What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-29 · 79 added, 158 removed, 101 unchanged (70% of the section changed)

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our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas.

fiscal year ended December 31, 2022, the following key aspects of our business advanced:

our year ended December 31, 2023, the following key aspects of our business advanced:

and Seasonal Influenza A

novel oral PB2 inhibitor, CC-42344, has shown excellent antiviral activity against

influenza A strains including pandemic and seasonal strains, as well as strains resistant

to Tamiflu® and Xofluza®.

initiated enrollment in our randomized, double-controlled, dose-escalating Phase 1 study

to evaluate the safety, tolerability and pharmacokinetics of orally administered CC-42344

in healthy adults.

April 2022 we announced preliminary Phase 1 study data, demonstrating a favorable safety

and PK profile in the first two cohorts in the single-ascending dose portion of the study.

July 2022 we reported PK results from the single-ascending dose of the study supporting once-daily

December 2022 we reported favorable safety and tolerability results from the Phase 1 study

with CC-42344 for influenza A.

entered into an agreement with a United Kingdom-based clinical research organization to conduct

a human challenge Phase 2a study evaluating safety, viral and clinical measures of orally

administered CC-42344 in influenza A-infected subjects.

Under the human challenge

model, healthy adults will be infected with the influenza A virus under carefully controlled

conditions, which we believe will hasten trial enrollment.

● Preparations

made to apply with the United Kingdom Medicines and Healthcare Products Regulatory Agency

in the first half of 2023 to conduct a human challenge Phase 2a study.

Pending clearance

by the agency, we expect to initiate the study in the second half of 2023.

● Preclinical

development is underway with an inhaled formulation of CC-42344 as a treatment and

prophylaxis for influenza A.

novel oral PB2 inhibitor, CC-42344, has shown excellent antiviral activity against influenza A strains including pandemic

and seasonal strains, as well as strains resistant to Tamiflu® and Xofluza®.

March 2022 enrollment was initiated in a randomized, double-blind, placebo-controlled Phase 1 study of CC-42344, which was conducted

in Australia.

In December 2023, we reported favorable safety and tolerability results from a Phase 1 study of CC-42344 for the treatment

of both pandemic and seasonal influenza A.

October 2023 we announced receipt of authorization from the United Kingdom Medicines and Healthcare Products Regulatory Agency (MHRA)

to initiate a Phase 2a human challenge trial with its broad-spectrum, oral PB2 inhibitor CC-42344 as a potential treatment for pandemic

and seasonal influenza A.

In December 2023 we announced achievement of first-patient-in for the Phase 2a human challenge clinical

Clinical results are expected in 2024.

development is progressing with an inhaled formulation of CC-42344 as a treatment and prophylaxis for influenza A.

and Seasonal Influenza A/B Program

Sharp & Dohme Corp.

notified the Company that they continue development activities with

the compounds discovered under a collaborative Exclusive License and Research Collaboration

Agreement to discover and develop certain proprietary influenza antiviral agents that are

effective against both influenza A and B strains.

This agreement includes milestone payments

of up to $156 million plus royalties on sales of products discovered under the agreement.

Protease Inhibitor CDI-988

selected CDI-988 as our lead candidate for development as a potential oral treatment

for SARS-CoV-2.

CDI-988 , which was designed and developed using our proprietary structure-based

drug discovery platform technology, targets a highly conserved region in the active site

of SARS-CoV-2 3CL (main) protease required for viral RNA replication.

are currently conducting good laboratory practice (GLP) toxicology studies in preparation

for a Phase 1 study.

● Preparations

are underway to submit an application to the Australian regulatory authority for a planned

randomized, double-blind, placebo-controlled Phase 1 study.

Pending regulatory clearance,

we expect to initiate the study in the first half of 2023.

Intranasal/Pulmonary

inhibitors effective against both influenza strains A and B have been identified and are in the preclinical stage.

Protease Inhibitor CDI-988

IND-enabling study is ongoing with CDI-45205, our novel SARS-CoV-2 3CL (main) protease

inhibitor being developed as a potential treatment for COVID-19 and its variants.

are using our proprietary structure-based drug discovery platform technology to discover

replication inhibitors for orally administered therapeutic and prophylactic treatments for

Replication inhibitors hold potential to work with protease inhibitors in a combination

therapy regimen.

are developing certain proprietary broad-spectrum, non-nucleoside polymerases for the treatment

of human norovirus infections using our proprietary structure-based drug design technology

We also hold exclusive rights to norovirus protease inhibitors for use in humans

under the KSURF license.

novel, broad-spectrum pan-viral 3CL protease inhibitor antiviral drug candidate CDI-988 for clinical development as an oral treatment

for SARS-CoV-2 and norovirus.

randomized, double-blind, placebo-controlled Phase 1 study of CDI-988 is approved by Australia Human Research Ethics Committees (HREC).

The study is designed to access the safety, tolerability and pharmacokinetics of CDI-988.

September 2023 we announced dosing of the first subjects in the Phase 1 clinical trial with oral, first-in-class pan-norovirus and

pan-coronavirus 3CL protease inhibitor CDI-988.

are using our proprietary structure-based drug discovery platform technology to discover replication inhibitors for orally administered

therapeutic and prophylactic treatments for SARS-CoV-2.

Replication inhibitors hold potential to work with protease inhibitors in

a combination therapy regimen.

of Operations

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legal fees, audit and tax fees, consultants and professional services, and general corporate expenses.

and administrative expenses were $5,745,000 for the year ended December 31, 2022, compared with $5,427,000 for the year ended December

This increase of $318,000 was primarily due professional fees and litigation.

and administrative expenses were $5,990,000 for the year ended December 31, 2023, compared with $ 5,745,000

for the year ended December 31, 2022.

This increase of $245,000 was primarily due professional

fees and litigation.

the ordinary course of business, the Company entered into non-cancellable related party leases for its facilities (see Note 14 –

Transactions with Related Parties in the following Consolidated Financial Statements).

Transactions with Related Parties in the Consolidated Financial Statements).

the six months ended June 30, 2022, the Company saw a significant decrease in its price of common stock resulting in an overall reduction

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As of December

31, 2022, the Company had no remaining goodwill.

July 2022, the Company filed a legal appeal and deposited $1,600,000 with the United State District Court for the District of Delaware

31, 2023 and 2022, the Company had no remaining goodwill.

July 2022, the Company filed a legal appeal and deposited $1.6 million with the United State District Court for the District of Delaware

as security during pending our appeal.

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amount inclusive of estimated costs.

Income/Expense

expense was $2,000 for the year ended December 31, 2022, compared to $4,000 for the year ended December 31, 2021.

The interest expense

in 2022 and 2021 is related to lease agreements.

Income/Expense

income/expense, net, was an expense of $8,000 for the year ended December 31, 2022 compared with income of $36,000 for the year ended

December 31, 2021.

This year-over-year change primarily consisted of recognized non-cash changes in the fair value of our derivative

liabilities as our stock price fluctuated.

Under accounting principles generally accepted in the United States, we record other income

or expense for the change in fair value of our outstanding warrants that are accounted for as liabilities during each reporting period.

If the value of the warrants increases during a period, which occurred during the year ended December 31, 2022, we record other income.

The fair value of our outstanding warrants is inversely related to the fair value of the underlying common stock;

as such, a decrease

in the fair value of our common stock during a given period generally results in other income while an increase in the fair value of

our common stock generally results in other expense.

During the third

quarter of 2023, the Company received a $1.6 million refund from the registry of the court reflecting the recovery of funds following

a successful appeal in the Company’s litigation with an insurer.

During November 2023, a settlement agreement was executed and

the insurer paid the Company an additional $1.0 million.

There is no further litigation with the insurer following the settlement.

Legal Proceedings” for more information

other Income/Expense

other income was $575,000 for the year ended December 31, 2023, compared to total other expense of $8,000 for the year ended December

This increase of $583,000 was primarily due to interest income discussed below.

income was $640,000 for the year ended December 31, 2023, compared to interest expense of $2,000 for the year ended December 31, 2022.

The interest income in 2023 was related to interest earned from cash held in banks and deposits with court registry and the expense in

2022 was related to finance lease agreements.

also had foreign exchange loss of $65,000 and $18,000 for the years ended December 31, 2023 and 2022, respectively, related to currency

exchange rate measurements with regards to our Australian operations.

had a net loss of $17,984,000 for the year ended December 31, 2023, compared to a net loss of $38,837,000 for the year ended December

This increase of $24,652,000 was primarily due to a $19,092,000 non-cash impairment-loss

of goodwill and increased research and development expenses as we continue in our efforts to advance CC-42344, CDI-988 and other product

This decrease of $20,853,000 was primarily due to a $19,092,000 non-cash impairment-loss

of goodwill in 2022 and offset by increases in research and development expenses in 2023 due transition from clinical trial phase I to

phase II of our CC-42344 product, and compensated by the increase efforts in the initiation of clinical trial phase I for CDI-988 and

other product candidates.

and Capital Resources

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of $21,435,000 for the year ended December 31, 2022.

The increase in cash used in operating activities in 2022 as compared to 2021 was

attributable to the increase of operating costs related to our COVID-19 and influenza-A clinical trials.

The decrease in cash used in operating activities in 2023 as compared to 2022 was

attributable to the decrease of operating costs related to our COVID-19 and influenza-A clinical trials.

the year ended December 31, 2023, net cash used in investing activities netted to $118,000, which consisted of capital expenditures for

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used in investing activities consisted of $74,000.

the year ended December 31, 2022, net cash used by financing activities was $27,000, compared to net cash provided by financing activities

the year ended December 31, 2023, net cash provided by financing activities was $3,993,000, compared to net cash used by financing activities

of $27,000 for the year ended December 31, 2022.

Net cash used by financing activities in 2022 was result of finance lease payments,

and 2021 net cash generated was the result of issuance common stock, net of finance lease payments.

Company had approximately $35 million cash on hand on March 21, 2023.

We expect that this cash balance will be sufficient to support

Net cash provided by financing activities in 2023 was result of a raise of $4,000,000

in a private placement sale of common stock.,

We expect that our reported cash balance will be sufficient to support

the Company’s working capital needs for the 12 months following the filing of this Report.

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of product candidates.

We have one hepatitis C product candidate that has completed a Phase 2a clinical trial and one influenza A product

candidate that has completed a Phase 1 trial and is expected to proceed to Phase 2a in 2023, as well as other influenza A/B product candidates

under our Collaboration Agreement with Merck.

Additionally, we expect that in the long term in case of successful development and commercialization

of one or more influenza A/B antiviral agents under the Collaboration Agreement we will be eligible to receive certain milestone payments

up to a total of $156 million, including payments associated with the successful product development and attainment of certain U.S.

EU regulatory approvals for the developed products and sales volume and royalties on net sales of the products.

See “Item 1 –

Business – Collaborations – Merck Collaboration.” However, in order to conduct research and development of our other

product candidates, including our potential COVID-19 therapy, we may need to raise additional capital to support our operations or form

partnerships, in addition to our existing collaborative alliances.

Such funding or partnerships may not be available to us on acceptable

terms, or at all.

did not raise any proceeds from the sale of common stock during the year ended December 31, 2022.

Set forth below is a summary of financings

which occurred since 2020.

Because we have an influenza A product candidate that is currently in a Phase 2a clinical trial and a pan-viral

coronavirus & norovirus product candidate that is currently in a Phase 1 clinical trial we may need to raise additional capital to

support our operations or form partnerships and collaborative alliances.

Such funding may not be available to us on acceptable terms,

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

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January 2021, the Company sold 1,030,000 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 for the remainder of 2021 or 2022.

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

There have been no sales under the ATM Agreement since then.

Note Regarding Forward Looking Statements

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including, preparation, commencement and advancement of clinical studies for certain product candidates in 2024, our expectations with

respect to HCV market opportunity and our plans regarding further clinical development of CC-31244, the potential future results of our

collaboration with Merck pursuant to the Collaboration Agreement, including potential receipt of milestone payments and royalties, our

expectations related to our collaborations with KSURF, our expectations regarding future operating results, statement

regarding the suitability and adequacy of our properties and capital resources, anticipated payments under the license agreements with

KSURF, and our future liquidity.

respect to market opportunities for certain product candidates and our plans regarding further clinical development of such product candidates,

our search for collaboration partners following the termination of agreements with Merck and KSURF, our expectations regarding future

operating results, statement regarding the suitability and adequacy of our properties and capital resources, and our future liquidity.

words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,”

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Important factors, uncertainties and risks that

may cause actual results to differ materially from these forward-looking statements include the risks and uncertainties arising from

the risks arising from the impact of COVID-19 (including long-term and pervasive effects of the virus), inflation, interest rate increases

and the Ukraine war on our Company, our collaboration partners, and on the U.S., U.K.

and global economy, including manufacturing and

research delays arising from raw materials and labor shortages, supply chain disruptions and other business interruptions including any

adverse impacts on our ability to obtain raw materials and test animals as well as similar problems with our vendors and our current

and any future CROs and CMOs, the results of the studies for CC-42344 and CDI-988, the ability of our CROs to recruit volunteers for,

and to proceed with, clinical studies, our reliance on Merck for further development in the influenza A/B program under the license and

collaboration agreement, our and our collaboration partners’ technology and software performing as expected, financial difficulties

experienced by certain partners, the results of future preclinical and clinical trials, general risks arising from clinical trials, receipt

of regulatory approvals, regulatory changes, development of effective treatments and/or vaccines by competitors, including as part of

the programs financed by the U.S.

government, potential mutations in a virus we are targeting which may result in variants that are resistant

to a product candidate we develop, and the outcome of our appeal of the summary judgment.

Further information on such uncertainties and

risks is contained in the “Risk Factors” in Item 1A of this this Annual Report.

We undertake no obligation to publicly update

or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

may cause actual results to differ materially from these forward-looking statements include inflation, the possibility of recession,

interest rate increases and the conflicts in Ukraine and Israel on our Company, our collaboration partners, and on the U.S., U.K., Australia

and global economy, including manufacturing and research delays arising from raw materials and labor shortages, supply chain disruptions

and other business interruptions including any adverse impacts on our ability to obtain raw materials and test animals as well as similar

problems with our vendors and our current and any future CROs and CMOs, the results of the studies for CC-42344 and CDI-988, the ability

of our CROs to recruit volunteers for, and to proceed with, clinical studies, our and our collaboration partners’ technology and

software performing as expected, financial difficulties experienced by certain partners, the results of future preclinical and clinical

trials, general risks arising from clinical trials, receipt of regulatory approvals, regulatory changes, development of effective treatments

and/or vaccines by competitors, including as part of the programs financed by the U.S.

government, and potential mutations in a virus

we are targeting which may result in variants that are resistant to a product candidate we develop.

Further information on such uncertainties

and risks is contained in the “Risk Factors” in Item 1A of this this Annual Report.

We undertake no obligation to publicly

update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

For more information

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with respect to stock-price volatility, employee exercise patterns and forfeitures, actual results could differ from our assumptions.

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 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.

The 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

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 concluded that goodwill

was impaired in its entirety and recorded a $19,092,000 non-cash impairment.

On December 31, 2022, the Company had no goodwill.

Issued Accounting Standards

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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 7. Management’s Discussion and Analysis