Unless the context otherwise requires, references to the "Company," the
"combined company," "Mosaic," "we," "our," or "us" in this Annual Report on Form
10-K ("Report") refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries
(formerly known as Patriot Scientific Corporation). References to "PTSC" refer
to Patriot Scientific Corporation prior to the completion of the Reverse Merger
(as discussed below) and references to "Private Mosaic" refer to privately held
Mosaic ImmunoEngineering, Inc. prior to the completion of the Reverse Merger.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes thereto appearing elsewhere in this Report.
Cautionary Note Regarding Forward-Looking Statements
This Report, including all documents incorporated by reference herein, includes
certain statements constituting "forward-looking" statements within the meaning
of Section 27A of the Securities Act, Section 21E of the Exchange Act and the
Private Securities Litigation Reform Act of 1995, including statements
concerning our beliefs, plans, objectives, goals, expectations, anticipations,
estimates, intentions, operations, future results and prospects, and we rely on
the "safe harbor" provisions in those laws. We are including this statement for
the express purpose of availing ourselves of the protections of such safe
harbors with respect to all such forward-looking statements. The forward-looking
statements in this Report reflect our current views with respect to future
events and financial performance. In this report, the words "anticipates,"
"believes," "expects," "intends," "future," "estimates," "may," "could,"
"should," "would," "will," "shall," "propose," "continue," "predict," "plan" and
similar expressions are generally intended to identify certain of the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date made. Any
forward-looking statement is not a guarantee of future performance. Please see
Part I, Item 1A. Risk Factors for a discussion of certain risk factors
applicable to our business, financial condition, and results of operations.
Operating results are not necessarily indicative of results that may occur for
any future period. Except as required by law, we assume no obligation to update
or revise these forward-looking statements for any reason, even if new
information becomes available in the future.
Overview
We are a development-stage biotechnology company focused on advancing and
eventually commercializing our proprietary immunotherapy platform technology.
Our lead immunotherapy product candidate, MIE-101, is based on a naturally
occurring plant virus known as Cowpea mosaic virus (or CPMV) which is believed
to be non-infectious in humans and animals. However, because of its virus
structure and genetic composition, CPMV elicits a strong immune response when
delivered directly into tumors as shown in our preclinical studies. Data from
numerous mouse cancer models and in companion dogs with naturally occurring
tumors show the ability of intratumoral administration of CPMV to result in
anti-tumor effects in treated tumors and systemically at other sites of disease
through immune activation.
Our lead immuno-oncology candidate, MIE-101, resulted from years of research by
our scientific co-founders that was supported by numerous grants from federal
and private funding agencies. Published preclinical data from our co-founders'
studies and ongoing research support the potential anti-cancer activity of
MIE-101 as a monotherapy. In addition, preclinical data generated further
support the potential of MIE-101 to improve anti-tumor effects of standard
cancer treatments including chemotherapy, radiation therapy and checkpoint
inhibitors. These studies include data from multiple preclinical tumor models,
veterinary studies in companion animals with naturally occurring cancer, as well
as showing the potential to activate human immune effector cells in vitro.
MIE-101 is currently in late-stage preclinical development and our goal is to
advance MIE-101 into veterinary studies and into Phase I clinical trials within
18 to 24 months from the date we are able to raise sufficient funding.
33
Summary of Significant Events
Private Mosaic, a Delaware corporation, was formed on March 30, 2020. On July 1,
2020, we signed a Material Transfer, Evaluation, and Exclusive Option Agreement
("License Option Agreement") with Case Western Reserve University ("CWRU"),
granting us the exclusive right to license the CPMV platform technology to treat
and prevent cancer and infectious diseases in humans and for veterinary use. On
May 4, 2022, we entered into the license agreement with CWRU ("License
Agreement") pursuant to our rights granted under the License Option Agreement
(see Note 6 to the accompanying audited consolidated financial statements). On
August 19, 2020, Patriot Scientific Corporation (now known as Mosaic
ImmunoEngineering, Inc.) and Private Mosaic entered into a reverse merger
transaction, as further described below.
Reverse Merger
On August 19, 2020, Patriot Scientific Corporation, a corporation organized
under Delaware law on March 24, 1992 (now known as Mosaic ImmunoEngineering,
Inc.) and Private Mosaic entered into a stock purchase agreement ("Stock
Purchase Agreement"), whereby one of the wholly owned subsidiaries of Patriot
Scientific Corporation merged with and into Private Mosaic, with Private Mosaic
surviving as wholly owned subsidiary of Patriot Scientific Corporation (the
"Reverse Merger"). The transaction closed on August 21, 2020 ("Closing Date") in
accordance with the terms of the Stock Purchase Agreement.
On the Closing Date, Patriot Scientific Corporation acquired 100% of the issued
and outstanding common stock of Private Mosaic, representing 630,000 shares of
its Class A common stock ("Class A Stock") and 70,000 shares of its Class B
common stock ("Class B Stock") (collectively referred to as "Target Common
Stock"). In exchange for the Target Common Stock, the holders of the Class A
Stock received 630,000 shares of the Company's Series A Convertible Voting
Preferred Stock ("Series A Preferred") and holders of the Class B Stock received
70,000 shares of the Company's Series B Convertible Voting Preferred Stock
("Series B Preferred"). Each share of Series A Preferred converted into
10.194106 shares of common stock as defined in the Series A Certificate of
Designation. Each share of Series B Preferred converts into 11.46837 shares of
common stock of the Company, possesses full voting rights, on an as-converted
basis, as the common stock of the Company and contains certain anti-dilution
rights, as defined in the Series B Certificate of Designation. On a fully
diluted as converted basis, the holders of Series A Preferred and Series B
Preferred, in aggregate, owned 90% of the issued and outstanding common stock of
the Company as of the Closing Date.
The Reverse Merger was treated by the Company as a reverse merger in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP"). For accounting purposes, Private Mosaic was considered to have
acquired PTSC as the accounting acquirer because: (i) Private Mosaic
stockholders owned 90% of the combined company, on an as-converted basis,
immediately following the Closing Date, (ii) Private Mosaic directors held a
majority of board seats in the combined company and (iii) Private Mosaic
management held all key positions in the management of the combined company.
Accordingly, Private Mosaic's historical results of operations replaced PTSC's
historical results of operations for all periods prior to the Closing Date of
the Reverse Merger and, for all periods following the Closing Date of the
Reverse Merger, the results of operations of the combined company are included
in the Company's financial statements.
Other Key Corporate Events
On November 30, 2020, we filed amended and restated articles of incorporation
with the Secretary of State of the State of Delaware ("Amended and Restated
Certificate") to change the name of the Company to Mosaic ImmunoEngineering,
Inc. ("Name Change") to align the Company's corporate name with its new
strategic direction, to implement a 1-for-500 reverse stock split ("Reverse
Stock Split"), and to reduce the number of authorized shares of common stock
from 600 million to 100 million. The Reverse Stock Split was effective on
December 2, 2020. All share numbers and preferred stock conversion numbers
included herein have been retroactively adjusted to reflect the 1-for-500
Reverse Stock Split. On December 30, 2020, we changed our fiscal year end from
May 31 to December 31.
34
Our funding has primarily come from the issuance of convertible notes. On May 7,
2021 and February 18, 2022, we issued unsecured convertible promissory notes in
the aggregate principal amount of $575,000 and $341,632, respectively (see Note
7 to the accompanying consolidated financial statements).
On July 6, 2022, we entered into a redemption agreement (the "Redemption
Agreement") with Holocom, Inc. ("Holocom") pursuant to which we requested full
redemption of our 2,100,000 shares of Series A Preferred Stock at a redemption
price of $0.40 per share, provided Holocom has sufficient capital to redeem the
underlying shares. During the year ended December 31, 2022, we received cash
proceeds in the amount of $343,000 upon the redemption of 857,500 shares of
Series A Preferred Stock (see Note 4 to the accompanying consolidated financial
statements).
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
require us to make estimates and judgments that significantly affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates, and such differences could affect the results of
operations reported in future periods. We believe the following critical
accounting policies affect our most significant estimates and judgments used in
the preparation of our consolidated financial statements.
1. Investment in Affiliated Company
In February 2007, we invested an aggregate of $370,000 in Holocom, Inc.
("Holocom"), a California corporation that manufactures products that protect
information transmitted over secure networks, in exchange for 2,100,000 shares
of Series A Convertible Preferred Stock ("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 common stock of
Holocom 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 a redemption agreement (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, which amount is included in other income in the
accompanying audited consolidated statements of operations (see Note 4 to the
accompanying audited consolidated financial statements). The remaining shares of
Series A Preferred Stock are expected to be redeemed over a period of thirty
(30) months beginning August 1, 2022 based on the following redemption schedule:
Shares of Series A
Preferred Stock to be Monthly Redemption
Period Redeemed each Month Proceeds to the Company
Months 1-12 35,000 $14,000
Months 13-24 43,750 $17,500
Months 25-30 52,500 $21,000We will recognize 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 are unable to assert that collection of amounts due under the Redemption
Agreement is probable, regardless of the terms of the Redemption Agreement. As a
result, the remaining redemption amount receivable has been fully reserved and
other income will be recognized once payments are received. We will remove the
cash basis of accounting designation at such time we believe collection from
Holocom is probable based upon sufficient liquidity or a demonstrated payment
history.
35
As of December 31, 2022, of the 175,000 shares of Series A Preferred Stock to be
redeemed under the aforementioned redemption schedule covering the periods of
August 2022 and December 2022, Holocom has redeemed 17,500 shares of Series A
Preferred Stock in exchange for $7,000. Any amounts not paid within fifteen (15)
days of its respective due date shall accrue 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.
Notwithstanding the foregoing, Holocom also agreed to expedite the redemption of
the Series A Preferred Stock in the event that Holocom has excess cash on hand,
which amount shall be calculated at each calendar month end period date ("Month
End Date"), equal to an amount of (i) total cash on hand of Holocom and Scripps
Ventures, Inc. (a related party entity of Holocom) (ii) less $200,000 ("Excess
Capital"). Holocom agreed to redeem a number of shares of Series A Preferred
Stock equal to the amount of Excess Capital divided by $0.40 per share no later
than ten (10) business days following the Month End Date. There were no
additional redemptions of Series A Preferred Stock during the year ended
December 31, 2022. During January 2023, 52,500 shares of Series A Preferred
Stock were redeemed under the Redemption Agreement in exchange for $21,000.
2. Fair Value of Financial Instruments
Anti-Dilution Issuance Rights Derivative Liability
Pursuant to the Series B Preferred Certificate of Designation, the Series B
Preferred includes certain anti-dilution issuance rights, whereby the holder
will continue to maintain equity ownership equal to 10% of the fully diluted
shares of common stock outstanding, calculated on an as converted basis,
including all other convertible securities outstanding and reserved for issuance
(and excluding stock options issued and outstanding and reserved for issuance
under a Board approved employee stock option plan reserving for issuance no more
than ten percent (10%) of the outstanding common stock of the Company) until we
raise the Capital Threshold under the License Agreement (see Note 6 to the
accompanying audited consolidated financial statements). As of December 31, 2022
and 2021, the Capital Threshold was approximately $283,000 and $626,000,
respectively.
To determine the estimated fair value of the anti-dilution issuance rights
liability, the Company used a Monte Carlo simulation methodology, which models
the future movement of stock prices based on several key variables. At December
31, 2022 and 2021, the estimated fair value of the anti-dilution issuance rights
was $46,700 and $104,300, respectively. We initially recorded the fair value as
a derivative liability with a corresponding charge to research and development
expense and we will mark-to-market at each reporting period, with changes in
fair value recognized in other income (expense) in the consolidated statement of
operations at each period-end while this derivative instrument is outstanding.
The primary inputs used in valuing the anti-dilution issuance rights liability
at December 31, 2022 and 2021 were as follows:
December 31, December 31,
2022 2021
Fair value of common stock (per share) $ 0.99 $ 1.02
Estimated additional shares of common stock
71,511 134,229
Expected volatility 130% 105%
Expected term (years) 0.25 0.25
Risk-free interest rate 4.42% 0.06%
The fair value of the common stock was determined by management with the
assistance of an independent third-party specialist. The computation of expected
volatility was estimated using available information about the historical
volatility of stocks of similar publicly traded companies for a period matching
the expected term assumption. In addition, the Company incorporated the
estimated number of shares, timing, and probability of future equity financings
in the calculation of the anti-dilution issuance rights liability.
36
3. Convertible Notes
The Company follows ASC 480-10, "Distinguishing Liabilities from Equity" in its
evaluation of the accounting for share-settled debt (Convertible Notes). ASC
480-10-25-14 requires liability accounting for certain financial instruments,
including shares that embody an unconditional obligation to transfer a variable
number of shares, provided that the monetary value of the obligation is based
solely or predominantly on one of the following three characteristics:
a) A fixed monetary amount known at inception;
b) Variations in something other than the fair value of the issuer's equity
shares; or
c) Variations in the fair value of the issuer's equity shares, but the
monetary value to the counterparty moves in the opposite direction as the
value of the issuer's shares.
Moreover, equity classification was not an appropriate classification for the
convertible notes because the underlying terms of the convertible notes do not
expose the investors to risks and rewards similar to those of an owner and,
therefore, do not create a shareholder relationship. Pursuant to ASC 835-30, the
convertible notes were initially recorded at their amortized cost and are being
accreted to their redemption value over the estimated conversion period using
the effective interest method.
4. Income Taxes
We follow authoritative guidance in accounting for uncertainties in income
taxes. This authoritative guidance prescribes a recognition threshold and
measurement requirement for the financial statement recognition of a tax
position that has been taken or is expected to be taken on a tax return and also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. Under this guidance,
we may only recognize tax positions that meet a "more likely than not"
threshold.
We follow authoritative guidance to evaluate whether a valuation allowance
should be established against our deferred tax assets based on the consideration
of all available evidence using a "more likely than not" standard. In making
such judgments, significant weight is given to evidence that can be objectively
verified. We assess our deferred tax assets annually under more likely than not
scenarios in which they may be realized through future income.
In addition, utilization of our net operating loss carryforwards may be subject
to an annual limitation due to ownership change limitations that may have
occurred as a result of the Reverse Merger that closed in August 2020, or that
could occur in the future, as required by Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"). These ownership changes may limit the
amount of the net operating loss carry forwards that can be utilized annually to
offset future taxable income and tax, respectively. In general, an "ownership
change" as defined by Section 382 of the Code results from a transaction or
series of transactions over a three-year period resulting in an ownership change
of more than 50 percentage points of the outstanding stock of a Company by
certain stockholders. Moreover, since we will need to raise substantial
additional funding to finance our operations, we may undergo further ownership
changes in the future, which could further limit our ability to use net
operating loss carryforwards. As a result, if we generate taxable income, our
ability to use some of our net operating loss carryforwards to offset U.S.
federal taxable income may be subject to limitations, which could result in
increased future tax liability to us.
With the exception of refundable income taxes, we have determined that it was
more likely than not that all of our deferred tax assets will not be realized in
the future due to our continuing pre-tax and taxable losses in addition to the
potential loss of deferred tax assets as a result of the change in control (see
Note 1 to the accompanying consolidated financial statements). As a result of
this determination, and with the exception for the aforementioned refundable
income taxes, we have recorded a full valuation allowance against our deferred
tax assets.
37
Results of Operations
Years Ended December 31, 2022 and 2021
Research and Development Expenses
Research and development expenses of approximately $1,048,000 for the year ended
December 31, 2022 are primarily related to salaries and related costs for
personnel in research and development functions and related consulting fees
associated with advancing the platform technologies of approximately $1,041,000,
including approximately $124,000 in share-based compensation. We believe our
research and development expenses will increase significantly over time,
provided we are able to raise sufficient capital to advance our lead program.
Research and development expenses of approximately $1,456,000 for the year ended
December 31, 2021 are primarily related to salaries and related costs for
personnel in research and development functions and related consulting fees
associated with advancing the platform technologies, including approximately
$499,000 in share-based compensation expense.
General and Administrative Expenses
General and administrative expenses of approximately $1,579,000 for the year
ended December 31, 2022 consist principally of salaries and related costs for
personnel and consultants in executive and administrative functions of
approximately $1,050,000, including approximately $171,000 in share-based
compensation expense, fees for outside legal counsel of approximately $20,000,
legal fees related to intellectual property rights of approximately $347,000,
audit, tax, accounting and filing fees of approximately $80,000, director and
officer insurance of approximately $45,000, investor and public relation fees of
approximately $21,000, and other fees and expenses of approximately $16,000. 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 lead program.
General and administrative expenses of approximately $2,045,000 for the year
ended December 31, 2021 consist principally of salaries and related costs for
personnel and consultants in executive and administrative functions of
approximately $1,740,000, including approximately $809,000 in share-based
compensation expense, fees for outside legal counsel of approximately $23,000,
fees related to intellectual property rights of approximately $70,000, audit,
tax, accounting and filing fees of approximately $88,000, director and officer
insurance of approximately $52,000, investor and public relation fees of
approximately $54,000, and other fees and expenses of approximately $18,000.
Other Income (Expense)
Gain on Sale of Holocom Preferred Stock
In February 2007, we invested an aggregate of $370,000 in Holocom, Inc.
("Holocom"), a California corporation that manufactures products that protect
information transmitted over secure networks, in exchange for 2,100,000 shares
of Series A Convertible Preferred Stock ("Series A Preferred Stock"). 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 Series A 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 year ended December
31, 2022, we received cash proceeds in the amount of $343,000 upon the
redemption of 857,500 shares of Series A Preferred Stock (see Note 4 to the
accompanying consolidated financial statements).
38
Change in Valuation of Derivative Liability
The change in valuation of the derivative liability of approximately $58,000 for
the year ended December 31, 2022 pertains to a decrease in the estimated fair
value of the anti-dilution issuance rights provided under the Series B Preferred
(see Note 3 to the accompanying consolidated financial statements).
The change in valuation of the derivative liability of approximately $21,000 for
the year ended December 31, 2021 pertains to an increase in the estimated fair
value of the anti-dilution issuance rights provided under the Series B Preferred
(see Notes 3 and 6 to the accompanying consolidated financial statements).
Interest Expense and Accretion to Redemption Value on Convertible Notes
Non-cash interest expense of approximately $70,000 and $30,000 for the year
ended December 31, 2022 and 2021, respectively, represents interest expense on
convertible notes (see Note 7 to the accompanying consolidated financial
statements).
Accretion to redemption value on convertible notes of approximately $82,000 and
130,000 for the year ended December 31, 2022 and 2021, respectively, pertains to
the accretion of the convertible notes to their redemption value using the
effective interest method (see Note 7 to the accompanying consolidated financial
statements).
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. During the year ended December 31, 2022, we received $343,000 from the
redemption of Holocom Series A Preferred Stock (see Note 4 to the accompanying
consolidated financial statements). As of December 31, 2022, we had cash and
cash equivalents of $220,645. 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 Report.
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
accrued 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.
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, as well as
potential collaborations or licensing arrangements with other companies.
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 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. Further, any contracts or
license arrangements we enter into to raise funds may require us to relinquish
our rights to our products or technology, and we may not be able to enter into
any such contracts or license arrangements on favorable terms, or at all. 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.
39
In addition, the continuation of disruptions caused by COVID-19, broad-based
inflation, and various economic indicators that the United States economy may be
entering a recession in upcoming quarters may cause investors to slow down or
delay their decision to deploy capital which will adversely impact our ability
to fund future operations. Consequently, there can be no assurance that any
additional financing on commercially reasonable terms, or at all, will be
available when needed. If we are unable to raise additional capital and continue
to have insufficient funds, we may be required to cease our operations
altogether. The above matters raise substantial doubt regarding our ability to
continue as a going concern.
Cash Flow Summary
The following table provides a summary of our net cash flow activity for the
years ended December 31, 2022 and 2021:
Year Ended Year Ended
December 31, December 31,
2022 2021
Net cash used in operating activities $ (690,129 ) $ (679,236 )
Net cash provided by investing activities
343,000 27,637
Net cash provided by financing activities 341,632 525,003
Net decrease in cash and cash equivalents $ (5,497 ) $ (126,596 )
Cash Flows From Operating Activities
Net cash used in operating activities for the year ended December 31, 2022
consisted of our net loss of $2,380,870 combined with a decrease in the fair
value of the derivative liability of $57,600 and a gain on redemption of
preferred stock of Holocom of $343,000, which amounts were offset by (i)
non-cash share-based compensation expense of $295,123, (ii) non-cash interest
expense of $69,738, (iii) the accretion to redemption value on convertible notes
of $81,843, and (iv) a net change in operating assets and liabilities of
$1,644,637 primarily due to an increase in accounts payable, accrued
compensation, accrued consulting, and other accrued expenses of $1,641,917, in
aggregate.
Net cash used in operating activities for the year ended December 31, 2021
consisted of our net loss of $3,684,478 offset by (i) share-based compensation
expense of $1,308,008, (ii) non-cash interest on convertible notes of $30,121,
(iii) accretion to redemption value on convertible notes of $130,027, (iv) an
increase in the fair value of the derivative liability of $20,800, (v) and a net
change in operating assets and liabilities of $1,516,286 primarily due to an
increase in accrued compensation of $997,866 and an increase in accrued expenses
and other of $456,846.
Cash Flows From Investing Activities
Net cash provided by investing activities for the year ended December 31, 2022
consisted of proceeds received from our partial redemption of Holocom's Series A
Preferred Stock of $343,000 (see Note 4 to the accompanying consolidated
financial statements).
Net cash provided by investing activities for the year ended December 31, 2021
consisted of net proceeds received of $27,637 from the dissolution of Phoenix
Digital Solutions LLC ("PDS"), representing our 50% interest in PDS.
Cash Flows From Financing Activities
Net cash provided by financing activities for the year ended December 31, 2022
consisted of net proceeds received from the issuance of convertible notes of
$341,632 (see Note 7 to the accompanying consolidated financial statements).
Net cash provided by financing activities for the year ended December 31, 2021
consisted of net proceeds received from the issuance of convertible notes of
$525,003, which amount excludes $49,997 that was payable to one of our
co-founders as of December 31, 2020 and invested in the convertible notes in May
2021.
40
Recent Accounting Pronouncements
For a detailed description of recent accounting pronouncements, see Note 2,
Summary of Significant Accounting Policies, to the consolidated financial
statements included in Part IV, Item 15 of this Report and begin on page F-1
with the index to consolidated financial statements.
© Edgar Online, source Glimpses
MOSAIC IMMUNOENGINEERING, INC. 
