What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-29 compared with 2022-03-23 · 370 added, 376 removed, 578 unchanged (56% of the section changed)

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

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Balance Sheets

Statements of Operations

Statements of Stockholders’ Equity

Statements of Cash Flows

to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

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

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

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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.

audit matters 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 $19,092,000

described in Note 5 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $19,092 as of

December 31, 2021.

Management tests its goodwill for impairment on November 30 or more frequently if circumstances indicate that the

carrying value of a reporting unit may exceed its fair value.

If the carrying amount of the Company, as a sole reporting unit, including

goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to that excess up to the amount of the recorded

During the second quarter of 2022, the Company experienced a sustained decrease in its share price, and as of June 30, 2022,

the Company’s market capitalization was below the carrying value of the Company’s net assets.

Pursuant to current accounting

guidance, management concluded that this was an impairment triggering event, and performed an impairment assessment of its goodwill.

Based on the results of the impairment assessment, management determined that its goodwill was impaired and recognized an impairment

charge of $19,092 related to goodwill during the year ended December 31, 2022.

Following the impairment, the Company had no remaining

goodwill as of December 31, 2022.

identified the evaluation of goodwill impairment as a critical audit matter because of the significant judgment by management when determining

the fair value of the reporting unit.

This required a high degree of auditor judgment and increased auditor effort in auditing such assumptions.

primary procedures we performed to address this critical audit matter included:

(i) obtained an understanding of management’s process

for determining the fair value of the reporting unit, (ii) We evaluated the allocation of the Company’s estimated fair value to

its reporting units and the comparison of the Company’s estimated fair value to its market capitalization, and (iii) we recalculated

the impairment recorded for goodwill of $19,092 based on the excess of the carrying values of goodwill over its estimated fair value

as of December 31, 2022.

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

Angeles, California

Los Angeles, California

March 29, 2023

BALANCE SHEETS

thousands, except per share data)

credit receivable

expenses and other current assets

current assets

Restricted cash

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

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

Liabilities and stockholders’ equity

and equipment, net

lease right-of-use assets, net (including $ 99 and $ 153 to related party)

and stockholders’ equity

payable and accrued expenses

maturities of finance lease liabilities

maturities of operating lease liabilities (including $ 59 and $ 53 to related party)

current liabilities

Accounts payable and accrued expenses

Current maturities of finance lease liabilities

Current maturities of operating lease liabilities (including $ 53 to related party)

Derivative liabilities

Total current liabilities

lease liabilities

lease liabilities (including $ 42 and $ 101 to related party)

long-term liabilities

Finance lease liabilities

Operating lease liabilities (including $ 101 to related party)

Total long-term liabilities

Total liabilities

Commitments and contingencies

and contingencies

Stockholders’

stock $ 0.001 par value;

150,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively;

8,143 shares issued

and outstanding as of December 31, 2022 and December 31, 2021, respectively

paid-in capital

stockholders’ equity

Common stock, $ 0.001 par value;

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

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

liabilities and stockholders’ equity

accompanying notes to consolidated financial statements.

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thousands, except per share data)

Collaboration revenue

and development

and administrative

operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

Other (expense) income:

Interest expense, net

Change in fair value of derivative liabilities

Foreign exchange loss

Total other income (expense), net

Net loss per common share:

Loss per share, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

from operations

(expense) income:

in fair value of derivative liabilities

exchange loss

other income (expense), net

loss per common share:

per share, basic and diluted

average number of common shares outstanding, basic and diluted

accompanying notes to consolidated financial statements.

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Balance as of December 31, 2020

$ ( 235,260 )

Stock-based compensation

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Balance as of December 31, 2021

$ ( 259,093 )

Stock-based compensation

Sale of common stock, net of transaction costs

Balance as of December 31, 2022

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Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

Amortization of right of use assets

Adjustments to reconcile net loss to net cash

used in operating activities:

Depreciation and amortization

Right of use assets

Loss on impairment of goodwill

Stock-based compensation

Payments on operating lease liabilities

Change in fair value of derivative liabilities

Changes in operating assets and liabilities:

Change in operating lease

Change in fair value of

derivative liabilities

Changes in operating assets

and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Net cash used in operating activities

Tax credit receivable

Prepaid expenses and other

current assets

payable and accrued expenses

Net cash used in operating

Investing activities:

Purchases of property and equipment

Net cash used in investing activities

Purchases of property

and equipment

Net cash used in investing

Financing activities:

Payments of finance lease obligations

Proceeds from sale of common stock, net of transaction costs

Net cash provided by financing activities

Net increase in cash and restricted cash

Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

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

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

Proceeds from sale of

common stock, net of transaction costs

Net cash provided by

(used in) financing activities

Net increase (decrease) in cash and restricted

Cash and restricted

cash at beginning of period

Cash and restricted

cash at end of period

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING

Recognition of operating lease right-of-use

assets and operating lease liabilities

accompanying notes to consolidated financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

the years ended December 31, 2022 and 2021

Organization and Business

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plan to leverage our infrastructure and expertise in these areas.

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

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.

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.

November 25, 2014, Cocrystal Pharma, Inc.

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.

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.

September 27, 2022, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Amendment”) with

the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio

of one-for-12.

At the Company’s 2022 Annual Meeting of Stockholders, holders of a majority of the outstanding voting power approved

an amendment to the Certificate of Incorporation of the Company to effect a reverse stock split of all outstanding shares of our common

stock at a ratio to be determined by the Board of Directors within a range of one-for-four through one-for-12.

Following such approval,

The Board of Directors determined to effect the reverse stock split at the ratio of one-for-12.

The Amendment became effective October

11, 2022 and the effect of the reverse stock split was reflected on the Nasdaq Stock Market.

All share and per share amounts have been retroactively restated to reflect

the one-for-12 stock split as if it occurred at the beginning of the earliest period presented.

The 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.

For the year ended December 31, 2022, the Company recorded a net loss of approximately

$ 38,837,000 and used approximately $ 21,435,000 of cash in operating activities.

On December 31, 2022, the Company had cash and cash

equivalents of approximately $ 37,219,000 .

We believe that our current resources will be sufficient to fund our operations beyond the next

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 phases.

The Company’s activities since inception have

principally consisted of acquiring product and technology rights, raising capital, and performing research and development.

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, 2022, the Company has primarily funded its operations through equity offerings.

The 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.

Our future cash requirements, and the

timing of those requirements, will depend on a number of factors, including economic conditions, the evolving impact of the COVID-19 pandemic

on our business, the approval and success of our products in development, the continued progress of research and development of our product

candidates, the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing, filing, prosecuting,

maintaining, defending, and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability

of financing, our success in developing markets for our product candidates and legal proceedings that may arise.

We have historically

not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to delay, reduce

the scope of, or eliminate one or more of our clinical trials or research and development programs.

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.

Additionally,

the rapid development and fluidity of the COVID-19 pandemic and new variants of the virus makes it very difficult to predict its ultimate

impact on our business, results of operations and liquidity.

The pandemic presents a significant uncertainty that could materially and

adversely affect our results of operations, financial condition and cash flows.

The combination of potential disruptions to our business

resulting from COVID-19 together with and volatile credit and capital markets could adversely impact our future liquidity, which could

have an adverse effect on our business and results of operations.

We will continue to monitor and assess the impact COVID-19 and new

variants of the virus may have on our business and financial results.

Basis of Presentation and Significant Accounting Policies

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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.

Company operates in one segment.

In accordance with the “Segment

Reporting” Topic of the ASC, the Company’s chief operating decision makers have been identified as the Co-Chief Executive

Officers, who review operating results to make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information

quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the

entity holds material assets and reports revenue.

All material operating units qualify for aggregation under “Segment Reporting”

due to their similar customer base and similarities in:

economic characteristics;

nature of products and services;

and procurement, manufacturing

and distribution processes.

Since the Company operates in one segment, all financial information required by “Segment Reporting”

can be found in the accompanying consolidated financial statements.

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

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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.

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

accounts are held.

At December 31, 2022 and 2021, our primary operating account held approximately $ 37,144,000 and $ 58,705,000 , respectively,

and our collateral account balance of $ 75,000 as of December 31, 2022 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.

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

Schedule of Reconciliation of Cash And Restricted Cash

of Reconciliation of Cash and Restricted Cash

Restricted cash

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

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

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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

of Reconciliation of Beginning and Ending Level 3 Liabilities

Value Measurements Using

Significant Unobservable Inputs

Balance, January 1,

Beginning balance

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

Change in fair value

of warrants potentially settleable in cash (Note 9)

Balance at December

Ending balance

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

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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

In performing an impairment test, the Company considers, 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

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

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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.

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.

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.

Research and development costs are presented net of tax credits.

Company’s Australian subsidiary is entitled to receive government assistance in the form of refundable and non-refundable

research and development tax credits from the federal and provincial taxation authorities, based on qualifying expenditures incurred

during the fiscal year.

The refundable credits are from the provincial taxation authorities and are not dependent on its ongoing tax

status or tax position and accordingly are not considered part of income taxes.

The Company records refundable tax credits as a

reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not,

they will be received.

During the year ended December 31, 2022, the Company recorded tax credits of $ 805,000 as

a reduction of research and development expense , of which approximately $ 716,000

was recorded as tax credit receivable as of the year then ended.

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

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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

Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered.

Such issuances vest

and expire according to terms established at the issuance date.

payments to employees, directors, and for acquiring goods and services from nonemployees, which include grants of employee stock options,

are recognized in the financial statements based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation.

Stock option grants to employees, which are generally time vested, are measured at the grant date fair value and depending on the conditions

associated with the vesting of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period.

Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.

The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related

to risk-free interest rates, expected volatility, expected life, and future dividends.

The assumptions used in the Black-Scholes option

pricing model could materially affect compensation expense recorded in future periods.

Stock Purchase Warrants and Other Derivative Financial Instruments

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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.

the 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

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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

Warrants to purchase common stock

of Antidilutive Securities Excluded from Calculations of Net Loss Per Share

Outstanding options to purchase

Warrants to purchase

Accounting Pronouncements

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

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

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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.

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

ASU 2020-06 is effective for fiscal years beginning

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the Company’s consolidated financial statements and related disclosures.

Foreign Currency Remeasurement

dollar has been determined to be the functional currency for the net

assets of Cocrystal Australia operations.

The transactions are recorded in the local currencies and are remeasured at each reporting date

using the historical rates for nonmonetary assets and liabilities and current exchange rates for monetary assets and liabilities at the

balance sheet date.

Exchange gains and losses from the remeasurement of monetary assets and liabilities are recognized in other income

The Company recognized an income (loss) of approximately $ ( 18,161 ) and $ ( 8,631 ) for the years ended December 31, 2022 and 2021,

respectively.

of December 31, 2022 and 2021, the Company’s cash balances consisted of the following (in thousands):

of Cash Balance

Australian Dollars

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)

Finance lease right-of-use lab equipment obtained in exchange for finance lease liabilities, net

Computer and office equipment

of Property and Equipment

Lab equipment (excluding equipment

under finance leases)

Finance lease right-of-use lab equipment obtained

in exchange for finance lease liabilities, net

Computer and office

Total property and equipment

Less accumulated depreciation

Property and equipment, net

Property and equipment,

expense was $ 185,000 and $ 190,000 for the years ended December 31, 2022 and 2021, respectively.

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.

Company completed its annual impairment test in November 2021, and at that time determined the fair value of its reporting unit, as determined

utilizing both the Company’s Nasdaq market capitalization and an income approach analysis;

exceeded the carrying value of the reporting

unit as of December 31, 2021;

therefore, management did not consider the $ 19,092,000 of goodwill to be impaired.

Company uses judgement in assessing whether assets may have become impaired between annual impairment tests.

The occurrence of a

change in circumstances, such as a continued decline in the market capitalization of the Company, would determine the need for

impairment testing between annual impairment tests.

During the six months ended June 30, 2022, the Company saw a significant

decrease in its price of common stock resulting in an overall reduction in market capitalization and our recorded net book value

exceeded our market capitalization as of June 30, 2022.

Pre-impairment, the carrying value of the reporting unit exceeded the market

capitalization of the Company at June 30, 2022 and management concluded that goodwill was impaired in its entirety and recorded a

non-cash impairment.

of December 31, 2022, the Company had no remaining 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

of Accounts Payable and Accrued Expenses

Accounts payable

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Accrued other expenses

Total accounts payable and accrued expenses

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

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The Company had approximately

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

8,143,000 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

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

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.

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

January 2021, the Company sold 85,834 shares of its common stock pursuant to the ATM Agreement for net proceeds of approximately $ 2.1

There were no sales under the ATM Agreement during the remainder of 2021 or 2022.

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

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Incentive Plans

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 an equity incentive plan in 2007 (the “2007 Plan”).

The 2007 Plan has expired, and the Company no longer

issues any awards under the 2007 Plan.

As of December 31, 2022, there are 424 outstanding incentive stock options granted under the 2007

Plan that are eligible to purchase shares of the Company’s common stock.

The maximum term of options granted under the 2007 Plan

was ten years.

Company adopted a second equity Incentive plan in 2015 (the “2015 Plan”) under which 833,333 shares of common stock have

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

been reserved for issuance to employees, and non-employee directors and consultants of the Company.

Recipients of incentive stock options

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As of December 31, 2022, approximately 483,833 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

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

2022 and 2021 (table in thousands, except per share amounts):

of Share-based Compensation, Stock Options, Activity

Schedule of Share-based Compensation, Stock Options, Activity

Balance at December 31, 2020

Increase in authorized options

Balance at December 31, 2021

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The options have an exercise price of $ 5.04 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 .

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, 2022.

The total fair value of these options at the grant date was approximately $ 633,000

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

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

for grants made during the year ended December 31, 2022:

Schedule of Weighted Average Assumptions Used for Grants

Weighted average per share grant date fair value

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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

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

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

Weighted average per share grant date fair value

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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 .

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.

the years ended December 31, 2022 and 2021, equity-based compensation expense for options vesting during the period was $ 855,000 and

$ 724,000 , respectively.

of December 31, 2022, there was $ 1,052,000 of total unrecognized compensation expense related to non-vested stock options that is expected

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totaled 140,359 , 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.

These options had a weighted-average exercise price of $ 26.53 per share

and a weighted-average remaining contractual term of 7.2 years at December 31, 2022.

aggregate intrinsic value of outstanding and exercisable options at December 31, 2022 was calculated based on the closing price of the

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

of Common Stock Reserved for Future Issuance

Schedule of Common Stock Reserved for Future Issuance

Stock options issued and outstanding

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December 31, 2022 and 2021 (table in thousands):

of Warrant Activity

Warrants Accounted for as:

Summary of Warrant Activity

Accounted for as:

Outstanding, December 31, 2020

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Expiration date

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

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 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.

outstanding as of December 31, 2022 and 2021 included warrants with the potential to be settled in cash, which are liability-classified

As of December 31, 2021, 13,268 warrants are accounted for as liabilities and 6,732 warrants are accounted for as equity.

the year ended December 31, 2022, the 6,732 warrants accounted as equity expired and the 13,268 warrants accounted for as liabilities

remained outstanding as of December 31, 2022.

Classified as Liabilities

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using the Black-Scholes option-pricing model with the following inputs as of December 31, 2022:

of Fair Value of Warrants Classified as Liabilities

Schedule of Fair Value of Warrants Classified as Liabilities

Expected dividend yield

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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.

Company recognized revenue for the years ended December 31, 2021 and 2020 of $ 0 and $ 2,014,000 , respectively.

As of December 31, 2021

and 2020, accounts receivable of $ 0 and $ 556,000 was due from Merck, respectively.

The Company continues working with Merck under this Collaboration Agreement as of the years then ended.

Company did not recognize revenue for the years ended December 31, 2022 and 2021 As of December 31, 2022 and 2021, the Company did not

report accounts receivable from Merck.

State University Research Foundation

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to customary terms.

2a Clinical Trial

August 3, 2022 the Company engaged hVIVO, a subsidiary of London-based Open Orphan plc (AIM:

ORPH), a rapidly growing specialist

contract research organization (CRO), to conduct a Phase 2a clinical trial with the Company’s novel, broad-spectrum, orally

administered antiviral influenza candidate.

The Company paid a reservation fee of $ 1.7

million upon execution of the agreement for a Phase 2a clinical trial that is scheduled to begin in 2023, which has been recorded under prepaid expenses

and other current assets on the accompanying December 31,2022 balance sheet.

The total estimated cost of the agreement (including the reservation fee) is

approximately $ 7.2

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

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Deferred tax assets:

Net operating loss carryforwards (i)(ii)

Research and development tax credits (iii)

Net operating

loss carryforwards

Research and development

Capitalized and Research

Total deferred tax assets

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Total deferred taxes, net

Valuation allowance

Deferred tax liability, net

Deferred tax liability,

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

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Goodwill impairment

Research credits

Change in valuation allowance

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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)

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)

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

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of Supplemental Balance Sheet Information

At December 31,

Operating leases

Long-term right-of-use assets of which $ 153 relates to related party, net of amortization of $ 527

Short-term operating lease liabilities, of which $ 53 relates to related party

Long-term operating lease liabilities, of which $ 101 relates to related party

Total operating lease liabilities

right-of-use assets of which $ 99 and $ 153 relates to related party, net of accumulated amortization of $ 592 and $ 388

Short-term operating lease liabilities, of

which $ 59 and $ 53 relates to related party

Long-term operating

lease liabilities, of which $ 42 and $ 101 relates to related party

Total operating lease

of Maturities of Lease Liabilities

Year ending December 31,

(in thousands)

2025 and thereafter

Total minimum operating lease payments

present value discount

Total operating lease liabilities

present value

Total operating lease

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

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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).

and a principal stockholder 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

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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,

(in thousands)

2024 and thereafter

Total minimum capital lease payments

leased lab equipment is included under property and equipment and depreciable over five years .

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Commitments and Contingencies

Contingencies

time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business.

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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

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.

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.

Liberty Insurance Underwriters,

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.

On June 7, 2022, the court filed a Stipulation and Order for Entry of Judgment in the amount of $ 1,359,063.72 in favor of

Liberty (the “Judgment”) following summary judgment granted by the court to Liberty on all but one of the matters at issue

The Company filed an appeal in July 2022.

Pending the outcome of the appeal, the Company paid $ 1.6 million into the registry

of the court which stayed execution of the Judgment.

The United States Court of Appeals for the Third Circuit (the “Third Circuit

Court”) held oral argument on the appeal on March 8, 2023.

As of the date of this Report, the Third Circuit Court has not issued

a ruling on the appeal.

November 2017, Lee Pederson, a former Biozone lawyer, filed a lawsuit in the U.S.

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In Pederson II, Mr.

Pederson seeks damages in the amount of $ 800,000

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.

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:

Pederson seeks damages in the amount of $ 800,000 or such other amount as may be determined at trial.

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 II.

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.

On October 3, 2022, the U.S.

Supreme Court

denied Pederson’s petition for a writ of certiorari.

administrative and finance activities are fully functional out of our Miami,

Florida location and our research laboratory in Bothell, Washington remained open for essential operations while meeting COVID-19 quarantine

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 COVID-19, 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

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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;

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

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 uncertainty.

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.

and principal stockholder, Dr.

Phillip Frost.

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

On 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 $ 60,000

for the years ended December 31, 2021

and 2020 respectively.

and total rent and other expenses paid in connection with this lease were $ 61,000 and $ 60,000 for the years ended December 31, 2022 and

2021 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