UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2024
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________

Commission File Number 0-22182

MOSAIC IMMUNOENGINEERING, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 84-1070278 (I.R.S. Employer Identification No.)

9114 Adams Avenue, #202, Huntington Beach, California (Address of principal executive offices) 94646 (Zip Code)

(Registrant’s telephone number, including area code): (657) 208-0890

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ý	Smaller reporting company ý
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐   NO ý

On August 12, 2024, 7,242,137 shares of common stock, par value $0.00001 per share, were outstanding.

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements	6
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.    Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.    Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1.    Legal Proceedings	29
Item 1A. Risk Factors	29
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.    Defaults Upon Senior Securities	46
Item 4.    Mine Safety Disclosures	46
Item 5.    Other Information	46
Item 6.    Exhibits	46
SIGNATURES	47

2

Unless the context otherwise requires, references to the “Company,” the “combined company,” “Mosaic,” “we,” “our,” or “us” in this Quarterly Report on Form 10-Q refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report” or Quarterly 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. In this Report, the words “anticipates,” “believes,” “expects,” “intends,” “future,” “estimates,” “may,” “could,” “should,” “would,” “will,” “shall,” “propose,” “continue,” “predict,” “plan” or the negative versions of these terms and other similar expressions are generally intended to identify certain of these forward-looking statements.

These forward-looking statements are subject to certain risks and uncertainties, and actual results may differ materially from those in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” in Part II, Item 1A of this Report as well as information provided elsewhere in this Report and our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the SEC) on April 15, 2024. You should carefully consider that information before you make an investment decision.

You should not place undue reliance on these types of forward-looking statements, which speak only as of the date that they were made. These forward-looking statements are based on the beliefs and assumptions of the Company’s management based on information currently available to management and should be considered in connection with any written or oral forward-looking statements that the Company may issue in the future as well as other cautionary statements the Company has made and may make. Except as required by law, the Company does not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of this Report to reflect later events or circumstances or the occurrence of unanticipated events.

The discussion of the Company’s financial condition and results of operations should be read in conjunction with the Company’s Unaudited Condensed Consolidated Financial Statements and the related Notes thereto included in this Report.

3

RISK FACTOR SUMMARY

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part II, Item 1A of this Quarterly Report. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under “Risk Factors” in Part II, Item 1A of this Quarterly Report as part of your evaluation of an investment in our common stock.

Risks Related to Our Operations

· While the Company’s financial statements have been prepared on a going concern basis, we do not currently have sufficient working capital to fund our current liabilities and planned operations for the next twelve months and we may be required to cease our operations altogether if we are unable to secure sufficient funding.

· We entered into a binding term sheet with Oncotelic Therapeutics, Inc. to acquire rights to certain technologies of Oncotelic and we may not enter into a definitive agreement if certain conditions are not met.

· If we enter into a definitive agreement with Oncotelic under the terms of the binding term sheet, existing stockholders will experience substantial immediate dilution.

· We may not successfully identify new product candidates to expand our development pipeline.

· If we are able to raise sufficient capital, we expect that we will incur significant losses over the next several years and may never achieve or maintain profitability.

· Our development efforts have historically been with product candidates in preclinical development.

· Our short operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

· The Company and its subsidiaries have limited insurance for their operations and are subject to various risks of loss.

· Drug development involves a lengthy and expensive process with an uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the product manufacturing of any product candidates.

· If serious adverse events or unacceptable side effects are identified during the development of any product candidates, we may need to abandon or limit our development of these product candidates.

· If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

Risks Related to Our Financial Position and Need for Additional Capital

· We need substantial additional funding. If we are unable to secure sufficient capital in the near term, we may be required to further reduce or eliminate product development and potentially cease operations.

· Raising capital will cause dilution to our stockholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates.

4

Risks Related to Our Dependence on Third Parties

· Future development collaborations may be important to us. If we are unable to enter into or maintain these collaborations, or if these collaborations are not successful, our business could be adversely affected.

· We may contract with third parties for the manufacture of product candidates for preclinical and clinical studies and may expect to continue to do so for commercialization. This potential reliance on third parties increases the risk that we will not have sufficient quantities of product candidates or products at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts.

· Data provided by collaborators and other parties upon which we rely has not been independently verified and could turn out to be inaccurate, misleading, or incomplete.

Risks Related to Intellectual Property

· If we are unable to obtain and maintain intellectual property protection for technology and products we plan to develop or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

· If we fail to comply with our obligations under any license agreement or other agreements under which we may license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationships with our future licensors, we could lose those rights or other rights, which could be the products upon which our business depends.

· We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

· We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.

· Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

· If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

Risks Related to Our Employee Matters, Managing Growth and Macroeconomic Conditions

· Our future success depends on our ability to attract, hire, retain and motivate executives, key employees, and our general workforce.

· We expect to expand our research and development function, as well as our corporate operations, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

· We may face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

Risks Related to Our Common Stock

· There is a substantial lack of liquidity of our common stock and volatility risks, and because there is no active public trading market for our common stock, you may not be able to resell your common stock.

· The market for our common stock is subject to rules relating to low-priced stock (“Penny Stock”) which may limit our ability to raise capital.

· Future sales of shares by existing stockholders could cause the Company’s stock price to decline.

· We expect our stock price to be volatile, and the market price of our common stock may drop unexpectedly.

· We may issue preferred stock, and the terms of such preferred stock may reduce the value of our common stock.

· Our executive officers, directors and principal stockholders, if they choose to act together, will have the ability to control all matters submitted to stockholders for approval.

· Our amended and restated certificate of incorporation and amended and restated bylaws provides that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

· Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

5

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mosaic ImmunoEngineering, Inc.

Condensed Consolidated Balance Sheets

	June 30, 2024			December 31, 2023
	unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	3,734		$	156,178
Prepaid expenses and other current assets		8,543			23,355
Total current assets		12,277			179,533
Total assets	$	12,277		$	179,533
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	125,040		$	118,478
Accrued compensation		3,512,477			3,184,911
Accrued consulting		787,903			787,903
Accrued expenses and other		623,577			641,763
Loan payable		56,133			–
Total current liabilities		5,105,130			4,733,055
Convertible notes, net		1,355,547			1,317,536
Total liabilities		6,460,677			6,050,591
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized:
Series A Convertible Voting Preferred Stock; 630,000 shares designated; no shares issued and outstanding		–			–
Series B Convertible Voting Preferred Stock; 70,000 shares designated; 70,000 shares issued and outstanding		1			1
Common stock, $0.00001 par value: 100,000,000 shares authorized: 7,242,137 shares issued and outstanding		72			72
Additional paid-in capital		2,050,073			2,045,206
Accumulated deficit		(8,498,546	)		(7,916,337	)
Total stockholders’ deficit		(6,448,400	)		(5,871,058	)
Total liabilities and stockholders’ deficit	$	12,277		$	179,533

See accompanying notes to unaudited condensed consolidated financial statements.

6

Mosaic ImmunoEngineering, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Operating expenses:
Research and development	$	60,707		$	122,638		$	128,018		$	300,533
General and administrative		213,595			229,868			415,050			511,746
Total operating expenses		274,302			352,506			543,068			812,279
Loss from operations		(274,302	)		(352,506	)		(543,068	)		(812,279	)
Other income (expense):
Gain on redemption of preferred stock of Holocom		–			356,000			–			433,000
Interest income		1			3,378			4			3,386
Change in valuation of derivative liability		–			33,900			–			46,700
Non-cash interest expense on convertible notes		(19,416	)		(18,283	)		(37,699	)		(36,365	)
Accretion to redemption value on convertible notes		–			(2,877	)		(1,446	)		(11,473	)
Total other income (expense), net		(19,415	)		372,118			(39,141	)		435,248
Income (loss) before provision for income taxes		(293,717	)		19,612			(582,209	)		(377,031	)
Provision for income taxes		–			–			–			2,400
Net income (loss)	$	(293,717	)	$	19,612		$	(582,209	)	$	(379,431	)
Basic and diluted income (loss) per common share	$	(0.04	)	$	0.00		$	(0.04	)	$	(0.05	)
Weighted average number of common shares outstanding – basic		7,236,447			7,236,447			7,236,447			7,236,447
Weighted average number of common shares outstanding – diluted		7,236,447			8,569,113			7,236,447			7,236,447

See accompanying notes to unaudited condensed consolidated financial statements.

7

Mosaic ImmunoEngineering, Inc.

Condensed Consolidated Statements of Stockholders’ Deficit

(Unaudited)

For the Three Months Ended June 30, 2024

	Series A Convertible Voting Preferred Stock				Series B Convertible Voting Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balances, March 31, 2024		–	$	–		70,000	$	1		7,242,137	$	72	$	2,050,073	$	(8,204,829	)	$	(6,154,683	)
Share-based compensation		–		–		–		–		–		–		–		–			–
Net loss		–		–		–		–		–		–		–		(293,717	)		(293,717	)
Balances, June 30, 2024		–	$	–		70,000	$	1		7,242,137	$	72	$	2,050,073	$	(8,498,546	)	$	(6,448,400	)

For the Three Months Ended June 30, 2023

	Series A Convertible Voting Preferred Stock				Series B Convertible Voting Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balances, March 31, 2023		–	$	–		70,000	$	1		7,242,137	$	72	$	2,028,679	$	(7,307,145	)	$	(5,278,393	)
Share-based compensation		–		–		–		–		–		–		5,469		–			5,469
Net loss		–		–		–		–		–		–		–		19,612			19,612
Balances, June 30, 2023		–	$	–		70,000	$	1		7,242,137	$	72	$	2,034,148	$	(7,287,533	)	$	(5,253,312	)

For the Six Months Ended June 30, 2024

	Series A Convertible Voting Preferred Stock				Series B Convertible Voting Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balances, January 1, 2024		–	$	–		70,000	$	1		7,242,137	$	72	$	2,045,206	$	(7,916,337	)	$	(5,871,058	)
Share-based compensation		–		–		–		–		–		–		4,867		–			4,867
Net loss		–		–		–		–		–		–		–		(582,209	)		(582,209	)
Balances, June 30, 2024		–	$	–		70,000	$	1		7,242,137	$	72	$	2,050,073	$	(8,498,546	)	$	(6,448,400	)

For the Six Months Ended June 30, 2023

	Series A Convertible Voting Preferred Stock				Series B Convertible Voting Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balances, January 1, 2023		–	$	–		70,000	$	1		7,242,137	$	72	$	2,023,271	$	(6,908,102	)	$	(4,884,758	)
Share-based compensation		–		–		–		–		–		–		10,877		–			10,877
Net loss		–		–		–		–		–		–		–		(379,431	)		(379,431	)
Balances, June 30, 2023		–	$	–		70,000	$	1		7,242,137	$	72	$	2,034,148	$	(7,287,533	)	$	(5,253,312	)

See accompanying notes to unaudited condensed consolidated financial statements.

8

Mosaic ImmunoEngineering, Inc.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
	2024			2023
Operating activities:
Net loss	$	(582,209	)	$	(379,431	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		4,867			10,877
Gain on redemption of preferred stock of Holocom		–			(433,000	)
Change in fair value of derivative liability		–			(46,700	)
Non-cash interest on convertible notes		36,565			36,365
Interest expense on loan payable		1,133			–
Accretion to redemption value on convertible notes		1,446			11,473
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		14,812			34,239
Accounts payable		6,562			(2,388	)
Accrued compensation		327,566			427,089
Accrued consulting		–			47,020
Accrued expenses and other		(18,186	)		3,781
Net cash used in operating activities		(207,444	)		(290,675	)
Investing activities:
Proceeds from redemption of preferred stock of Holocom		–			433,000
Net cash provided by investing activities		–			433,000
Financing activities:
Proceeds from issuance of loan payable		55,000			–
Net cash provided by financing activities		55,000			–
Net change in cash and cash equivalents		(152,444	)		142,325
Cash and cash equivalents, beginning of period		156,178			220,645
Cash and cash equivalents, end of period	$	3,734		$	362,970
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	–		$	2,400
Cash paid for interest	$	–		$	–

See accompanying notes to unaudited condensed consolidated financial statements.

9

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024

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

1.        Organization and Business

Organization

Mosaic ImmunoEngineering, Inc. (the “Company,” “Mosaic,” “we,” “us,” or “our”) is a corporation organized under Delaware law on March 24, 1992. 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 candidate and we are pursuing new product candidates and platforms to expand our pipeline based on a deep understanding of immunotherapies and our license agreements with University of California San Diego.

The Company has two inactive wholly owned subsidiaries: Mosaic ImmunoEngineering Development Company, a corporation organized under Delaware law on March 30, 2020 and Patriot Data Solutions Group, Inc.

Going Concern and Management’s Plans

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. At June 30, 2024, the Company had cash and cash equivalents of $3,734 and has not yet generated any revenues. Therefore, 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 and cash equivalents on hand will not satisfy our operational and capital requirements through twelve months from the filing date of this Quarterly Report on Form 10-Q.

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. In addition, the continuation of disruptions caused by COVID-19 or other variants or pandemics, 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. The inability to obtain additional capital will delay our ability to conduct our business operations. Any additional equity financing may involve substantial dilution to our then existing stockholders. The above matters raise substantial doubt regarding our ability to continue as a going concern.

2.        Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. The accompanying unaudited condensed consolidated financial statements should therefore be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of the results for the interim period presented.

10

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2024, as compared to the significant accounting policies disclosed in Note 2 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Adopted Accounting Standards

Other than described below, there have been no additional accounting pronouncements adopted by the Company or new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) during the three and six months ended June 30, 2024, as compared to the recent accounting pronouncements described in Note 2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, that the Company believes are of significance or potential significance to the Company.

In August 2020, the FASB issued Accounting Standards Updates (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). The guidance simplifies the accounting for certain financial instruments, eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments, and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. It also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity and amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The guidance is effective for public business entities that meet the definition of a Securities and Exchange Commission filer, excluding entities eligible to be smaller reporting companies as defined by the Securities and Exchange Commission, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the guidance as of January 1, 2024, which had no impact on the Company’s unaudited condensed consolidated financial statements.

3.        Fair Value of Financial Instruments

Under this authoritative guidance, we are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We determine fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment or valuations by third-party professionals. The three levels of inputs that we may use to measure fair value are:

· Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

· Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

· Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

11

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

The carrying amount of certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate their estimated fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources and management estimates. Convertible notes were initially recorded at their amortized cost and are being accreted to their redemption value over the estimated conversion period (Note 7).

4.        Investment in Affiliated Companies

Holocom, Inc.

In February 2007, we invested an aggregate of $370,000 in Holocom in exchange for 2,100,000 shares of Series A Preferred Stock, which represented an approximate 46% ownership interest in Holocom, on an as-converted basis. Pursuant to the articles of incorporation of Holocom, the Series A Preferred Stock is convertible at our option into shares of Holocom’s common stock on a one-to-one basis or is redeemable at any time after May 31, 2007 at a redemption price equal to $0.40 per share or $840,000 in aggregate, provided Holocom has sufficient funding to redeem our shares of Series A Preferred Stock.

On July 6, 2022, we entered into the Redemption Agreement with Holocom, pursuant to which we requested full redemption of our Series A Preferred Stock. Pursuant to the Redemption Agreement, we received cash proceeds in the amount of $336,000 upon the redemption of 840,000 shares of Series A Preferred Stock in July 2022 with the remaining shares of Series A Preferred Stock were to be redeemed over a period of thirty (30) months beginning August 1, 2022 based on the following redemption schedule:

Period	Shares of Series A Preferred Stock to be Redeemed each Month	Monthly Redemption Proceeds to the Company
Months 1-12	35,000	$14,000
Months 13-24	43,750	$17,500
Months 25-30	52,500	$21,000

We recognized the initial and monthly redemption of shares of Series A Preferred Stock using a cash basis of accounting rather than an accrual method as we were unable to assert that collection of amounts due under the redemption agreement was probable, regardless of the terms of the Redemption Agreement. Any amounts not paid within fifteen (15) days of its respective due date accrued interest at a rate of 8% per annum until fully paid and retroactively adjusted to 12% per annum from its original due date for amounts not paid within 90 days of its original due date. On June 21, 2023, we entered into an amendment to the Redemption Agreement (“Amendment No. 1”) to redeem the remaining 910,000 shares of Series A Preferred Stock outstanding in exchange for a lump sum payment of $300,000 (in lieu of monthly payments), representing a redemption price of approximately $0.33 per share.

During the three and six months ended June 30, 2023, we received aggregate proceeds of $356,000 and $433,000, respectively, in exchange for 1,050,000 and 1,242,500 shares of Series A Preferred Stock, respectively. As of June 30, 2023, we redeemed in aggregate, 2,100,000 shares of Series A Preferred Stock, in exchange for aggregate net proceeds received by us of $776,000. As of June 30, 2023, Holocom had no further obligations to us under the Redemption Agreement or any other arrangement.

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Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

5.        Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	June 30, 2024		December 31, 2023
Crossflo acquisition liability	$	177,244	$	177,244
Accrued patent expenses		430,873		430,873
Other accrued expenses		15,460		33,646
Total accrued expenses and other current liabilities	$	623,577	$	641,763

In September 2008, we acquired Patriot Data Solutions Group, Inc. formerly known as Crossflo Systems, Inc. (“PDSG”). In connection with the acquisition of Crossflo, we have accrued $177,244 that could be payable to Crossflo investors.

6.        License Agreements

License Option Agreement and License Agreement with CWRU

On July 1, 2020, we signed a License Option Agreement with CWRU, granting the Company the exclusive right to license certain technology covering an immunotherapy platform technology to treat and prevent cancer in humans and for veterinary use, including MIE-101, our lead clinical candidate. Under the License Option Agreement, CWRU granted us the exclusive option for a period of two (2) years to negotiate and enter into a license agreement with CWRU, provided that we meet certain diligence milestones.

Under the License Option Agreement, we issued CWRU 70,000 shares of Class B Common Stock at the fair market value of $7 on the date of issuance. On August 21, 2020, the Class B Common Stock was exchanged for shares of Series B Preferred.

On May 4, 2022, we exercised our rights under the License Option Agreement and entered into a license agreement with CWRU (“License Agreement”). Pursuant to the terms of the License Agreement, we agreed to pay CWRU for each licensed product used in human applications (i) development milestones of up to $1.8 million in aggregate dependent upon the progress of clinical trials, regulatory approvals, and initiation of product launch, (ii) tiered royalty on net sales beginning in the mid-single digits, (iii) annual minimum royalty of $10,000 beginning on the second anniversary date of the Agreement with the minimum amount rising based on net sales of the licensed product, and (iv) a declining percentage of all non-royalty sublicensing income based on the escalating stage of development upon a sublicensing event, if applicable. In addition, we agreed to pay CWRU for each licensed product used in veterinarian applications (i) a tiered royalty on net sales beginning in the low single digits and (ii) a declining percentage of all non-royalty sublicensing income based on the escalating stage of development upon a sublicensing event, if applicable.

In addition, we are responsible for the reimbursement of all past, current and future patent fees incurred by CWRU under the License Agreement. During the six months ended June 30, 2024 and 2023, we incurred zero and $26,178, respectively, in patent legal fees associated with the License Agreement, which amounts are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

13

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

Furthermore, we agreed to reimburse CWRU for all intellectual property fees incurred since inception of the portfolio through the date of the License Agreement in the amount of approximately $303,000 (included in Accrued expenses and other in the accompanying condensed consolidated balance sheets) in four (4) equal quarterly installments beginning upon the sooner of (i) August 31, 2022 or (ii) upon the Company closing a financing in the amount of $5 million or more. Due to our limited cash position, as of December 31, 2023, we had not paid any amounts owed to CWRU and we continued to seek additional time to raise sufficient capital in order to pay amounts due to CWRU. On March 22, 2024, we received a notice of termination from CWRU to terminate the License Agreement effective on the notice date. As of June 30, 2024 and December 31, 2023, we have accrued $406,973 in accrued patent fees under the License Agreement.

License Agreements with University of California San Diego (“UC San Diego”)

During July 2021, we licensed the exclusive rights from UC San Diego to develop and commercialize technology that involves the loading of immuno-stimulatory molecules into plant virus protein nanoparticles. These plant virus protein nanoparticles can be loaded with other TLR agonists to further tailor specific immune response parameters. Under the licensing agreement, we are obligated to pay (i) a nominal upfront license access fee, (ii) all patent costs incurred prior to the effective date of the license agreement, (iii) annual license maintenance fees beginning on the second anniversary date of the agreement, (iv) aggregate future milestone payments based on potential clinical development and regulatory milestones of up to $165,000 through Phase III development plus additional milestones upon regulatory approval in the U.S. and other countries, (v) potential sales milestones upon achieving certain sales levels, and (vi) a low single digit royalty on net sales and/or a percentage of sublicense income.

During September 2021, we licensed the exclusive rights to develop and commercialize several novel vaccine candidates, including SARS-CoV-2 and other infectious disease applications from UC San Diego. Under the licensing agreement, we are obligated to pay (i) a nominal upfront license access fee, (ii) all patent costs incurred prior to the effective date of the license agreement, (iii) annual license maintenance fees beginning on the second anniversary date of the agreement, (iv) aggregate future milestone payments based on potential clinical development and regulatory milestones of up to $1,250,000 through Phase III development plus additional milestones upon regulatory approval in the U.S. and other countries, and (v) a low single digit royalty on net sales and/or a percentage of sublicense income. On July 12, 2023, we provided notice to UC San Diego to terminate the September 2021 license agreement based on our evaluation of our licensed technology portfolio and our focus on advancing our lead oncology candidate, MIE-101.

During the six months ended June 30, 2024 and 2023, we incurred zero and $200, respectively, in intellectual property costs associated with the license agreements with UC San Diego, which amount is included in general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, we have accrued $33,900 in accrued expenses under the license agreements with UC San Diego.

7.        Convertible Notes

On May 7, 2021, we entered into a convertible note purchase agreement (“May Note Agreement”) with five (5) accredited investors, including three (3) members of our Board of Directors (“Board”) that participated on the same terms as other accredited investors. Pursuant to the Note Agreement, we received $525,003 in proceeds in addition to $49,997 in accrued payable to founder that was invested in convertible notes and the Company issued unsecured convertible promissory notes (“May Convertible Notes”) in the aggregate principal amount of $575,000.

14

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

On February 18, 2022, we entered into additional convertible note purchase agreements (“February Note Agreement”) with sixteen (16) accredited investors, including five (5) members of our Board that participated on the same terms as other accredited investors. Pursuant to the February Note Agreement, we received $341,632 in proceeds and issued unsecured convertible promissory notes (“February Convertible Notes”) in the aggregate principal amount of $341,632. The February Convertible Notes were issued as part of a convertible note offering authorized by the Company’s Board (the “Convertible Notes Offering”) for raising up to $5 million from the issuance of convertible notes through June 30, 2022.

The May and February Convertible Notes (collectively, the “Convertible Notes”) have no stated maturity date; bear interest at a simple rate equal to eight percent (8.0%) per annum until converted; and automatically convert into the same equity securities issued for cash in the Qualified Financing (as described below), or at the option of the holder, into the same equity securities issued for cash in a Smaller Financing (as described below). Interest on the Convertible Notes is accreted and added to the unpaid principal balance prior to conversion of the Convertible Notes. During the three and six months ended June 30, 2024, the Company recorded non-cash interest expense on the Convertible Notes in the amount of $18,283 and $36,565, respectively. During the three and six months ended June 30, 2023, the Company recorded non-cash interest expense on the Convertible Notes in the amount of $18,283 and $36,365, respectively.

The Convertible Notes will convert into the same equity securities offered in the Qualified Financing or Smaller Financing (“Conversion Shares”), as described below, at a conversion price equal to the lower of (i) the product equal to 80% times the lowest per unit purchase price of the equity securities issued for cash in the Qualified Financing or Smaller Financing, or (ii) $2.377 for the May Convertible Notes (“May Conversion Price”) or $1.00 for the February Convertible Notes (“February Conversion Price”). Pursuant to the February Note Agreement, for each holder of the May Convertible Notes that purchased a February Convertible Note in the amount of (a) $50,000 or (b) an amount equivalent to the principal amount of their May Convertible Note, the conversion price of the May Convertible Notes was adjusted to the February Conversion Price. As of June 30, 2024, the principal amount of the Convertible Notes that may be converted at the February Conversion Price was $866,632. In addition, the conversion price may be reduced or increased proportionately as a result of stock splits, stock dividends, recapitalizations, reorganizations, and similar transactions. Upon any conversion of the Convertible Notes in connection with a Qualified Financing or a Smaller Financing, as applicable, the Convertible Notes shall convert immediately prior to the closing thereof, such that the investors paying cash in such Qualified Financing or Smaller Financing, as applicable, are not diluted by the conversion of the Convertible Notes.

Pursuant to the Convertible Notes, a Qualified Financing represents a single transaction or series of transactions whereby the Company receives aggregate gross proceeds of at least $5 million from the sale of equity securities following the issuance date (excluding proceeds from the issuance of any future convertible notes). A Smaller Financing represents any sale of equity securities whereby the aggregate gross proceeds are less than $5 million (excluding proceeds from the issuance of any future convertible notes).

In addition, in the event of a corporate transaction covering the sale of all or substantially all of the Company’s assets, or merger or consolidation with or into another entity, or change in ownership of at least 50% in voting securities of the Company, the holder of the Convertible Note may elect that either: (a) the Company pay the holder of such Convertible Note an amount equal to the sum of (i) all accrued and unpaid interest due on such Convertible Note and (ii) one and one-half (1.5) times the outstanding principal balance of such Convertible Note; or (b) such Convertible Note will convert into that number of conversion shares equal to the quotient obtained by dividing (i) the outstanding principal balance and unpaid accrued interest of such Convertible Note on the date of conversion by (ii) the May or February Conversion Price, as applicable. In connection with the potential transaction with Oncotelic Therapeutics, Inc. (see Note 11), we received a one-time waiver from the convertible noteholders representing approximately 96% of the principal balance of the Convertible Notes, that no payments of principal and interest would be due under the proposed transaction with Oncotelic Therapeutics, Inc.

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Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

Pursuant to ASC Topic 835-30, “Imputation of Interest”, the Convertible Notes were initially recorded at their amortized cost of $916,632 and are being accreted to their redemption value of $1,145,790 (“Redemption Value”) over the estimated conversion period ending June 30, 2024 using the effective interest method. During the three and six months ended June 30, 2024, the Company recorded $0 and $1,446, respectively, in accretion to redemption value on the Convertible Notes. During the three and six months ended June 30, 2023, the Company recorded $2,877 and $11,473, respectively, in accretion to redemption value on the Convertible Notes. The Convertible Notes have been accreted to their full Redemption Value as of March 31, 2024.

8.        Stockholders’ Equity and Share-Based Compensation

Stockholders’ Equity (Deficit)

The Company’s authorized capital consists of 100,000,000 shares of common stock, par value $0.00001 per share, and 5,000,000 shares of preferred stock, par value $0.00001 per share (“Preferred Stock”). We designated 630,000 shares of Series A Convertible Voting Preferred Stock (“Series A Preferred”) and designated and issued 70,000 shares of Series B Convertible Voting Preferred Stock (“Series B Preferred”). As of June 30, 2024 and December 31, 2023, there are no shares of Series A Preferred outstanding and 70,000 shares of Series B Preferred outstanding.

Series B Preferred

On August 21, 2020, the Company issued 70,000 shares of Series B Preferred (classified as permanent equity), in exchange for 70,000 shares of Class B Common Stock in connection with the reverse merger in August 2020. Each share of Series B Preferred has a par value of $0.00001 per share, no dividend rate, a stated value of $6.50 per share, and each share of Series B Preferred initially converts into 11.46837 shares of common stock of the Company (“Series B Conversion Number”). In addition, the Series B Preferred possesses full voting rights, on an as-converted basis, as the common stock of the Company, as defined in the Series B Certificate of Designation. Furthermore, the Series B Preferred does not have any mandatory conversion rights and only converts upon written notice from the holder.

The Series B Preferred also includes certain anti-dilution rights (“anti-dilution issuance rights”), whereby the holder of Series B Preferred will continue to maintain ownership equal to 10% of the fully diluted shares of common stock outstanding, including for such purposes all other convertible securities outstanding and reserved for issuance except equity awards issued and outstanding and reserved for issuance under a board approved equity compensation plan reserving for issuance no more than ten percent (10%) of the outstanding common stock of the Company then outstanding, until the Capital Threshold is met. The anti-dilution issuance rights meet the definition of a derivative instrument under FASB’s ASC Topic 815. As of December 31, 2023, the $1 million dollar Capital Threshold was achieved and therefore, there is no remaining derivative liability.

In the event of any Liquidation Event, the Holders of Series B Preferred shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common stock, an amount per share in cash equal to the greater of (x) the stated value of $6.50 for each share of Series B Preferred then held by the holder or (y) the amount payable per share of common stock which such holder of Series B Preferred would have received if such Holder had converted to common stock immediately prior to the Liquidation Event.

16

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

Share-Based Compensation

2020 Omnibus Incentive Plan

On October 21, 2020, we adopted our 2020 Omnibus Incentive Plan (the “2020 Plan”) and on October 22, 2020, the 2020 Plan was approved by our stockholders. The 2020 Plan was adopted to promote our long-term success and the creation of stockholder value by motivating participants, through equity incentive awards, to achieve long-term success in our business. The 2020 Plan permits the discretionary award of stock options, restricted stock, RSUs, and other equity awards to selected participants. On October 21, 2021, the first anniversary date from the adoption date of the 2020 Plan, the number of shares of common stock reserved for issuance under the 2020 Plan increased to 20% of the fully diluted shares of common stock outstanding, including shares of common stock reserved for issuance under convertible securities. As of June 30, 2024, we have reserved 1,661,966 shares of common stock for issuance under the 2020 Plan, of which 536,600 were subject to outstanding RSUs and 1,111,322 shares were available for future grants of share-based awards.

The cost of all share-based awards will be recognized in the consolidated financial statements based on the fair value of the awards. The fair value of stock option awards will be determined using the Black-Scholes valuation model on the date of grant. The fair value of restricted stock awards and RSUs will be equal to the closing market price of our common stock on the date of grant. The Company will generally recognize share-based compensation expense over the period of vesting or period that services will be provided for all time-based awards. Share-based compensation expense for the three and six months ended June 30, 2024 and 2023 was comprised of the following:

	For the Three Months Ended June 30,
	2024		2023
Research and development	$	–	$	5,469
General and administrative		–		–
Total	$	–	$	5,469

	For the Six Months Ended June 30,
	2024		2023
Research and development	$	4,867	$	10,877
General and administrative		–		–
Total	$	4,867	$	10,877

17

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

The following summarizes our transaction activity related to RSUs for the six months ended June 30, 2024:

	Shares			Weighted Average Grant Date Fair Value
Nonvested and outstanding at January 1, 2024		541,957		$	3.01
Granted		–			–
Vested		–			–
Forfeited		(5,357	)		(2.80	)
Nonvested and outstanding at June 30, 2024		536,600		$	3.01

As of June 30, 2024, there was no unrecognized compensation cost related to RSUs. As of June 30, 2024, 14,044 RSUs have vested under the 2020 Plan since its adoption.

9.        Commitments and Contingencies

Legal Matters

While the Company is not involved in any litigation as of June 30, 2024, the Company may be involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. Any litigation could have a material adverse effect on the Company’s business, financial condition, results of operations, and/or cash flows in the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods.

Indemnification

We have made certain guarantees and indemnities, under which we may be required to make payments to a guaranteed or indemnified party. We indemnify our directors, officers, employees, and agents to the maximum extent permitted under the laws of the State of Delaware. The duration of the guarantees and indemnities varies, and in many cases is indefinite. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments we could be obligated to make. Historically, we have not been obligated to make any payments for these obligations and no liabilities have been recorded for these guarantees and indemnities in the accompanying unaudited condensed consolidated balance sheets.

Escrow Shares

On August 31, 2009, we gave notice to the former shareholders of Crossflo and Union Bank of California (the “Escrow Agent”) under Section 2.5 of the Agreement and Plan of Merger between us and Crossflo (the “Agreement”), outlining damages incurred by us in conjunction with the acquisition of Crossflo, and seeking the return of 5,690 shares of our common stock held by the Escrow Agent. Subsequently, former shareholders of Crossflo, representing a majority of the escrowed shares responded in protest to our claim, delaying the release of the escrowed shares until a formal resolution is reached. In the event we fail to prevail in our claim against the escrowed shares, we may be obligated to deposit into escrow approximately $256,000 of cash consideration due to the decline in our average stock price over the one-year escrow period calculated in accordance with the agreement. We have evaluated the potential for loss regarding our claim and believe that it is probable that the resolution of this issue will not result in a material obligation to the Company, although there is no assurance of this. Accordingly, we have not recorded any liability for this matter.

18

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

Operating Lease

We have no lease obligations as of June 30, 2024 and there was no rent expense for the three and six months ended June 30, 2024 and 2023. Employees are working from home offices at no cost to the Company.

10.        Related Parties

During April 2021, we entered into consulting agreements (retroactive to September 1, 2020) with Nicole Steinmetz, Ph.D., former acting Chief Scientific Officer and former member of the Board of Directors, Jonathan Pokorski, Ph.D. (Dr. Steinmetz’s spouse), and Steve Fiering, Ph.D., each a co-founder of the company acquired in the reverse merger and greater than 5% shareholder of the Company (“Related Parties”), for their scientific contributions towards advancing the technology platforms. On May 2, 2023, Dr. Steinmetz resigned from the Board of Directors and her role as acting Chief Scientific Officer.

During the three and six months ended June 30, 2024, we did not incur any related party consulting expenses. During the three months ended June 30, 2023, we incurred related party consulting expenses for Dr. Steinmetz, Dr. Pokorski, and Dr. Fiering in the aggregate amount of $5,000, $2,500 and $7,500, respectively, included in research and development expenses in the accompanying unaudited condensed consolidated financial statements. During the six months ended June 30, 2023, we incurred related party consulting expenses for Dr. Steinmetz, Dr. Pokorski, and Dr. Fiering in the aggregate amount of $15,000, $7,500 and $7,500, respectively, included in research and development expenses in the accompanying unaudited condensed consolidated financial statements. Pursuant to the consulting agreements, Dr. Steinmetz, Dr. Pokorski, and Dr. Fiering are initially paid 15% of their monthly amounts up and until the Company is able to raise at least $4 million in new funding. In exchange for the deferral of consulting payments, the Company agreed to grant each of the Related Parties RSU’s with a fair market value equal to 20% of their deferred cash compensation as of the closing date of the financing (the “20% Deferral”). The number of RSU’s to be granted will be calculated based on the closing price of the Company’s common stock on the closing date of the financing and will vest one-year from the date of grant. There was no share-based compensation expense recorded for the three months ended June 30, 2024 and 2023 pertaining to the 20% Deferral as the terms are unknown and are based on a future performance trigger. As of June 30, 2024 and December 31, 2023, we have accrued $264,375 in accrued consulting fees provided by the Related Parties, which amounts are included in accrued consulting in the accompanying unaudited condensed consolidated balance sheets.

In addition, on May 7, 2021, we entered into convertible note purchase agreements with five (5) accredited investors, including three (3) members of our Board of Directors that participated on the same terms as other accredited investors, in the aggregate principal amount of $575,000. Of such amount, the three members of our Board of Directors invested $225,000 in aggregate (see Note 7).

Moreover, on February 18, 2022, we entered into convertible note purchase agreements with sixteen (16) accredited investors, including five (5) members of our Board that participated on the same terms as other accredited investors, in the aggregate principal amount of $341,632. Of such amount, four members of our Board and one former member of our Board invested $155,000 in aggregate (see Note 7).

On April 26, 2024, we entered into a binding term sheet (“Binding Term Sheet”) with Oncotelic Therapeutics, Inc. (“Oncotelic”), which was unanimously approved by our Board of Directors. Under the terms of the Binding Term Sheet, we plan to achieve certain goals of acquiring new technologies and short-term funding so that we can establish our pipeline, pending the completion of due diligence and other criteria pursuant to the terms of the Binding Term Sheet. Mr. Steven King, our president and CEO is a shareholder and member of the board of directors of Oncotelic with less than 1% ownership of total shares outstanding of Oncotelic, and a paid advisor of Oncotelic (see Note 11).

19

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

11.        Oncotelic Therapeutics, Inc. (“Oncotelic”)

In an effort to establish a new product pipeline, on April 26, 2024, we entered into a Binding Term Sheet with 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 the issuance of shares of our common stock valued at $15.0 million upon execution of the definitive agreement (representing 47,923,322 shares of our common stock), 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 within ninety (90) days, which is subject to customary due diligence and other conditions, including us 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 (see Note 7).

In addition, under the Binding Term Sheet, (i) we will continue the development work necessary to achieve the mutually agreed upon milestones upon the requisite funding, (ii) Oncotelic will provide a loan to us to cover certain operational costs of the Company through June 1, 2024, (iii) Oncotelic will assist the Company in potentially raising initial funding to support the technologies of $2 million, and (iv) in the event the Company is unable to raise the requisite funding, then the transaction may proceed to a reverse acquisition/merger, with conditions typical of such a transaction.

If we enter into a definitive agreement under the terms of the Binding Term Sheet, our present stockholders will experience immediate substantial dilution and will not have control of our majority voting securities. If we do not receive shareholder approval for the transaction within ninety (90) days of signing the Binding Term Sheet (or by July 25, 2024), we may not be able to enter into a definitive agreement with Oncotelic, and we may need to cease our operations altogether. Currently, we and Oncotelic are continuing to pursue a potential transaction under the Binding Term Sheet although there are no guarantees we will enter into any definitive agreement. On August 9, 2024, the expiration date to enter into a possible transaction with Oncotelic was extended from July 25, 2024 to December 31, 2024 (see Note 12).

On May 8, 2024, we entered into a convertible note purchase agreement with Oncotelic for up to $70,000 in funding and we received initial loan proceeds from Oncotelic of $40,000 to pay certain expenses of the Company in exchange for an unsecured convertible note (“Note”) pursuant to the Binding Term Sheet. The Note bears interest at a rate of 16% per annum and is due and payable upon closing a financing of at least $2.0 million or converted into additional shares of common stock of Mosaic, at the sole discretion of Oncotelic. The number of shares of common stock to be issued, if elected, would be equal to the entire unpaid principal amount of such Note and the 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. On May 31, 2024, we received an additional $15,000 in loan proceeds. As of June 30, 2024, we have received $55,000 in loan proceeds and accrued $1,133 in accrued interest related to the notes payable with Oncotelic, which amounts are included in loan payable in the accompanying unaudited condensed consolidated balance sheets.

20

Mosaic ImmunoEngineering, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2024 (continued)

12.        Subsequent Events

On July 1, 2024, we received an additional $15,000 in loan proceeds under the convertible note purchase agreement with Oncotelic (see Note 11) to pay certain expenses of the Company.

On July 23, 2024, Mr. Carlton Johnson, a member of the Board of Directors (the “Board”) resigned from the Board effective immediately. In connection with his resignation from the Board, Mr. Johnson also resigned from all committees of the Board of Directors on which he served, including the Audit Committee and Compensation Committee of the Board. Mr. Johnson’s resignation is not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On August 9, 2024, the expiration date to enter into a possible transaction with Oncotelic in accordance with the Binding Term Sheet was extended to December 31, 2024 (see Note 11).

We have evaluated subsequent events after the consolidated balance sheet date and through the filing date of this Quarterly Report, and based on our evaluation, management has determined that no other subsequent events have occurred that would require recognition in the accompanying unaudited condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed herein and in the accompanying notes.

21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Mosaic ImmunoEngineering, Inc. included in Part I Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Unless the context otherwise requires, references to the “Company,” the “combined company,” “Mosaic,” “we,” “our,” or “us” in this Quarterly Report refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please see Part II, 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 the full year or any other future period.

Any forward-looking statements in this Quarterly Report reflect our views and assumptions only as of the date that this Quarterly Report. Future events or our future financial performance involves known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.  Given these uncertainties, you should not place undue reliance on these forward-looking statements. 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.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

About Mosaic

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 expand our pipeline based on a deep understanding of immunotherapies.

As part of our strategy, 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.

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In addition, under the Binding Term Sheet, (i) we will continue the development work necessary to achieve the mutually agreed upon milestones upon the requisite funding, (ii) Oncotelic will provide a loan to us to cover certain operational costs of the Company initially through June 2024, (iii) Oncotelic will assist the Company in potentially raising initial funding to support the technologies of $2 million, and (iv) in the event the Company is unable to raise the requisite funding, then the transaction may proceed to a reverse acquisition/merger, with conditions typical of such a transaction.

If we do not receive shareholder approval for the transaction and receive the required waivers from the holders of the Convertible Notes within ninety (90) days of signing the Binding Term Sheet (or by July 25, 2024), we may not be able to enter into a definitive agreement with Oncotelic, and we may need to cease our operations altogether. On August 9, 2024, the expiration date to enter into a possible transaction with Oncotelic was extended from July 25, 2024 to December 31, 2024 (see Note 12 to the accompanying unaudited condensed consolidated financial statements). 

On May 8, 2024, we entered into a convertible note purchase agreement with Oncotelic for up to $70,000 in funding and we received initial loan proceeds from Oncotelic of $40,000 to pay certain expenses of the Company in exchange for an unsecured convertible note (“Note”) pursuant to the Binding Term Sheet. The Note bears interest at a rate of 16% per annum and is due and payable upon closing a financing of at least $2.0 million or converted into additional shares of common stock of Mosaic, at the sole discretion of Oncotelic. The number of shares of common stock to be issued, if elected, would be equal to the entire unpaid principal amount of such Note and the 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 June 30, 2024 we have received a total of $55,000 in loan proceeds from Oncoletic and accrued interest of $1,133.

Critical Accounting Policies and Estimates

Our unaudited condensed 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. During the three months ended June 30, 2024, there have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies disclosed in Note 2 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operation

Three Months Ended June 30, 2024 and 2023:

Research and Development Expenses

Research and development expenses of approximately $61,000 for the three months ended June 30, 2024 are primarily related to salaries and related costs for personnel in research and development functions and related consulting fees. The decrease in research and development expenses of approximately $62,000 for the three months ended June 30, 2024 as compared to the same prior year period was primarily due to a decrease in payroll and related costs of approximately $45,000 due to a reduced time commitment by certain employees, combined with a decrease in consulting fees of approximately $17,000 due to a lower time commitment by our independent contractors. We believe our research and development expenses will increase significantly over time if we are able to raise sufficient capital to advance our programs.

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General and Administrative Expenses

General and administrative expenses of approximately $214,000 for the three months ended June 30, 2024 consist principally of salaries and related costs for personnel and consultants in executive and administrative functions of approximately $170,000, accounting and filing fees of approximately $28,000, director and officer insurance of approximately $9,000, and other expenses of approximately $7,000. The decrease in general and administrative expenses of approximately $16,000 for the three months ended June 30, 2024 as compared to the same prior year period was primarily due to (i) a decrease in payroll and related expenses of approximately $32,000 due to a reduced time commitment by certain employees and (ii) a decrease in other expenses of approximately $2,000, offset by an increase in accounting and filing fees of approximately $18,000 due to timing of services provided. We believe our general and administrative expenses will increase over time as we hire new employees to support key administrative functions and the planned expansion of research and development personnel, provided we are able to raise sufficient capital to advance our programs.

Other Income (Expense)

Gain on Redemption of Holocom Preferred Stock

On July 6, 2022, we entered into a Redemption Agreement with Holocom, pursuant to which we requested full redemption of our Series A Preferred Stock. During the three months ended June 30, 2023, we received cash proceeds in the amount of $356,000 upon the redemption of 192,500 shares of Series A Preferred Stock of Holocom. As of December 31, 2023, we received all proceeds under the Redemption Agreement, and therefore, there were no proceeds received during the three months ended June 30, 2024.

Change in Valuation of Derivative Liability

The change in valuation of the derivative liability of $33,900 for the three months ended June 30, 2023 pertains to a decrease in the estimated fair value of the anti-dilution issuance rights provided under the Series B Preferred. There was no remaining anti-dilution issuance rights liability outstanding as of December 31, 2023.

Interest Expense and Accretion to Redemption Value on Convertible Notes

Non-cash interest expense of approximately $19,000 and $18,000 for the three months ended June 30, 2024 and 2023, respectively, represents interest expense on convertible notes and loan payable.

Accretion to redemption value on convertible notes of approximately $3,000 for the three months ended June 30, 2023, pertains to the accretion of the convertible notes to their redemption value of $1,145,790 over the estimated conversion period using the effective interest method. The was no expense incurred for the three months ended June 30, 2024 as the Convertible Notes have been accreted to their full Redemption Value as of March 31, 2024.

Six Months Ended June 30, 2024 and 2023:

Research and Development Expenses

Research and development expenses of approximately $128,000 for the six months ended June 30, 2024 are primarily related to salaries and related costs for personnel in research and development functions and related consulting fees. The decrease in research and development expenses of approximately $173,000 for the six months ended June 30, 2024 as compared to the same prior year period was primarily due to a decrease in payroll and related costs of approximately $119,000 due to a reduced time commitment by certain employees, combined with a decrease in consulting fees of approximately $54,000 due to a lower time commitment by our independent contractors. We believe our research and development expenses will increase significantly over time if we are able to raise sufficient capital to advance our programs.

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General and Administrative Expenses

General and administrative expenses of approximately $415,000 for the six months ended June 30, 2024 consist principally of salaries and related costs for personnel and consultants in executive and administrative functions of approximately $346,000, accounting and filing fees of approximately $39,000, director and officer insurance of approximately $19,000, and other expenses of approximately $12,000. The decrease in general and administrative expenses of approximately $97,000 for the six months ended March 31, 2024 as compared to the same prior year period was primarily due to (i) a decrease in legal fees related to intellectual property rights of approximately $26,000 primarily related to lower patent fees owed under the former license agreement with Case Western Reserve University, (ii) a decrease in payroll and related expenses of approximately $65,000 due to a reduced time commitment by certain employees, and (iii) a decrease in other expenses of approximately $6,000. We believe our general and administrative expenses will increase over time as we hire new employees to support key administrative functions and the planned expansion of research and development personnel, provided we are able to raise sufficient capital to advance our programs.

Other Income (Expense)

Gain on Redemption of Holocom Preferred Stock

On July 6, 2022, we entered into a Redemption Agreement with Holocom, pursuant to which we requested full redemption of our Series A Preferred Stock. During the six months ended June 30, 2023, we received cash proceeds in the amount of $433,000 upon the redemption of 192,500 shares of Series A Preferred Stock of Holocom. As of December 31, 2023, we received all proceeds under the Redemption Agreement, and therefore, there were no proceeds received during the six months ended June 30, 2024.

Change in Valuation of Derivative Liability

The change in valuation of the derivative liability of $46,700 for the six months ended June 30, 2023 pertains to a decrease in the estimated fair value of the anti-dilution issuance rights provided under the Series B Preferred. There was no remaining anti-dilution issuance rights liability outstanding as of December 31, 2023.

Interest Expense and Accretion to Redemption Value on Convertible Notes

Non-cash interest expense of approximately $38,000 and $36,000 for the six months ended June 30, 2024 and 2023, respectively, represents interest expense on convertible notes and loan payable.

Accretion to redemption value on convertible notes of approximately $1,000 and $11,000 for the six months ended June 30, 2024 and 2023, respectively, pertains to the accretion of the convertible notes to their redemption value of $1,145,790 over the estimated conversion period 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

On August 21, 2020, we completed a reverse merger with PTSC, which provided us $605,215 in cash, cash equivalents, and restricted cash. During May 2021, we raised $575,000 from the issuance of convertible notes, which included $49,997 of accrued payable to founder that was invested in convertible notes. During February 2022, we raised an additional $341,632 from the issuance of convertible notes. As of June 30, 2024, we had cash and cash equivalents of $3,734. 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 Quarterly Report.

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Our primary uses of capital to date are primarily related to payroll, consulting and related costs, corporate formation and ongoing public company expenses, fees associated with license agreements, including patent related expenses, and costs of the reverse merger. 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. We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates, provided we are able to raise sufficient capital to advance our technologies.

In addition, 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 the issuance of shares of our common stock valued at $15.0 million upon execution of the definitive agreement (representing 47,923,322 shares of our common stock), 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 within ninety (90) days, which is subject to customary due diligence and other conditions, including us 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.

In addition, under the Binding Term Sheet, (i) we will continue the development work necessary to achieve the mutually agreed upon milestones upon the requisite funding, (ii) Oncotelic will provide a loan to us to cover certain operational costs of the Company initially through June 2024, (iii) Oncotelic will assist the Company in potentially raising initial funding to support the technologies of $2 million, and (iv) in the event the Company is unable to raise the requisite funding, then the transaction may proceed to a reverse acquisition/merger, with conditions typical of such a transaction.

If we enter into a definitive agreement under the terms of the Binding Term Sheet, our present stockholders will experience immediate substantial dilution and will not have control of our majority voting securities. If we do not receive shareholder approval for the transaction and receive the required waivers from the holders of the Convertible Notes within ninety (90) days of signing the Binding Term Sheet (or by July 25, 2024), we may not be able to enter into a definitive agreement with Oncotelic, and we may need to cease our operations altogether. On August 9, 2024, the expiration date to enter into a possible transaction with Oncotelic was extended from July 25, 2024 to December 31, 2024 (see Note 12 to the accompanying unaudited condensed consolidated financial statements). 

On May 8, 2024, we entered into a convertible note purchase agreement with Oncotelic for up to $70,000 in funding. As of June 30, 2024, we have received loan proceeds from Oncotelic totaling $55,000 to pay certain expenses of the Company in exchange for an unsecured convertible note (“Note”) pursuant to the Binding Term Sheet. The Note bears interest at a rate of 16% per annum and is due and payable upon closing a financing of at least $2.0 million or converted into additional shares of common stock of Mosaic, at the sole discretion of Oncotelic. The number of shares of common stock to be issued, if elected, would be equal to the entire unpaid principal amount of such Note and the 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.

We plan to continue to fund losses from operations and future funding needs through our cash on hand and future 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.

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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 six months ended June 30, 2024 and 2023:

	Six Months Ended June 30, 2024			Six Months Ended June 30, 2023
Net cash used in operating activities	$	(207,444	)	$	(290,675	)
Net cash provided by investing activities		–			433,000
Net cash provided by financing activities		55,000			–
Net change in cash and cash equivalents	$	(152,444	)	$	142,325

Cash Flows From Operating Activities

Net cash used in operating activities for the six months ended June 30, 2024 consisted of our net loss of $582,209, which amount was offset by (i) non-cash share-based compensation expense of $4,867, (ii) non-cash interest expense of $37,698, (iii) the accretion to redemption value on convertible notes of $1,446, and (iv) a net change in operating assets and liabilities of $330,758 primarily due to an increase in accrued compensation of $327,566.

Net cash used in operating activities for the six months ended June 30, 2023 consisted of our net loss of $379,431 combined with a decrease in the fair value of the derivative liability of $46,700 and a gain on redemption of preferred stock of Holocom of $433,000, which amounts were offset by (i) non-cash share-based compensation expense of $10,877, (ii) non-cash interest expense of $36,365, (iii) the accretion to redemption value on convertible notes of $11,473, and (iv) a net change in operating assets and liabilities of $509,741 primarily due to an increase in accrued compensation, accrued consulting, and other accrued expenses of $477,890, in aggregate.

Cash Flows From Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2023 consisted of proceeds received from our redemption of Holocom’s Series A Preferred Stock of $433,000 (see Note 4 to the accompanying unaudited condensed consolidated financial statements).

Cash Flows From Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2024 consisted of proceeds received from loan payable from Oncotelic totaling $55,000 (see Note 11 to the accompanying unaudited condensed consolidated financial statements).

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Recently Adopted Accounting Standards

There have been no new accounting pronouncements adopted by the Company or new accounting pronouncements issued by the Financial Accounting Standards Board during the three months ended June 30, 2024, as compared to the recent accounting pronouncements described in Note 2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, that the Company believes are of significance or potential significance to the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this item.

Item 4. Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, as of June 30, 2024, the end of the period to which this quarterly report relates, we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our President and Chief Executive Officer and our EVP, Chief Financial Officer.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including the President and Chief Executive Officer and the EVP, Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our management, with the participation of our President and Chief Executive Officer and our EVP, Chief Financial Officer, concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no significant changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Information pertaining to legal proceedings is provided in Note 9, Commitments and Contingencies, to the unaudited condensed consolidated financial statements and is incorporated by reference herein.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with our unaudited condensed consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q (“Report” or “Quarterly Report”) before making a decision to invest in our securities. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe are not material, also may become important factors that affect us and impair our business operations. The occurrence of any of the events or developments discussed in the risk factors below could have a material and adverse impact on our business, financial condition, results of operations and cash flows and, in such case, our future prospects would likely be materially and adversely affected.

Unless the context otherwise requires, references to the “Company,” the “combined company,” “Mosaic,” “we,” “our,” or “us” in this Quarterly Report refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries (formerly known as Patriot Scientific Corporation). References to “PTSC” and “Private Mosaic” refer to Patriot Scientific Corporation and privately held Mosaic ImmunoEngineering Inc., respectively, prior to the completion of a reverse merger in August 2020.

Risks Related to Our Operations

While the Company’s financial statements have been prepared on a going concern basis, we do not currently have sufficient working capital to fund our current liabilities and planned operations for the next twelve months and we may be required to cease our operations altogether if we are unable to secure sufficient funding.

There is substantial doubt about our ability to continue as a going concern, as we currently do not have adequate financial resources to fund our forecasted operating costs for at least twelve months from the filing of this Report. As of June 30, 2024, the Company had incurred operating losses since inception, and continues to generate losses from operations, and has cash and equivalents of $3,734, an accumulated deficit of $8,498,546 and current liabilities of $5,105,130. As a result, our existing cash resources are not sufficient to meet our anticipated needs over the next twelve months from the date hereof and we would need to raise additional capital to continue our operations and to implement our business plan, which capital is unlikely to be available on favorable terms or at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

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.

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Our ability to pursue the research and development activities and other initiatives discussed in the following risk factors and elsewhere in this Report will require significant funding, which may not be available to us in light of current market conditions combined with our limited technologies.

The unaudited condensed consolidated financial statements included in this Report do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

We entered into a binding term with Oncotelic Therapeutics, Inc. to acquire rights to certain technologies of Oncotelic and we may not enter into a definitive agreement if certain conditions are not met.

In order to establish a new product pipeline, 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 (see Notes 7 and 11 to the accompanying unaudited condensed consolidated financial statements) as contemplated under the Binding Term Sheet.

In addition, under the Binding Term Sheet, (i) we will continue the development work necessary to achieve the mutually agreed upon milestones upon the requisite funding, (ii) Oncotelic will provide a loan to us to cover certain operational costs of the Company initially through June 2024 of up to $70,000 which was fully funded, (iii) Oncotelic will assist the Company in potentially raising initial funding of $2 million to support the technologies, and (iv) in the event the Company is unable to raise the requisite funding, then the transaction may proceed to a reverse acquisition/merger, with conditions typical of such a transaction.

Pursuant to the Binding Term Sheet, we needed to obtain shareholder approval for the transaction within ninety (90) days of signing the Binding Term Sheet (or by July 25, 2024), or we may not be able to enter into a definitive agreement with Oncotelic, and we may need to cease our operations altogether. As of the date of this Report, we and Oncotelic are continuing to pursue the potential transaction under the Binding Term Sheet although there are no guarantees we will enter into any definitive agreement. On August 9, 2024, the expiration date to enter into a possible transaction with Oncotelic was extended from July 25, 2024 to December 31, 2024 (see Note 12 to the accompanying unaudited condensed consolidated financial statements).

If we enter into a definitive agreement with Oncotelic under the terms of the binding term sheet, existing stockholders will experience substantial immediate dilution.

We have 7,242,137 shares of common stock outstanding as of the filing date of this Report. If we enter into a definitive agreement with Oncotelic pursuant to the terms of the Binding Term Sheet, we could issue 47,923,322 shares of our common stock to Oncotelic, resulting in immediate substantial dilution to our existing stockholders. In addition, under the Binding Term Sheet, Oncotelic could receive up to an additional $15.0 million in shares of common stock of Mosaic that would be valued at the time of issuance if certain milestones are achieved (see Note 11 to the accompanying unaudited condensed consolidated financial statements), which would cause substantial additional dilution to existing stockholders.

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We may not successfully identify new product candidates to expand our development pipeline.

The success of our business over the near term depends upon our ability to identify and validate new potential cancer therapeutics, including the technology we intend to acquire under the Binding Term Sheet. Efforts to identify new product candidates require substantial technical, financial and human resources, and our limited financial resources combined with our methodology may not successfully identify medically relevant potential therapeutics to be developed as product candidates. Moreover, our research and business development efforts may identify molecules that initially show promise yet fail to yield product candidates for clinical development for multiple reasons. For example, potential product candidates may, on further study, be shown to have inadequate efficacy, harmful side effects, suboptimal drug profiles, suboptimal manufacturability or stability, or other characteristics suggesting that they are unlikely to be commercially viable products. Our inability to successfully identify additional new product candidates to advance into clinical trials could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are able to raise sufficient capital, we expect that we will incur significant losses over the next several years and may never achieve or maintain profitability.

We have limited our operations in advancing our technology based on the limited amount of capital we have raised. Since the reverse merger in August 2020, we have not raised any capital other than $575,000 and $341,632 from the issuance of our convertible notes in May 2021 and February 2022, respectively. Due to our limited operations, our historical results do not reflect the significant costs required to develop a product candidate. In addition, our products have historically been in preclinical development and therefore, we anticipate that our expenses will increase substantially over the next several years, if and as we:

· identify and successfully license or acquire new product candidates or technologies;

· develop product manufacturing processes under the Food and Drug Administration's (“FDA’s”) current Good Manufacturing Practice regulations (“cGMP”) for product candidates and enter into manufacturing supply agreements to support toxicology studies and clinical trials;

· contract preclinical toxicology studies to support the safety of product candidates prior to starting any human trial;

· continue preclinical research and translational studies to enhance our understanding of the mechanism of action of the product candidates;

· enter into collaboration arrangements with regards to product discovery and product development;

· pay amounts owed under the former licensing agreement with Case Western Reserve University and potentially acquire rights to other product candidates and technologies;

· prepare regulatory filings, such as filing IND applications with the FDA that are required prior to starting any human clinical trial;

· plan, initiate, enroll, and complete clinical trials;

· maintain, expand and protect intellectual property; and

· hire additional personnel to support our research, development, and administrative efforts.

We expect that it will be several years, if ever, before we have a product candidate ready for commercialization. If we are unable to license or acquire new product candidates and advance these product candidates, we may have greater difficulty raising capital on favorable terms, or at all. In addition, there are many risks associated with our financial position and need for additional capital, as further described below under the section titled “RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL”.

If we are able to raise sufficient capital, we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses that we incur may fluctuate significantly from quarter to quarter and year to year.

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To become and remain profitable, we or a potential partner must develop and eventually commercialize a product or products with significant market potential. This will require us to be successful in a range of challenging activities, including completing all phases of clinical trials, obtaining marketing approval and manufacturing, marketing and selling those products for which we obtain marketing approval. We or a potential partner may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our development efforts will take several years and will require significant capital that will dilute the ownership interest of common stockholders. A decline in the value of the Company could also cause stockholders to lose all or part of their investment.

Our development efforts have historically been with product candidates in preclinical development.

We currently do not have any products that have gained regulatory approval and our development efforts have historically been focused on product candidates in preclinical development. Our ability to generate product revenues, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and eventual commercialization of new product candidates. As a result, our business is substantially dependent on our ability to successfully license or acquire new technologies and complete the development of and obtain regulatory approval for these product candidates.

If we are unsuccessful in accomplishing the numerous and complex objectives in developing product candidates, we may not be able to successfully develop and commercialize new product candidates, and our business will suffer.

Our short operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

We are an early development stage biotechnology company formed on March 30, 2020. Our ongoing operations to date have been limited to organizing the Company, business planning, acquiring rights to technologies, and identifying potential product candidates. In addition, we have limited human resources to help us achieve our goals. Consequently, any predictions made about our future success or viability based on our short operating history to date may not be as accurate as they could be if we had a longer and more established operating history. In addition, as an early-stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

Business interruptions resulting from the coronavirus disease (COVID-19) outbreak or similar public health crises could cause a disruption of the development of product candidates and adversely impact our business.

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. We may experience disruptions as a result of COVID-19, any variants of COVID-19, or any other pandemic that could severely impact our business and planned clinical trials, including:

· delays or difficulties in planned clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

· delays or difficulties in enrolling patients in our planned clinical trials and further incurrence of additional costs as a result of preclinical study and clinical trial delays and adjustments;

· challenges related to ongoing and increased operational expenses related to any pandemic;

· diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of clinical trials;

· interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

· limitations in resources that would otherwise be focused on the conduct of our business or our clinical trials, including because of sickness or the desire to avoid contact with large groups of people or as a result of government-imposed “Stay-at-Home” orders or similar working restrictions;

· delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

· delays in preclinical and clinical sites receiving the supplies and materials needed to conduct our planned clinical trials;

· interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our planned clinical trials;

· changes in regulations as part of a response to the COVID-19 pandemic or any variants of COVID-19 or any other pandemic which may require us to change the ways in which our planned clinical trials may be conducted, or which may result in unexpected costs;

· delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel; and

· increased competition for contract research organizations (“CROs”), suppliers and vendors.

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Should COVID-19 or any variants of COVID-19 or any other pandemic cases in USA increase, the country or states may institute stricter social distancing protocols.

Additionally, third parties that we may engage, including our collaborators, contract organizations, third-party manufacturers, suppliers, clinical trial sites, regulators and other third parties with whom we conduct business are similarly adjusting their operations and assessing their capacity in light of any pandemic. If these third parties experience shutdowns or continued business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is likely that the disproportionate impact of any pandemic on hospitals and clinical sites will have an impact on recruitment and retention for our planned clinical trials. In addition, our future clinical trial sites could experience delays in collecting, receiving and analyzing data from patients enrolled in our planned clinical trial due to limited staff at such sites, limitation or suspension of on-site visits by patients, or patients’ reluctance to visit the clinical trial sites during the pandemic. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from any pandemic on the costs and timing associated with the conduct of our panned clinical trial and other related business activities.

To the extent the any pandemic adversely affects our business, financial condition and operating results, it may also have the effect of heightening many of the risks described in this “Risk Factors” section.

The Company and its subsidiaries have limited insurance for their operations and are subject to various risks of loss.

The Company and its subsidiaries carry limited directors’ and officers’ insurance. In addition, we do not carry general business liability insurance or other insurance applicable to our business. Successful claims against the Company would likely render us insolvent. The Company has not reserved any amounts in connection with self-insuring against any potential claims against the Company or its subsidiaries. Once we are able to raise sufficient funding to advance our business, we plan to secure additional insurance coverage to better protect our business. There can be no assurance that we will obtain sufficient insurance coverage to cover all possible risks and potential related losses.

Drug development involves a lengthy and expensive process with an uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the product manufacturing of any product candidates.

The risk of failure for products in preclinical or early stage of development is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we would need to complete formulation development, conduct nonclinical trials, and then conduct extensive clinical trials to demonstrate the safety and efficacy in humans. In addition, product manufacturing and process development along with preclinical and clinical testing are all expensive activities, difficult to design and implement, and can take several years to complete. The outcome of preclinical and clinical trials is inherently uncertain. Failure can occur at any time during the development program, including during the clinical trial process. Further, the results of preclinical studies and early clinical trials for new product candidates may not be predictive of the results of later-stage clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical and clinical trials have nonetheless failed to obtain marketing approval of their products. It is impossible to predict when or if product candidates will prove effective and safe in humans or will receive regulatory approval.

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We may experience delays in clinical trials, and we do not know whether any planned clinical trials will begin or enroll subjects on time, need to be redesigned or be completed on schedule, if at all. There can be no assurance that the FDA or any other foreign regulatory body will not put any product candidate on clinical hold in the future. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize product candidates. Planned clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:

· delay or failure in reaching agreement with the FDA, European Medicines Agency (“EMA”), or a comparable foreign regulatory authority on a trial design that we want to execute;

· delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical study;

· delays in reaching, or failure to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

· inability, delay, or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs;

· delay or failure in recruiting and enrolling suitable subjects to participate in a trial;

· delay or failure in having subjects complete a trial or return for post-treatment follow-up;

· clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;

· lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional clinical studies and increased expenses associated with the services of our contract research organizations (“CROs”) and other third parties;

· clinical trials of product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

· the number of patients required for clinical trials of product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;

· we may experience delays or difficulties in the enrollment of patients that product candidates are designed to target based on the inclusion and exclusion criteria;

· our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

· we may have difficulty partnering with experienced Clinical Research Organization and study sites that can identify patients that product candidates are designed to target and run our clinical trials effectively;

· regulators or institutional review boards (“IRBs”) may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

· the supply or quality of product candidates or other materials necessary to conduct clinical trials of product candidates may be insufficient or inadequate; or

· there may be changes in governmental regulations or administrative actions.

If we are required to conduct additional clinical trials or other testing of product candidates, or if we are unable to successfully complete clinical trials or other testing, or if the results of these trials or tests are not positive or are only modestly positive, or if there are safety concerns, we may:

· be delayed in obtaining marketing approval for product candidates, if ever;

· obtain approval for indications or patient populations that are not as broad as intended or desired;

· obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market for products or inhibit our ability to successfully commercialize product candidates;

· be subject to additional post-marketing restrictions and/or testing requirements; or

· have the product removed from the market after obtaining marketing approval.

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Product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether preclinical studies or clinical trials will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize product candidates or may allow our competitors to bring products to market before we do and impair our ability to successfully commercialize new product candidates and may harm our business and results of operations. In addition, enrollment delays in clinical trials may result in increased development costs, which would cause the value of the Company to decline and limit our ability to obtain additional financing.

If serious adverse events or unacceptable side effects are identified during the development of any product candidates, we may need to abandon or limit our development of these product candidates.

If product candidates are associated with undesirable effects in preclinical or clinical trials or have characteristics that are unexpected, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Currently unknown, drug-related side effects may be identified in our planned clinical studies and, as such, these possible drug-related side effects could affect patient recruitment, the ability of enrolled subjects to complete the trial, or result in potential product liability claims. Reported serious adverse events may arise and the occurrence, whatever the cause, may impact the conduct of any ongoing or future clinical trial. To date, we have had no product candidates evaluated in any human clinical studies. Any occurrence of clinically significant adverse events may harm our business, financial condition and prospects significantly.

Our business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our or third parties’ cyber security.

Given our limited operating history and limited capital, we are still in the process of implementing our internal security measures. Our internal computer systems and those of current and future third parties on which we rely may fail and are vulnerable to damage from computer viruses and unauthorized access. Our information technology and other planned internal infrastructure systems, including corporate firewalls, servers, connection to the Internet, face the risk of systemic failure that could disrupt our operations. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of product candidates or any future product candidates could be hindered or delayed. In addition, due to limited corporate infrastructure, our entire workforce is currently working remotely. This could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions.

We do not presently maintain insurance coverage to protect against cybersecurity risks. If we procure such coverage in the future, we cannot ensure that it will be sufficient to cover any loss we may experience as a result of such cyberattacks. Any cyber incident could have a material adverse effect on our business, financial condition, and results of operations.

If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

Ensuring that we will have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles or GAAP.

In addition, we are required to be compliant with public company internal control requirements mandated under Section 302 and 906 of the Sarbanes-Oxley Act. If we are unable to successfully maintain internal controls over financial reporting, the accuracy and timing of our financial reporting, and our stock price, may be adversely affected.

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Risks Related to Our Financial Position and Need for Additional Capital

We will need substantial additional funding. If we are unable to secure sufficient capital in the near term, we may be required to cease our operations altogether.

As of June 30, 2024, we had cash and cash equivalents of $3.734 and current liabilities of $5,105,130. Since the closing date of the Reverse Merger, we have been unable to raise sufficient capital to advance any product candidate from preclinical development into clinical development. Moreover, our existing cash resources are not sufficient to meet our anticipated needs over the near term. We will need to raise additional capital to continue our operations and to implement our business plan, which capital is unlikely to be available on favorable terms or at all. In addition, we expect our expenses to significantly increase if and when we are able to initiate product manufacturing to support preclinical and clinical testing, perform preclinical studies, including toxicology studies, initiate clinical development, and eventually, if successful, seek marketing approval for, any product candidates. Since the closing date of the Reverse Merger, our limited cash position has slowed our product development and other activities to remain afloat. If we are unable to raise additional capital in the near term, we may be forced to cease our operations altogether.

If we are able to raise additional capital, our funding needs may fluctuate significantly based on several factors, including, but not limited to:

· the scope, progress, results and costs of product development and manufacture of drug product to support preclinical and clinical development of product candidates;

· the extent to which we enter into additional collaboration arrangements regarding product discovery or development;

· the costs, timing and outcome of regulatory review of product candidates;

· our ability to establish additional collaborations with favorable terms, if at all;

· the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of product candidates for which we receive marketing approval;

· the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

· the costs to in-license technology for new products or technologies; and

· revenue, if any, received from commercial sales of product candidates, should any product candidates receive marketing approval.

Identifying potential product candidates and conducting manufacturing and process development, preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, any product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional capital is unlikely to be available on favorable terms or at all.

Raising capital will cause dilution to our stockholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and/or licensing arrangements. While we do not have any committed external source of funds, if we raise funds from the issuance of equity securities (which will be challenging in light of current market conditions combined with our early stage of development), 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 early stage of development), 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.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional funds in the near term, we may be required to cease our operations altogether.

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Because the Reverse Merger resulted in an ownership change under Section 382 of the Internal Revenue Code for PTSC, PTSC’s pre-merger net operating loss carryforwards and certain other tax attributes may be subject to limitations. In addition, if we enter into a definitive agreement with Oncotelic, we would experience a greater than 50% change in ownership that could cause further limitations on our net operating loss carryforwards.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Reverse Merger resulted in an ownership change for PTSC and, accordingly, PTSC’s net operating loss carryforwards and certain other tax attributes may be subject to limitations (or disallowance) on their use after the Reverse Merger. Additional ownership changes in the future, including the intent to issue 47,923,322 shares of common stock to Oncotelic (see Note 11 to the accompanying unaudited condensed consolidated financial statements), could result in additional limitations on the Company’s post-merger net operating loss carryforwards. Consequently, even if the Company achieves profitability, it may not be able to utilize a material portion of PTSC’s, or the post-merger Company’s net operating loss carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

Risks Related to Our Dependence on Third Parties

Future development collaborations may be important to us. If we are unable to enter into or maintain these collaborations, or if these collaborations are not successful, our business could be adversely affected.

We may in the future determine to seek to collaborate with pharmaceutical and biotechnology companies for the development of product candidates. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other potential development programs, delay its potential development schedule or reduce the scope of research activities, or increase our expenditures and all development activities at our own expense. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development activities, we may not be able to further develop these product candidates, and our business may be materially and adversely affected.

If any future collaboration does not result in the successful development of products or product candidates, product candidates could be delayed, and we may need additional resources to develop product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this periodic report also apply to the activities of our collaborators.

We may contract with third parties for the manufacture of product candidates for preclinical and clinical studies and may expect to continue to do so for commercialization. This potential reliance on third parties increases the risk that we will not have sufficient quantities of product candidates or products at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts.

Due to our limited operations and no existing manufacturing infrastructure or capabilities, we may utilize third parties to formulate, manufacture, package, and distribute preclinical and clinical supplies. In addition, these materials are generally custom-made and available from only a limited number of sources. Despite drug substance and product risk management, this reliance on third parties presents a risk that we will not have sufficient quantities of these product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. Any performance failure on the part of our future manufacturers of drug substance or drug products could delay clinical development or potential marketing approval.

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We also expect to rely on other third parties to label, store, and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of product candidates or commercialization of products, producing additional losses and depriving us of potential product revenue.

We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we can establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

· reliance on the third party for regulatory compliance and quality assurance;

· the possible breach of the manufacturing agreement by the third party;

· the possible misappropriation of our proprietary information, including our trade secrets and know-how; and

· the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

The third parties we may rely on for manufacturing and packaging are also subject to regulatory review, and any regulatory compliance problems with these third parties could significantly delay or disrupt our clinical or commercialization activities. Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of products. Additionally, macro-economic conditions may adversely affect these third parties, causing them to suffer liquidity or operational problems. If a key third-party vendor becomes insolvent or is forced to lay off workers assisting with our projects, our results and development timing could suffer.

In addition, any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations that may be capable of manufacturing for us. Our anticipated future dependence upon others for the manufacture of product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

Data provided by collaborators and other parties upon which we rely has not been independently verified and could turn out to be inaccurate, misleading, or incomplete.

We rely and intend to rely on third-party vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials, and business. We do not independently verify or audit all such data (including possibly material portions thereof). As a result, such data may be inaccurate, misleading, or incomplete.

Risks Related to Intellectual Property

If we are unable to obtain and maintain intellectual property protection for technology and products we plan to develop or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States, the European Union, and other countries with respect to proprietary technology and products we plan to develop. We will seek to protect our proprietary position by filing patent applications in the United States and internationally that are related to novel technologies and product candidates.

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The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also possible that we will fail to identify patentable aspects of our discovery and preclinical development output before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in limited cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Also, an examination is often lengthy and can involve numerous challenges to the claims sought. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States, the European Union, and other countries may diminish the value of the underlying patents under our License Agreement or narrow the scope of our patent protection.

Any inability by us to adequately protect the underlying intellectual property with respect to proprietary technology and products we plan to develop may have a material adverse effect on our business, operating results, and financial position.

If we fail to comply with our obligations under any license or other agreements under which we may license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationships with our future licensors, we could lose those rights or other rights which could be the products upon which our business depends.

If we fail to comply with our obligations under any license agreement, or any other future agreement, including the payment of all amounts due under these agreements, we may lose the rights to developed and potentially commercialize the underlying technology, and the licensor may have the right to terminate the license agreement or restrict our rights upon notice, in which event we would not be able to develop or market products covered by the agreement, which could be the products upon which our business depends. For instance, on May 4, 2022, we entered into a License Agreement with CWRU allowing us to develop and commercialize our former lead product candidate, MIE-101. On March 22, 2024, we received a notice of termination from CWRU terminating the License Agreement due to our inability to pay amounts owe of approximately $407,000 in accrued patent fees due to our limited cash position.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Because competition in our industry is intense, competitors may infringe or otherwise violate our potential rights to patents of our licensors or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly, or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our potential patents at risk of being invalidated or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreement may require us to pay royalties and other fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure.

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We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.

A third party may hold intellectual property, including patent rights that are important or necessary to the development of potential new products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize potential products, in which case, we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. If we were not able to obtain a license, or we are not able to obtain a license on commercially reasonable terms, our business could be harmed, possibly materially.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability, and the ability of our licensors and collaborators, to develop, manufacture, market and sell product candidates and use proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to potential new products and technology, including proceedings challenging validity before the United States Patent and Trademark Office (“USPTO”) and/or European Patent Office (“EPO”). Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing these products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing any infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for the technology and product candidates, we also plan to rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. Any NDAs or similar agreements entered into by the Company may not be with all relevant parties, or adequately protect the confidentiality of our trade secrets. Moreover, to the extent we enter into such agreements, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from sharing such trade secrets or from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

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Risks Related to Our Employee Matters, Managing Growth and Macroeconomic Conditions

Our future success depends on our ability to attract, hire, retain and motivate executives, key employees, and our general workforce.

We are highly dependent on the product development, clinical and business development expertise of the principal members of our management, scientific and clinical teams. Although we have entered into offer letters with our executives and employees, each of them may terminate their employment with us at any time.  In addition, if we are unable to raise more capital in the near term, we may be required to furlough or lay off our current workforce, which may require us to cease our operations altogether.

Moreover, our business plan relies significantly on the continued services of our President and Chief Executive Officer, Steven King. If we were to lose his services, including through death or disability, our ability to continue to execute our business plan would be materially impaired. We do not maintain “key person” insurance for any of our executives or other employees. The Company has not entered into an employment agreement with Mr. King, or any other officer of the Company.

Recruiting and retaining qualified scientific, clinical, regulatory, and manufacturing personnel is critical to our success. Due to the small size of the Company and the limited number of employees, each of our executives and key employees serves a critical role. The loss of the services of our executive officers or other key employees could impede the achievement of our development objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also may experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we have relied on consultants and advisors, including scientific and clinical advisors, to assist us in product manufacturing, preclinical development, clinical development, regulatory strategy, and commercial strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to provide services to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our development strategy will be limited.

We expect to expand our research and development function, as well as our corporate operations, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

If we are able to secure sufficient funding, we would expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of product manufacturing, preclinical research, clinical development, and regulatory affairs, as capital resources become available. To manage our anticipated future growth, we must also implement and improve our managerial, operational and financial systems, identify new facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We may face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

We may in the future become subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these types of lawsuits. Regardless of the outcome, litigation may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.

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Risks Related to Our Common Stock

There is a substantial lack of liquidity of our common stock and volatility risks, and because there is no active public trading market for our common stock, you may not be able to resell your common stock.

Our common stock is not listed on any securities exchange and is quoted on the OTC Pink Open Market (“OTC Pink”) under the symbol “CPMV.” The trading volume of our common stock historically has been limited and sporadic, and the stock prices have been volatile. There can be no assurance that there will be an active market for our shares of common stock either now or in the future or that stockholders will be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, our stockholders may not find purchasers for our securities should they desire to sell them. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. In addition, if our shares of common stock cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate quotation as to the market value of our common stock, and as a result, the market value of our common stock likely would decline.

The market for our common stock is subject to rules relating to low-priced stock (“Penny Stock”) which may limit our ability to raise capital.

Our common stock is currently subject to the “penny stock rules” adopted pursuant to Section 15(g) of the Exchange Act. In general, the penny stock rules apply to non-Nasdaq or non-national stock exchange companies whose common stock trades at less than $5.00 per share or which have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). Such rules require, among other things, that brokers who trade “penny stock” on behalf of persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document, quote information, broker’s commission information and rights and remedies available to investors in penny stocks. Many brokers have decided not to trade “penny stock” because of the requirements of the penny stock rules, and as a result, the number of broker-dealers willing to act as market makers in such securities is limited. The “penny stock rules,” therefore, may have an adverse impact on the market for our common stock and may affect our ability to raise additional capital.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.

Future sales of shares by existing stockholders could cause the Company’s stock price to decline.

If existing stockholders of the Company sell, or indicate an intention to sell, substantial amounts of the Company’s common stock in the public market, the trading price of the common stock could decline significantly. After the Reverse Merger, shareholders of Private Mosaic currently own a majority of the fully diluted shares of common stock outstanding, on an as-converted basis. In addition, our shareholders are not restricted in the price at which they can sell their shares. Shares sold at a price below the current market price at which our common stock is trading may cause the market price of our common stock to decline.

We expect our stock price to be volatile, and the market price of our common stock may drop unexpectedly.

The market price of our common stock could be subject to significant fluctuations. For instance, during the six months ended June 30, 2024, the low and high trading prices of our common stock ranged from $0.10 to $0.65 per share and during the year ended December 31, 2023, the low and high trading prices of our common stock ranged from $0.50 to $1.25 per share. Market prices for securities of early-stage pharmaceutical, biopharmaceutical, and other life sciences companies have historically been particularly volatile.

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Some of the factors that may cause the market price of our common stock to fluctuate include:

· our limited cash position and our immediate need for additional capital;

· results from preclinical testing and clinical trial results, and our ability to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;

· issues in manufacturing these product candidates;

· the entry into, or termination of, key agreements, including the termination of our License Agreement with CWRU and any future license agreement;

· the initiation of, material developments in, or conclusion of litigation to enforce or defend intellectual property rights or defend against the intellectual property rights of others;

· announcements by competitors of new commercial products, clinical progress or the lack thereof, significant contracts, or commercial relationships;

· the introduction of technological innovations or new therapies that compete with our potential products;

· the loss of key employees;

· general and industry-specific economic conditions that may affect our research and development expenditures;

· changes in the structure of healthcare payment systems;

· issuance of new shares of common stock from raising additional capital, which may not be available on acceptable terms, or at all; and

· period-to-period fluctuations in our financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our financial position.

Our share price could decline as a result of short sales.

When an investor sells stock that he does not own, it is known as a short sale. The seller, anticipating that the price of the stock will go down, intends to buy stock to cover his/her sale at a later date. If the price of the stock goes down, the seller will profit to the extent of the difference between the price at which he originally sold it less his later purchase price. Short sales enable the seller to profit in a down market. Short sales could place significant downward pressure on the price of our common stock. Penny stocks which do not trade on an exchange, such as our common stock, are particularly susceptible to short sales.

We may issue preferred stock, and the terms of such preferred stock may reduce the value of our common stock.

We are authorized to issue up to a total of 5,000,000 shares of preferred stock in one or more series, of which, 4,300,000 have been undesignated as of June 30, 2024. Our Board of Directors may determine whether to issue shares of preferred stock without further action by holders of our common stock. If we issue shares of preferred stock, it could affect the rights or reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. As we seek capital for our business, such capital may be raised through the issuance of preferred stock.

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Our executive officers, directors and principal stockholders, if they choose to act together, will have the ability to control all matters submitted to stockholders for approval.

Shareholders of Private Mosaic beneficially own shares representing a majority of our capital stock outstanding as of June 30, 2024, on an as-converted basis. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

· delay, defer or prevent a change in control;

· entrench our management and the board of directors; or

· impede a merger, consolidation, takeover or other business combination involving the Company that other stockholders may desire.

In addition, if we enter into a definitive agreement with Oncotelic under the binding term sheet to acquire certain rights to their technology (see Note 11 to the accompanying unaudited condensed consolidated financial statements), we would issue Oncotelic 47,923,322 shares of common stock and Oncotelic would own a majority of shares of common stock of the Company and would be able to control all matters at the Company.

Our amended and restated certificate of incorporation and amended and restated bylaws provides that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Section XIV of our amended and restated certificate of incorporation provides that “Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (A) any derivative action or proceeding brought on behalf of the Corporation, (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (C) any action asserting a claim against the Corporation, its directors, officers or employees or agents arising pursuant to any provision of the DGCL, this Amended and Restated Certificate of Incorporation or the Corporation’s bylaws, or (D) any action asserting a claim against the Corporation, its directors, officers or employees or agents governed by the internal affairs doctrine, except as to each of (A) through (D) above, for any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or over which the Court of Chancery does not have subject matter jurisdiction. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XIV.”

The exclusive forum provision in our amended and restated certificate of incorporation and amended and restated bylaws will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder, and shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us or our directors, officers or other employees. In addition, shareholders who do bring a claim in the state or federal court in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The state or federal court of the State of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our shareholders. However, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.

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Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

The Company’s amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors.

These provisions include:

· providing that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the voting power of our then outstanding shares of common stock entitled to vote generally for the election of directors;

· providing that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders, subject to the rights of the holders of any series of preferred stock with respect to such series, if any;

· providing that special meetings of our stockholders may only be called by the board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the board of directors;

· providing that our board of directors can be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three-year terms, other than directors which may be elected by holders of preferred stock, if any. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors;

· providing that all board vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders;

· providing that our amended and restated bylaws may only be amended by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock;

· providing the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; and

· limiting the liability of, and providing indemnification to, our directors and officers.

These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our board of directors and management.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.

We do not expect to pay any cash dividends in the foreseeable future.

We expect to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain, if any, for any stockholders for the foreseeable future

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On May 8, 2024, we entered into a convertible note purchase agreement with Oncotelic for up to $70,000 in funding. As of June 30, 2024, we have received loan proceeds from Oncotelic totaling $55,000 to pay certain expenses of the Company in exchange for an unsecured convertible note (“Note”) pursuant to the Binding Term Sheet. The Note bears interest at a rate of 16% per annum and is due and payable upon closing a financing of at least $2.0 million or converted into additional shares of common stock of Mosaic, at the sole discretion of Oncotelic. The number of shares of common stock to be issued, if elected, would be equal to the entire unpaid principal amount of such Note and the 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.

This Item 2 contains only a brief description of the material terms of the convertible note purchase agreement and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such descriptions are qualified in their entirety by reference to the full text of the convertible note purchase agreement and form of the promissory note, which have been previously filed on May 14, 2024 as Exhibit 10.1 and 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and are incorporated herein by reference into this Item 2.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarter ended June 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth below.

Exhibit No.		Description
31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document
101.LAB*		XBRL Label Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

    Dated: August 14, 2024 MOSAIC IMMUNOENGINEERING, INC.   /s/ Steven King                                        Steven King. President and Chief Executive Officer, Director (Principal Executive Officer)  

      Dated: August 14, 2024 MOSAIC IMMUNOENGINEERING, INC.     /s/ Paul Lytle                                       Paul Lytle. EVP, Chief Financial Officer, Director (Principal Financial Officer and Principal Accounting Officer)  

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