{"url_path":"/sec/cocp/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 for more information on the risks and uncertainties","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1412486/0001493152-26-023377-index.html","accession_number":"0001493152-26-023377","cik":"0001412486","ticker":"COCP","issuer_name":"Cocrystal Pharma, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1412486/0001493152-26-023377-index.html","primary_entity_key":"0001412486","primary_entity_name":"Cocrystal Pharma, Inc."},"word_count":4443,"has_tables":true,"body_markdown":"Item 1A- Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 for more information on the risks and uncertainties\nwe face.\n\n \n\n**Foreign\nCurrency Transactions**\n\n \n\nThe\nCompany and its subsidiaries use the U.S. dollar as functional currency. Foreign currency transactions are initially measured and recorded\nin the functional currency using the exchange rate on the date of the transaction. Foreign exchange gains and losses arising from settlement\nof foreign currency transactions are recognized in profit and loss.\n\n \n\nCocrystal\nAustralia maintains its records in Australian dollars. The monetary assets and liabilities of Cocrystal Australia are remeasured into\nthe functional currency using the closing rate at the end of every reporting period. All nonmonetary assets and liabilities and related\nprofit and loss accounts are remeasured into the functional currency using the historical exchange rates. Profit and loss accounts, other\nthan those that are remeasured using the historical exchange rates, are remeasured into the functional currency using the average exchange\nrate for the period. Foreign exchange gains and losses arising from the remeasurement into the functional currency is recognized in profit\nand loss.\n\n \n\n**Fair\nValue Measurements**\n\n \n\nFASB\nAccounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under\nU.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would\nbe received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or\nliability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value\nunder ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value\nhierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used\nto measure fair value which are the following:\n\n \n\n \nLevel\n1 — quoted prices in active markets for identical assets or liabilities.\n\n \n\nF-7\n\n \n\n \n\n \nLevel\n2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement\ndate.\n\n \n \n\n \nLevel\n3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to\nprice the assets or liabilities at the measurement date.\n\n \n\nAt\nMarch 31, 2026 and December 31, 2025, the carrying amounts of financial assets and liabilities, such as cash, grant receivable, tax\nreceivable, other assets, and accounts payable and accrued expenses approximate their fair values due to their short-term nature.\nThe carrying values of leases payable approximate their fair values due to the fact that the interest rates on these obligations are\nbased on prevailing market interest rates.\n\n \n\n**Long-Lived\nAssets**\n\n \n\nThe\nCompany regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to determine\nwhether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used\nfor this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and\npositive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should\nan impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value.\n\n \n\n**Research\nand Development Expenses**\n\n \n\nResearch\nand development costs consist primarily of fees paid to consultants and outside service providers, and other expenses relating to the\nacquisition, design, development and testing of the Company’s clinical products. All research and development costs are expensed\nas incurred. Research and development costs are presented net of tax credits.\n\n \n\nThe\nCompany’s Australian subsidiary is entitled to receive government assistance in the form of refundable and non-refundable research\nand development tax credits (“Refundable Tax Credits”) from the federal and provincial taxation authorities, based on qualifying\nexpenditures incurred during the fiscal year. The Refundable Tax Credits are from the provincial taxation authorities and are not dependent\non its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records Refundable Tax\nCredits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely\nthan not, they will be received. As of March 31, 2026, the balance of Refundable Tax Credits was approximately $691,000.\n\n \n\n**Income\nTaxes**\n\n \n\nThe\nCompany accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined\nbased on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and\nlaws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets\nis dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of\na deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company\nrecognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be\nsustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will\nmeasurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely\nthan not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change\nin recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties\nrelated to income taxes as part of its income tax expense.\n\n \n\nF-8\n\n \n\n \n\nAs\nof March 31, 2026, the Company assessed its income tax expense based on its projected future taxable income for the year ending December\n31, 2025 and therefore recorded no amount for income tax expense for the three months ended March 31, 2026. In addition, the Company\nhas significant deferred tax assets available to offset income tax expense due to net operating loss carry forwards which are currently\nsubject to a full valuation allowance based on the Company’s assessment of future taxable income. Refer to our Annual Report on\nForm 10-K for the year ended December 31, 2025 for more information.\n\n \n\n**Stock-Based\nCompensation**\n\n \n\nThe\nCompany recognizes compensation expense using a fair value-based method for costs related to stock-based payments, including stock options.\nThe fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized\nas expense over the requisite service period on a straight-line basis. Recognition of compensation expense for non-employees is in the\nsame period and manner as if the Company had paid cash for the services.\n\n \n\nUse\nof the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term,\nand a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as\nthat of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility\nof its own. The expected term of the options is estimated by using the SEC Staff Bulletin No. 107’s *Simplified Method for Estimate\nExpected Term*. The risk-free interest rate is estimated using comparable published federal funds rates.\n\n \n\n**Grant\nIncome**\n\n \n\nThe\nCompany accounts for government grant funding by analogy to ASC 958-605 because U.S. GAAP does not contain specific guidance for business\nentities receiving government grants.\n\n \n\nGrant\nincome is recognized as the Company incurs qualifying research and development expenditures and satisfies the conditions associated with\nthe grant arrangement.\n\n \n\nIn\nOctober 2025, the Company announced that it had received a $500,000 Small Business Innovation Research (“SBIR”) Phase I award\n(the “Award”) from the National Institutes of Health (“NIH”) and the National Institute of Allergy and Infectious\nDiseases (“NIAID”). The Award supports the Company’s development of a novel oral broad-spectrum antiviral candidate\nfor the treatment of influenza A and B infections. The Award is subject to the terms and provisions of Contract No. 75N93025C00038 entered\ninto with NIAID, covering a performance period from September 2025 through September 2026.\n\n \n\nDuring\nthe three months ended March 31, 2026, the Company recognized grant income of $225,000 under the Award related to qualifying expenditures\nincurred during the period. Of the total grant income recognized, $70,000 remained outstanding as of March 31, 2026 and was recorded\nas a grant receivable in the accompanying balance sheet. The grant receivable was subsequently collected in April 2026.\n\n \n\n**Net\nIncome (Loss) per Share**\n\n \n\nThe\nCompany accounts for and discloses net income (loss) per common share in accordance with FASB ASC Topic 260, *Earnings Per Share*.\nBasic income (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average\nnumber of common shares outstanding. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable\nto common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the\nissuance of common stock for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon\nthe exercise of stock options and restricted stock units.\n\n \n\nThe\nfollowing table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because\ntheir inclusion would be anti-dilutive (in thousands):\n\n Schedule of Anti-dilutive Securities Excluded from Calculations of Net Loss Per Share \n\n  \n2026  \n2025 \n\n  \nMarch\n31, \n\n  \n2026  \n2025 \n\nOutstanding options to purchase\ncommon stock \n 838  \n 549 \n\nWarrants to purchase common stock \n 7,223  \n - \n\nUnvested restricted stock\nunits \n 77  \n 155 \n\nTotal \n 8,138  \n 704 \n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nIn\nNovember 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-03, Income Statement—Reporting Comprehensive\nIncome—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments\nthat require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases\nof inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where\nsuch expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early\nadoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU\nto determine its impact on the Company’s disclosures.\n\n \n\nOther\nauthoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants,\nand the SEC did not, or are not expected to, have a material impact on the Company’s consolidated financial statements and related\ndisclosures.\n\n \n\nF-9\n\n \n\n \n\n**3.\nProperty and Equipment**\n\n \n\nProperty\nand equipment are recorded at cost and depreciated over the estimated useful lives of the underlying assets (3three to five years) using\nthe straight-line method. As of March 31, 2026, and December 31, 2025, property and equipment consist of (table in thousands):\n\n Schedule of Property and Equipment \n\n  \nMarch\n31, 2026  \nDecember\n31, 2025 \n\nLab equipment (excluding equipment\nunder finance leases) \n$1,777  \n$1,777 \n\nFinance lease right-of-use lab equipment obtained\nin exchange for finance lease liabilities, net \n 162  \n 162 \n\nComputer and office equipment \n 155  \n 155 \n\nTotal property and equipment \n 2,094  \n 2,094 \n\nLess: accumulated depreciation\nand amortization \n (2,013) \n (2,001)\n\nProperty and equipment,\nnet \n$81  \n$93 \n\n \n\nTotal\ndepreciation and amortization expense were approximately $12,000 and $25,000 for the three months ended March 31, 2026 and 2025, For\nadditional finance leases information, refer to Note 7 – Commitments and Contingencies.\n\n \n\n**4.\nAccounts Payable and Accrued Expenses**\n\n \n\nAccounts\npayable and accrued expenses consisted of the following (in thousands) as of:\n\n Schedule of Accounts Payable and Accrued Expenses \n\n  \nMarch\n31, 2026  \nDecember\n31, 2025 \n\nAccounts payable \n$1,371  \n$890 \n\nAccrued compensation \n 101  \n 85 \n\nAccrued other expenses \n 414  \n 901 \n\nTotal accounts payable\nand accrued expenses \n$1,886  \n$1,876 \n\n \n\nAccounts\npayable and accrued expenses contain unpaid general and administrative expenses and costs related to research and development that have\nbeen billed and estimated unbilled, respectively, as of period-end.\n\n \n\n**5.\nCommon Stock and Warrants**\n\n \n\nAs\nof March 31, 2026, the Company has authorized 100,000,000 shares of common stock, $0.001 par value per share. The Company had 13,787,000\nand 13,784,000 shares issued and outstanding as of March 31, 2026 and December 31, 2025.\n\n \n\nThe\nholders of common stock are entitled to one vote for each share of common stock held.\n\n \n\nOn\nSeptember 12, 2025, the Company, entered into a securities purchase agreement with certain accredited investors, pursuant to which the\nCompany sold to the investors (i) in a registered direct offering, an aggregate of 2,764,710 shares of the Company’s\ncommon stock, at a price of $1.70 per share and (ii) in a concurrent private placement, warrants to purchase up to an aggregate\nof 5,529,420 shares of common stock (“the Investor Warrants”), at an initial exercise price of $1.50 per share.\nThe Investor Warrants are exercisable upon issuance and will expire on September 27, 2027. Wainwright acted as the Company’s placement\nagent in connection with this offering. The Company paid Wainwright consideration consisting of (i) a cash fee equal to 7.0% of\nthe aggregate gross proceeds in the offering, (ii) a management fee equal to 1.0% of the aggregate gross proceeds in the offering, (iii)\nreimbursement of certain expenses and (iv) warrants to acquire up to an aggregate of 207,353 shares of common stock (the “Placement\nAgent Warrants”). The Placement Agent Warrants are similar to the Investor Warrants, except that the initial exercise price\nof the Placement Agent Warrants is $2.125 per share. The Company received net proceeds of $4,183,000 from the sale of its common\nshares and warrants in the direct offering.\n\n \n\n**Warrant\nActivity Table:**\n\n Schedule\nof Warrants Activity\n\n  \nTotal\nOptions\nOutstanding  \nWeighted\nAverage\nExercise\nPrice  \nAggregate\nIntrinsic\nValue \n\nBalance at December 31, 2025 \n 7,222,821  \n$1.46  \n$    - \n\nGranted \n -  \n -  \n - \n\nExercised \n -  \n -  \n - \n\nForfeited \n -  \n -  \n - \n\nOutstanding at March 31, 2026 \n 7,222,821  \n$1.46  \n$- \n\n \n\n**6.\nStock Based Awards**\n\n \n\n**Equity\nIncentive Plans**\n\n \n\nThe\nCompany adopted an equity incentive plan in 2015 (the “2015 Plan”) under which 833,333 shares of common stock have been reserved\nfor issuance to employees, and non-employee directors and consultants of the Company. Recipients of incentive stock options granted under\nthe 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the\nestimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 Plan is ten years.\nOn June 16, 2021, the Company’s stockholders voted to approve an amendment to the 2015 Plan to increase the number of shares of\ncommon stock authorized for issuance under the 2015 Plan from 416,667 to 833,333 shares. As of March 31, 2026, no shares remained available\nfor future grants under the 2015 Plan. The 2015 Plan expired on June 29, 2025.\n\n \n\nF-10\n\n \n\n \n\nOn\nApril 2, 2025, the Board of Directors of the Company approved and adopted an Equity Incentive Plan (the “2025 Plan”), which\nhas an effective date of March 31, 2025. On June 25, 2025, the 2025 Plan was approved by our stockholders at our annual meeting of stockholders.\nThe 2025 Plan provides for the grant of incentive stock options, qualified stock options, restricted stock awards, restricted stock units,\nstock appreciation rights, and performance shares or units and cash awards. Awards may be granted under the 2025 Plan to our employees,\ndirectors and independent contractors. the aggregate number of shares of Common Stock which shall be available for grants or payments\nof Awards under the 2025 Plan during its term shall initially be 1,500,000 (the “Total Plan Shares”). The Total Plan Shares\nwill automatically increase on January 1st of each year, for a period of nine years commencing on January 1, 2026, in an amount equal\nto 5% of the total number of shares of Common Stock outstanding as of December 31 of the preceding calendar year on a fully diluted basis.\n\n \n\nThe\n2025 Plan also provides that, notwithstanding the annual increase provision, in no event will the increase in Total Plan Shares available\nunder the 2025 Plan pursuant to the increase provision exceed 2,500,000 additional shares (or a total of up to 4,000,000 Total Plan Shares),\nsubject to adjustment as provided under the 2025 Plan.\n\n \n\nAs\nof March 31, 2026, 1,893,940 shares remained available for future grants under the 2025 Plan.\n\n \n\n**Common\nStock Reserved for Future Issuance**\n\n \n\nThe\nfollowing table presents information concerning common stock available for future issuance (in thousands) as of March 31, 2026:\n\n Schedule of Common Stock Available for Future Issuance \n\n  \nShares\nAvailable\n\nfor Grant \n\nStock options issued and outstanding \n 838 \n\nRestricted stock units issued and outstanding \n 221 \n\nShares authorized for future option grants \n 1,894 \n\nWarrants outstanding \n 7,223 \n\nBalance at March 31, 2026 \n$10,176 \n\nTotal \n$10,176 \n\n \n\n**Stock\nOptions**\n\n \n\nThe\nfollowing table summarizes stock option transactions for the 2015 and 2025 Plan, collectively, for the three months ended March 31, 2026\n(in thousands, except per share amounts):\n\n Schedule of Stock Option Transactions \n\n  \nTotal\n\nOptions\nOutstanding  \nWeighted\n\nAverage\nExercise\nPrice  \nAggregate\n\nIntrinsic\nValue \n\nBalance at December 31, 2025 \n 537  \n$8.91  \n$        - \n\nExercised \n -  \n -  \n - \n\nGranted \n 319  \n 1.1  \n - \n\nCancelled \n (18) \n 1.24  \n - \n\nBalance at March 31, 2026 \n 838  \n$6.10  \n$- \n\n \n\nIn\nJanuary 2026, the Compensation Committee of the Company’s Board of Directors granted a total of 318,966 stock options\nwith a fair value of $299,000 effective as of January 9, 2026. The Company granted stock options to directors, executives, employees,\nand consultants. The options are ten-year incentive stock options exercisable at $1.10 per share and vesting as follows: one-half\nvest on the one-year anniversary of the grant date and the remainder vest in eight equal quarterly instalments commencing on March 31,\n2027.\n\n \n\nThe\nfair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:\n\n \n\n Schedule\nof Fair Value of Share Option Award\n\n  \n   \n  \n\n  \nThree months ended March 31, \n\n  \n2026  \n2025 \n\nRisk-Free interest rate \n 3.83% \n 0.00%\n\nExpected dividend yield \n 0.00% \n 0.00%\n\nExpected volatility \n 106.3  \n - \n\nExpected term (in years) \n 5.77  \n - \n\n \n\n**Restricted\nStock Units**\n\n** **\n\nOn\nAugust 12, 2024, the Company’s Compensation Committee approved the issuance of 256,000 restricted stock unit (“RSU”)\nawards to non-employee directors, officers, consultants and employees. The aggregate fair value of the restricted stock unit awards granted\nwas estimated to be $451,000 using the market price of the stock on the date of the grant which is expensed using the straight-line method\nover the vesting period.\n\n Schedule of Restricted Stock Units \n\n  \nTotal\n\nRestricted Stock Units Outstanding  \nWeighted\n\nAverage\nFair Value  \nAggregate\n\nIntrinsic\nValue \n\nUnvested December 31, 2025 \n 97  \n$1.76  \n$        - \n\nGranted \n -  \n -  \n - \n\nForfeited \n (6) \n -  \n - \n\nVested \n (15) \n -  \n - \n\nUnvested and expected\nto vest at March 31, 2026 \n 76  \n$1.76  \n$- \n\n \n\nF-11\n\n \n\n \n\nThe\nCompany accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions of ASC\n718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07,\nCompensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable\nupdates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite\nservice, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures\nwhen they occur. For the three months ended March 31, 2026 and 2025, equity-based compensation expense recorded was approximately $84,000\nand $82,000, respectively.\n\n \n\nAs\nof March 31, 2026, there was approximately $279,000 of total unrecognized compensation expense related to non-vested stock options that\nis expected to be recognized over a weighted average period of 1.3 years. For options granted and outstanding, there were 838,351 options\noutstanding which were fully vested or expected to vest, with an aggregate intrinsic value of $ 0.00, a weighted average exercise price\nof $6.10 and weighted average remaining contractual term of 7.14 years at March 31, 2026. For vested and exercisable options, outstanding\nshares totaled 823,840, with an aggregate intrinsic value of $ 0.00. These options had a weighted average exercise price of $ 9.07 per\nshare and a weighted-average remaining contractual term of 5.61 years at March 31, 2026.\n\n \n\nThe\naggregate intrinsic value of outstanding and exercisable options at March 31, 2026 was calculated based on the closing price of the Company’s\ncommon stock as reported on The Nasdaq Capital Market on March 31, 2026 of $1.01 per share less the exercise price of the options. The\naggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s\ncommon stock and the exercise price of the underlying options.\n\n \n\n**7.\nCommitments and Contingencies**\n\n \n\n**Commitments**\n\n \n\nIn\nthe ordinary course of business, the Company enters into non-cancellable leases to purchase equipment and for its facilities, including\nrelated party leases (see Note 8 – Transactions with Related Parties). Leases are accounted for as operating leases or finance\nleases, in accordance with ASC 842, *Leases*.\n\n \n\nOperating\nLeases\n\n \n\nThe\nCompany leases office space in Miami, Florida and research and development laboratory space in Bothell, Washington under operating leases\nthat expire on September 30, 2027 and January 31, 2031, respectively. For operating leases, the weighted average discount rate is 6.4%\nand the weighted average remaining lease term is 5.0 years.\n\n \n\nThe\nfollowing table summarizes the Company’s maturities of operating lease liabilities, by year and in aggregate, as of March 31, 2026\n(table in thousands):\n\n Schedule of Maturities of Operating Lease Liabilities \n\n  \n   \n\n2026 (excluding the three months\nended March 31, 2026) \n$315 \n\n2027 \n 415 \n\n2028 \n 376 \n\n2029 \n 249 \n\n2030 and thereafter \n 264 \n\nTotal operating lease payments \n 1,619 \n\nLess: present value\ndiscount \n (195)\n\nTotal operating lease\nliabilities \n$1,424 \n\n \n\nF-12\n\n \n\n \n\nAs\nof March 31, 2026, the total operating lease liability of $343 is classified as a current operating lease liability.\n\n \n\nIn\nApril 2023, the Company renewed its lease for the unit 100 at the Bothell, Washington facility (“Bothell 100”) for an 84-month\n(7 years)\nterm, starting February 1, 2024, and ending on January\n31, 2031. The Company classified the amended\nlease as an operating lease pursuant to the provisions of ASC 842 and calculated the discounted value of the total lease payments to\nbe approximately $1,224,000 using\na discount rate of 6%.\nThis amount was recognized as the lease liability and right-of use asset at the renewal date of the lease.\n\n \n\nIn\nSeptember 2023, following the renewal of the Bothell 100 facility lease, the Company amended the agreement to expand the premises to\ninclude Suite 200 (“Bothell 200 facility”). The lease for the Bothell 200 facility has a 60-month (5-year)\nterm, running from February 1, 2024, through January\n31, 2029. The Company classified the lease as\nan operating lease and calculated the discounted value of the total lease payments to be approximately $571,000,\nusing a 6%\ndiscount rate. This amount was recognized as the lease liability and right-of-use asset at the lease commencement date.\n\n \n\nIn\nAugust 2024, the Company renewed its lease for the Miami, Florida location for a 36-month term, starting from October 1, 2024, and ending\non September 30, 2027, with an optional two-year extension. At the time of renewal, the Company classified the lease as an operating\nlease pursuant to the provisions of ASC 842 and calculated the discounted value of the total lease payments to be approximately $163,000,\nusing a discount rate of 10.75%, and recognized this amount as the lease liability and right-of-use asset at renewal date.\n\n \n\nThe\noperating lease liabilities summarized above do not include variable common area maintenance (the “CAM”) charges, which are\ncontractual liabilities under the Company’s Bothell, Washington lease. CAM charges for the Bothell, Washington facility are calculated\nannually based on actual common expenses for the building incurred by the lessor and proportionately billed to tenants based on leased\nsquare footage. For the three months ended March 31, 2026 and 2025, approximately $44,000 and $39,000 of CAM was included in general\nand administrative operating expenses on the condensed consolidated statements of operations, respectively.\n\n \n\nThe\nlessor of the Miami, Florida lease is a limited liability company controlled by Dr. Phillip Frost, a director and a principal stockholder\nof the Company.\n\n \n\nF-13\n\n \n\n \n\nFor\nthe three months ended March 31, 2026 and 2025, operating lease expense, including short-term leases, finance leases and CAM charges,\ntotaled approximately $102,000 and $ 103,000, respectively, of which $16,000 and $16,000 for each period was to a related party.\n\n \n\n**Contingencies**\n\n \n\nFrom\ntime to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. As of\nthe date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which,\nif determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.\n\n \n\n**8.\nTransactions with Related Parties**\n\n \n\nOn\nAugust 14, 2024, the Company entered into a three-year lease extension with a limited liability company controlled by Dr. Phillip Frost,\na director and a principal stockholder of the Company. On an annualized basis, straight-line rent expense is approximately $64,000 including\nfixed and estimable fees and taxes. Upon the extension of the lease, the Company recognized a right-of-use asset of approximately $163,000.\nThe discount rate used to measure the lease assets and liabilities for the extension was 10.75%.\n\n \n\nThe\nCompany paid a lease deposit of $4,000\non the original agreement and total rent and other expenses paid in connection with this lease were $16,000 for\neach of the three months ended March 31, 2026 and 2025 respectively.\n\n** **\n\n**9.\nSegment Information**\n\n \n\nThe\nCompany operates and manages its business as one1 reportable and operating segment dedicated to the research and development of the Company’s\nnovel orally administered antiviral influenza candidate. The measure of segment assets is reported on the balance sheet as total consolidated\nassets. In addition, the Company manages the business activities on a consolidated basis.\n\n \n\nThe\nCompany’s CODM reviews financial information presented on a consolidated basis and decides how to allocate resources based on net\nincome (loss).\n\n \n\nSignificant\nsegment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all\nremaining costs necessary to operate our business, which primarily include external professional services and other administrative expenses.\nThe following table presents the significant segment expenses and other segment items regularly reviewed by our CODM (table in thousands):\n\n Schedule\nof Segment Information \n\n  \n2026  \n2025 \n\n  \nThree\nmonths ended March 31, \n\n  \n2026  \n2025 \n\nRevenue \n$225  \n$- \n\n  \n    \n   \n\nLess: \n    \n   \n\nResearch and development \n 1,042  \n 1,027 \n\nSalaries and personnel costs \n 481  \n 544 \n\nInsurance \n 57  \n 62 \n\nStock-based compensation \n 84  \n 82 \n\nOperating expenses \n 917  \n 625 \n\nOther income \n (57) \n (39)\n\nNet\nloss \n$2,299  \n$2,301 \n\n \n\n \n\nF-14"}