Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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, 2025.

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 build a new 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. The Binding Term Sheet expired on June 30, 2025.

On November 18, 2024, we entered into an unsecured convertible promissory note ("Note Purchase Agreement") with an accredited investor ("Investor") for proceeds of up to $200,000 to be used for general corporate purposes. On December 4, 2024, the Company received $200,000 under the note purchase agreement and issued an unsecured convertible note bearing interest at a rate of 5% per annum that is due and payable upon closing a financing of at least $10.0 million or convertible into shares of common stock of the Company, at the sole discretion of the accredited investor. The number of shares of common stock to be issued, if converted, would be equal to the unpaid principal amount and accrued and unpaid interest thereon divided by the closing price of our common stock on the date that is one day prior to such election. During the three months ended March 31, 2026 and 2025, the Company recorded interest expense on the note payable of $2,467 and $2,466, respectively. As of March 31, 2026 and December 31, 2025, the Company has accrued $13,208 and $10,741, respectively, in interest that is included in other accrued expenses within the accompanying unaudited condensed consolidated balance sheet.

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 March 31, 2026, 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, 2025.

Results of Operation

Three Months Ended March 31, 2026 and 2025:

Research and Development Expenses

Research and development expenses of approximately $16,000 for the three months ended March 31, 2026 are primarily related to salaries and related costs for personnel in research and development functions. We believe our research and development expenses will increase significantly over time if we are able to raise sufficient capital to advance our programs.

General and Administrative Expenses

General and administrative expenses of approximately $139,000 for the three months ended March 31, 2026 consist principally of salaries and related costs for personnel and consultants in executive and administrative functions of approximately $101,000, accounting and filing fees of approximately $28,000, director and officer insurance of approximately $7,000, and other expenses of approximately $3,000. The decrease in general and administrative expenses of approximately $20,000 for the three months ended March 31, 2026 as compared to the same prior year period was primarily due to (i) a decrease in accounting and filing fees of approximately $9,000 due to timing of services provided, (ii) a decrease in payroll and related costs of $8,000 due to a reduced time commitment by certain employees, (iii) a decrease in director and officer insurance of approximately $1,000 and (iv) a decrease of $2,000 in other miscellaneous corporate expenses. 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)

Master Services Agreement with Oncotelic

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

Interest Expense and Accretion to Redemption Value on Convertible Notes

Interest expense of approximately $21,000 and $21,000 for the three months ended March 31, 2026 and 2025, respectively, represents interest expense on convertible notes and loan payables.

Liquidity and Capital Resources

As of March 31, 2026, we had cash and cash equivalents of less than $1,000. Our ability to continue our operations is highly dependent on our ability to raise capital to fund future operations. We anticipate, based on currently proposed plans and assumptions, that our cash on hand will not satisfy our operational and capital requirements through twelve months from the filing date of this Quarterly Report.

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

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 by June 30, 2025, as amended, 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. The Binding Term Sheet expired on June 30, 2025.

On July 1, 2024, we entered into a Master Services Agreement with Oncotelic whereby we perform advisory and related services in connection with studies and projects. For the three months ended March 31, 2025, we earned $14,000 for advisory and related services which is recorded in other income in the accompanying unaudited condensed consolidated statement of operations. The Master Services Agreement expired effective February 28, 2025.

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

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

Cash Flow Summary

The following table provides a summary of our net cash flow activity for the three months ended March 31, 2026 and 2025:

		Three Months Ended March 31, 2026				Three Months Ended March 31, 2025
Net cash used in operating activities		$	(3,550	)		$	(29,089	)
Net change in cash and cash equivalents		$	(3,550	)		$	(29,089	)

Cash Flows From Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 consisted of our net loss of $175,351, which amount was offset by (i) non-cash interest expense of $18,082 and (ii) a net change in operating assets and liabilities of $153,719, primarily due to (i) an increase in accrued compensation of $116,161 and (ii) an increase in accounts payable of $34,274.

Net cash used in operating activities for the three months ended March 31, 2025 consisted of our net loss of $181,320, which amount was offset by (i) non-cash interest expense of $18,083 and (ii) a net change in operating assets and liabilities of $134,149, primarily due to an increase in accrued compensation of $121,297.

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 March 31, 2026, 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, 2025, that the Company believes are of significance or potential significance to the Company.