COCP US Equity☆

Item 1A. Risk Factors. 11

Item 1B. Unresolved Staff Comments. 41

Item 2. Properties. 41

Item 3. Legal Proceedings. 42

Item 4. Mine Safety Disclosures. 42

Part II. 43

Item 6. Selected Financial Data. 43

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 48

Item 8. Financial Statements. 48

Item 9A. Controls and Procedures. 49

Item 9B. Other Information. 49

Part III. 49

Item 10. Directors, Executive Officers and Corporate Governance. 49

Item 11. Executive Compensation. 49

Item 14. Principal Accounting Fees and Services. 49

Part IV. 50

Item 15. Exhibits, Financial Statement Schedules. 50

SIGNATURES 52

PART

I

Item

1. Business.

Overview

Cocrystal

Pharma, Inc. (the “Company” or “Cocrystal”) is a clinical-stage biotechnology company seeking to discover and

develop novel antiviral therapeutics as treatments for serious and/or chronic viral diseases. We employ unique structure-based technologies

and Nobel Prize winning expertise to create first- and best-in-class antiviral drugs. These technologies are designed to efficiently

deliver small molecule therapeutics that are safe, effective, and convenient to administer. We have identified promising discovery, preclinical

and clinical stage antiviral compounds for unmet medical needs caused by coronavirus, influenza virus, norovirus, and hepatitis C virus

(“HCV”) infections.

The

Company operates in 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.

Cocrystal

Technology

We

are developing antiviral therapeutics that inhibit the essential viral replication function of RNA viruses causing acute and chronic

viral diseases. Our goals include treating influenza virus, coronavirus, and norovirus infections by discovering and developing drug

candidates targeting the viral replication process. Additionally, one of our goals is to decrease the duration of HCV therapy by advancing

our drug candidate targeting the HCV RNA-dependent RNA polymerase enzyme through partnerships and/or licensing activities. In the case

of coronavirus antiviral therapeutics, we target replication enzymes and proteases that are required for the viral replication and transcription.

To discover and design these inhibitors, we use a proprietary platform comprising computational chemistry, medicinal chemistry, X-ray

crystallography and our extensive know-how. We determine the structures of cocrystals containing the inhibitors bound to the enzyme or

protein to guide our structure-based drug design. We also use advanced computational methods to screen and design product candidates

using proprietary cocrystal structural information. In designing the candidates, we seek to anticipate and avert potential viral mutations

leading to resistance. By designing and selecting drug candidates that interrupt the viral replication process and also have specific

binding characteristics, we seek to develop drugs that are not only effective against both the virus and possible mutants of the virus,

but which also have reduced off-target interactions that may cause undesirable clinical side effects. The successful application of our

approach requires an extensive knowledge of viruses and drug targets. In addition, knowledge and experience in the fields of structural

biology, and enzymology are required. We developed our proprietary structure-based drug design under the guidance of Dr. Roger Kornberg,

our Chief Scientist and Chairman of both our Scientific Advisory Board and Board of Directors (the “Board”), in addition

to a recipient of the Nobel Prize in Chemistry in 2006. Our drug discovery process focuses on the highly conserved regions of the viral

enzymes and inhibitor-enzyme interactions at the atomic level. Additionally, we have developed proprietary chemical libraries consisting

of non-nucleoside inhibitors, metal-binding inhibitors, and drug-like fragments. Our drug discovery process is different from traditional,

empirical, medicinal chemistry approaches that often require iterative high-throughput compound screening and lengthy hit-to-lead processes.

We will continue developing preclinical and clinical drug candidates using our proprietary drug discovery technology.

The

Company’s proprietary technology integrates several powerful and specialized techniques:

(2) Atomic resolution 3-D structure determination of drug binding pockets;

We

have applied these techniques to develop antiviral inhibitors of four important viruses: influenza virus, coronavirus, norovirus and

HCV.

Market-Driven

Product Profiles

In

all of our programs our goal is to develop best-in-class broad-spectrum antiviral drugs with high-barrier-to-drug resistance. An ideal

product for an antiviral therapy would have at least the following characteristics:

(1) High barrier to viral resistance;

(2) Effective against all viral subtypes that cause disease;

(3) Fast onset of action and/or shortened therapeutic time;

(4) Good safety and tolerability profile; and

Even

at the discovery stage of drug development, we select compounds with these factors in mind. Furthermore, we believe our technology is

capable of delivering therapies that satisfy all of these key factors, as detailed below.

High

barrier to drug resistance: Drug resistance is a major obstacle to developing effective antiviral therapies. Viruses can reproduce

rapidly and in enormous quantities in infected human cells. During viral replication, random changes in the viral genome, called mutations,

develop. If such a mutation occurs in a region of the viral genome that is targeted by a given antiviral therapy, that therapy may no

longer be effective against the mutated virus. These mutated or “resistant” viruses can freely infect and multiply even in

individuals who have received drug treatment. In some cases, resistant virus strains may even predominate. For example, in the 2009 swine

influenza pandemic, the predominant strain was resistant to the best available therapies. In the COVID-19 pandemic mutated viruses have

been identified and sequenced demonstrating that the potential for resistance to current drugs and reduced effectiveness of vaccines

is already present. For example, the Omicron variant which arose as the dominant strain of COVID-19 in late 2021 until it diminished

in the winter of 2022 displayed increased resistance to available vaccines and treatments, resulting in the limitation or suspension

of emergency use authorizations by the FDA for certain therapeutic products.

The

Company’s focus on viral replication proteins can overcome the obstacle of viral resistance. We identify and target critical components

of viral replication proteins that are essential for function, and therefore, sensitive to change. A mutation in these critical components

is likely to inactivate the replication protein and, in turn, render the virus incapable of replicating. Because such mutations cannot

propagate, the virus cannot effectively develop resistance to the enzyme inhibitors we employ. We test the effectiveness of our compounds

against potential viral mutations and select compounds with the highest barrier to resistance.

Broadly

effective against major strains responsible for a viral disease: For any given viral disease, there are different strains of viruses

that cause the disease. For example, there are three types of influenza viruses, A, B, and C. Influenza A and B viruses are significant

human respiratory pathogens that cause seasonal flu. Influenza A viruses can also cause an influenza pandemic. Influenza C is a subtype

of the influenza virus that tends to cause only mild illness and is not responsible for seasonal or pandemic infections. Our goal is

to design and develop drug candidates that will be effective on the broadest possible range of viruses causing the disease.

Many

antiviral drugs available today are effective only against certain strains of a given virus and less effective or not effective at all

against other strains. To address this problem, we are developing drug candidates that specifically target viral proteins involved in

viral replication. Despite the various strains of virus that may exist, these enzymes required for viral replication are essentially

similar (highly conserved) among all strains of a given virus. By targeting these highly conserved regions of the replication enzymes,

our antiviral compounds are designed and tested to be effective against major virus strains. Replication enzymes are generally conserved

not only among subtypes of a given virus but also among many different viruses, creating an opportunity for the development of broad-spectrum

antiviral drugs.

Fast

onset of action: As viruses can reproduce rapidly and in enormous quantities in human cells, antiviral drugs are needed with faster

onset of viral load reduction resulting in shorter treatment time.

Safety

and tolerability: All drugs have side effects, also referred to as adverse effects. These usually result from a drug’s ability

to bind to human molecules (usually proteins). When this interaction is intentional (i.e., part of the drug’s mechanism of action),

the adverse effects are classified as on-target effects. When this interaction is unintentional (i.e., resulting from the drug’s

interaction with an unintended human molecule), the effects are called off-target effects. Our inhibitors target viral replication enzymes,

which are generally unique to viruses. Because the targets are viral, not human, minimal adverse effects may be the result. During the

discovery phase, we evaluate candidate compounds for potential cross-reactivity with human replication enzymes and attempt to eliminate

those compounds that are cross-reactive with human homologous proteins. In December 2022, we reported favorable safety and tolerability

results from a Phase 1 study of our oral antiviral CC-42344 developed for the treatment of both pandemic and seasonal influenza A.

Ease

of administration: We select compounds for development that can be administered orally, preferably once daily in pill-form, or by

inhalation or injection.

Research

and Development Update

During

the year ended December 31, 2022 the Company focused its research and development efforts primarily in three areas:

Influenza

infections

We

have several candidates under development for the treatment of influenza infection. CC-42344, a novel oral PB2 inhibitor, was selected

as a preclinical lead for the treatment of pandemic and seasonal influenza A, and was advanced to a Phase 1 clinical trial in 2022 as

described in more detail below. This candidate binds to a highly conserved PB2 site of influenza polymerase complex (PB1: PB2: PA) and

exhibits a novel mechanism of action. CC-42344 showed excellent antiviral activity against influenza A strains, including avian pandemic

strains and Tamiflu resistant strains, and has favorable pharmacokinetic and drug resistance profiles.

In

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

in Australia. In April 2022 we announced preliminary results from the first two cohorts of the single-ascending dose portion of the study

in which CC-42344 demonstrated a favorable safety and pharmacokinetic profile. In December 2022, 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.

In

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

of these have potencies approaching single-digit nanomolar. On 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. See “Item 1 – Business – Collaborations – Merck

Collaboration” for more information.

In

January 2021, we announced that we completed all research obligations under the Merck exclusive worldwide license and collaboration agreement,

and that Merck would be solely responsible for further development of the influenza A/B antiviral compounds that were discovered using

Cocrystal’s unique structure-based technologies and Nobel Prize-winning expertise. Merck is continuing development of the influenza

A/B antiviral compounds under the terms of our Collaboration Agreement and is legally protecting the intellectual property of the collaboration

compounds.

Coronavirus

infections

In

October 2022 we announced the selection of a novel, broad-spectrum antiviral drug candidate CDI-988 for clinical development as an oral

treatment for SARS-CoV-2, the virus that causes COVID-19. CDI-988 targets a highly conserved region in the active site of SARS-CoV-2

main (3CL) protease required for viral replication and was specifically designed and developed as an oral antiviral candidate for COVID-19

using Cocrystal’s proprietary structure-based drug discovery platform technology.

In

January 2022 we announced the selection of two investigational novel antiviral drug candidates, CDI-988 and CDI-873, for further

development as oral treatments for coronaviruses, including SARS-CoV-2, the virus that causes COVID-19. Both compounds exhibited

superior in vitro potency against SARS-CoV-2 with activity maintained against recent variants of concern. In preclinical studies,

both candidates demonstrated a favorable safety profile and pharmacokinetic properties supportive of daily oral dosing. We plan to

begin a randomized, double-blind, placebo-controlled Phase 1 study of CDI-988 during the first half of 2023.

In

December 2020 we announced the selection of CDI-45205 for further development against coronaviruses including SARS-CoV-2, that causes

COVID-19. CDI-45205 was one of the broad-spectrum protease inhibitors that were obtained from Kansas State University Research Foundation

(“KSURF”) under an exclusive license agreement announced in April 2020. That agreement provides Cocrystal with an exclusive,

royalty-bearing license to develop and commercialize therapeutic, diagnostic and prophylactic products against coronaviruses, caliciviruses

and picornaviruses based on antivirals discovered by KSURF. See “Collaborations – Kansas State University Research Foundation.”

Norovirus

Infections

We

continue to identify and develop non-nucleoside polymerase and protease inhibitors using the Company’s proprietary structure-based

drug design technology platform. In addition, we now have exclusive rights to norovirus protease inhibitors for use in humans obtained

in the license from KSURF (see under Collaborations below). We expect to select a preclinical lead in the first half of 2023.

Therapeutic

Targets

Influenza:

A worldwide public health problem, including the potential for pandemic disease.

Influenza

is a severe respiratory illness, caused primarily by influenza A or B virus. The Centers for Disease Control and Prevention (the “CDC”)

estimates that influenza was linked to approximately 79,000 deaths and 960,000 hospitalizations in the United States during the 2017-2018

flu season. According to the report published by BCC Research in May 2018, the global influenza market was valued at approximately $5.6

billion in 2017 and was expected to reach nearly $6.5 billion by 2022, increasing at a compound annual growth rate (CAGR) of 3.0% from

2017 through 2022.

Currently,

approved antiviral treatments for influenza are effective, but burdened with significant viral resistance. Strains of influenza virus

that are resistant to the approved treatments osteltamivir phosphate (Tamiflu®) and zanamavir (Relenza®), baloxavir marboxil

(Xofluza®) have appeared, and in some cases predominated. For example, the predominant strain of the 2009 swine influenza pandemic

was resistant to Tamiflu. These drugs target viral neuraminidase enzymes, which are not highly conserved between viral strains. In fact,

different influenza virus strains such as H1N1 and H5N1 are named according to their respective differences in hemagglutinin (H) and

neuraminidase (N).

The

Company selected CC-42344, a novel PB2 inhibitor, as a lead candidate and has clinically completed a Phase 1 study. In December 2022,

the Company reported on the favorable safety and tolerability results of the CC-42344 Phase 1 study and plan to initiate a Phase 2a study

in the first half of 2023. CC-42344 binds to a highly conserved PB2 site of the influenza polymerase (PB1: PB2: PA), and exhibits a novel

mechanism of action. CC-42344 has shown excellent antiviral activity against influenza A strains, including avian pandemic strains, and

Tamiflu-resistant, Xofluza-resistant strains, and has a favorable pharmacokinetic profile. In addition to Tamiflu, an approved antiviral

product candidate that is a competitor for the Company’s influenza programs, S-033188, being developed by Shionogi/Roche. S-033188

was approved as Xofluza in Japan on February 23, 2018, and in the US as baloxavir marboxil (trade name Xofluza®) on October

24, 2018. See “Item 1 – Business – Research and Development Update – Influenza” for more information. Xofluza-resistant

strains emerged in both the US and Japan within several months of Xofluza being on the market.

Coronavirus:

COVID-19 continues to be a global pandemic fueled by an emergence of new strains.

As

a global pandemic with 760,360,956 COVID-19 confirmed cases globally, including 6,873,477 deaths, as of March 16, 2023, according

to the data reported by the World Health Organization (“WHO”). The COVID-19 pandemic and the measures taken by the federal,

state and foreign governments to stop the spread of the virus have caused a significant disruption to the U.S. and global economy.

Coronaviruses

(CoV) are a large family of RNA viruses that historically have been associated with illness ranging from mild symptoms similar to the

common cold to more severe respiratory disease. Infection with the novel SARS-CoV-2 has been associated with a wide range of responses,

from no symptoms to more severe disease that has included pneumonia, severe acute respiratory syndrome, kidney failure, and death. The

incubation period for SARS-CoV-2 is believed to be within 14 days after exposure, with most illness occurring within about 5 days after

exposure. SARS-CoV-2, like other RNA viruses, is prone to mutate over time, resulting in the emergence of multiple variants. Adaptive

mutations in the viral genome can alter the virus’s pathogenic potential. Even a single amino acid exchange can drastically affect

a virus’s ability to evade the immune system and complicate the vaccine and antibody therapeutics development against the virus.

Based on the recent epidemiological update by the WHO, five SARS-CoV-2 VOCs (variants of concern) have been identified since the beginning

of the pandemic. Also, as demonstrated in Delta and Omicron variants, some variations allow the virus to spread more easily and make

it resistant to the treatments and vaccines.

On

October 22, 2020, FDA approved the antiviral drug Veklury (remdesivir) for the treatment of COVID-19 requiring hospitalization. Remdesivir

is a nucleotide prodrug that inhibits viral replication and was previously evaluated in clinical trials for Ebola treatment in 2014.

In addition to Veklury, the FDA has issued emergency authorization use on several antibody and antiviral therapeutics, including Paxlovid

(nirmatrelvir and ritonavir) and Lagevrio (molpiravir). We continue pursuing the development of novel antiviral compounds for the treatment

of coronavirus infections using our established proprietary drug discovery platform. By targeting the viral replication enzymes and protease,

we believe it is possible to develop an effective treatment for all coronavirus diseases including COVID-19, Severe Acute Respiratory

Syndrome (SARS), and Middle East Respiratory Syndrome (MERS) - coronaviruses.

Hepatitis

C: A large competitive market with opportunity for shorter treatment regimens.

HCV

is a highly competitive and changing market. Currently, the standard treatment varies with the genotype of the HCV infection. Prior to

late 2013, treatment included peginterferon alpha and ribavirin, along with a protease inhibitor (either telaprevir, boceprevir, or simeprevir).

In late 2013, sofosbuvir, a drug belonging to a new class of drugs called “nucleoside analogs” or “Nucs,” was

approved to treat HCV. In patients infected with HCV genotype 1 (the most common HCV genotype in the US), sofosbuvir was administered

in combination with peginterferon alpha and ribavirin. In patients with HCV genotypes 2 and 3, however, sofosbuvir could be effectively

administered in combination with ribavirin, without the need for peginterferon alpha. Since 2014, several new combinations of direct-acting

antiviral agents (“DAAs”) have been approved for the treatment of HCV infection. These include Harvoni (sofosbuvir/ledipasvir)

12 weeks of treatment, Viekira Pak (ombitasvir/paritaprevir/ritonavir, dasabuvir) 12 weeks of treatment, Epclusa (sofosbuvir/velpatasvir)

12 weeks of treatment, Zepatier (elbasvir/grazoprevir) 12 weeks of treatment and Mavyret (glecaprevir/pibrentasvir) 8 weeks of treatment.

We believe the next improvements in HCV treatment will be ultra-short combination oral treatments of four to six weeks, the goal of our

program.

We

anticipate a significant global HCV market opportunity that will persist through at least 2036, given the large prevalence of HCV infection

worldwide. The 2017 World Health Organization Global Hepatitis Report estimates that 71 million people worldwide have chronic HCV infections.

We

are targeting the viral NS5B polymerase with an NNI, which could be developed as part of an all-oral, pan-genotypic combination regimen.

Our focus is on developing what is now called ultrashort treatment regimens from 4 to 6 weeks in length. Such a combination treatment

CC-31244 with different classes of approved DAAs has the potential to change the paradigm of treatment for HCV with a shorter duration

of treatment. Combination strategies with approved drugs could allow us to expand CC-31244 into the HCV antiviral therapeutic area globally

and could lead to a high and fast cure rate, to improved compliance, and to reduced treatment duration. To our knowledge no competing

company has yet developed a short HCV treatment of less than 8 weeks with a high (>95%) sustained virologic response (SVR) at week

12.

CC-31244,

an HCV NNI, is a potential best in class pan-genotypic inhibitor of NS5B polymerase for the treatment of HCV. The Company completed a

Phase 1a/b study in Canada in September 2016, with favorable safety results in a randomized, double-blinded, Phase 1a/b study in healthy

volunteers and HCV-infected subjects. The Company completed a Phase 2a study in HCV genotype 1 subjects in the United States. Cocrystal

presented the interim results from the Phase1a/b study at the APASL in February 2017. HCV-infected subjects treated with CC-31244 had

a rapid and marked decline in HCV RNA levels, and slow viral rebound after treatment. Results of this study suggest that CC-31244 could

be an important component in a shortened duration all-oral HCV combination therapy. Patient enrollment has been completed in the Phase

2b and the final study report filed with the FDA. See “Item 1 – Business – Research and Development Update –

Hepatitis C” for more information.

The

Company has been seeking a partner for further clinical development of CC-31244 since completing Phase 2a trials.

Norovirus:

A worldwide public health problem responsible for close to 90% of epidemic, non-bacterial outbreaks of gastroenteritis around the world.

Norovirus

is a very common and highly contagious virus that causes symptoms of acute gastroenteritis including nausea, vomiting, stomach pain and

diarrhea. Other symptoms include fatigue, fever and dehydration. Noroviruses are a major cause of gastrointestinal illness in closed

and crowded environments, having become notorious for their common occurrence in hospitals, nursing homes, childcare facilities, and

cruise ships. In the United States alone, noroviruses are the most common cause of acute gastroenteritis, and are estimated to cause

19-21 million illnesses each year and contribute to 109,000 hospitalizations and 900 deaths. Noroviruses are responsible for up to 1.1

million hospitalizations and 218,000 deaths annually in children in the developing world. In immunosuppressed patients, chronic norovirus

infection can lead to a debilitating illness with extended periods of nausea, vomiting and diarrhea. There is currently no effective

treatment or effective vaccine for norovirus, and the ability to curtail outbreaks is limited. A few companies have been developing antiviral

treatments for this disease and four candidate vaccines are in stages of clinical testing by Vaxart Pharmaceutical, Takeda Pharmaceuticals,

Anhui Zhifei Longcom Biopharmaceutical (China) and National Vaccine and Serum Institute (China).

By

targeting viral replication enzymes and a viral protease, we believe it is possible to develop an effective treatment for all genogroups

of norovirus. Also, because of the significant unmet medical need and the possibility of chronic norovirus infection in immunocompromised

individuals, new antiviral therapeutic approaches may warrant an accelerated path to market. The Company is developing inhibitors of

the RNA-dependent RNA polymerase and protease of norovirus. Similar to the HCV polymerases, these enzymes are essential to viral replication

and are highly conserved between all noroviral genogroups. Therefore, an inhibitor of these enzymes might be an effective treatment or

short-term prophylactic agent, when administered during a cruise or nursing home stay, for example. We have developed X-ray quality norovirus

polymerase and protease crystals and have identified promising inhibitors. We are implementing the platform and approaches that have

proven successful in our other antiviral programs.

Intellectual

Property

Our

success depends, in part, upon our ability to protect our core technology. To establish and protect our proprietary rights, we rely on

a combination of patents, patent applications, trademarks, copyrights, trade secrets and know-how, license agreements, confidentiality

procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual

rights.

Our

patent portfolio consists of issued patents and pending applications in the areas primarily related to the treatment of disease associated

with HCV, Influenza A, Influenza B, and norovirus/coronavirus.

In

our HCV program, our patent portfolio consists of several patent families, with granted patents in the U.S. and Europe, as well as China,

Canada, Eurasia, Japan, and Singapore. Applications are pending in numerous other jurisdictions.

In

our Influenza A program, our patent portfolio consists of several patent families, including two pending international (PCT) applications

and two families of pending applications in the U.S. and various foreign countries.

In

our Influenza A/B program, our patent portfolio consists of a number of patent families pending, variously, as international (PCT) applications

and in Taiwan. Aspects of this program are developed in collaboration with Merck, which is legally protecting the intellectual property

of the collaboration compounds.

In

our norovirus and coronavirus programs, our patent portfolio consists of three pending families of U.S. provisional applications, and

a portfolio of patent families licensed through KSURF.

Collaborations

Merck

Collaboration

On

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

with Merck to discover and develop certain proprietary influenza A/B antiviral agents.

Under

the terms of the Collaboration Agreement, Merck is funding research and development for the program at Cocrystal and Merck, including

clinical development at Merck, protecting intellectual property and Merck is responsible for worldwide commercialization of any products

derived from the collaboration. The Company received an upfront payment of $4,000,000 in January 2019 and is eligible to receive milestone

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. Other than the initial upfront payment, to date we have not received any payments under this Collaboration

Agreement.

The

Collaboration Agreement operates under a Research Operating Plan (ROP) which includes goals for both organizations. In January 2021,

the Company announced it had completed all research obligations under the Collaboration Agreement, and that Merck is now solely responsible

for further development of the influenza A/B antiviral compounds that were discovered in the collaboration using Cocrystal’s unique

structure-based technologies and Nobel Prize-winning expertise.

Kansas

State University Research Foundation

Cocrystal

entered into a License Agreement with KSURF on February 18, 2020 to further develop certain proprietary broad-spectrum antiviral compounds

for the treatment of norovirus and coronavirus infections.

Pursuant

to the terms of the License Agreement, KSURF granted the Company an exclusive royalty bearing license to practice under certain patent

rights, under patent applications covering antivirals against coronaviruses, caliciviruses, and picornaviruses, and related know-how,

including to make and sell therapeutic, diagnostic and prophylactic products.

The

Company agreed to pay KSURF a one-time non-refundable license initiation fee of $80,000 under the License Agreement, and annual license

maintenance fees. The Company also agreed to make certain future milestone payments of up to approximately $3.1 million, dependent upon

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

outside the United States.

On

April 19, 2020, the Company entered into a second License Agreement with KSURF in addition to the License Agreement entered into in February

2020.

Pursuant

to the terms of the second License Agreement, KSURF granted the Company an exclusive royalty bearing license to practice under certain

patent rights under patent applications covering antivirals against coronaviruses, caliciviruses, and picornaviruses, and related know-how,

including to make and sell therapeutic, diagnostic and prophylactic products.

The

Company agreed to pay KSURF a one-time non-refundable license initiation fee and annual license maintenance fees. The Company also agreed

to make certain future milestone payments of up to approximately $4.2 million, dependent upon the progress of clinical trials, regulatory

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

Competition

The

biotechnology and pharmaceutical industries are subject to intense and rapidly changing competition as companies seek to develop new

technologies and proprietary products. We face worldwide competition from larger biotechnology and pharmaceutical companies, universities

and other academic or research institutions and government agencies that are developing and commercializing pharmaceutical products similar

to our product candidates that target the viruses we are seeking to treat. We know of several companies that have marketed or are developing

products for the treatment of influenza, coronavirus and HCV, including Roche, Gilead Sciences, Inc. (“Gilead”), Merck, Janssen

Pharmaceuticals, Inc., Bristol-Myers Squibb, Toyama Chemical Co., Shionogi/Roche and Abbvie, Inc. Their products are widely considered

effective. Further, in the wake of the global COVID-19 pandemic a number of third parties, including large biotechnology and pharmaceutical

companies such as Pfizer Inc., Moderna, Inc., Janssen Pharmaceuticals, Inc., and academic institutions have been conducting research

aimed at development of an effective treatment for, or a vaccine against, COVID-19. A number of vaccines and treatments for COVID-19

have been commercialized under the FDA’s emergency use authorization. At least one treatment and four vaccines for COVID-19 have

received FDA approval. Many of the companies developing products for the viral diseases that are the focus of our programs have substantially

greater financial resources, including government funding, expertise and capabilities than we do and have existing products in significantly

more advanced stages of development. Additionally, viral mutations can lead to new strains or variants of a virus that may be more resistant

to products we develop when compared to those of competitors. See “Risk Factors” for more information on the risks we face

with respect to our competition.

To

date, we have not fully developed, received regulatory approval for or commercialized any of our product candidates. Our ability to compete

will depend, to a great extent, on the speed in which we and our collaborators can develop safe and effective product candidates, complete

clinical testing and regulatory approval processes, and coordinate with third parties to produce and distribute the resulting products

in sufficient commercial quantities to create and maintain a market for such products at favorable costs and prices. If we do complete

development of and obtain regulatory approval to market any product candidate, we anticipate that the competition we would face with

respect to such product would be based on a combination of a number of factors including efficacy, safety, reliability, availability,

price, patent position, and other factors.

Government

Regulation

Government

authorities extensively regulate the research, development, testing, manufacturing and commercialization of drug products. Any product

candidates we develop must be approved by the U.S. Food and Drug Administration (“FDA”) before they may be legally marketed

in the U.S., and by the appropriate foreign regulatory agencies before they may be legally marketed in other countries. The clinical

testing of product candidates to establish their safety and efficacy in humans is subject to substantial statutory and regulatory requirements

with which we must comply.

In

addition to the U.S. requirements such as those enforced by the FDA with

respect to safety and efficacy of research, testing, development and production, we also must comply with applicable laws and regulations

of any foreign jurisdictions in which we operate. For example, our Phase 1 trial in Australia in 2022 for CC-42344, our lead Influenza

A product candidate, caused us to be subject to the Australian government’s laws and regulations pertaining to the research and

development, including clinical testing on human subjects, of therapeutic product candidates. Our presence in Australia has also subjected

us to more general laws applicable to operations abroad, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”) and comparable

legislation and regulation in foreign jurisdictions. In general, the FCPA prohibits U.S. corporations and their representatives from offering,

promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate

to obtain or retain business abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries.

Other countries have enacted similar anti-corruption laws and/or regulations. Further, because of our reliance on one or more CROs and

CMOs with respect to our research and development activities both in the U.S. and in foreign jurisdictions, we may have limited control

over compliance with such requirements in certain instances.

With

respect to coronavirus-related products as of the date of this Report, with the exception of Veklury (remdesivir), an antiviral drug

commercialized by Gilead, no treatment has been approved by the FDA for COVID-19 symptoms. Instead, most existing treatments for COVID-19

that are or have been offered by competing companies have been made available under the FDA’s emergency use authorization. The

FDA has, however, reduced or removed many of these authorizations, including for treatments using monoclonal antibodies such as the REGEN-COV

treatment commercialized by Regeneron Pharmaceuticals, Inc., due to waning efficacy against symptoms caused by the Omicron variant of

the virus which until recently was the dominant strain. As the foregoing description demonstrates, our coronavirus programs and any product

candidates that we may develop therefrom are subject to uncertainty as to the FDA’s actions, which are in turn inherently unpredictable

given the unpredictable nature of the virus and its mutations, as well as their effects on treatment compounds.

Human

Capital

As

of March 21, 2023, we employed 12 full-time employees. Of these full-time employees, nine are engaged in research and development activities.

In addition, we have contracts with CROs, CMOs and consultants to provide chemistry, toxicology, preclinical, clinical, and regulatory

work on our programs, including in both preclinical and clinical studies for our product candidates.

Available

Information

Our

corporate website is www.cocrystalpharma.com. We make available on our website under “Investors – SEC Filings” access

to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A and

amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended

(the “Exchange Act”), free of charge.

ITEM

1A. RISK FACTORS

You

should carefully consider the risks described below, as well as other information contained in this report, including the consolidated

financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of

Operations.” The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects,

results of operations, financial condition, and cash flow.

Summary

Risk Factors

Our

business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. The following

is a summary of the principal risk factors we face:

● We have no history of commercializing products.

Risk

Factors

RISKS

RELATED TO OUR BUSINESS

We

have never generated revenue from product sales and all of our product candidates are currently in the preclinical and early clinical

stage, and we may continue to incur significant losses for the foreseeable future and never generate revenue from product sales.

We

are a preclinical and early stage clinical, biopharmaceutical discovery and development company. We completed a Phase 1 clinical trial

for our Influenza A lead oral candidate CC-42344 in December 2022. We also plan to commence a COVID-19 clinical trial in 2023 for our

lead oral candidate CDI-988. Because of the need to complete clinical trials, establish safety and efficacy and obtain regulatory approval,

which is an expensive and time-consuming process, we do not anticipate generating revenue from product sales for at least five years

and will continue to sustain considerable losses. We may develop a partnership that could generate income sooner, but there is no guarantee

that will be achievable.

We

had an accumulated deficit of $297,930,000 from inception through December 31, 2022 and expect to continue losing money in the future.

We may never achieve income from operations or have positive cash flow from operations.

As

an early-stage drug development company, our focus is on developing product candidates, obtaining regulatory approvals and commercializing

pharmaceutical products. As a result, we have lost $297,930,000 from inception through December 31, 2022, expect losses to continue,

and have never generated revenue from product sales. It is likely that we will need to raise additional capital in the future. There

can be no assurance that we will ever generate income from operations or have positive cash flow from operations.

Because

we have yet to generate any revenue from product sales on which to evaluate our potential for future success and to determine if we will

be able to execute our business plan, it is difficult to evaluate our prospects and the likelihood of success or failure of our business.

Our

ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with partners, to successfully

complete the development of, obtain the regulatory approvals for and commercialize pharmaceutical product candidates. We have no pharmaceutical

product candidates that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of pharmaceutical

products for foreseeable future, and might never generate revenues from the sale of pharmaceutical products. Our ability to generate

revenue and achieve profitability will depend on, among other things, the following:

● identifying and validating new therapeutic strategies;

● attracting, hiring and retaining qualified personnel.

Because

of the numerous risks and uncertainties associated with pharmaceutical product development, we cannot predict the timing or amount of

increased expenses and when we will be able to achieve or maintain profitability, if ever. Our expenses could increase beyond expectations

if we are required by regulatory agencies to perform additional unanticipated studies and trials.

Even

if one or more pharmaceutical product candidates we independently develop is approved for commercial sale, we anticipate incurring significant

costs associated with commercializing any approved pharmaceutical product candidate. Moreover, even if we can generate revenues from

the sale of any approved pharmaceutical products, we may not become profitable and may need to obtain additional funding to continue

operations.

Because

early-stage drug development requires major capital investment, as we continue to incur operating losses, we will need to raise additional

capital or form strategic partnerships to support our research and development activities in the future.

We

are still in the early stages of preclinical and clinical development of our product candidates and have no products approved for commercial

sale or presently in clinical trials. However, our ability to conduct clinical trials in a cost-effective manner and within the desired

timeframes remains subject to uncertainties arising from COVID-19 (including the pandemic’s effect on third parties on which we

rely), supply chain shortages, and potential difficulties in obtaining adequate participant enrollments. Further, developing pharmaceutical

products, including conducting preclinical studies and clinical trials, is capital-intensive. As a rule, research and development expenses

increase substantially as we advance our product candidates toward clinical programs. If we are able to advance our products through

clinical trials, we may need to raise additional capital to support our operations and/or form partnerships, in addition to our existing

collaborative alliances, which may give substantial rights to a partner. Such funding or partnerships may not be available to us on acceptable

terms, or at all. Moreover, any future financing may be very dilutive to our existing stockholders.

As

we move lead compounds through toxicology and other preclinical studies, also referred to as nonclinical studies, we have and we will

be required to file an IND or its equivalent in foreign countries, and as we conduct clinical development of product candidates, we may

have adverse results that may cause us to consume additional capital. Our partners may not elect to pursue the development and commercialization

of our product candidates subject to our respective agreements with them. These events may increase our development costs more than we

expect. We may need to raise additional capital or otherwise obtain funding through strategic alliances if we initiate clinical trials

for new product candidates other than programs currently partnered. We will require additional capital to obtain regulatory approval

for, and to commercialize, product candidates.

In

securing additional financing, such additional fundraising efforts may divert our management’s attention from our day-to-day activities,

which may adversely affect our ability to develop and commercialize product candidates. We cannot guarantee that future financing will

be available in sufficient amounts or on terms acceptable to us, if at all. If we cannot raise additional capital when required or on

acceptable terms, we may be required to:

If

we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development

and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects or may render

the Company unable to continue operations.

RISKS

RELATED TO THE DISCOVERY, DEVELOPMENT AND COMMERCIALIZATION OF PRODUCT CANDIDATES

Our

COVID-19 programs are in the preclinical stage and we face significant competition from major companies who have developed vaccines or

COVID-19 treatments. If we fail to gain market share because our competitors develop and successfully commercialize effective COVID-19

vaccines or therapies or if we fail to obtain or maintain FDA authorization or to otherwise account for uncertainties surrounding the

virus, our business and future prospects could be materially and adversely affected.

While

we plan to commence a Phase 1 clinical study of our COVID-19 lead oral candidate CDI-988 in the first half of 2023, we may be unable

to produce an effective therapy in a timely manner or at all. Additionally, we are committing substantial financial and other resources

to our COVID-19 program, which may negatively impact our other programs. Further, in the wake of the global COVID-19 pandemic a number

of third parties, including large biotechnology and pharmaceutical companies and academic institutions have developed vaccines, at least

two of which have FDA approval. Some competitors have also received FDA approval or emergency use authorization for the treatment of

COVID-19. Some of these large pharmaceutical companies, including Pfizer, Moderna and Janssen Biotech, Inc., have obtained FDA approval

for vaccines which have demonstrated high efficacy rates and are currently being distributed to the general population, with the permitted

age of use for certain vaccines as low as six months and older. While our COVID-19 program is focused on treatment rather than prevention,

widespread vaccination limits our prospects with respect to any therapeutic product candidate we develop.

Further,

some of our competitors that are also developing treatments for the virus have substantially more resources, including government funding,

than we do and have existing products in significantly more advanced stages of development. For example, the FDA approved remdesivir,

an investigational antiviral agent developed by Gilead for the treatment of patients with COVID-19 requiring hospitalization. In addition,

the FDA has issued an emergency use authorization for the investigational monoclonal antibody therapy for the treatment of mild-to-moderate

COVID-19 in adult and pediatric patients. At least one other competitor is conducting a combination Phase 2/3 clinical trials for a treatment

using cannabidiol to treat COVID-19 for patients with heart issues. Another competitor is conducting Phase 2 clinical trials for the

treatment of “long” COVID, also known as post-COVID syndrome, for patients who experience symptoms for more than four weeks.

Even if we do obtain FDA authorization for a therapeutic product, the FDA may subsequently rescind or limit such authorization as more

information about the product, including its efficacy and side effects, becomes available. Further, this virus is highly mutative and

a number of variants have already arisen, and any treatment we are able to develop and commercialize will therefore remain subject to

the risk that a mutation will occur that produces a strain or strains of the virus to which such treatment has a diminished effect or

is ineffective. For example, the Omicron variant of the virus is more resistant to treatments that were effective against prior variants

of the virus. If we do develop a treatment that is effective against a current variant, a later variant may arise that reduces or eliminates

the product’s efficacy before we are able to commercialize it. Further, if this occurs, one or more competitors’ products

may be more effective against new variants than ours, resulting in a diminished market for our products. For example, on February 11,

2022, the FDA announced its emergency use authorization for bebtelovimab, a new monoclonal antibody for the treatment of COVID-19 by

non-hospitalized patients, that retains activity against the Omicron variant. If we are unable to timely advance our COVID-19 program,

or if we fail to gain or maintain a market share as a result of our competitors developing and successfully commercializing vaccines

and effective COVID-19 therapies more quickly than we do, our business and future prospects could be materially and adversely affected.

We

will depend on Merck for the successful research, development and commercialization of our Influenza A/B product candidates.

We

are party to the Collaboration Agreement, dated January 4, 2019, with Merck to research, develop, and commercialize certain proprietary

Influenza A/B antiviral agents. On January 19, 2021, the Company announced that it had completed all research obligations under the Collaboration

Agreement with Merck, and Merck is now solely responsible for further development of the Influenza A/B antiviral compounds and will also

be solely responsible for the commercialization of any products derived therefrom. See “Item 1 – Business – Collaborations

– Merck Collaboration” for more information on the Collaboration Agreement. As such, the success of this collaborative alliance

will depend on the efforts and activities of Merck, particularly moving forward.

If

our research collaboration with Merck is terminated or is otherwise unsuccessful, including failure to reach milestones, we would not

receive milestone payments or royalties, which could materially and adversely affect our ability to successfully develop and commercialize

Influenza A/B product candidates and our future financial condition.

Pursuant

to the terms of the Collaboration Agreement, Merck agreed to, among other things, (i) fund the research and development collaboration,

including clinical development and commercialization; (ii) make certain milestone payments up to a total of $156 million, including payments

associated with the successful product development and attainment of certain U.S. and EU regulatory approvals for the developed products

and sales volume; and (iii) pay royalties on net sales of the products.

Merck

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

Agreement, in its sole discretion, without cause. Furthermore, research collaborations, including the Collaboration Agreement, may turn

out to be unsuccessful and are subject to certain risks, including the following risks:

● change the focus by Merck of its development and commercialization efforts;

If

our collaboration with Merck is unsuccessful for these or other reasons, or is otherwise terminated for any reason, we would not receive

the milestone payments or royalties under the Collaboration Agreement.

Further,

pursuant to the Collaboration Agreement Merck will only be obligated to make many of the milestone payments if our Influenza A/B product

receives required regulatory approvals, is commercialized and net sales exceed the thresholds set forth in the Collaboration Agreement.

Achieving milestones may be difficult and time-consuming. If some or all of these goals are not achieved, we may not receive some or

all of the milestone payments under the Collaboration Agreement. As of the date of this Report, none of the milestones under the Collaboration

Agreement have been reached.

Any

of the foregoing could have a material adverse effect on our ability to successfully develop and commercialize Influenza A/B product

candidates and our future financial condition.

If

we form strategic alliances which are unsuccessful or are terminated, we may be unable to develop or commercialize certain product candidates

and we may be unable to generate revenues from our development programs.

In

addition to the Collaboration Agreement with Merck, we are likely to use third-party alliance partners for financial, scientific, manufacturing,

marketing and sales resources for the clinical development and commercialization of certain of our product candidates. These strategic

alliances will likely constrain our control over development and commercialization of our product candidates, especially once a candidate

has reached the stage of clinical development. Our ability to recognize revenues from successful strategic alliances may be impaired

by several factors including:

Termination

of a strategic alliance may require us to seek out and establish alternative strategic alliances with third-party partners. This may

not be possible, including due to restrictions under the terms of our existing collaborations, or we may not be able to do so on terms

acceptable to us. See also the risk factor entitled “We will depend on Merck for the successful research, development and commercialization

of our Influenza A/B product candidates.” If we fail to establish alternative strategic alliances with third-party partners on

terms acceptable to us, or at all, we may be required to limit the size or scope of one or more of our programs or decrease our expenditures

and seek additional funding by other means. Such events would likely have a material adverse effect on our results of operations and

financial condition.

We

expect to rely on third parties to conduct some or all aspects of our compound formulation, research and preclinical testing, if those

third parties do not perform satisfactorily our business and future prospects would be materially and adversely affected.

We

do not expect to independently conduct all aspects of our drug discovery activities, compound formulation research or preclinical testing

of product candidates. We rely and expect to continue to rely on third parties to conduct some aspects of our preclinical testing and

on third-party CROs to conduct clinical trials. This reliance can materially delay our research and developments efforts, and increase

the costs of undertaking them. For example, beginning in 2021, certain of our CROs began experiencing staffing shortages and other issues