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Item 8. Financial Statements and Supplementary Data

2022-03-23 compared with 2021-03-17 · 668 added, 713 removed, 286 unchanged (83% of the section changed)

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consolidated financial statements of Cocrystal Pharma, Inc.

required by this Item are described in Item 15 of this Annual Report

on Form 10-K and are presented beginning on page F-1.

required by this Item are described in Item 15 of this Annual Report on Form

10-K and are presented beginning on page F-1.

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

of Independent Registered Certified Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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have audited the accompanying consolidated balance sheets of Cocrystal Pharma, Inc.

(the “Company”) and subsidiaries

as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’

equity, and cash flows

for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the

Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity

with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

with the Public Company Accounting Oversight Board of the United States “(“PCAOB”) and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the

Securities and Exchange Commission and the PCAOB.

(the “Company”) and subsidiaries as of

December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years

then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,

2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board of the United States (“PCAOB”) and are required to be independent with respect to the

Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated

below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated

to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way

our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters

below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial

statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does

not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical

audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment Assessment

described in Notes 2 and 4 to the consolidated financial statements, the Company’s consolidated net goodwill balance was

described in Notes 2 and 4 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $19,092,000

as of December 31, 2021.

Management conducts impairment testing at the reporting unit level on an annual basis

as of November 30th or more frequently if events or circumstances indicate a potential impairment.

Reporting units are tested

for impairment by comparing the estimated fair value of each reporting unit to their respective carrying amounts.

Impairment is

measured as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill

for that reporting unit.

Management estimates the fair value of the reporting units using the income approach, specifically the

discounted cash flow method, and uses a market capitalization corroboration.

This requires the use of significant estimates and

assumptions, including future revenues, projected margins and capital spending, terminal growth rates, and discount rates.

principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a

critical audit matter are the significant judgment by management when developing the fair value measurements of the reporting

units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating

audit evidence related to management’s significant assumptions related to future revenues, projected margins and capital

spending, terminal growth rates, and discount rates.

In addition, the audit effort involved the use of professionals with specialized

skill and knowledge.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing

the fair value of the reporting units, (ii) evaluating the appropriateness of the discounted cash flow models, (iii) testing the

completeness and accuracy of underlying data used in the models, (iv) performing an independent market corroboration calculation,

and (iv) evaluating the significant assumptions used by management related to future revenues, projected margins and capital spending,

terminal growth rates, and discount rates.

Evaluating management’s assumptions related to future revenues and projected

margins and capital spending involved evaluating whether the assumptions used by management were reasonable considering the current

and past performance of the reporting units, third-party industry data, and whether these assumptions were consistent with evidence

obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation

of the Company’s discounted cash flow models and the terminal growth rates and discount rates assumptions.

have served as the Company’s auditor since 2019.

Management conducts impairment testing at the reporting unit level on an annual basis as of November 30th or

more frequently if events or circumstances indicate a potential impairment.

Reporting unit is tested for impairment by comparing the

estimated fair value of the reporting unit to its carrying amount.

Impairment is measured as the excess of a reporting unit’s carrying

amount over its fair value, not to exceed the carrying amount of goodwill for that reporting unit.

Management estimates the fair value

of the reporting unit using the income approach, specifically the discounted cash flow method, and uses a market capitalization corroboration.

This requires the use of significant estimates and assumptions, including future revenues, projected margins and capital spending, terminal

growth rates, and discount rates.

principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical

audit matter are the significant judgment by management when developing the fair value measurement of the reporting unit, which in turn

led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence related

to management’s significant assumptions related to future revenues, projected margins and capital spending, terminal growth rates,

and discount rates.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated

financial statements.

These procedures included, among others, (i) testing management’s process for developing the fair value of

the reporting units, (ii) evaluating the appropriateness of the discounted cash flow models, (iii) testing the completeness and accuracy

of underlying data used in the models, (iv) performing an independent market corroboration calculation, and (iv) evaluating the significant

assumptions used by management related to future revenues, projected margins and capital spending, terminal growth rates, and discount

Evaluating management’s assumptions related to future revenues and projected margins and capital spending involved evaluating

whether the assumptions used by management were reasonable considering the current and past performance of the reporting unit, third-party

industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized

skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow models and the terminal growth

rates and discount rates assumptions.

have served as the Company’s auditor since 2019.

Weinberg & Company

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BALANCE SHEETS

December 31, 2020

December 31, 2019

Current assets:

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Operating lease right-of-use assets, net (including $ 153 to related party)

Liabilities and stockholders’

Liabilities and stockholders’ equity

Current liabilities:

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Finance lease liabilities

Operating lease liabilities

Operating lease liabilities (including $ 101 to related party)

Total long-term liabilities

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Commitments and contingencies

Stockholders’

Stockholders’ equity:

Common stock, $ 0.001 par value;

100,000 shares authorized as of December 31, 2020 and December 31, 2019;

150,000 and 100,000 shares authorized as of December 31, 2021 and December 31, 2020, respectively;

97,469 and 70,439 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

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Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes to consolidated financial statements.

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Change in fair value of derivative liabilities

Foreign exchange loss

Total other income (expense), net

Loss before income taxes

Net loss per common share:

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accompanying notes to consolidated financial statements.

STATEMENTS OF STOCKHOLDERS’

Stockholders’

STATEMENTS OF STOCKHOLDERS’ EQUITY

Stockholders’

Balance as of December 31, 2019

$ ( 235,260 )

Stock-based compensation

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Balance as of December 31, 2021

$ ( 259,093 )

accompanying notes to consolidated financial statements.

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Payments on operating lease liabilities

Loss on impairment goodwill

Change in fair value of derivative liabilities

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Recognition of finance lease right-of-use asset and liability

Recognition of operating lease right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842, Leases

Recognition of operating lease right-of-use assets and operating lease liabilities

accompanying notes to consolidated financial statements.

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Organization and Business

(“we”, the “Company”

or “Cocrystal”), a biopharmaceutical company, has been developing

novel technologies and approaches to create first-in-class and best-in-class antiviral drug candidates since its initial funding

Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform

the treatment and prophylaxis of viral diseases in humans.

By concentrating our research and development efforts on viral replication

inhibitors, we plan to leverage our infrastructure and expertise in these areas.

(“we”, the “Company” or “Cocrystal”), a biopharmaceutical company, has been developing

novel technologies and approaches to create first-in-class and best-in-class antiviral drug candidates since its initial funding in 2008.

Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment

and prophylaxis of viral diseases in humans.

By concentrating our research and development efforts on viral replication inhibitors, we

plan to leverage our infrastructure and expertise in these areas.

Company was formerly incorporated in Nevada under the name Biozone Pharmaceuticals, Inc.

(“Biozone”).

On January 2, 2014,

Biozone Pharmaceuticals, Inc.

sold substantially all of its assets to MusclePharm Corporation (“MusclePharm”),

and, on the same day, merged with Cocrystal Discovery, Inc.

sold substantially all of its assets to MusclePharm Corporation (“MusclePharm”), and, on the

same day, merged with Cocrystal Discovery, Inc.

in a transaction accounted for as a reverse merger.

Following the

merger, the Company assumed Cocrystal Discovery, Inc.’s business plan and operations.

On March 18, 2014, the Company reincorporated

in Delaware under the name Cocrystal Pharma, Inc.

Following the merger, the Company

assumed Cocrystal Discovery, Inc.’s business plan and operations.

On March 18, 2014, the Company reincorporated in Delaware under

the name Cocrystal Pharma, Inc.

November 25, 2014, Cocrystal Pharma, Inc.

and affiliated entities completed a series of merger transactions as a result of which

Cocrystal Pharma, Inc.

merged with RFS Pharma, LLC, a Georgia limited liability company (“RFS Pharma”).

the surviving entity of this merger as “Cocrystal”

or the “Company.”

Company’s activities since inception have principally consisted of acquiring product and technology rights, raising capital,

and performing research and development.

Successful completion of the Company’s development programs, obtaining regulatory

approvals of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among

other things, its ability to access potential markets, secure financing, develop a customer base, attract, retain and motivate

qualified personnel, and develop strategic alliances.

Through December 31, 2020, the Company has primarily funded its operations

through equity offerings.

Company has no pharmaceutical products approved for sale, has not generated any revenues to date from pharmaceutical product sales,

and has incurred significant operating losses since inception.

The Company has never been profitable and has incurred losses from

operations of $9,586,000 and $48,406,000 in the years ended December 31, 2020 and 2019, respectively.

the disease caused by SARS-CoV-2, a novel strain of coronavirus, COVID-19 continues to spread and severely impact the economy

and other countries around the world, we are committed to the need of antiviral therapeutics for this unprecedented

The extent to which this coronavirus impacts our business and operating results will depend on future developments

that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the virus,

including variants of the virus, and the actions to contain the spread of or to detect, prevent, or treat COVID-19, among others.

March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into

The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior

and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions,

temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections

from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain payroll

tax credits associated with the retention of employees.

Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States

of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in

the normal course of business.

and affiliated entities completed a series of merger transactions as a result of which Cocrystal

merged with RFS Pharma, LLC, a Georgia limited liability company (“RFS Pharma”).

We refer to the surviving entity

of this merger as “Cocrystal” or the “Company.”

September 2021, the Company opened a wholly owned foreign subsidiary in Australia named Cocrystal Pharma Australia, Ltd (“Cocrystal

Australia”) with the objective of operating clinical trials in Australia.

Company’s activities since inception have principally consisted of acquiring product and technology rights, raising capital, and

performing research and development.

Successful completion of the Company’s development programs, obtaining regulatory approvals

of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things,

its ability to access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel,

and develop strategic alliances.

Through December 31, 2021, the Company has primarily funded its operations through equity offerings.

Company has no pharmaceutical products approved for sale, has not generated any revenues to date from pharmaceutical product sales, and

has incurred significant operating losses since inception.

The Company has never been profitable and has incurred losses from operations

of $ 14,185,000 and $ 9,648,000 in the years ended December 31, 2021 and 2020, respectively.

the disease caused by SARS-CoV-2, a novel strain of coronavirus, COVID-19 continues to impact the economy of the

and other countries around the world, we are committed to the need of antiviral therapeutics for this unprecedented challenge.

extent to which this coronavirus impacts our business and operating results will depend on future developments that are highly uncertain

and cannot be accurately predicted, including new information that may emerge concerning the virus, including variants of the virus,

and the actions to contain the spread of or to detect, prevent, or treat COVID-19, among others.

March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law.

The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future

utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension

of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for

tax depreciation of certain qualified improvement property, and the creation of certain payroll tax credits associated with the retention

of employees.

Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of

America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal

course of business.

The Company has incurred net losses and negative operating cash flows since inception.

year ended December 31, 2020, the Company recorded a net loss of approximately $9,648,000 and used approximately $9,830,000 of

cash in operating activities.

For the year ended December

31, 2021, the Company recorded a net loss of approximately $ 14,185,000 and used approximately $ 12,719,000 of cash in operating activities.

December 31, 2021, the Company had cash and cash equivalents of approximately $ 58,755,000 .

We believe that our current resources

will be sufficient to fund our operations for the foreseeable future.

This estimate is based, in part, upon our currently projected

expenditures for 2021 and 2022.

We believe that our current resources will

be sufficient to fund our operations for the foreseeable future.

This estimate is based, in part, upon our currently projected expenditures

for 2022, 2023 and 2024.

Company will need to continue obtaining adequate capital to fund operating losses until it becomes profitable.

The Company can

give no assurances that the additional capital it is able to raise, if any, will be sufficient to meet its needs, or that any

such financing will be obtainable on acceptable terms.

If the Company is unable to obtain adequate capital, it could be forced

to cease operations or substantially curtail its drug development activities.

The Company expects to continue incurring substantial

operating losses and negative cash flows from operations over the next several years during its pre-clinical and clinical development

The Company can give no

assurances that the additional capital it is able to raise, if any, will be sufficient to meet its needs, or that any such financing

will be obtainable on acceptable terms.

If the Company is unable to obtain adequate capital, it could be forced to cease operations or

substantially curtail its drug development activities.

The Company expects to continue incurring substantial operating losses and negative

cash flows from operations over the next several years during its pre-clinical and clinical development phases.

Basis of Presentation and Significant Accounting Policies

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accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles

GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)

for reporting of annual financial information.

generally accepted accounting principles (“U.S.

GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting of

annual financial information.

of Consolidation

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and its wholly owned subsidiaries:

Discovery, Inc., Cocrystal Merger Sub, Inc., Baker Cummins Corp.

Cocrystal Pharma

Australia Pty, Ltd., Cocrystal Discovery, Inc., Cocrystal Merger Sub, Inc., Baker Cummins Corp.

and Biozone Laboratories, Inc.

Intercompany transactions and

balances have been eliminated.

transactions and balances have been eliminated.

Company operates in only one segment.

Management uses cash flows as the primary measure to manage its business and does not segment

its business for internal reporting or decision-making.

of the Company’s consolidated financial statements in conformance with U.S.

GAAP requires the Company’s management

to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure

of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

The significant

estimates in the Company’s consolidated financial statements relate to the valuation of equity awards and derivative liabilities,

recoverability of deferred tax assets, estimated useful lives of fixed assets, and forecast assumptions used in the impairment

testing of goodwill.

The Company bases estimates and assumptions on historical experience, when available, and on various factors

that it believes to be reasonable under the circumstances.

The Company evaluates its estimates and assumptions on an ongoing basis,

and its actual results may differ from estimates made under different assumptions or conditions.

Management uses cash flows as the primary measure to manage its business and does not segment its

business for internal reporting or decision-making.

of the Company’s consolidated financial statements in conformance with U.S.

GAAP requires the Company’s management to make

estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent

assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

The significant estimates in

the Company’s consolidated financial statements relate to the valuation of equity awards and derivative liabilities, recoverability

of deferred tax assets, estimated useful lives of fixed assets, and forecast assumptions used in the impairment testing of goodwill.

The Company bases estimates and assumptions on historical experience, when available, and on various factors that it believes to be reasonable

under the circumstances.

The Company evaluates its estimates and assumptions on an ongoing basis, and its actual results may differ from

estimates made under different assumptions or conditions.

Concentrations

of Credit Risk

instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposited

in accounts held at two U.S.

financial institutions, which may, at times, exceed federally insured limits of $250,000 for each

institution accounts are held.

At December 31, 2020 and 2019, our primary operating account held approximately $33,010,000 and

$7,418,000, respectively, and our collateral account balance was $50,000 at a different institution.

The Company has not experienced

any losses in such accounts and believes it is not exposed to significant risks thereof.

of December 31, 2020, 100% of our revenue and receivables are from one customer.

instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposited in

accounts held at two U.S.

financial institutions, which may, at times, exceed federally insured limits of $ 250,000

for each institution accounts are held.

31, 2021 and 2020, our primary operating account held approximately $ 58,705,000

and $ 33,010,000 ,

respectively, and our collateral account balance of $ 50,000

and other cash accounts are maintained at different

institutions.

The Company has not experienced any losses in such accounts and believes it is not exposed to significant risks thereof.

and Uncertainties

Company’s future results of operations involve a number of risks and uncertainties.

Factors that could affect the Company’s

future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid

technological change, ability to obtain regulatory approvals, competition from currently available treatments and therapies, competition

from larger companies, effective protection of proprietary technology, maintenance of strategic relationships, and dependence

on key individuals.

Company’s future results of operations involve a number of risks and uncertainties.

Factors that could affect the Company’s

future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological

change, ability to obtain regulatory approvals, competition from currently available treatments and therapies, competition from larger

companies, effective protection of proprietary technology, maintenance of strategic relationships, and dependence on key individuals.

developed by the Company will require clearances from the U.S.

Food and Drug Administration (the “FDA”) and other

international regulatory agencies prior to commercial sales in their respective markets.

The Company’s products may not

receive the necessary clearances and if they are denied clearance, clearance is delayed, or the Company is unable to maintain

clearance, the Company’s business could be materially, adversely impacted.

Food and Drug Administration (the “FDA”) and other international

regulatory agencies prior to commercial sales in their respective markets.

The Company’s products may not receive the necessary

clearances and if they are denied clearance, clearance is delayed, or the Company is unable to maintain clearance, the Company’s

business could be materially, adversely impacted.

and Restricted Cash

Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to

be cash equivalents, and the Company held no cash equivalents as of December 31, 2020 and 2019.

following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum

to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

December 31, 2020

December 31, 2019

Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash

equivalents, and the Company held no cash equivalents as of December 31, 2021 and 2020.

following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the

total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

Schedule of Reconciliation of Cash And Restricted Cash

Restricted cash

Total cash and restricted cash shown in the statements of cash flows

cash represents amounts pledged as collateral for financing arrangements that are currently limited to the issuance of business

credit cards.

cash represents amounts pledged as collateral for financing arrangements that are currently limited to the issuance of business credit

The restriction will end upon the conclusion of these financing arrangements.

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is recorded at cost and depreciated over the estimated useful lives of the underlying assets (three to five years) using the straight-line

to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (“ASC”) 840, Accounting

Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize

a right-of-use asset and a lease liability for virtually all leases.

The Company adopted ASC 842 using a modified retrospective

As a result, the comparative financial information has not been updated and the required disclosures prior to the date

of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods.

adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets and lease liabilities

of approximately $833,000 and did not result in a cumulative-effect adjustment to accumulated deficit.

Value Measurements

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value

under generally accepted accounting principles and enhances disclosures about fair value measurements.

Fair value is defined under

ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal

or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the

use of unobservable inputs.

The standard describes a fair value hierarchy based on three levels of inputs, of which the first

two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under

generally accepted accounting principles and enhances disclosures about fair value measurements.

Fair value is defined under ASC 820

as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous

market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques

used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last

unobservable, that may be used to measure fair value which are the following:

1 — quoted prices in active markets for identical assets or liabilities.

other significant observable inputs for the assets or liabilities through corroboration with market data at the

measurement date.

significant unobservable inputs that reflect management’s best estimate of what market participants would

use to price the assets or liabilities at the measurement date.

2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement

3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to

price the assets or liabilities at the measurement date.

Company categorizes its cash and restricted cash as Level 1 fair value measurements.

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settleable in cash as Level 3 fair value measurements.

The warrants potentially settleable in cash are measured at fair value

on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements

to be accounted for as component of stockholders’

The warrants are valued using the Black-Scholes option pricing

model as discussed in Note 10 –

December 31, 2020 and 2019, the carrying amounts of financial assets and liabilities, such as cash, accounts receivable, other

assets, and accounts payable and accrued expenses approximate their fair values due to their short-term nature.

The carrying values

of notes payable approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing

market interest rates.

The warrants potentially settleable in cash are measured at fair value on a recurring

basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted

for as component of stockholders’ equity.

The warrants are valued using the Black-Scholes option pricing model as discussed in

Note 10 – Warrants.

December 31, 2021 and 2020, the carrying amounts of financial assets and liabilities, such as cash, accounts receivable, other assets,

and accounts payable and accrued expenses approximate their fair values due to their short-term nature.

The carrying values of notes

payable approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest

Company has not transferred any financial instruments into or out of Level 3 classification during the years ended December 31, 2021

2020 and 2019.

A reconciliation of the beginning and ending Level 3 liabilities for is as follows (in thousands):

Schedule of Reconciliation of Beginning and Ending Level 3 Liabilities

Fair Value Measurements Using

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Balance, January 1,

Beginning balance

Change in fair value of warrants potentially settleable in cash (Note 10)

Balance at December 31,

account for business combinations using the acquisition method, recording the acquisition-date fair value of total consideration

over the acquisition-date fair value of net assets acquired as goodwill.

Acquisition-related costs, including banking, legal,

accounting, valuation, and other similar costs, are expensed in the periods in which the costs are incurred and included in loss

from operations in the consolidated financial statements.

The results of operations of the acquired business are included in the

consolidated financial statements from the acquisition date.

November 2014, goodwill was recorded in connection with the acquisition of RFS Pharma, and have represented a series of awarded

patents and filed patent applications.

evaluate indefinite-lived intangible assets and goodwill for impairment annually, as of November 30, or more frequently when events

or circumstances indicate that impairment may have occurred.

As part of the impairment evaluation, we may elect to perform an

assessment of qualitative factors.

If this qualitative assessment indicates that it is more likely than not that the fair value

of the indefinite-lived intangible asset or the reporting unit (for goodwill) is less than its carrying value, we then would proceed

with the quantitative impairment test to compare the fair value to the carrying value and record an impairment charge if the carrying

value exceeds the fair value.

January 1, 2019, the Company early adopted ASU No.

2017-04, “Intangibles-Goodwill and Other (Topic 350):

Simplifying the

Test for Goodwill Impairment.”

The standard eliminates the second step in the goodwill impairment test which requires an

entity to determine the implied fair value of the reporting unit’s goodwill.

Instead, an entity should recognize an impairment

loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with

the impairment loss not to exceed the amount of goodwill allocated to the reporting unit.

Such early adoption did not have a material

effect on the Company’s financial statements and related disclosures.

Ending balance

November 2014, goodwill was recorded in connection with the acquisition of RFS Pharma.

evaluate indefinite-lived intangible assets and goodwill for impairment annually, as of November 30, or more frequently when events or

circumstances indicate that impairment may have occurred.

As part of the impairment evaluation, we may elect to perform an assessment

of qualitative factors.

If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived

intangible asset or the reporting unit (for goodwill) is less than its carrying value, we then would proceed with the quantitative impairment

test to compare the fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value.

value is typically estimated using an income approach based on the present value of future discounted cash flows.

The significant

estimates in the discounted cash flow model primarily include the discount rate, and rates of future revenue and expense growth

and/or profitability of the acquired assets.

In performing the impairment test, the Company considered, among other factors, the

Company’s intention for future use of acquired assets, analyses of historical financial performance and estimates of future

performance of Cocrystal’s product candidates.

December 31, 2018, the Company had goodwill of $65,195,000.

The significant estimates

in the discounted cash flow model primarily include the discount rate, and rates of future revenue and expense growth and/or profitability

of the acquired assets.

In performing the impairment test, the Company considered, among other factors, the Company’s intention

for future use of acquired assets, analyses of historical financial performance and estimates of future performance of Cocrystal’s

product candidates.

December 31, 2021, the Company had goodwill of approximately $ 19,092,000 .

The Company completed its annual impairment test in November

and at that time determined the fair value of its reporting unit, under both the Company’s Nasdaq market capitalization

and an income approach analysis;

both methods did not exceed the carrying value as of December 31, 2019;

therefore, management

considered goodwill to be impaired.

This resulted in a $46,103,000 impairment in 2019.

At December 31, 2020, the Company had goodwill

of approximately $19,092,000.

The Company completed its annual impairment test in November 2020, and at that time determined the

fair value of its reporting unit, under both the Company’s Nasdaq market capitalization and an income approach analysis;

2021, and at that time determined the fair value of its reporting unit, under both the Company’s Nasdaq market capitalization and

an income approach analysis;

both methods did exceed the carrying value as of December 31, 2021;

therefore, management did not consider goodwill to be impaired.

Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to

determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income

from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s

business objective.

Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount

over the asset’s fair value.

therefore, management did not consider

goodwill to be impaired.

Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to determine

whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

The determinants used

for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and

positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective.

an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value.

and Licensing Related Legal and Filing Costs

to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s

research efforts and related patent applications, all patent-related legal and filing fees and licensing-related legal fees are charged

to operations as incurred.

Patent and licensing-related legal and filing costs were $ 533,000 and $ 273,000 for the years ended December

31, 2021 and 2020, respectively.

Patent and licensing related legal and filing costs are included in general and administrative costs

in the Company’s consolidated statements of operations.

and Development Expenses

and development costs consist primarily of fees paid to consultants and outside service providers, and other expenses relating to the

acquisition, design, development and testing of the Company’s clinical products.

research and development costs are expensed as incurred.

Reclassifications

Company has reclassified $ 273,000 of costs previously included in research and development costs in the prior year to general and administrative

costs to conform to current year presentation.

Company recognizes revenue from research and development arrangements.

In accordance with Accounting Standards Codification (“ASC”)

Topic 606–

Revenue from Contracts with Customers (“Topic 606”), revenue is recognized when a customer

obtains control of promised goods or services.

The amount of revenue recognized reflects the consideration to which the Company

expects to be entitled to receive in exchange for these goods and services.

November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic

808 and Topic 606 .

This ASU provides guidance on whether certain transactions between collaborative arrangement participants

should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context

of a unit of account.

Accordingly, this amendment added unit of account guidance in Topic 606 when an entity is assessing whether

the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606.

In addition, the amendment provides

certain guidance on presenting the collaborative arrangement transaction together with Topic 606.

The Company adopted ASU 2018-18,

effective in the fourth quarter of 2018 with no impact on our consolidated financial statements and related footnote disclosures.

January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration

Agreement”) with Merck Sharp & Dohme Corp.

(“Merck”) to discover and develop certain proprietary influenza

A/B antiviral agents.

Under the terms of the Collaboration Agreement, Merck will fund research and development for the program,

including clinical development, and will be responsible for worldwide commercialization of any products derived from the collaboration.

During the year ended December 31, 2020 the Company recognized revenue of $1,779,000 for research and development activities related

to its influenza A/B program and $235,000 for program expense reimbursements.

During the year ended December 31, 2019 the Company

recognized revenue of $4,368,000 as consideration in exchange for conveyance of intellectual property rights at the signing of

the agreement, $1,838,000 for research and development activities related to its influenza A/B program and $358,000 for program

In accordance with Accounting Standards Codification (“ASC”)

Topic 606– Revenue from Contracts with Customers (“Topic 606”), revenue is recognized when a customer obtains

control of promised goods or services.

The amount of revenue recognized reflects the consideration to which the Company expects to be

entitled to receive in exchange for these goods and services.

January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”)

with Merck Sharp & Dohme Corp.

(“Merck”) to discover and develop certain proprietary influenza A/B antiviral agents.

Under the terms of the Collaboration Agreement, Merck will fund research and development for the program, including clinical development,

and will be responsible for worldwide commercialization of any products derived from the collaboration.

During the year ended December

31, 2021 the Company did not recognize revenue for research and development activities related to its influenza A/B program or for program

expense reimbursements.

of December 31, 2020 and 2019, accounts receivable of $556,000 and $644,000 were due from Merck, respectively.

During the year ended December 31, 2020 the Company recognized revenue of $ 2,014,000 as consideration in exchange

for conveyance of intellectual property rights at the signing of the agreement, $ 1,779,000 for research and development activities related

to its influenza A/B program and $ 235,000 for program expense reimbursements.

Company accounts for income taxes under the asset and liability method.

Under this method, deferred tax assets and liabilities

are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using

enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled.

of deferred tax assets is dependent upon future taxable income.

A valuation allowance is recognized if it is more likely than

not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including

expected future earnings.

The Company recognizes an uncertain tax position in its financial statements when it concludes that

a tax position is more likely than not to be sustained upon examination based solely on its technical merits.

Only after a tax

position passes the first step of recognition will measurement be required.

Under the measurement step, the tax benefit is measured

as the largest amount of benefit that is more likely than not to be realized upon effective settlement.

This is determined on

a cumulative probability basis.

The full impact of any change in recognition or measurement is reflected in the period in which

such change occurs.

The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense.

Company recognizes compensation expense using a fair value-based method for costs related to stock-based payments, including stock

The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing

model and is recognized as expense over the requisite service period on a straight-line basis.

of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected

term, and a risk-free interest rate.

The Company estimates volatility using a blend of its own historical stock price volatility

as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable

volatility of its own.

The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin

107’s Simplified Method for Estimate Expected Term .

The risk-free interest rate is estimated using comparable

published federal funds rates.

Under this method, deferred tax assets and liabilities are determined

based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and

laws that are expected to be in effect when the differences are expected to be recovered or settled.

Realization of deferred tax assets

is dependent upon future taxable income.

A valuation allowance is recognized if it is more likely than not that some portion or all of

a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.

recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be

sustained upon examination based solely on its technical merits.

Only after a tax position passes the first step of recognition will

measurement be required.

Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely

than not to be realized upon effective settlement.

This is determined on a cumulative probability basis.

The full impact of any change

in recognition or measurement is reflected in the period in which such change occurs.

The Company elects to accrue any interest or penalties

related to income taxes as part of its income tax expense.

Company recognizes compensation expense using a fair value-based method for costs related to stock-based payments, including stock options.

The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized

as expense over the requisite service period on a straight-line basis.

of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term,

and a risk-free interest rate.

The Company estimates volatility using a blend of its own historical stock price volatility as well as

that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility

The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No.

Simplified Method for Estimate Expected Term .

The risk-free interest rate is estimated using comparable published federal funds

Stock Purchase Warrants and Other Derivative Financial Instruments

classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement

or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our

own stock as defined in ASC 815-40, Contracts in Entity’s Own Equity .

We classify as assets or liabilities any contracts

that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event

is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement

or net-share settlement).

We assess classification of our common stock purchase warrants and other freestanding derivatives at

each reporting date to determine whether a change in classification between assets and liabilities is required.

or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock

as defined in ASC 815-40, Contracts in Entity’s Own Equity .

We classify as assets or liabilities any contracts that require

net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control)

or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

classification of our common stock purchase warrants and other freestanding derivatives at each reporting date to determine whether a

change in classification between assets and liabilities is required.

Income (Loss) per Share

Company accounts for and discloses net income (loss) per common share in accordance with FASB ASC Topic 260, Earnings Per Share .

Basic income (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted

average number of common shares outstanding.

Diluted net income (loss) per common share is computed by dividing net income (loss)

attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the

period assuming the issuance of common stock for all potential dilutive common shares outstanding.

Potential common shares consist

of shares issuable upon the exercise of stock options and warrants.

following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share

because their inclusion would be anti-dilutive (in thousands):

Basic income (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average

number of common shares outstanding.

Diluted net income (loss) per common share is computed by dividing net income (loss) attributable

to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the

issuance of common stock for all potential dilutive common shares outstanding.

Potential common shares consist of shares issuable upon

the exercise of stock options and warrants.

following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because

their inclusion would be anti-dilutive (in thousands):

Schedule of Antidilutive Securities Excluded from Calculations of Net Loss Per Share

Outstanding options to purchase common stock

1 unchanged sentence

Accounting Pronouncements

following are new FASB Accounting Standards Updates that have not been adopted by the Company as of December 31, 2020, and contain

detail regarding the effective dates:

following are new FASB Accounting Standards Updates that have not been adopted by the Company as of December 31, 2021, and contain detail

regarding the effective dates:

June 2016, the FASB issued ASU No.

2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC

The standard significantly changes how entities will measure credit losses for most financial assets, including accounts

and notes receivables.

The standard will replace today’s “incurred loss”

approach with an “expected loss”

model, under which companies will recognize allowances based on expected rather than incurred losses.

Entities will apply the

standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting

period in which the guidance is effective.

The standard is effective for interim and annual reporting periods beginning after

December 15, 2019.

The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial position,

results of operations, and cash flows.

recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified

Public Accountants, and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material

impact on the Company’s consolidated financial statements and related disclosures.

2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).

The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables.

The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies

will recognize allowances based on expected rather than incurred losses.

Entities will apply the standard’s provisions as a cumulative-effect

adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

The standard is

effective for interim and annual reporting periods beginning after December 15, 2019.

The adoption of ASU 2016-13 is not expected to

have a material impact on the Company’s financial position, results of operations, and cash flows.

August 2020, the FASB issued 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):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

(“ASU 2020-06”).

ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and

cash conversion accounting models.

Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium

or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt

and equity components.

This modification will reduce the issue discount and result in less non-cash interest expense in financial statements.

ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt

can be settled in cash or shares.

For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06

are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the

settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider

whether collateral is required to be posted, and (iii) assess shareholder rights.

ASU 2020-06 is effective for fiscal years beginning

after December 15, 2023.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if

adopted as of the beginning of such fiscal year.

The Company adopted ASU 2020-06 effective January 1, 2021.

The adoption of ASU 2020-06

did not have any impact on the Company’s consolidated financial statement presentation or disclosures.

recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public

Accountants, and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on

the Company’s consolidated financial statements and related disclosures.

Property and Equipment

and equipment as of December 31, consists of the following (table in thousands):

Schedule of Property and Equipment

Lab equipment (excluding equipment under finance leases)

5 unchanged sentences

expense was $ 190,000 and $ 157,000 for the years ended December 31, 2021 and 2020, respectively.

reconciliation of the beginning and ending goodwill for the years ended December 31, 2020 and 2019 is as follows (table in thousands):

Balance, January 1,

Impairment charges

Balance at December 31,

December 31, 2018, the Company had goodwill of $65,195,000.

On November 30, 2019 the Company performed its annual impairment test

and determined the fair value of its reporting unit, measured by the Company’s Nasdaq market capitalization and an income

approach analysis, exceeded the carrying value by $46,103,000;

therefore, management considered goodwill of that amount to be

Based on management’s impairment test at November 30, 2020, there were no further indicators of impairment.

December 31, 2021 and 2020, the Company had goodwill of $ 19,092,000 .

The Company performs an annual impairment test on November 30 th

to determine the fair value of its reporting unit, measured by the Company’s Nasdaq market capitalization and an income approach

Based on management’s impairment test at November 30, 2021, there was no impairment of goodwill.

Accounts Payable and Accrued Expenses

payable and accrued expenses consisted of the following as of December 31, (table in thousands):

Schedule of Accounts Payable and Accrued Expenses

Accounts payable

2 unchanged sentences

Total accounts payable and accrued expenses

payable and accrued other expenses contain unpaid general and administrative expenses and costs related to research and development

that have been billed and estimated unbilled, respectively, as of year-end.

payable and accrued other expenses contain unpaid general and administrative expenses and costs related to research and development that

have been billed and estimated unbilled, respectively, as of year-end.

of December 31, 2021, the Company has authorized 150,000,000 shares of common stock, $ 0.001 par value per share.

The Company had

approximately 70,439,000 and 35,150,000 shares issued and outstanding as of December 31, 2020 and 2019, respectively.

The Company had approximately

97,469,000 and 70,439,000 shares issued and outstanding as of December 31, 2021 and 2020, respectively.

holders of common stock are entitled to one vote for each share of common stock held .

January, March and November 2019, the Company closed a series of placements of its common stock resulting in the sale of 5,211,695

shares of its common stock for net proceeds after transaction costs of approximately $6,638,422.

January 29, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which

the Company agreed to sell and issue, in a registered direct offering, 3,492,063 of the Company’s shares of common stock,

par value $0.001 at a purchase price per share of $0.63 for aggregate net proceeds to the Company of approximately $1.5 million,

after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company.

closed the offering on January 31, 2020.

February 27, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to

which the Company agreed to sell and issue, in a registered direct offering, 8,461,540 of the Company’s shares of common

stock, par value $0.001 at a purchase price per share of $1.30 for aggregate net proceeds to the Company of approximately $10.1

million, after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company.

Company closed the offering on February 28, 2020.

March 9, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which

the Company agreed to sell and issue, in a registered direct offering, 5,037,038 of the Company’s shares of common stock,

par value $0.001 at a purchase price per share of $1.35 for aggregate net proceeds to the Company of approximately $5.0 million,

before after fees payable to the placement agent and other estimated offering expenses payable by the Company.

The Company closed

the offering on March 10, 2020.

July 1, 2020, the Company entered into an At-The-Market Offering Agreement (“ATM”) with H.C.

Wainwright & Co.,

LLC (“Wainwright”), pursuant to which the Company may issue and sell over time and from time to time, to or through

Wainwright, up to $10,000,000 of shares of the Company’s common stock.

August 31, 2020, the Company closed an underwritten public offering of its common stock totaling 16,422,813 shares at public offering

price of $1.05 per share sold to Wainwright for net proceeds of approximately $15.6 million, after deducting underwriting discounts

and commissions and offering expenses payable by the Company.

The 16,422,813 shares of common stock sold in the offering includes

2,137,098 shares pursuant to Wainwright’s partial exercise of its over-allotment option to purchase additional shares of

common stock, pursuant to the Amended and Restated Underwriting Agreement, dated as of August 26, 2020, between the Company and

November 2020, we sold 1,875,243 shares of common stock under the ATM and received net proceeds of approximately $3,621,000 and

in January 2021, we sold 1,030,000 shares of common stock under the ATM and received net proceeds of approximately $2,072,000.

January, February, March, August and November 2020, the Company closed a series of placements of its common stock resulting in the sale

of 35,288,697 shares of its common stock for net proceeds after transaction costs of approximately $ 35.8 million.

Company was a party to the At-The-Market Offering Agreement, dated July 1, 2020 (“ATM Agreement”) with H.C.

Co., LLC (“Wainwright”), pursuant to which the Company may issue and sell over time and from time to time, to or through

Wainwright, up to $ 10,000,000

of shares of the Company’s

common stock.

During January 2021, the Company sold

shares of its common stock pursuant to the ATM

Agreement for net proceeds of approximately $ 2,072,000 .

There were no sales under the ATM Agreement during the remainder of 2021.

May 4, 2021, the Company entered into an underwriting agreement with H.C.

Wainwright & Co., LLC, pursuant to which the Company agreed

to issue and sell 26,000,000 shares of the Company’s common stock at a public offering price of $ 1.54 per share, less underwriting

discounts and commissions (the “Offering”).

The Company received approximately $ 36.4 million in net proceeds from the Offering,

after deducting underwriting discounts and estimated offering expenses.

The Offering closed on May 7, 2021.

Stock Based Awards

Incentive Plans

Company adopted an equity incentive plan in 2007 (the “2007 Plan”) under which 1,786,635 shares of common stock have

Company adopted an equity incentive plan in 2007 (the “2007 Plan”) under which 1,786,635 shares of common stock have been

reserved for issuance to employees and nonemployee directors and consultants of the Company.

Recipients of incentive stock options granted

under the 2007 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than

the fair market value of such stock on the date of grant.

The maximum term of options granted under the 2007 Plan is ten years .

generally vest 25% after one year, with the remaining balance vesting monthly over the following three years .

As of December 31, 2021,

all future options available under the 2007 plan have expired and no options remain available for future grant under this plan.

Company adopted a second equity incentive plan in 2015 (the “2015 Plan”) under which 1,666,667 shares of common stock have

been reserved for issuance to employees, and nonemployee directors and consultants of the Company.

Recipients of incentive stock

options granted under the 2007 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price

equal to no less than the fair market value of such stock on the date of grant.

The maximum term of options granted under the

2007 Plan is ten years.

The options generally vest 25% after one year, with the remaining balance vesting monthly over the following

As of December 31, 2020, all future options available under the 2007 plan have expired and no options remain available

for future grant under this plan.

Company adopted a second equity incentive plan in 2015 (the “2015 Plan”) under which 1,666,667 shares of common stock

have been reserved for issuance to employees, and nonemployee directors and consultants of the Company.

Recipients of incentive

stock options granted under the 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise

price equal to no less than the estimated fair market value of such stock on the date of grant.

The maximum term of options granted

under the 2015 Plan is ten years.

The options generally vest 25% after one year, with the remaining balance vesting monthly over

the following three years.

As of December 31, 2020, 2,262,736 options remain available for future grant under the 2015 Plan.

Recipients of incentive stock options

granted under the 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no

less than the estimated fair market value of such stock on the date of grant.

The maximum term of options granted under the 2015 Plan

is ten years .

The options generally vest 25% after one year, with the remaining balance vesting monthly over the following three years .

As of December 31, 2021, approximately 7.5 million options remain available for future grant under the 2015 Plan.

following table summarizes stock option transactions for the 2007 Plan and 2015 Plan, collectively, for the year ended December 31, 2021

and 2020 (table in thousands, except per share amounts):

of Share-based Compensation, Stock Options, Activity

Balance at December 31, 2019

Balance at December 31, 2020

Increase in authorized options

Balance at December 31, 2021

the year ended December 31, 2020 the Company granted stock options to officers, directors, employees and consultants to purchase

a total of 928,000 shares of common stock.

The options have an exercise price of $1.33 per share, expire in ten years, and vest

one half vests on the one-year anniversary of the grant date and the remainder will vest in eight equal quarterly

increments with the first such quarterly increment vesting on September 30, 2021.

The total fair value of these options at the

grant date was approximately $944,000 using the Black-Scholes Option pricing model.

The Company did not grant any stock options

during the year ended December 31, 2019.

The Black-Scholes option pricing model includes the following weighted average assumptions

for grants made during the year ended December 31, 2020:

the year ended December 31, 2021 the Company granted stock options to officers, directors, employees and consultants to purchase a total

of 1,037,000 shares of common stock.

The options have an exercise price of $ 1.11 per share, expire in ten years , and vest as follows:

one half vests on the one-year anniversary of the grant date and the remainder will vest in eight equal quarterly increments with the

first such quarterly increment vesting on September 30, 2021 .

The total fair value of these options at the grant date was approximately

$ 965,000 using the Black-Scholes Option pricing model.

The Black-Scholes option pricing model includes the following weighted average

assumptions for grants made during the year ended December 31, 2021:

of Weighted Average Assumptions Used for Grants

Weighted average per share grant date fair value

3 unchanged sentences

Expected terms (in years)

Company accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions

of ASC 718, Compensation—Stock Compensation.

, and under the recently issued guidance following FASB’s pronouncement,

ASU 2018-07, Compensation—Stock Compensation (Topic 718):

the year ended December 31, 2020 the Company granted stock options to officers, directors, employees and consultants to purchase a total

of 928,000 shares of common stock.

The options have an exercise price of $ 1.33 per share, expire in ten years , and vest as follows:

half vests on the one-year anniversary of the grant date and the remainder will vest in eight equal quarterly increments with the first

such quarterly increment vesting on September 30, 2021 .

The total fair value of these options at the grant date was approximately $ 944,000

using the Black-Scholes Option pricing model.

The Company did not grant any stock options during the year ended December 31, 2019.

Black-Scholes option pricing model includes the following weighted average assumptions for grants made during the year ended December

Weighted average per share grant date fair value

Risk-free interest rate

Expected dividend yield

Expected volatility

Expected terms (in years)

Company accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions of ASC

718, Compensation—Stock Compensation.

, and under the recently issued guidance following FASB’s pronouncement, ASU

2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair

value is recognized over the requisite service, or vesting, period.

The Company values its equity awards using the Black-Scholes

option pricing model, and accounts for forfeitures when they occur.

For the years ended December 31, 2020 and 2019, equity-based

compensation expense recorded was $662,000 and $351,000, respectively.

of December 31, 2020, there was $1,426,000 of total unrecognized compensation expense related to non-vested stock options that

is expected to be recognized over a weighted average period of 2.11 years.

For options granted and outstanding, there were 1,779,399

options outstanding which were fully vested or expected to vest, with an aggregate intrinsic value of $29,040, a weighted average

exercise price of $2.53, and weighted average remaining contractual term of 8.33 years at December 31, 2020.

For vested and exercisable

options, outstanding shares totaled 541,811, with an aggregate intrinsic value of $453.

These options had a weighted-average exercise

price of $4.38 per share and a weighted-average remaining contractual term of 6.76 years at December 31, 2020.

aggregate intrinsic value of outstanding and exercisable options at December 31, 2020 was calculated based on the closing price

of the Company’s common stock as reported on the Nasdaq Capital Market on December 31, 2020 of approximately $1.36 per share

less the exercise price of the options.

The aggregate intrinsic value is calculated based on the positive difference between the

closing fair market value of the Company’s common stock and the exercise price of the underlying options.

ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized

over the requisite service, or vesting, period.

The Company values its equity awards using the Black-Scholes option pricing model, and

accounts for forfeitures when they occur.

For the years ended December 31, 2021 and 2020, equity-based compensation expense recorded

was $ 724,00 and $ 662,000 , respectively.

of December 31, 2021, there was $ 1,292,000 of total unrecognized compensation expense related to non-vested stock options that is expected

to be recognized over a weighted average period of 9.1 years.

For options granted and outstanding, there were 2,473,000 options outstanding

which were fully vested or expected to vest, with an aggregate intrinsic value of $ 0.00 , a weighted average exercise price of $ 1.98 ,

and weighted average remaining contractual term of 8.0 years at December 31, 2021.

For vested and exercisable options, outstanding shares

totaled 984,000 , with an aggregate intrinsic value of $ 0.00 .

These options had a weighted-average exercise price of $ 3.05 per share and

a weighted-average remaining contractual term of 6.4 years at December 31, 2021.

aggregate intrinsic value of outstanding and exercisable options at December 31, 2021 was calculated based on the closing price of the

Company’s common stock as reported on the Nasdaq Capital Market on December 31, 2021 of approximately $ 0.65 per share less the

exercise price of the options.

The aggregate intrinsic value is calculated based on the positive difference between the closing fair

market value of the Company’s common stock and the exercise price of the underlying options.

Stock Reserved for Future Issuance

following table presents information concerning common stock available for future issuance as of December 31, (in thousands):

of Common Stock Reserved for Future Issuance

Stock options issued and outstanding

1 unchanged sentence

Warrants outstanding

following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the

years ended December 31, 2020 and 2019 (table in thousands):

following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the years ended

December 31, 2021 and 2020 (table in thousands):

of Warrant Activity

Warrants Accounted for as:

4 unchanged sentences

Expiration date

October 27, 2022

October 24, 2023

January 16, 2024

consist of equity-classified warrants and warrants with the potential to be settled in cash, which are liability-classified warrants.

As of December 31, 2020, and 2019, 159,000 warrants are accounted for as liabilities and 84,000 warrants are accounted for as

As of December 31, 2021, and 2020, 159,000 warrants are accounted for as liabilities and 84,000 warrants are accounted for as equity.

Classified as Equity

Equity-classified

warrants consist of stand-alone warrants with rights to buy shares of the Company at a pre-designated price on or before the date

of expiration, irrespective of the market price.

These purchase warrants are not attached to any debt or equity instruments, thus

considered freestanding, and there are no circumstances under ASC 815 that require the warrants to be classified as liabilities

or as derivatives.

Thus, our May 2018 warrants will be classified as equity, and their value will be carried in the additional

paid-in capital account in the stockholders’

warrants consist of stand-alone warrants with rights to buy shares of the Company at a pre-designated price on or before the date of

expiration, irrespective of the market price.

These purchase warrants are not attached to any debt or equity instruments, thus considered

freestanding, and there are no circumstances under ASC 815 that require the warrants to be classified as liabilities or as derivatives.

Thus, our May 2018 warrants are classified as equity, and their value are carried in the additional paid-in capital account in the stockholders’

equity section of the balance sheet.

warrants were granted to the underwriters and investment brokers for services provided related to the Company’s May 2018

equity financing, and collectively grant the right to buy 84,211 shares of our stock at $2.09 per share for up to four years until

expiration from the commencement date of October 27, 2018.

warrants were granted to the underwriters and investment brokers for services provided related to the Company’s May 2018 equity

financing, and collectively grant the right to buy 84,211 shares of our stock at $ 2.09 per share for up to four years until expiration

from the commencement date of October 27, 2018.

Classified as Liabilities

Liability-classified

warrants consist of warrants issued by Biozone in connection with equity financings in October 2013 and January 2014, which were

assumed by the Company in connection with its merger with Biozone in January 2014.

Warrants accounted for as liabilities have

the potential to be settled in cash or are not indexed to the Company’s own stock.

warrants consist of warrants issued by Biozone in connection with equity financings in October 2013 and January 2014, which were assumed

by the Company in connection with its merger with Biozone in January 2014.

Warrants accounted for as liabilities have the potential to

be settled in cash or are not indexed to the Company’s own stock.

estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date.

or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated

statement of operations as changes in fair value of derivative liabilities.

The fair value of the warrants classified as liabilities

is estimated using the Black-Scholes option-pricing model with the following inputs as of December 31, 2020:

Any decrease or increase

in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement

of operations as changes in fair value of derivative liabilities.

The fair value of the warrants classified as liabilities is estimated

using the Black-Scholes option-pricing model with the following inputs as of December 31, 2021:

of Fair Value of Warrants Classified as Liabilities

Expected dividend yield

2 unchanged sentences

Risk-free rate

fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following

inputs as of December 31, 2019:

Fair value (in thousands)

fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs

as of December 31, 2020:

Expected dividend yield

2 unchanged sentences

Risk-free rate

Company estimates volatility using its own historical stock price volatility based upon the range of periods consistent with

the expected life of the warrants.

Fair value (in thousands)

Company estimates volatility using its own historical stock price volatility based upon the range of periods consistent with the expected

life of the warrants.

The expected life assumption is based on the remaining contractual terms of the warrants.

The risk-free rate is based on the zero coupon rates in effect at the balance sheet date.

The dividend yield used in the pricing

model is zero, because the Company has no present intention to pay cash dividends.

The risk-free rate is

based on the zero coupon rates in effect at the balance sheet date.

The dividend yield used in the pricing model is zero, because the

Company has no present intention to pay cash dividends.

Licenses and Collaborations

Sharp & Dohme Corp.

January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration

Agreement”) with Merck Sharp & Dohme Corp.

(“Merck”) to discover and develop certain proprietary influenza

A/B antiviral agents.

Under the terms of the Collaboration Agreement, Merck will fund research and development for the program,

including clinical development, and will be responsible for worldwide commercialization of any products derived from the collaboration.

Cocrystal received an upfront payment of $4 million and is eligible to receive payments related to designated development, regulatory

and sales milestones with the potential to earn up to $156,000,000, as well as royalties on product sales.

Merck can terminate

the Collaboration Agreement at any time prior to the first commercial sale of the first product developed under the Collaboration

Agreement, in its sole discretion, without cause.

January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”)

with Merck Sharp & Dohme Corp.

(“Merck”) to discover and develop certain proprietary influenza A/B antiviral agents.

Under the terms of the Collaboration Agreement, Merck will fund research and development for the program, including clinical development,

and will be responsible for worldwide commercialization of any products derived from the collaboration.

Cocrystal received an upfront

payment of $ 4 million and is eligible to receive payments related to designated development, regulatory and sales milestones with the

potential to earn up to $ 156,000,000 , as well as royalties on product sales.

Merck can terminate the Collaboration Agreement at any time

prior to the first commercial sale of the first product developed under the Collaboration Agreement, in its sole discretion, without

The Company continues working with Merck under this Collaboration Agreement.

4 unchanged sentences

February 18, 2020, Cocrystal Pharma, Inc.

(the “Company”) entered into a License Agreement (the “Agreement”)

with Kansas State University Research Foundation (the “Foundation”) effective February 12, 2020.

to the terms of the Agreement, the Foundation granted the Company an exclusive for human use a royalty bearing license to practice

under certain patent rights, including a patent and a patent application covering antiviral compounds against coronaviruses and

norovirus, and related know-how, to make and sell therapeutic, diagnostic and prophylactic products.

(the “Company”) entered into a License Agreement (the “Agreement”)

with Kansas State University Research Foundation (the “Foundation”) effective February 12, 2020.

to the terms of the Agreement, the Foundation granted the Company an exclusive for human use a royalty bearing license to practice under

certain patent rights, including a patent and a patent application covering antiviral compounds against coronaviruses and norovirus,

and related know-how, to make and sell therapeutic, diagnostic and prophylactic products.

Company agreed to pay the Foundation a one-time non-refundable license initiation fee in the amount of $ 80,000 and an annual license

maintenance fee in the amount of $20,000 per year and agreed to reimburse the Foundation for third party expenses associated with

the filing, prosecution, and maintenance of the patent rights in question.

The Company also agreed to make certain future milestone

payments up to $3.1 million, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial

sales in the United States and certain countries outside the United States.

maintenance fee in the amount of $ 20,000 per year and agreed to reimburse the Foundation for third party expenses associated with the

filing, prosecution, and maintenance of the patent rights in question.

The Company also agreed to make certain future milestone payments

up to $ 3.1 million, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial sales in the United

States and certain countries outside the United States.

April 17, 2020, the Company entered into an Agreement with Foundation effective April 1, 2020.

Pursuant to the terms of the Agreement,

the Foundation granted the Company an exclusive for human use a royalty bearing license to practice under certain patent rights,

including a patent and a patent application covering antiviral compounds against coronaviruses and norovirus, and related know-how,

to make and sell therapeutic, diagnostic and prophylactic products.

Company agreed to pay the Foundation a one-time non-refundable license initiation fee in the amount of $110,000 and an annual

license maintenance fee in the amount of $20,000 per year for the first seven (7) years and $50,000 per year thereafter and agreed

to reimburse the Foundation for third party expenses associated with the filing, prosecution and maintenance of the patent rights

The Company also agreed to make certain future milestone payments up to $4,150,000, dependent upon the progress of

clinical trials, regulatory approvals, and initiation of commercial sales in the United States and certain countries outside the

United States.

As of December 31, 2020 no milestone payments were due under the agreement.

Agreement will remain in effect until the expiration of the patent rights covered by the Agreement, unless earlier terminated

pursuant to customary terms.

accordance with the authoritative guidance for income taxes under ASC 740, a deferred tax asset or liability is determined based

on the difference between the financial statement and the tax basis of assets and liabilities as measured by the enacted tax rates,

which will be in effect when these differences reverse.

The Company provides a valuation allowance against net deferred tax assets

unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Company recognizes the impact of a tax position in the consolidated financial statements only if that position is more likely

than not of being sustained upon examination by taxing authorities, based on the technical merits of the position.

The Company’s

practice is to recognize interest and/or penalties related to income tax matters as income tax expense.

Company is subject to taxation and files income tax returns in the United States and various state jurisdictions.

All tax years

from inception to date are subject to examination by the U.S.

the Foundation granted the Company an exclusive for human use a royalty bearing license to practice under certain patent rights, including

a patent and a patent application covering antiviral compounds against coronaviruses and norovirus, and related know-how, to make and

sell therapeutic, diagnostic and prophylactic products.

Company agreed to pay the Foundation a one-time non-refundable license initiation fee in the amount of $ 110,000 and an annual license

maintenance fee in the amount of $ 20,000 per year for the first seven (7) years and $ 50,000 per year thereafter and agreed to reimburse

the Foundation for third party expenses associated with the filing, prosecution and maintenance of the patent rights in question.

Company also agreed to make certain future milestone payments up to $ 4,150,000 , dependent upon the progress of clinical trials, regulatory

approvals, and initiation of commercial sales in the United States and certain countries outside the United States.

As of December 31,

2021 no milestone payments were due under the agreement.

Agreement will remain in effect until the expiration of the patent rights covered by the Agreement, unless earlier terminated pursuant

to customary terms.

accordance with the authoritative guidance for income taxes under ASC 740, a deferred tax asset or liability is determined based on the

difference between the financial statement and the tax basis of assets and liabilities as measured by the enacted tax rates, which will

be in effect when these differences reverse.

The Company provides a valuation allowance against net deferred tax assets unless, based

upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Company recognizes the impact of a tax position in the consolidated financial statements only if that position is more likely than not

of being sustained upon examination by taxing authorities, based on the technical merits of the position.

The Company’s practice

is to recognize interest and/or penalties related to income tax matters as income tax expense.

Company is subject to taxation and files income tax returns in the United States, Australia and various state jurisdictions.

years from inception to date are subject to examination by the U.S.

and state tax authorities due to the carry-forward of unutilized

1 unchanged sentence

Currently, no years are under examination.

components of the Company’s deferred income taxes at December 31, 2020 and 2019 are shown below (table in thousands):

components of the Company’s deferred income taxes at December 31, 2021 and 2020 are shown below (table in thousands):

of Deferred Tax Assets and Liabilities

Deferred tax assets:

8 unchanged sentences

Deferred tax liability, net

Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be

Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized.

The Company periodically evaluates the recoverability of the deferred tax assets.

At such time as it is determined that

it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced.

March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy

and fund a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response

to the COVID-19 pandemic, some of the more significant provisions are the extension of the carryback period of certain losses

to five years, and increasing the ability to deduct interest expense from 30 percent to 50 percent of modified taxable income.

The CARES Act also provides for a credit against employee wages, the opportunity to defer payment of a portion of federal payroll

taxes to December 2021 and December 2022 and enhanced small business loans to assist business impacted by the pandemic.

The Company’s

tax provision and financial position was not materially impacted by the CARES Act.

At such time as it is determined that it is more likely

than not that deferred tax assets will be realizable, the valuation allowance will be reduced.

March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund

a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response to the COVID-19

pandemic, some of the more significant provisions are the extension of the carryback period of certain losses to five years, and increasing

the ability to deduct interest expense from 30 percent to 50 percent of modified taxable income.

The CARES Act also provides for a credit

against employee wages, the opportunity to defer payment of a portion of federal payroll taxes to December 2021 and December 2022 and

enhanced small business loans to assist business impacted by the pandemic.

The Company’s tax provision and financial position was

not materially impacted by the CARES Act.

December 27, 2020, the United States enacted the Consolidated Appropriations Act which extended and modified many of the tax related

provisions of the CARES Act.

The Company does not anticipate a material impact of the Consolidated Appropriations Act on its tax

provision or financial position.

December 31, 2020, the Company has federal and state net operating losses (“NOL”) carryforwards of approximately $80,700,000

and $2,000,000, respectively.

The federal and Florida NOL generated after 2017 of $19,100,000 and $2,000,000, respectively, will

The Company does not anticipate a material impact of the Consolidated Appropriations Act on its tax provision

or financial position.

December 31, 2021, the Company has federal and state net operating losses (“NOL”) carryforwards of approximately $ 93.2 million

and $ 4.4 million, respectively.

The federal and Florida NOL generated after 2017 of $ 31.6 million and $ 4.4 million, respectively, will

carryforward indefinitely.

Under the CARES Act, the Internal Revenue Code was amended to allow for federal NOL carrybacks for

five years to offset previous income, or can be carried forward indefinitely to offset 100% of the taxable income for the tax

year 2020 and 80% of the taxable income for the tax years 2021 and thereafter.

Under the CARES Act, the Internal Revenue Code was amended to allow for federal NOL carrybacks for five years

to offset previous income, or can be carried forward indefinitely to offset 100% of the taxable income for the tax year 2020 and 80%

of the taxable income for the tax years 2021 and thereafter .

The federal NOL carryforwards begin to expire in 2026

December 31, 2020, the Company had federal and state capital loss carryforwards of approximately $2,200,000 that expire in 2028.

December 31, 2020, the Company had federal and state capital loss carryforwards of approximately $1,070,000 that expire in 2023.

above NOL carryforward and the research tax credit carryforward may be subject to an annual limitation under the Section 382 and

383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes,

which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax,

respectively.

In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership

of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

The Company has not completed an IRC Section 382/382 analysis.

If a change in ownership were to have occurred, NOL and tax credits

carryforwards could be eliminated or restricted.

If eliminated, the related asset would be removed from the deferred tax asset

schedule with a corresponding reduction in the valuation allowance.

reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

December 31, 2021, the Company had federal research credit carryforwards of approximately $ 2.4 million that expire in 2028.

December 31, 2021, the Company had federal and state capital loss carryforwards of approximately $ 1.07 million that expire in 2023.

above NOL carryforward and the research tax credit carryforward are subject to an annual limitation under the Section 382 and 383 of

the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes, which would

limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively.

an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public

groups in the stock of the corporation by more than 50 percentage points over a three-year period.

The Company has not completed an IRC

Section 382/382 analysis.

If a change in ownership were to have occurred, NOL and tax credits carryforwards could be eliminated or restricted.

If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation

reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

of Reconciliation of Federal Statutory Income Tax Rate

Statutory federal income tax rate

4 unchanged sentences

Lease Commitments

Company leases office space in Miami, Florida and laboratory space in Bothell, Washington under operating leases that expire on

August 31, 2021 and January 31, 2024, respectively.

Company leases office space in Miami, Florida and laboratory space in Bothell, Washington under operating leases that expire on August

31, 2024 and January 31, 2024 , respectively.

The lease for our Miami office is with a related party (see below).

lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of

lease payments over the lease term.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities

represent our obligation to make lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements

is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease

The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit

rating would be.

The operating lease ROU asset includes any lease payments made and excludes lease incentives.

to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases.

Effective January 1, 2019, the Company

adopted the guidance of ASC 842, Leases (“ASC 842”), which requires an entity to recognize a right-of-use asset and

a lease liability for certain leases.

The Company adopted ASC 842 using a modified retrospective approach.

As a result, the comparative

financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and

continue to be reported under the accounting standards in effect for those periods.

The adoption of ASC 842 on January 1, 2019,

resulted in the recognition of operating lease right-of-use assets of $833,000 and corresponding lease liabilities of approximately

the same amount.

There was no cumulative-effect adjustment to accumulated deficit.

As of December 31, 2020, the unamortized right

of use asset was $498,000 and total lease liabilities were $523,000, of which $178,000 was current.

lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease

payments over the lease term.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent

our obligation to make lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements is not readily

determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments.

The Company’s

incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be.

The operating lease

ROU asset includes any lease payments made and excludes lease incentives.

components of rent expense and supplemental cash flow information related to leases for the period are as follows (tables in thousands):

December 31, 2020

Operating lease cost (included in operating expenses in the Company’s consolidated statement of operations)

of Components of Rent Expense and Supplemental Cash Flow Information

Operating lease cost (included in operating expenses in the Company’s consolidated statement of operations)

Other Information

Cash paid for amounts included in the measurement of lease liabilities

Weighted average remaining lease term –

operating leases (in years)

Average discount rate –

operating leases

Weighted average remaining lease term – operating leases (in years)

Average discount rate – operating leases

supplemental balance sheet information related to leases for the period is as follows (tables in thousands):

of Supplemental Balance Sheet Information

At December 31,

5 unchanged sentences

Total operating lease liabilities

of Maturities of Lease Liabilities

Year ending December 31,

4 unchanged sentences

Total operating lease liabilities

minimum lease payments above do not include common area maintenance (CAM) charges, which are contractual obligations under the

Company’s Bothell, Washington lease, but are not fixed and can fluctuate from year to year.

CAM charges for the Bothell,

Washington facility are calculated and billed based on total common expenses for the building incurred by the lessor and apportioned

to tenants based on square footage.

In 2020 and 2019, approximately $74,000 and $86,000 of CAM charges for the Bothell, Washington

lease were included in operating expenses in the consolidated statements of operations, respectively.

minimum lease payments above do not include common area maintenance (CAM) charges, which are contractual obligations under the Company’s

Bothell, Washington lease, but are not fixed and can fluctuate from year to year.

CAM charges for the Bothell, Washington facility are

calculated and billed based on total common expenses for the building incurred by the lessor and apportioned to tenants based on square

In 2021 and 2020, approximately $ 75,000 and $ 74,000 of CAM charges for the Bothell, Washington lease were included in operating

expenses in the consolidated statements of operations, respectively.

September 1, 2018, the Company entered into a lease agreement with a limited liability company controlled by Dr.

Phillip Frost,

a director, and a principal shareholder of the Company for the lease of its Miami office (see Note 16 –

Transactions with

Related Parties).

The lease term is three years with an optional three-year extension.

Monthly lease payments under this lease

total $155,000 through September 2021.

The minimum lease payments above include taxes and fees, which are expected to be approximately

$9,000 annually.

As of December 31, 2020, the remaining right of use asset relating to this lease was $39,000 and the remaining

lease obligation was $39,000.

Phillip Frost, a director,

and a principal shareholder of the Company for the lease of its Miami office (see Note 13 – Transactions with Related Parties).

On September 1, 2021, the Company extended this lease agreement into additional three -year with

m onthly lease payments under this lease total $ 186,000 through September 2024.

The minimum lease payments above include taxes

and fees, which are expected to be approximately $ 9,000 annually.

As of December 31, 2021, the remaining right of use asset relating

to this lease was $ 154,000 and the remaining lease obligation was $ 154,000 .

expense, excluding capital leases and CAM charges, for 2021 and 2020 totaled $ 230,000 and $ 228,000 , respectively.

November 2018, the Company entered into two lease agreements to acquire equipment with 18 monthly payments of $18,000 payable

through May 27, 2020 and 36 monthly payments of $1,000 payable through November 21, 2021.

The lease agreements have an effective

interest rate of 8.00%.

November 2018, the Company entered into two lease agreements to acquire equipment with 18 monthly payments of $ 18,000 payable through

May 27, 2020 and 36 monthly payments of $ 1,000 payable through November 21, 2021.

The lease agreements have an effective interest rate

minimum finance lease payments, by year and in aggregate, are as follows:

of Maturities of Finance Lease

Year ending December 31,

5 unchanged sentences

recognized, net, under finance leases was $ 194,000 and $ 143,000 as of December 31, 2021, respectively.

Total assets and accumulated

depreciation recognized, net, under finance leases was $347,000 and $75,000 as of December 31, 2019.

Total assets and accumulated depreciation

recognized, net, under finance leases was $ 92,000 and $ 119,000 as of December 31, 2020.

Commitments and Contingencies

1 unchanged sentence

time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business.

As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending,

against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or

financial position.

September 20, 2018, Anthony Pepe, individually and on behalf of a class, filed with the United States District Court for the District

of New Jersey a complaint against the Company, certain current and former executive officers and directors of the Company and

the other defendants named therein for violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

class consists of the persons and entities who purchased the Company’s common stock during the period from September 23,

2013 through September 7, 2018.

Pepe also alleges violation of other sections of the Exchange Act by the defendants named in the

complaint other than the Company.

Pepe seeks damages, pre-judgment and post-judgment interest, reasonable attorneys’

expert fees and other costs.

January 16, 2019, Ms.

Susan Church, a stockholder of the Company, filed with the United States District Court for the Western

District of Washington a derivative suit against certain current and former executive officers and directors of the Company alleging

breach of fiduciary duties, unjust enrichment, waste of corporate assets, and violations of the rules governing proxy solicitation.

Church seeks, among other things, money damages, disgorgement of profits from alleged wrongful conduct, including cash bonuses,

pre-judgment and post-judgment interest, reasonable attorneys’

fees, expert fees and other costs.

December 16, 2020, the United States District Court for the District of New Jersey approved the terms of the settlement of the

above class action, the derivative action discussed above, and two related derivative actions.

The Company paid $450,000 for its

share of the total class action settlement.

As for the settlement of the derivative lawsuits, on February 14, 2021, the Board

of Directors of the Company approved certain corporate governance changes that the Company agreed to make pursuant to the terms

of the settlement, including an amendment to its Bylaws.

the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which,

if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.

Insurance Underwriters Inc.

filed suit against us in federal court in Delaware seeking a declaratory judgment that there was no

insurance coverage for any settlement, judgment, or defense costs in the class and derivative litigation, that the monies totaling

approximately $1 million it paid to the Company in connection with the SEC investigation were not covered by insurance, and for

recoupment of the monies already paid.

We have retained counsel to defend us which has filed an answer to the complaint denying

its material allegations, as well as a counterclaim against Liberty for breach of contract, declaratory judgment, bad faith and

violation of the Washington State Consumer Protection Act, alleging among other things that Liberty wrongfully denied the Company’s

claims for coverage of the class and derivative litigations, and seeking money damages.

filed suit against us in federal court in Delaware seeking a declaratory judgment that there was no insurance

coverage for any settlement, judgment, or defense costs in the class and derivative litigation, that the monies totaling approximately

million it paid to the Company in connection

with the SEC investigation were not covered by insurance, and for recoupment of the monies already paid.

We have retained counsel to

defend us which has filed an answer to the complaint denying its material allegations, as well as a counterclaim against Liberty for

breach of contract, declaratory judgment, bad faith and violation of the Washington State Consumer Protection Act, alleging among other

things that Liberty wrongfully denied the Company’s claims for coverage of the class and derivative litigations, and seeking money

Liberty Insurance Underwriters, Inc.

filed suit against us in federal court in Delaware seeking a declaratory judgement that

there was no insurance coverage for any settlement, judgement, or defense costs in the class and derivative litigation, the monies totaling

approximately $ 1 million it paid to the Company in connection with the SEC request for information in an investigation was not covered

by insurance, and for the recoupment of the monies already paid.

The case has been set for trial in July, 2022.

November 2017, Lee Pederson, a former Biozone lawyer, filed a lawsuit in the U.S.

District Court in Minnesota against co-defendants

the Company, Dr.

District Court in Minnesota against co-defendants the

Phillip Frost, OPKO Health, Inc.

and Brian Keller alleging that defendants engaged in wrongful conduct related

to Biozone, including causing Biozone to enter into an allegedly improper licensing agreement and engaged in alleged market manipulation

(“Pederson I”).

On September 13, 2018, the United States District Court granted the Company and its co-defendants’

motion to dismiss Pederson’s amended complaint in Pederson I for lack of personal jurisdiction in Minnesota.

11, 2018, Pederson filed a notice of appeal with the United States Court of Appeals for the Eighth Circuit.

The plaintiff’s

appeal was denied and the dismissal of Pederson I affirmed in March 2020.

Meanwhile, in July 2019, Lee Pederson had filed another

lawsuit in the U.S.

District Court in Minnesota against co-defendants the Company, Dr.

Frost, and Daniel Fisher (“Pederson

In his complaint in Pederson II, Pederson alleges tortious interference by the Company and Dr.

Frost with an alleged

collaboration agreement between Mr.

and Brian Keller alleging that defendants engaged in wrongful conduct related to Biozone,

including causing Biozone to enter into an allegedly improper licensing agreement and engaged in alleged market manipulation (“Pederson

On September 13, 2018, the United States District Court granted the Company and its co-defendants’ motion to dismiss

Pederson’s amended complaint in Pederson I for lack of personal jurisdiction in Minnesota.

On October 11, 2018, Pederson filed

a notice of appeal with the United States Court of Appeals for the Eighth Circuit.

The plaintiff’s appeal was denied and the dismissal

of Pederson I affirmed in March 2020.

Meanwhile, in July 2019, Lee Pederson had filed another lawsuit in the U.S.

District Court in Minnesota

against co-defendants the Company, Dr.

Frost, and Daniel Fisher (“Pederson II”).

In his complaint in Pederson II, Pederson

alleges tortious interference by the Company and Dr.

Frost with an alleged collaboration agreement between Mr.

Pederson and Mr.

1 unchanged sentence

Pederson seeks damages in the amount of $ 800,000

or such other amount as may be determined at trial.

Pederson II had previously been stayed by the court, pending disposition of

With that first lawsuit having been dismissed and appeal denied, the stay was lifted in Pederson II, and the Company

and all other defendants in that case filed Motions to Dismiss the (then amended) complaint.

On November 19, 2020 the Magistrate

Judge recommended dismissal of Pederson II, and further recommended that Pederson be restricted from filing any other actions

in the District of Minnesota against defendants on the same or similar allegations as those in Pederson II, and on January 4,

2021 the District Court Judge adopted those recommendations and ordered dismissal of Pederson II.

On February 1, 2021 Pederson

filed a Notice of Appeal from the order of dismissal of Pederson II in the Eighth Circuit, and that appeal remains pending.

May 19, 2020, A.G.P./Alliance Global Partners (“AGP”), which had previously acted as the Company’s underwriter,

placement agent and sales agent in connection with the Company’s registered and exempt equity offerings, filed a lawsuit

against the Company in the United States District Court for the Southern District of New York alleging violation of a lock-up

provision under the Placement Agent Agreement, dated January 28, 2020 (the “Placement Agent Agreement”), by and between

the Company and AGP.

AGP seeks (i) damages estimated in the complaint to be in excess of $1 million and attorneys’

and (ii) declaratory relief.

The Company has answered the complaint and discovery has been initiated.

the Company intends to defend itself vigorously from the claims in the aforementioned disputes, it is unable to predict the outcome

of these legal proceedings.

or such other amount as may be determined at

Pederson II had previously been stayed by the court, pending disposition of Pederson I.

With that first lawsuit having been dismissed

and appeal denied, the stay was lifted in Pederson II, and the Company and all other defendants in that case filed Motions to Dismiss

the (then amended) complaint.

On November 19, 2020 the Magistrate Judge recommended dismissal of Pederson II, and further recommended

that Pederson be restricted from filing any other actions in the District of Minnesota against defendants on the same or similar allegations

as those in Pederson II, and on January 4, 2021 the District Court Judge adopted those recommendations and ordered dismissal of Pederson

On February 1, 2021 Pederson filed a Notice of Appeal from the order of dismissal of Pederson II in the Eighth Circuit, and on

December 29, 2021 the Eighth Circuit affirmed the decision of the District Court.

Thereafter, on or about January 11, 2022 Pederson sought

via petition, re-hearing en banc by the Eighth Circuit, which petition remains pending.

May 19, 2020, A.G.P./Alliance Global Partners (“AGP”), which had previously acted as the Company’s underwriter, placement

agent and sales agent in connection with the Company’s registered and exempt equity offerings, filed a lawsuit against the Company

in the United States District Court for the Southern District of New York alleging violation of a lock-up provision under the Placement

Agent Agreement, dated January 28, 2020 (the “Placement Agent Agreement”), by and between the Company and AGP.

(i) damages estimated in the complaint to be in excess of $ 1

million and attorneys’ fees, and (ii) declaratory

In August 2021, the Company settled the lawsuit filed against it by AGP.

Following the Company’s negotiated payment,

the lawsuit was dismissed with prejudice.

the Company intends to defend itself vigorously from the claims in the aforementioned disputes, it is unable to predict the outcome of

these legal proceedings.

Any potential loss as a result of these legal proceedings cannot be reasonably estimated.

the Company has not recorded a loss contingency for any of the aforementioned claims.

As a result, the Company

has not recorded a loss contingency for any of the aforementioned claims.

administrative and finance activities are fully functional out of our Miami, Florida location and our research laboratory in Bothell,

Washington remains open for essential operations while meeting COVID-19 quarantine challenges.

Our scientists are also able to continue

working remotely and we remain committed to meeting our corporate and development milestones throughout the year.

We have experienced

delays in our supply chain and with service partners as a result of the COVID-19 pandemic, including recent raw material and test animal

shortages affecting our research and development efforts.

Also because of the unknown impact from the COVID-19 pandemic, it may have

unanticipated material adverse effects on us in a number of ways including:

our scientists and other personnel (or their family members) are infected with the virus, it may hamper our ability to engage in

ongoing research activities;

we rely on third parties who have been and may in the future be adversely impacted;

these third parties are and/or continue to be adversely affected by COVID-19, they may focus on other activities which they

may devote their limited time to other priorities rather than to our joint research, which has caused and may in the future cause

material delays in our research and development efforts;

have experienced and may experience in the future shortages of laboratory materials and other resources which impact our research

a result of the continuing impact of the virus, we may fail to get access to third party laboratories which would impact our research

addition to the problems described above, we

may sustain problems due to the serious short-term and possible longer term serious economic disruptions as our economy faces unprecedented

Transactions with Related Parties

September 2018, the Company leased administrative offices from a limited liability company owned by one of the Company’s

directors and principal shareholder, Dr.

September 2018, the Company leased administrative offices from a limited liability company owned by one of the Company’s directors

and principal shareholder, Dr.

Phillip Frost.

The lease term is three years with an optional three-year extension.

The lease term is three

years with an optional three-year extension.

an annualized basis, rent expense, including taxes and fees, for this location would be approximately $ 62,000 .

The Company paid

a lease deposit of $4,000 and total rent and other expenses paid in connection with this lease were $57,000 for both years ended

December 31, 2020 and 2019.

Subsequent Events

January 2021, the Company sold 1,030,000 shares of its common stock pursuant to the ATM offering agreement with Wainwright for

net proceeds of approximately $2,072,000.

The Company paid a lease deposit of $ 4,000

and total rent and other expenses paid in connection

with this lease were $ 60,000

for the years ended December 31, 2021

and 2020 respectively.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data