid in full along with accrued interest on December 12, 2024 (see Note 12 to the accompanying consolidated financial statements).

Recent Accounting Pronouncements

For a detailed description of recent accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in Part IV, Item 15 of this Report and begin on page F-1 with the index to consolidated financial statements.