What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-28 compared with 2023-03-29 · 286 added, 391 removed, 557 unchanged (55% of the section changed)

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

Balance Sheets

Statements of Operations

Statements of Stockholders’ Equity

Statements of Cash Flows

to Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes 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 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

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.

Impairment Assessment

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.

audit matters are matters 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 statements and

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

We determined that there are no critical audit matters.

have served as the Company’s auditor since 2019.

Los Angeles, California

March 29, 2023

& Company, P.A.

& Company , P.A

Angeles, California

BALANCE SHEETS

thousands, except per share data)

credit receivable

expenses and other current assets

December 31, 2023

December 31, 2022

Current assets:

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)

Restricted cash

Tax credit receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Operating lease right-of-use assets, net (including $ 42 and $ 99 to related party)

Liabilities and stockholders’ equity

Current liabilities:

lease liabilities

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

Accounts payable and accrued expenses

Current maturities of finance lease liabilities

Current maturities of operating lease liabilities (including $ 42 and $ 59 to related party)

Total current liabilities

Long-term liabilities:

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

Operating lease liabilities (including $ 0 and $ 42 to related party)

Total long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders’ equity:

liabilities and stockholders’ equity

Common stock $ 0.001 par value;

150,000 shares authorized as of December 31, 2023 and December 31, 2022, respectively;

10,174 and 8,143 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes to consolidated financial statements.

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thousands, except per share data)

and development

and administrative

Operating expenses:

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

Research and development

General and administrative

Legal settlement

Total operating expenses

Loss from operations

Other (expense) income:

Interest income (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

accompanying notes to consolidated financial statements.

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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

$ ( 297,930 )

Stock-based compensation

Sale of common stock to related entities, net of transaction costs

Balance as of December 31, 2023

$ ( 315,914 )

accompanying notes to consolidated financial statements.

STATEMENTS OF CASH FLOWS

Operating activities:

Adjustments to reconcile net loss to net cash

used in operating activities:

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

Change in operating lease

Change in fair value of

derivative liabilities

Changes in operating assets

and liabilities:

Accounts receivable

Tax credit receivable

Prepaid expenses and other

current assets

of use assets

on impairment of goodwill

in operating lease liabilities

in fair value of derivative liabilities

in operating assets and liabilities:

credit receivable

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

Financing activities:

Payments of finance lease obligations

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

cash used in operating activities

of property and equipment

cash used in investing activities

of finance lease obligations

from sale of common stock, net of transaction costs

cash provided by (used in) financing activities

decrease in cash and restricted cash

and restricted cash at beginning of period

and restricted cash at end of period

accompanying notes to consolidated financial statements.

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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

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.

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, 2023, the Company recorded a net loss of approximately $ 17,984,000 and used approximately $ 14,666,000 of cash in operating activities.

December 31, 2023, the Company had cash and cash equivalents of approximately $ 26,353,000 .

We believe that our current resources will

be sufficient to fund our operations beyond the next 12 months.

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

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.

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, 2023, the Company has primarily funded its operations through equity offerings.

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 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

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.

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,

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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.

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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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;

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:

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.

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

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

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of Reconciliation of Cash and Restricted Cash

December 31, 2023

December 31, 2022

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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Note 9 – Warrants.

December 31, 2022 and 2021, 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

December 31, 2023 and 2022, the carrying amounts of financial assets and liabilities, such as cash, other assets, and accounts payable

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

Company has not transferred any financial instruments into or out of Level 3 classification during the years ended December 31, 2023

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of Reconciliation of Beginning and Ending Level 3 Liabilities

Value Measurements Using

Fair Value Measurements Using

Significant Unobservable Inputs

Balance, January 1,

Change in fair value

of warrants potentially settleable in cash (Note 9)

Change in fair value of warrants potentially settleable in cash (Note 9)

Balance at December 31,

Ending balance

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

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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’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

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, 2023, the Company recorded tax

credits receivable of $ 890,000 , of which approximately $ 823,000 was recorded as a reduction

of research and development expense.

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

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of Antidilutive Securities Excluded from Calculations of Net Loss Per Share

Outstanding options to purchase

Warrants to purchase

Outstanding options to purchase common stock

Warrants to purchase common stock

Accounting Pronouncements

following are new FASB Accounting Standards Updates that have not been adopted by the Company as of December 31, 2022, 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 326”).

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

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 stockholder 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.

Company’s management has evaluated all the recently issued, but not yet effective, accounting standards and guidance that have

been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does

not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and

results of operations.

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.

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 (loss).

The Company recognized an loss of approximately

$ 65,000 and $ 18,000 for the years ended December 31, 2023 and 2022, respectively.

of December 31, 2023 and 2022, the Company’s cash balances consisted of the following (in thousands):

of Cash Balance

Australian Dollars

Australian Dollars – in US $

Property and Equipment

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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

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

Total property and equipment

Less accumulated depreciation

Property and equipment,

Property and equipment, net

expense was $ 189,000 and $ 185,000 for the years ended December 31, 2023 and 2022, respectively.

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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.

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 $ 19,092,000 non-cash impairment.

of December 31, 2023, the Company had no remaining goodwill.

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of Accounts Payable and Accrued Expenses

Accounts payable

Accrued compensation

Accrued other expenses

Total accounts payable

and accrued expenses

other expenses

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

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

10,174,000 and 8,143,000 shares issued and outstanding as of December 31, 2023 and 2022, respectively.

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

April 4, 2023, the Company entered into a Securities Purchase Agreement with two accredited investors (the “Purchasers”)

whereby the Purchasers agreed to purchase a total of 2,030,458 shares of unregistered common stock at a price of $ 1.97 per share for

a total purchase price of $ 4,000,000 in two equal $ 2,000,000 investments.

The Purchasers were an entity controlled by a director and

another investor who subsequently joined the Company’s Board of Directors.

Company was a 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 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.

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

to issue and sell 2,167,000 shares of the Company’s common stock at a public offering price of $ 18.48 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.

Stock Based Awards

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Balance at December 31, 2021

Increase in authorized options

Balance at December 31, 2022

Increase in authorized options

Balance at December 31, 2023

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totaled 279,000 , with an aggregate intrinsic value of $ 0.0 .

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.

These options had a weighted-average exercise price of $ 17.17 per share and

a weighted-average remaining contractual term of 7.2 years at December 31, 2023.

aggregate intrinsic value of outstanding and exercisable options at December 31, 2023 was calculated based on the closing price of the

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Schedule of Common Stock Reserved for Future Issuance

Stock options issued and outstanding

Shares authorized for future option grants

Warrants outstanding

options issued and outstanding

authorized for future option grants

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, 2023 and 2022 (table in thousands):

Summary of Warrant Activity

Accounted for as:

of Warrants Activity

Warrants Accounted for as:

Accounted for as:

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outstanding as of December 31, 2023 and 2022 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.

During 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.During the year ended December 31, 2023, the 2,000 warrants accounted as

liabilities expired and the 11,000 warrants accounted for as liabilities remained outstanding as of December 31, 2023.

of December 31, 2023, outstanding warrants had no intrinsic value.

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 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.

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Schedule of Fair Value of Warrants Classified as Liabilities

Warrants (expired October 24, 2023)

Expected dividend yield

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(“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,

Under the terms of the Collaboration Agreement, Merck agreed to 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

payment of $ 4 million and was 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.

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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 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.

December 15, 2023, the Company received written notice from Merck of Merck’s election to terminate the Exclusive License and Collaboration

The termination of the Agreement is effective on March 14, 2024.

According to Merck’s termination notice, Merck determined

there were no existing conditions to continue the collaboration.

The termination resulted from the inability to develop the compounds

to meet a specific aspect of Merck’s program.

The pending patent applications on compounds covered by the Agreement and previously

filed by Merck on behalf of both companies remain in place.

State University Research Foundation

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.

February 18, 2020, 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

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As of December 31,

2022, 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.

2023, no milestone payments to the Foundation were due under the agreement.

February 28, 2024, the Company provided notice to the Foundation of the Company’s election to terminate both License Agreements.

The terminations, which were made due to the Company’s determination that further development efforts under the License Agreements

would be futile, are effective on March 29, 2024.

The Company continues to clinically progress its fully owned compound CDI-988 for coronaviruses

and norovirus.

2a Clinical Trial

August, 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

ORPH), a rapidly growing specialist contract

research organization (CRO), to conduct a Phase 2a clinical trial (the “Study”) 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 Start-Up

Agreement (the “Agreement”) for the Study.

The Company recognized the reservation fee as prepaid asset on its balance sheet

at December 31, 2022.

In September 2023, the Clinical Trial Agreement (“CTA”) was executed by the Company and hVIVO, which

supersedes the Agreement, including the terms attributable to the reservation fee.

Under the terms of the CTA, total budget of the Study

was approximately $ 6.8 million, which consisted of the reservation fee of $ 1.7 million and additional milestone payments totaling approximately

$ 5.1 million.

The reduction of the reservation fee and the milestone payments will become due during the length of the CTA as milestones

are realized.

the year ended December 31, 2023, upon achievement of certain milestones, the reservation fee was reduced by approximately $ 440,000 ,

which was recognized as expense during the year then ended.

As a result, the balance of the reservation fee was approximately $ 1.28 million

which is included in prepaid expenses as of December 31, 2023.

Pursuant to the CTA, additional milestones payments totaling approximately

$ 2.61 million became due during the year ended December 31, 2023, resulting in the recognition during the year of aggregate expenses

of $ 3.05 million incurred on the CTA.

As of December 31, 2023, $ 1.9 million was due on the CTA which is included in accounts payable

and accrued expenses in the accompanying consolidated balance sheet.

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

Research and development

Capitalized and Research

Net operating loss carryforwards

Research and development tax credits

Capitalized and Research Expenditures

Total deferred tax assets

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Total deferred taxes, net

Deferred tax liability,

Valuation allowance

Deferred tax liability, net

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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December 31, 2023, the Company had federal research credit carryforwards of approximately $ 3.2 million that expire in 2028.

December 31, 2022, the Company had federal and state capital loss carryforwards of approximately $ 1.07 million that expire in 2023.

December 31, 2023, the Company did not have any federal and state capital loss carryforwards.

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

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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

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

Long-term right-of-use assets of which $ 42 and $ 99 relates to related party, net of accumulated amortization of $ 950 and $ 592

Short-term operating lease liabilities, of which $ 42 and $ 59 relates to related party

Long-term operating lease liabilities, of which $ 0 and $ 42 relates to related party

Total operating lease liabilities

of Maturities of Lease Liabilities

Year ending December 31,

(in thousands)

2029 and thereafter

Total minimum operating lease payments

present value

Total operating lease

present value discount

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

CAM charges for the Bothell, Washington facility is

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

In 2022 and 2021, approximately $ 98,000 and $ 75,000 of CAM charges for the Bothell, Washington lease were included in operating

In 2023 and 2022, approximately $ 98,000 and $ 98,000 of CAM charges for the Bothell, Washington lease was included in operating

expenses in the consolidated statements of operations, respectively.

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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

On September 1, 2021, the Company extended this lease agreement into an additional three -year with

m onthly lease payments under this lease total $ 186,000 through September 2024.

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to this lease was $ 42,000 and the remaining lease obligation was $ 42,000 .

September 21, 2018, the Company amended the lease agreement with a North Creek Tec LLC, to expand its laboratory facility in Bothell

– WA, with additional 6,000 sq ft for a period of 5 years that expires on January 31, 2029, with monthly lease payments under this

lease total $ 660,000 .

In addition, the Company amended the lease agreement to extend the original laboratory facility for an additional

7 years with monthly lease payments under this lease total $ 1,498,000 Through January 2031.

The minimum lease payment combined totals

approximately $ 380,000 annually.

expense, excluding capital leases and CAM charges, for 2023 and 2022 totaled $ 233,000 and $ 233,000 , 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

April 2020, the Company entered into a lease agreements to acquire equipment with 36 monthly payments of $ 2,420 payable through March

The lease agreement have an effective interest rate of 8.01 %.

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

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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 $ 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

(“Liberty”) 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 had retained counsel to defend us which had 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 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.

On June 7, 2022, the court filed

a Stipulation and Order for Entry of Judgment in the amount of $ 1,359,064 in favor of Liberty (the “Judgment”) following

summary judgment granted by the court to Liberty on all but one of the matters at issue in the case.

The Company filed an appeal in July

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.

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

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.

In Pederson II, Mr.

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

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 uncertainty.

On March 29, 2023, the Third Circuit ruled in favor of the Company on the appeal, thereby vacating the trial court’s prior

grant of summary judgment in favor of Liberty.

As a result of this ruling, the case has been remanded to the District Court for trial

on the merits of the Company’s coverage claims for defense and settlement costs.

The Court had ordered the return of the $ 1.6 million.

On August 8, 2023, the Company received $ 1.6 million as refunded by the registry of the court.

On November 16, 2023, prior to commencement

of a new trial which had been scheduled for December 4, 2023, the parties entered into a settlement agreement pursuant to which Liberty

paid the Company an additional $ 1 million and each party released the other from its respective claims and rights arising from the matter.

There is no further litigation with Liberty following this settlement.

Transactions with Related Parties

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2022 respectively.

Subsequent Events

February 28, 2024, the Company provided notice to KSURF of the Company’s election to terminate the License Agreements.

The terminations,

which were made due to the Company’s determination that further development efforts under the License Agreements would be futile,

are effective on March 29, 2024.

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