10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission file number: 000-55158

COCRYSTAL PHARMA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	35-2528215
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1860 Montreal Road
Tucker, Georgia	30084
(Address of Principal Executive Offices)	(Zip Code)

(678)-892-8800

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	[  ]	Accelerated filer	[X]
Non-accelerated filer	[  ]	Smaller reporting company	[  ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of August 4, 2017, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 726,531,530.

COCRYSTAL PHARMA, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2017

INDEX

Part I - FINANCIAL INFORMATION
	Item 1.
	Condensed Consolidated Balance Sheets	F-1
	Condensed Consolidated Statements of Comprehensive Loss	F-2
	Condensed Consolidated Statement of Stockholders’ Equity	F-3
	Condensed Consolidated Statements of Cash Flows	F-4
	Notes to the Condensed Consolidated Financial Statements	F-5
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	6
	Item 4. Controls and Procedures	6
Part II - OTHER INFORMATION
	Item 1. Legal Proceedings	7
	Item 1.A. Risk Factors	8
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8
	Item 3. Defaults Upon Senior Securities	8
	Item 4. Mine Safety Disclosures	8
	Item 5. Other	8
	Item 6. Exhibits	8
SIGNATURES		9

2

Part I – FINANCIAL INFORMATION

Cocrystal Pharma, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2017			December 31, 2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,451		$	3,640
Accounts receivable		-			21
Prepaid expenses and other current assets		196			517
Mortgage note receivable		1,294			1,294
Total current assets		4,941			5,472
Property and equipment, net		268			280
Deposits		31			31
In process research and development		53,905			53,905
Goodwill		65,195			65,195
Total assets	$	124,340		$	124,883
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses		1,093			563
Derivative liabilities		707			1,476
Total current liabilities		1,800			2,039
Long-term liabilities
Deferred rent		42			63
Deferred tax liability		20,462			20,462
Total long-term liabilities		20,504			20,525
Total liabilities		22,304			22,564
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 800,000 shares authorized; 726,532 and 714,032 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively		727			714
Additional paid-in capital		242,290			239,035
Accumulated deficit		(140,981	)		(137,430	)
Total stockholders’ equity		102,036			102,319
Total liabilities and stockholders’ equity	$	124,340		$	124,883

F-1

Cocrystal Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Operating expenses
Research and development		1,255			2,368			3,325			5,710
General and administrative		(55	)		1,836			996			3,829
Total operating expenses		1,200			4,204			4,321			9,539
Loss from operations		(1,200	)		(4,204	)		(4,321	)		(9,539	)
Other income (expense)
Interest income		-			39			1			89
Change in fair value of derivative liabilities		198			938			769			2,211
Total other income (expense), net		198			977			770			2,300
Loss before income taxes		(1,002	)		(3,227	)		(3,551	)		(7,239	)
Income tax expense		-			-			-			-
Net loss and comprehensive loss	$	(1,002	)	$	(3,227	)	$	(3,551	)	$	(7,239	)
Net loss per common share:
Loss per share, basic	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average common shares outstanding, basic		724,633			704,256			719,332			700,204
Loss per share, fully diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average common shares outstanding, diluted		724,633			705,606			719,332			701,446

F-2

Cocrystal Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		capital		Deficit			Equity
Balance as of December 31, 2016		714,032	$	714	$	239,035	$	(137,430	)	$	102,319
Sale of common shares		12,500		13		2,987		-			3,000
Stock-based compensation		-		-		268		-			268
Net loss		-		-		-		(3,551	)		(3,551	)
Balance as of June 30, 2017		726,532	$	727	$	242,290	$	(140,981	)	$	102,036

F-3

Cocrystal Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six months ended June 30,
	2017			2016
Operating activities:
Net loss	$	(3,551	)	$	(7,239	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		52			109
Stock-based compensation		268			1,436
Change in fair value of derivative liabilities		(769	)		(2,211	)
Change in deferred rent		(9	)		(4	)
Changes in operating assets and liabilities:
Accounts receivable		21			19
Prepaid expenses and other current assets		321			(247	)
Accounts payable and accrued expenses		530			(1,071	)
Net cash used in operating activities		(3,137	)		(9,208	)
Investing activities:
Purchase of fixed assets		(40	)		(36	)
Long-term deposits		(12	)		(25	)
Principal payments received on mortgage note receivable		-			8
Net cash used in investing activities		(52	)		(53	)
Financing activities:
Proceeds from issuance of common stock and warrants		3,000			5,004
Proceeds from exercise of stock options		-			3
Net cash provided by financing activities		3,000			5,007
Net decrease in cash and cash equivalents		(189	)		(4,254	)
Cash and cash equivalents at beginning of period		3,640			9,276
Cash and cash equivalents at end of period	$	3,451		$	5,022
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cashless exercise of warrants		-			35

F-4

Cocrystal Pharma, Inc.

Notes to the Condensed Consolidated Financial Statements

June 30, 2017

(unaudited)

Note 1- Organization and Significant Accounting Policies

Overview

Cocrystal Pharma, Inc. (“the Company”) has been developing novel technologies and approaches to create first-in-class and best-in-class antiviral drug candidates since its initial funding in 2008. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of viral diseases in humans. By concentrating our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas.

The Company was formerly incorporated in Nevada under the name Biozone Pharmaceuticals, Inc. On January 2, 2014, Biozone Pharmaceuticals, Inc. sold substantially all its assets to MusclePharm Corporation (“MusclePharm”), and, on the same day, merged with Cocrystal Discovery, Inc. in a transaction accounted for as a reverse merger. Following the merger, the Company assumed Cocrystal Discovery, Inc.’s business plan and operations. On March 18, 2014, the Company reincorporated in Delaware under the name Cocrystal Pharma, Inc.

Effective November 25, 2014, Cocrystal Pharma, Inc. and affiliated entities completed a series of merger transactions as a result of which Cocrystal Pharma, Inc. merged with RFS Pharma, LLC, a Georgia limited liability company (“RFS Pharma”). We refer to the surviving entity of this merger as “Cocrystal” or the “Company.”

Cocrystal has developed proprietary structure-based drug design technology and antiviral nucleoside chemistry to create antiviral drug candidates. In addition, we have licensed gene-editing technologies. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of hepatitis C, influenza, norovirus infections and hepatitis B. By concentrating our research and development efforts on viral replication inhibitors, we leverage our infrastructure and expertise in these areas.

The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making.

The Company’s activities since inception have consisted principally 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 are 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 June 30, 2017, the Company has funded its operations through equity offerings.

As of June 30, 2017, the Company had an accumulated deficit of $141.0 million. During the three and six month period ended June 30, 2017, the Company had a loss from operations of $1.2 million and $4.3 million, respectively. Cash used in operating activities was approximately $3.1 million for the six months ended June 30, 2017. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company expects to continue to incur substantial operating losses and negative cash flows from operations over the next several years during its pre-clinical and clinical development phases.

Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. Reference is made to the audited annual financial statements of Cocrystal Pharma, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 30, 2017 (“Annual Report”), which contain information useful to understanding the Company’s business and financial statement presentations. The condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. Our significant accounting policies and practices are presented in Note 2 to the financial statements included in the Form 10-K.

F-5

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has not yet implemented this guidance. However, based on the Company’s current operating lease arrangements, the Company does not expect the adoption of this standard to have a material impact on its financial statements based upon current obligations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this standard as of January 1, 2017. The Company has elected to adopt the provisions of ASU No. 2016-09 that allow for stock option forfeitures to be recorded as they occur; however, adoption of this provision had no impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350). This standard simplifies how an entity is required to test for goodwill impairment. ASU 2017-04 will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted after January 1, 2017. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features and Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this ASU addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of future equity offerings. Current accounting guidance requires financial instruments with down round features to be accounted for at fair value. Part II of the Update applies only to nonpublic companies and is therefore not applicable to the Company. The amendments in Part I of the Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. This Update is effective for public entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company has not yet determined when it will adopt the provisions of this Update and has not yet determined the impact on its consolidated financial statements upon adoption.

F-6

Note 2 – Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The Company categorized its cash equivalents as Level 1 fair value measurements. The Company categorized its warrants potentially settleable in cash as Level 3 fair value measurements. The warrants potentially settleable in cash are measured at fair value on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted for as component of stockholders’ equity. The warrants are valued using the Black-Scholes option-pricing model as discussed in Note 4 below.

The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of June 30, 2017 and December 31, 2016, and their placement within the fair value hierarchy as discussed above (in thousands):

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	June 30, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,451	$	3,451	$	-	$	-
Total assets	$	3,451	$	3,451	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	707	$	-	$	-	$	707
Total liabilities	$	707	$	-	$	-	$	707

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,640	$	3,640	$	-	$	-
Total assets	$	3,640	$	3,640	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	1,476	$	-	$	-	$	1,476
Total liabilities	$	1,476	$	-	$	-	$	1,476

F-7

The Company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2017 or 2016. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2017 and 2016 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		June 30, 2017			June 30, 2016
Balance, January 1,	$	1,476		$	4,115
Estimated fair value of warrants exchanged for common shares		-			(35	)
Change in fair value of warrants		(769	)		(2,211	)
Balance at June 30,	$	707		$	1,869

Note 3 – Stockholders’ equity

Common Stock — The Company has authorized up to 800,000,000 shares of common stock, $0.001 par value per share, and had 726,531,530 shares issued and outstanding as of June 30, 2017.

On April 20, 2017, the Company closed on proceeds of $3,000,000 in a private placement offering of 12,500,000 shares of the Company’s common stock at a purchase price of $0.24 per share to three accredited investors, which included Chairman Dr. Raymond F. Schinazi and OPKO Health, Inc., of which the Company’s director Dr. Phillip Frost is Chairman and Chief Executive Officer.

Shares of common stock authorized for future issuance as follows as of June 30, 2017 (in thousands):

	As of June 30, 2017
Stock options issued and outstanding		23,051
Authorized for future option grants		49,668
Warrants outstanding		6,275
Total		78,994

The common stock authorized for future option grants was not reserved by the Company. The Company currently does not have enough common stock authorized to issue all the options authorized by the Company for future grants.

Note 4 – Warrants

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2016 (in thousands):

	Warrants accounted for as: Equity		Warrants accounted for as: Liabilities
	April 2013 warrants		October 2013 Series A warrants		January 2014 warrants		Total
Outstanding, December 31, 2016		1,500		775		4,000		6,275
Warrants Expired		-		-		-		-
Warrants exercised		-		-		-		-
Outstanding, June 30, 2017		1,500		775		4,000		6,275
Expiration date		April 25, 2018		October 24, 2023		January 16, 2024

Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

F-8

Warrants classified as liabilities

Liability-classified warrants consist of warrants issued in connection with equity financings in October 2013 and January 2014 and potentially settleable in cash and were determined not to be indexed to the Company’s own stock and are therefore accounted for as liabilities.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of comprehensive loss as changes in fair value of derivative liabilities.

The Company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities given that the Company has limited history of its own observable stock price. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2017:

	October 2013 warrants			January 2014 warrants
Strike price	$	0.50		$	0.50
Expected term (years)		6.3			6.6
Cumulative volatility %		90	%		91	%
Risk-free rate %		2.10	%		2.11	%

Warrants classified as equity

Warrants that were recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet, are included in the above table which shows all warrants.

Note 5 – Stock-based compensation

The Company recorded approximately $54,000 and $268,000 of stock-based compensation related to employee stock options for the three and six months ended June 30, 2017 and $719,000 and $1,436,000 for the three and six months ended June 30, 2016, respectively. As of June 30, 2017, there was $751,000 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the Company’s operating expenses over a weighted average period of 1.75 years.

The administrator of the plans determines the times when an option may become exercisable at the time of grant. Vesting periods of options granted to date have not exceeded five years. The options generally will expire, unless previously exercised, no later than ten years from the grant date. The Company is using unissued shares for all shares issued for options and restricted share awards.

The following schedule presents activity in the Company’s outstanding stock options for the six months ended June 30, 2017 (in thousands, except per share amounts):

	Number of shares available for grant		Total options outstanding			Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance at December 31, 2016		48,368		24,351		$	0.30	$	5,457
Exercised		-		-			-		-
Granted		-		-			-		-
Cancelled		1,300		(1,300	)		0.96		-
Balance at June 30, 2017		49,668		23,051		$	0.26	$	2,352

As of June 30, 2017, options to purchase 23,051,200 shares of common stock, with an aggregate intrinsic value of $2,352,000, were outstanding that were fully vested or expected to vest with a weighted average remaining contractual term of 4.1 years. As of June 30, 2017, options to purchase 21,521,709 shares of common stock with a weighted average exercise price of $0.23 per share and a weighted average remaining contractual term of 3.6 years were fully vested with an intrinsic value of $2,306,000.

F-9

The aggregate intrinsic value of outstanding and exercisable options at June 30, 2017 was calculated based on the closing price of the Company’s common stock as reported on the OTCQB market on June 30, 2017 of $0.223 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying options.

Note 6 – Net Loss per Share

The Company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260, Earnings Per Share. Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants.

The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Options to purchase common stock		23,051		43,051		23,051		43,059
Warrants to purchase common stock		6,275		1,350		6,275		1,242
Total		29,326		44,401		29,326		44,301

Note 7 - Mortgage Note Receivable

In June 2014, the Company acquired a mortgage note from a bank for $2,626,290 which is collateralized by, among other things, the underlying real estate and related improvements. The property subject to the mortgage is owned by an entity managed by Daniel Fisher, one of the founders of Biozone, and is currently under lease to Flavor Producers, Inc. At June 30, 2017, the carrying amount of the mortgage note receivable was $1,294,000, consisting entirely of principal. The mortgage note has a maturity date of August 1, 2032 and bears an interest rate of 7.24%.

In 2014, Daniel Fisher and his affiliate, 580 Garcia Properties LLC, brought multiple lawsuits against the Company involving its predecessors and subsidiaries. The lawsuits have been settled and the complaints initiating them dismissed, without the Company making any payments to either Mr. Fisher or 580 Garcia Properties LLC. In addition, the mortgage note discussed above is a promissory note secured by a deed of trust under which 580 Garcia Properties LLC is the primary obligor. As of the time of the acquisition by the Company of the promissory note, 580 Garcia Properties LLC, was delinquent in its obligation to make certain monthly payments thereunder. Consequently, in December 2015, the Company issued notice of default letters to 580 Garcia Properties LLC, Daniel Fisher, and Sharon Fisher for said delinquencies, and proceeded in accordance with rights of a secured real estate creditor under California law, to initiate private foreclosure proceedings respecting the property, to foreclose under the promissory note secured by the deed of trust. A foreclosure sale was set in accordance with California law for January 27, 2017. Prior to the date of this foreclosure sale, Mr. Fisher filed a motion where he sought among other things an order of the court enjoining the foreclosure sale, alleging wrongdoing by the Company and Biozone Pharmaceuticals, Inc. and others that Mr. Fisher claims the Company has direct responsibility over. The court in the Fisher/Biozone Lawsuit heard oral argument on Mr. Fisher’s motion on March 2, 2017. On March 23, 2017, the court ordered further briefing by March 30, 2017 on the issue of whether to enjoin the foreclosure sale. On April 5, 2017, the court in the Fisher/Biozone Lawsuit entered a preliminary injunction barring the foreclosure sale until further order, and since that time the Company has engaged in settlement discussions with Mr. Fisher and 580 Garcia Properties LLC and others, to discuss an overall resolution. The Company cannot offer any assurances as to when, or if, any settlement will be achieved, and the court has scheduled case management conferences to consider further proceedings, with the next case management conference set for September 14, 2017.

Because the Company intended to foreclose on the property and foreclosure was probable, in December 2016 the Company recognized an impairment on the mortgage note receivable of $1,176,000 to adjust the carrying value of the note to its fair value. The fair value of the note was determined by reference to the estimated fair value of the underlying property, which was determined based on analysis of comparable properties and recent market data. Furthermore, as a result of the Company’s plan to divest of this asset within the next twelve months, we are no longer recording interest income and the asset was reclassified from long-term to current at December 31, 2016.

F-10

Note 8 – Income Taxes

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. The Company has recorded a net deferred tax liability of $20,462,000 as of June 30, 2017 and December 31, 2016 as it has not considered the deferred tax liability, which is related to acquired in-process research and development, to be a future source of taxable income in evaluating the need for a valuation allowance against its deferred tax assets due to the in-process research and development asset being considered an indefinite-lived intangible asset.

FASB ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and a measurement criterion for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered more likely than not to be sustained upon examination by taxing authorities. The Company records interest and penalties related to uncertain tax positions as a component of the provision for income taxes. As of June 30, 2017 and December 31, 2016, the Company had no unrecognized tax benefits.

The Company currently files income tax returns in the United States federal and various state jurisdictions. The Company is not currently under examination in any jurisdiction.

Note 9 - Contingencies

As a publicly traded company, from time to time, the Company may be party to, or otherwise involved in, legal proceedings and inquiries from regulators arising in the normal course of business. As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.

In June 2014, the Company acquired a mortgage note from a bank, which is collateralized by, among other things, the underlying real estate and related improvements. At June 30, 2017, the carrying amount of the mortgage note receivable was $1,294,000, consisting entirely of principal. The Company is currently in legal proceedings regarding the mortgage note receivable and collateralized real estate (see Note 7).

Note 10 - Transactions with Related Parties

Since November 2014, the Company has leased its Tucker, Georgia facility from a limited liability company owned by one of Cocrystal’s directors and principal shareholder, Dr. Raymond Schinazi. The annual expense for this lease is estimated to be $209,000. The present lease expired June 30, 2017 and the Company is currently on a month-to-month term. The total rent expense was $63,000 and $111,000 for the three and six months ended June 30, 2017 and $46,000 and $92,000 for the three and six months ended 2016, respectively.

Emory University: Cocrystal Pharma has an exclusive license from Emory University for use of certain inventions and technology related to inhibitors of HCV that were jointly developed by Emory and Cocrystal Pharma employees. The License Agreement is dated March 7, 2013 wherein Emory agrees to add to the Licensed Patents and Licensed Technology Emory’s rights to any patent, patent application, invention, or technology application that is based on technology disclosed within three (3) years of March 7, 2013. The agreement includes payments due to Emory ranging from $40,000 to $500,000 based on successful achievement of certain drug development milestones. Additionally, Cocrystal may have royalty payments at 3.5% of net sales due to Emory with a minimum in year one of $25,000 and increase to $400,000 in year five upon product commercialization. One of Cocrystal’s Directors, Dr. Raymond Schinazi, is also a faculty member at Emory University and may share in these royalty payments with Emory.

Duke University and Emory University: Cocrystal Pharma has entered an agreement to license various patents and know-how to use CRISPR/Cas9 technologies for developing a possible cure for hepatitis B virus (HBV) and human papilloma virus (HPV). This license allows Cocrystal Pharma to develop and potentially commercialize a cure for HBV and HPV utilizing the underlying patents and technologies developed by the universities. This agreement includes a non-refundable $100,000 license fee payable to Duke upon a determination of rights letter from the U.S. Veterans Administration with respect to patents and know-how that disclaims any ownership interest. Future royalties may be payable to Duke, ranging from 2-5% of net sales depending on achieving certain sales milestones, if commercial products are developed using this know-how. One of Cocrystal’s Directors, Dr. Raymond Schinazi, is also a faculty member at Emory University and may share in these royalty payments with Emory.

F-11

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Cocrystal is a biotechnology company working to develop novel medicines for use in the treatment of human viral diseases. Cocrystal has developed proprietary structure-based drug design technology and antiviral nucleoside chemistry to create first-in-class and best-in-class antiviral drug candidates. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of hepatitis C, influenza and norovirus infections. By concentrating our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas.

Highlights

During the last six months, the Company focused its research and development efforts primarily in three areas:

● Hepatitis C. Our Hepatitis C Virus (“HCV”) Non-Nucleoside Polymerase Inhibitor CC-31244, is a potential best in class pan-genotypic inhibitor of NS5B polymerase for the treatment of hepatitis C infection. The Company completed a Phase 1b study during July 2017 in HCV infected genotype 1 subjects. HCV-infected subjects treated with CC-31244 had a rapid and marked decline in HCV RNA levels, slow viral rebound after treatment, and no viral breakthrough during treatment. Results of this study suggest that CC-31244 could be an important component in an all-oral HCV combination therapy. The Company has three additional broad-spectrum preclinical candidates: a nucleoside inhibitor, an NS5A inhibitor, and an NS3 helicase inhibitor. The Company is seeking a partner for further clinical development of CC-31244 and the preclinical candidates.

● Influenza. We have several preclinical candidates under development for the treatment of influenza infection. CC-42344, a novel PB2 inhibitor, has been selected as a preclinical lead. 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 profiles. We plan to initiate Investigational New Drug (“IND”) enabling studies this year.

● Norovirus Infections. We continue to identify and develop nucleoside and non-nucleoside polymerase inhibitors. We have a preclinical nucleoside inhibitor, which exhibits broad spectrum anti-norovirus activity.

Results of Operations for the Three and Six Months Ended June 30, 2017 compared to the Three and Six Months Ended June 30, 2016

Research and Development Expense

Research and development expense consists primarily of compensation-related costs for our employees dedicated to research and development activities and for our Scientific Advisory Board members, as well as lab supplies, lab services, and facilities and equipment costs. We expect research and development expenses to increase in future periods as we expand our clinical and pre-clinical development activities.

Total research and development expenses were approximately $1,255,000 for the three months ended June 30, 2017, compared with $2,368,000 for the three months ended June 30, 2016. The decrease of $1,113,000, or 47%, was due to the reduction in phase I clinical trials as these costs were primarily incurred during 2016.

Total research and development expenses for the six months ended June 30, 2017 were $3,325,000, compared with $5,710,000 for the six months ended June 30, 2016. The decrease of $2,385,000 or 42%, was predominately due to the conclusion of phase I of clinical trials in 2016.

General and Administrative Expense

General and administrative expense includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses.

3

General and administrative expenses were $(55,000) for the three months ended June 30, 2017, compared with $1,836,000 for the three months ended June 30, 2016. The decrease of $1,891,000, or 103%, was primarily due to an insurance reimbursement of prior legal costs in the amount of $896,000 and a $132,000 non-cash reversal of stock compensation expense related to unvested options for executives that are no longer with the Company. In addition, we had a decrease in compensation costs due to staffing turnover and a decrease in legal costs.

General and administrative expenses were approximately $996,000 for the six months ended June 30, 2017, compared with $3,829,000 for the six months ended June 30, 2016. The decrease of $2,833,000, or 74%, was due to the aforementioned insurance reimbursement of prior legal costs, reversal of stock compensation expense and lower personnel costs due to employee reduction.

Interest Income/Expense

Interest income was $0 and $1,000 for the three months and six months ended June 30, 2017, respectively. Interest income was $39,000 and $89,000 for the three months and six months ended June 30, 2016, respectively. The 2016 amounts represent interest recognized on the mortgage note we acquired in June 2014. Interest expense was negligible for the three and six months ended June 30, 2017 and 2016. The key objectives of our investment policy are to preserve principal and ensure sufficient liquidity, so our invested cash may not earn as high a level of income as longer-term or higher risk securities, which generally have less liquidity and more volatility.

Other Income/Expense

Other income, net was $198,000 and $770,000 for the three and six months ended June 30, 2017, respectively. Conversely, other income, net was $977,000 and $2,300,000 for the three and six months ended June 30, 2016, respectively. Other income consists primarily of the change in fair value of outstanding warrants to purchase our common stock, which is accounted for as liabilities. For both the three and six months ended June 30, 2017 and 2016, our stock price decreased. During 2016, 111,111 warrants were exercised and 888,889 warrants expired. Under accounting principles generally accepted in the United States, we record other income or expense for the change in fair value of our outstanding warrants that are accounted for as liabilities during each reporting period. If the fair value of the warrants were to decrease during the period, which it did during the three and six months ended June 30, 2017 and 2016, we record other income. The fair value of our outstanding warrants is inversely related to the fair value of the underlying common stock; as such, a decrease in the fair value of our common stock during a given period generally results in other income, which occurred during the three and six months ended June 30, 2017 and 2016, while an increase in the fair value of our common stock results in other expense. This other income or expense is non-cash. We believe investors should focus on our operating loss rather than net loss for the periods presented. Our operating loss for the three and six months ended June 30, 2017 was $1,200,000 and $4,321,000, respectively, compared to $4,204,000 and $9,539,000 for the same periods in 2016, respectively.

4

Income Taxes

As a result of our cumulative losses, we have concluded that a full valuation allowance against our net deferred tax assets is appropriate. We have recorded a net deferred tax liability of $20,462,000 as of June 30, 2017 and December 31, 2016 as we have not considered the deferred tax liability, which is related to acquired in-process research and development, to be a future source of taxable income in evaluating the need for a valuation allowance against our deferred tax assets due to the in-process research and development asset being considered an indefinite-lived intangible asset.

Net Loss

As a result of the above factors, for the three and six months ended June 30, 2017, we had a net loss of approximately $1,002,000 and $3,551,000 compared to a net loss of approximately $3,227,000 and $7,239,000 for the same periods in 2016.

Liquidity and Capital Resources

Net cash used in operating activities was approximately $3,137,000 for the six months ended June 30, 2017 compared to $9,208,000 for the same period in 2016. For the six months ended June 30, 2017, net cash used by operating activities consisted primarily of $4,321,000 in operating expenses net of changes in operating assets and liabilities.

Net cash used in investing activities was $52,000 for the six months ended June 30, 2017 compared to $53,000 provided for the same period in 2016. For the six months ended June 30, 2017, net cash used for investing activities consist primarily of capital spending of $40,000 and payment of a long-term deposit of $12,000. For the six months ended June 30, 2016, net cash used for investing activities consist primarily of capital spending of $36,000 and payment of a long-term deposit of $25,000, net of $8,000 in principal payments received on our mortgage note receivable.

For the six months ended June 30, 2017, cash provided by financing activities resulted from our sale of common stock, which resulted in proceeds of $3,000,000. Net cash provided by financing activities for the six months ended June 30, 2016 amounted to approximately $5,004,000 in proceeds from our sale of common stock and warrants and $3,000 for the exercise of stock options.

We have a history of operating losses as we have focused our efforts on raising capital and research and development activities. 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 never been profitable, has no products approved for sale, has not generated any revenues to date from product sales, and has incurred significant operating losses and negative operating cash flows since inception. For the year ended December 31, 2016, the Company recorded a net loss of approximately $74.9 million, which included an IPR&D write-down of $92.4 million and used approximately $14.7 million of cash in operating activities. For the six months ended June 30, 2017, the Company recorded a net loss of approximately $3.6 million and used approximately $3.1 million of cash for operating activities.

As of June 30, 2017, the Company had $3.5 million in cash to fund its operations. The Company does not believe its current cash balance will be sufficient to allow the Company to fund its planned operating activities for the balance of 2017. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern.

5

As the Company continues to incur losses, achieving profitability is dependent upon the successful development, approval and commercialization of its product candidates, and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through additional private or public equity offering and may seek additional capital through arrangements with strategic partners or from other sources. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all. Any equity financing may be dilutive to existing shareholders.

Tabular Disclosure of Contractual Obligations

Contractual Obligations ($ in thousands)	Payments due by period
	Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	222	$	99	$	-	$	-

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements including statements regarding our drug development activities, future equity offerings, cash flow deficits and liquidity. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include the continued strength of the market for bio pharma equity offerings, unanticipated events which adversely affect the timing and success of our regulatory filings, failure to develop products which are deemed safe and effective and other issues which affect our ability to commercialize our product candidates. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Critical Accounting Policies and Estimates

In our Annual Report on Form 10-K for the year ended December 31, 2016, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no changes to these policies since December 31, 2016. Readers are encouraged to review these disclosures in conjunction with the review of this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There has been no material change in our assessment of sensitivity to market risk since our presentation set forth in Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2017 at the reasonable assurance level.

6

Changes to the Company’s Internal Control Over Financial Reporting

The following changes that occurred during the six months ended June 30, 2017 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On January 24, 2017, Curtis Dale, Interim Chief Financial Officer, tendered his resignation, at which time the Company initiated a search for a qualified replacement.

On February 12, 2017, Walt A. Linscott informed the Board of the Company of his resignation as General Counsel and Secretary of the Company, effective March 1, 2017.

On February 23, 2017, James Martin was appointed to serve as the Interim Chief Financial Officer. Mr. Martin has extensive experience in accounting and finance, as well as significant pharmaceutical industry knowledge.

During the year ended December 31, 2015, we concluded there were material weaknesses in the design and operating effectiveness of our internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. With the oversight of senior management and our audit committee, we took additional measures to remediate the underlying causes of the material weaknesses. During the year ended December 31, 2016, we worked with a third-party consultant to assist our management team in addressing the underlying cause of the material weaknesses primarily through the documentation of improved processes and documented procedures, which were designed and implemented by our management team. Management concluded that certain previously identified material weaknesses were not completely remediated as of December 31, 2016. Progress in addressing material weaknesses has also recently been hampered by the timing of the turnover in our management team, as described above, during the first quarter of 2017 and the effect of such timing on the transition of responsibilities related to the execution of control activities. Therefore, we identified several material weaknesses that still existed as of December 31, 2016 and which were reported in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 30, 2017.

We have begun procedures to enhance our internal control and are in the process of designing and implementing enhanced internal control to address these material weaknesses. After these enhanced internal control processes are implemented, we plan to test these controls to determine whether they are operating effectively and whether we can conclude that the material weaknesses previously identified have been remediated. The material weaknesses previously identified cannot be considered remediated until the controls have operated for a sufficient period of time and until management has concluded that the controls are operating effectively. Our goal is to remediate the material weaknesses by the end of 2017.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. During the quarter ended June 30, 2017, there were no material developments to our previously reported legal proceedings except the following:

In proceedings involving the Company’s litigation with a former affiliate, Daniel Fisher, and his affiliated entity, 580 Garcia Properties LLC, a foreclosure sale was set in accordance with California law for January 27, 2017. Prior to the date of this foreclosure sale, Mr. Fisher filed a motion in an action that Mr. Fisher, Biozone Pharmaceuticals, Inc., and numerous others had been parties to, captioned Fisher v. Biozone Pharmaceuticals, et al. N.D. Cal. C12-03716 (WHA) (LB) (“Fisher/Biozone Lawsuit”) that had originally been filed in 2012 and settled by means of a settlement agreement dated September 5, 2013. In the motion that Mr. Fisher filed, he sought among other things an order of the court enjoining the foreclosure sale, alleging wrongdoing by the Company and Biozone Pharmaceuticals, Inc. and others that Mr. Fisher claims the Company has direct responsibility over. The court in the Fisher/Biozone Lawsuit heard oral argument on Mr. Fisher’s motion on March 2, 2017. On March 23, 2017, the court ordered further briefing by March 30, 2017 on the issue of whether to enjoin the foreclosure sale. On April 5, 2017, the court in the Fisher/Biozone Lawsuit entered a preliminary injunction barring the foreclosure sale until further order, and since that time the Company has engaged in settlement discussions with Mr. Fisher and 580 Garcia Properties LLC and others, to discuss an overall resolution. The Company cannot offer any assurances as to when, or if, any settlement will be achieved, and the court has scheduled case management conferences to consider further proceedings, with the next case management conference set for September 14, 2017 (see note 7).

7

ITEM 1.A RISK FACTORS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

All recent sales of unregistered securities have been previously reported.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER

None

ITEM 6. EXHIBITS

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.

8

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Cocrystal Pharma, Inc.
Dated: August 8, 2017	By:	/s/ Gary Wilcox
		Gary Wilcox
		Interim Chief Executive Officer
		(Principal Executive Officer)

Dated: August 8, 2017	By:	/s/ James Martin
		James Martin
		Chief Financial Officer
		(Principal Financial Officer)

9

EXHIBIT INDEX

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	Date	Number	Filed or Furnished Herewith
3.1	Certificate of Incorporation, as amended	10-K	3/31/15	3.1
3.2	Amended and Restated Bylaws	8-K	12/1/14	3.6
10.1	James Martin Consulting Agreement	8-K	2/24/17	10.1	*
10.2	Form of Securities Purchase Agreement dated April 20, 2017	8-K	4/24/17	10.1
10.3	James Martin Offer Letter date May 26, 2017	8-K	6/1/17	10.1
31.1	Certification of Principal Executive Officer (302)				Filed
31.2	Certification of Principal Financial Officer (302)				Filed
32.1	Certification of Principal Executive Officer and Principal Financial Officer (906)				Furnished**
101.INS	XBRL Instance Document				Filed
101.SCH	XBRL Taxonomy Extension Schema Document				Filed
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				Filed

* Represents management contracts or compensatory plan

** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to our Corporate Secretary at Cocrystal Pharma, Inc., 1860 Montreal Road, Tucker GA 30084.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Gary Wilcox, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Cocrystal Pharma, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2017

/s/ Gary Wilcox

Gary Wilcox

Interim Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, James Martin, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Cocrystal Pharma, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2017

/s/ James Martin

James Martin

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Cocrystal Pharma, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof, I, Gary Wilcox, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.        The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2.        The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary Wilcox

Gary Wilcox

Interim Chief Executive Officer

(Principal Executive Officer)

Dated: August 8, 2017

In connection with the quarterly report of Cocrystal Pharma, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof, I, James Martin, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.        The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2.        The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Martin

James Martin

Chief Financial Officer

(Principal Financial Officer)

Dated: August 8, 2017

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 04, 2017
Document And Entity Information
Entity Registrant Name	Cocrystal Pharma, Inc.
Entity Central Index Key	0001412486
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		726,531,530
Trading Symbol	COCP
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 3,451	$ 3,640
Accounts receivable		21
Prepaid expenses and other current assets	196	517
Mortgage note receivable	1,294	1,294
Total current assets	4,941	5,472
Property and equipment, net	268	280
Deposits	31	31
In process research and development	53,905	53,905
Goodwill	65,195	65,195
Total assets	124,340	124,883
Current liabilities:
Accounts payable and accrued expenses	1,093	563
Derivative liabilities	707	1,476
Total current liabilities	1,800	2,039
Long-term liabilities
Deferred rent	42	63
Deferred tax liability	20,462	20,462
Total long-term liabilities	20,504	20,525
Total liabilities	22,304	22,564
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 800,000 shares authorized; 726,532 and 714,032 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	727	714
Additional paid-in capital	242,290	239,035
Accumulated deficit	(140,981)	(137,430)
Total stockholders' equity	102,036	102,319
Total liabilities and stockholders' equity	$ 124,340	$ 124,883

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	800,000,000	800,000,000
Common stock, shares issued	726,532,000	714,032,000
Common stock, shares outstanding	726,532,000	714,032,000

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Operating expenses
Research and development	$ 1,255	$ 2,368	$ 3,325	$ 5,710
General and administrative	(55)	1,836	996	3,829
Total operating expenses	1,200	4,204	4,321	9,539
Loss from operations	(1,200)	(4,204)	(4,321)	(9,539)
Other income (expense)
Interest income		39	1	89
Change in fair value of derivative liabilities	198	938	769	2,211
Total other income (expense), net	198	977	770	2,300
Loss before income taxes	(1,002)	(3,227)	(3,551)	(7,239)
Income tax expense
Net loss and comprehensive loss	$ (1,002)	$ (3,227)	$ (3,551)	$ (7,239)
Net loss per common share:
Loss per share, basic	$ 0.00	$ 0.00	$ (0.01)	$ (0.01)
Weighted average common shares outstanding, basic	724,633,000	704,256,000	719,332,000	700,204,000
Loss per share, fully diluted	$ 0.00	$ 0.00	$ (0.01)	$ (0.01)
Weighted average common shares outstanding, diluted	724,633,000	705,606,000	719,332,000	701,446,000

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Beginning balance at Dec. 31, 2016	$ 714	$ 239,035	$ (137,430)	$ 102,319
Beginning balance, shares at Dec. 31, 2016	714,032,000
Sale of common shares	$ 13	2,987		3,000
Sale of common shares, shares	12,500,000
Stock-based compensation		268		268
Net loss			(3,551)	(3,551)
Ending Balance at Jun. 30, 2017	$ 727	$ 242,290	$ (140,981)	$ 102,036
Ending Balance, shares at Jun. 30, 2017	726,532,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Operating activities:
Net loss	$ (3,551)	$ (7,239)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	52	109
Stock-based compensation	268	1,436
Change in fair value of derivative liabilities	(769)	(2,211)
Change in deferred rent	(9)	(4)
Changes in operating assets and liabilities:
Accounts receivable	21	19
Prepaid expenses and other current assets	321	(247)
Accounts payable and accrued expenses	530	(1,071)
Net cash used in operating activities	(3,137)	(9,208)
Investing activities:
Purchase of fixed assets	(40)	(36)
Long-term deposits	(12)	(25)
Principal payments received on mortgage note receivable		8
Net cash used in investing activities	(52)	(53)
Financing activities:
Proceeds from issuance of common stock and warrants	3,000	5,004
Proceeds from exercise of stock options		3
Net cash provided by financing activities	3,000	5,007
Net decrease in cash and cash equivalents	(189)	(4,254)
Cash and cash equivalents at beginning of period	3,640	9,276
Cash and cash equivalents at end of period	3,451	5,022
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cashless exercise of warrants		$ 35

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Organization and Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Organization and Significant Accounting Policies

Note 1- Organization and Significant Accounting Policies

Overview

Cocrystal Pharma, Inc. (“the Company”) has been developing novel technologies and approaches to create first-in-class and best-in-class antiviral drug candidates since its initial funding in 2008. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of viral diseases in humans. By concentrating our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas.

The Company was formerly incorporated in Nevada under the name Biozone Pharmaceuticals, Inc. On January 2, 2014, Biozone Pharmaceuticals, Inc. sold substantially all its assets to MusclePharm Corporation (“MusclePharm”), and, on the same day, merged with Cocrystal Discovery, Inc. in a transaction accounted for as a reverse merger. Following the merger, the Company assumed Cocrystal Discovery, Inc.’s business plan and operations. On March 18, 2014, the Company reincorporated in Delaware under the name Cocrystal Pharma, Inc.

Effective November 25, 2014, Cocrystal Pharma, Inc. and affiliated entities completed a series of merger transactions as a result of which Cocrystal Pharma, Inc. merged with RFS Pharma, LLC, a Georgia limited liability company (“RFS Pharma”). We refer to the surviving entity of this merger as “Cocrystal” or the “Company.”

Cocrystal has developed proprietary structure-based drug design technology and antiviral nucleoside chemistry to create antiviral drug candidates. In addition, we have licensed gene-editing technologies. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of hepatitis C, influenza, norovirus infections and hepatitis B. By concentrating our research and development efforts on viral replication inhibitors, we leverage our infrastructure and expertise in these areas.

The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making.

The Company’s activities since inception have consisted principally 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 are 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 June 30, 2017, the Company has funded its operations through equity offerings.

As of June 30, 2017, the Company had an accumulated deficit of $141.0 million. During the three and six month period ended June 30, 2017, the Company had a loss from operations of $1.2 million and $4.3 million, respectively. Cash used in operating activities was approximately $3.1 million for the six months ended June 30, 2017. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company expects to continue to incur substantial operating losses and negative cash flows from operations over the next several years during its pre-clinical and clinical development phases.

Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. Reference is made to the audited annual financial statements of Cocrystal Pharma, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 30, 2017 (“Annual Report”), which contain information useful to understanding the Company’s business and financial statement presentations. The condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. Our significant accounting policies and practices are presented in Note 2 to the financial statements included in the Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has not yet implemented this guidance. However, based on the Company’s current operating lease arrangements, the Company does not expect the adoption of this standard to have a material impact on its financial statements based upon current obligations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this standard as of January 1, 2017. The Company has elected to adopt the provisions of ASU No. 2016-09 that allow for stock option forfeitures to be recorded as they occur; however, adoption of this provision had no impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350). This standard simplifies how an entity is required to test for goodwill impairment. ASU 2017-04 will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted after January 1, 2017. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features and Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this ASU addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of future equity offerings. Current accounting guidance requires financial instruments with down round features to be accounted for at fair value. Part II of the Update applies only to nonpublic companies and is therefore not applicable to the Company. The amendments in Part I of the Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. This Update is effective for public entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company has not yet determined when it will adopt the provisions of this Update and has not yet determined the impact on its consolidated financial statements upon adoption.

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Fair Value Measurement

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurement

Note 2 – Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The Company categorized its cash equivalents as Level 1 fair value measurements. The Company categorized its warrants potentially settleable in cash as Level 3 fair value measurements. The warrants potentially settleable in cash are measured at fair value on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted for as component of stockholders’ equity. The warrants are valued using the Black-Scholes option-pricing model as discussed in Note 4 below.

The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of June 30, 2017 and December 31, 2016, and their placement within the fair value hierarchy as discussed above (in thousands):

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	June 30, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,451	$	3,451	$	-	$	-
Total assets	$	3,451	$	3,451	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	707	$	-	$	-	$	707
Total liabilities	$	707	$	-	$	-	$	707

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,640	$	3,640	$	-	$	-
Total assets	$	3,640	$	3,640	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	1,476	$	-	$	-	$	1,476
Total liabilities	$	1,476	$	-	$	-	$	1,476

The Company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2017 or 2016. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2017 and 2016 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		June 30, 2017			June 30, 2016
Balance, January 1,	$	1,476		$	4,115
Estimated fair value of warrants exchanged for common shares		-			(35	)
Change in fair value of warrants		(769	)		(2,211	)
Balance at June 30,	$	707		$	1,869

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Stockholders' Equity

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Stockholders' Equity

Note 3 – Stockholders’ equity

Common Stock — The Company has authorized up to 800,000,000 shares of common stock, $0.001 par value per share, and had 726,531,530 shares issued and outstanding as of June 30, 2017.

On April 20, 2017, the Company closed on proceeds of $3,000,000 in a private placement offering of 12,500,000 shares of the Company’s common stock at a purchase price of $0.24 per share to three accredited investors, which included Chairman Dr. Raymond F. Schinazi and OPKO Health, Inc., of which the Company’s director Dr. Phillip Frost is Chairman and Chief Executive Officer.

Shares of common stock authorized for future issuance as follows as of June 30, 2017 (in thousands):

	As of June 30, 2017
Stock options issued and outstanding		23,051
Authorized for future option grants		49,668
Warrants outstanding		6,275
Total		78,994

The common stock authorized for future option grants was not reserved by the Company. The Company currently does not have enough common stock authorized to issue all the options authorized by the Company for future grants.

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Warrants

6 Months Ended

Jun. 30, 2017

Warrants

Warrants

Note 4 – Warrants

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2016 (in thousands):

	Warrants accounted for as: Equity		Warrants accounted for as: Liabilities
	April 2013 warrants		October 2013 Series A warrants		January 2014 warrants		Total
Outstanding, December 31, 2016		1,500		775		4,000		6,275
Warrants Expired		-		-		-		-
Warrants exercised		-		-		-		-
Outstanding, June 30, 2017		1,500		775		4,000		6,275
Expiration date		April 25, 2018		October 24, 2023		January 16, 2024

Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

Warrants classified as liabilities

Liability-classified warrants consist of warrants issued in connection with equity financings in October 2013 and January 2014 and potentially settleable in cash and were determined not to be indexed to the Company’s own stock and are therefore accounted for as liabilities.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of comprehensive loss as changes in fair value of derivative liabilities.

The Company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities given that the Company has limited history of its own observable stock price. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2017:

	October 2013 warrants			January 2014 warrants
Strike price	$	0.50		$	0.50
Expected term (years)		6.3			6.6
Cumulative volatility %		90	%		91	%
Risk-free rate %		2.10	%		2.11	%

Warrants classified as equity

Warrants that were recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet, are included in the above table which shows all warrants.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note 5 – Stock-based compensation

The Company recorded approximately $54,000 and $268,000 of stock-based compensation related to employee stock options for the three and six months ended June 30, 2017 and $719,000 and $1,436,000 for the three and six months ended June 30, 2016, respectively. As of June 30, 2017, there was $751,000 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the Company’s operating expenses over a weighted average period of 1.75 years.

The administrator of the plans determines the times when an option may become exercisable at the time of grant. Vesting periods of options granted to date have not exceeded five years. The options generally will expire, unless previously exercised, no later than ten years from the grant date. The Company is using unissued shares for all shares issued for options and restricted share awards.

The following schedule presents activity in the Company’s outstanding stock options for the six months ended June 30, 2017 (in thousands, except per share amounts):

	Number of shares available for grant		Total options outstanding			Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance at December 31, 2016		48,368		24,351		$	0.30	$	5,457
Exercised		-		-			-		-
Granted		-		-			-		-
Cancelled		1,300		(1,300	)		0.96		-
Balance at June 30, 2017		49,668		23,051		$	0.26	$	2,352

As of June 30, 2017, options to purchase 23,051,200 shares of common stock, with an aggregate intrinsic value of $2,352,000, were outstanding that were fully vested or expected to vest with a weighted average remaining contractual term of 4.1 years. As of June 30, 2017, options to purchase 21,521,709 shares of common stock with a weighted average exercise price of $0.23 per share and a weighted average remaining contractual term of 3.6 years were fully vested with an intrinsic value of $2,306,000.

The aggregate intrinsic value of outstanding and exercisable options at June 30, 2017 was calculated based on the closing price of the Company’s common stock as reported on the OTCQB market on June 30, 2017 of $0.223 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying options.

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Net Loss Per Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Net Loss Per Share

Note 6 – Net Loss per Share

The Company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260, Earnings Per Share. Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants.

The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Options to purchase common stock		23,051		43,051		23,051		43,059
Warrants to purchase common stock		6,275		1,350		6,275		1,242
Total		29,326		44,401		29,326		44,301

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Mortgage Note Receivable

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Mortgage Note Receivable

Note 7 - Mortgage Note Receivable

In June 2014, the Company acquired a mortgage note from a bank for $2,626,290 which is collateralized by, among other things, the underlying real estate and related improvements. The property subject to the mortgage is owned by an entity managed by Daniel Fisher, one of the founders of Biozone, and is currently under lease to Flavor Producers, Inc. At June 30, 2017, the carrying amount of the mortgage note receivable was $1,294,000, consisting entirely of principal. The mortgage note has a maturity date of August 1, 2032 and bears an interest rate of 7.24%.

In 2014, Daniel Fisher and his affiliate, 580 Garcia Properties LLC, brought multiple lawsuits against the Company involving its predecessors and subsidiaries. The lawsuits have been settled and the complaints initiating them dismissed, without the Company making any payments to either Mr. Fisher or 580 Garcia Properties LLC. In addition, the mortgage note discussed above is a promissory note secured by a deed of trust under which 580 Garcia Properties LLC is the primary obligor. As of the time of the acquisition by the Company of the promissory note, 580 Garcia Properties LLC, was delinquent in its obligation to make certain monthly payments thereunder. Consequently, in December 2015, the Company issued notice of default letters to 580 Garcia Properties LLC, Daniel Fisher, and Sharon Fisher for said delinquencies, and proceeded in accordance with rights of a secured real estate creditor under California law, to initiate private foreclosure proceedings respecting the property, to foreclose under the promissory note secured by the deed of trust. A foreclosure sale was set in accordance with California law for January 27, 2017. Prior to the date of this foreclosure sale, Mr. Fisher filed a motion where he sought among other things an order of the court enjoining the foreclosure sale, alleging wrongdoing by the Company and Biozone Pharmaceuticals, Inc. and others that Mr. Fisher claims the Company has direct responsibility over. The court in the Fisher/Biozone Lawsuit heard oral argument on Mr. Fisher’s motion on March 2, 2017. On March 23, 2017, the court ordered further briefing by March 30, 2017 on the issue of whether to enjoin the foreclosure sale. On April 5, 2017, the court in the Fisher/Biozone Lawsuit entered a preliminary injunction barring the foreclosure sale until further order, and since that time the Company has engaged in settlement discussions with Mr. Fisher and 580 Garcia Properties LLC and others, to discuss an overall resolution. The Company cannot offer any assurances as to when, or if, any settlement will be achieved, and the court has scheduled case management conferences to consider further proceedings, with the next case management conference set for September 14, 2017.

Because the Company intended to foreclose on the property and foreclosure was probable, in December 2016 the Company recognized an impairment on the mortgage note receivable of $1,176,000 to adjust the carrying value of the note to its fair value. The fair value of the note was determined by reference to the estimated fair value of the underlying property, which was determined based on analysis of comparable properties and recent market data. Furthermore, as a result of the Company’s plan to divest of this asset within the next twelve months, we are no longer recording interest income and the asset was reclassified from long-term to current at December 31, 2016.

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 – Income Taxes

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. The Company has recorded a net deferred tax liability of $20,462,000 as of June 30, 2017 and December 31, 2016 as it has not considered the deferred tax liability, which is related to acquired in-process research and development, to be a future source of taxable income in evaluating the need for a valuation allowance against its deferred tax assets due to the in-process research and development asset being considered an indefinite-lived intangible asset.

FASB ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and a measurement criterion for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered more likely than not to be sustained upon examination by taxing authorities. The Company records interest and penalties related to uncertain tax positions as a component of the provision for income taxes. As of June 30, 2017 and December 31, 2016, the Company had no unrecognized tax benefits.

The Company currently files income tax returns in the United States federal and various state jurisdictions. The Company is not currently under examination in any jurisdiction.

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Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Note 9 - Contingencies

As a publicly traded company, from time to time, the Company may be party to, or otherwise involved in, legal proceedings and inquiries from regulators arising in the normal course of business. As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.

In June 2014, the Company acquired a mortgage note from a bank, which is collateralized by, among other things, the underlying real estate and related improvements. At June 30, 2017, the carrying amount of the mortgage note receivable was $1,294,000, consisting entirely of principal. The Company is currently in legal proceedings regarding the mortgage note receivable and collateralized real estate (see Note 7).

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Transactions with Related Parties

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Transactions with Related Parties

Note 10 - Transactions with Related Parties

Since November 2014, the Company has leased its Tucker, Georgia facility from a limited liability company owned by one of Cocrystal’s directors and principal shareholder, Dr. Raymond Schinazi. The annual expense for this lease is estimated to be $209,000. The present lease expired June 30, 2017 and the Company is currently on a month-to-month term. The total rent expense was $63,000 and $111,000 for the three and six months ended June 30, 2017 and $46,000 and $92,000 for the three and six months ended 2016, respectively.

Emory University: Cocrystal Pharma has an exclusive license from Emory University for use of certain inventions and technology related to inhibitors of HCV that were jointly developed by Emory and Cocrystal Pharma employees. The License Agreement is dated March 7, 2013 wherein Emory agrees to add to the Licensed Patents and Licensed Technology Emory’s rights to any patent, patent application, invention, or technology application that is based on technology disclosed within three (3) years of March 7, 2013. The agreement includes payments due to Emory ranging from $40,000 to $500,000 based on successful achievement of certain drug development milestones. Additionally, Cocrystal may have royalty payments at 3.5% of net sales due to Emory with a minimum in year one of $25,000 and increase to $400,000 in year five upon product commercialization. One of Cocrystal’s Directors, Dr. Raymond Schinazi, is also a faculty member at Emory University and may share in these royalty payments with Emory.

Duke University and Emory University: Cocrystal Pharma has entered an agreement to license various patents and know-how to use CRISPR/Cas9 technologies for developing a possible cure for hepatitis B virus (HBV) and human papilloma virus (HPV). This license allows Cocrystal Pharma to develop and potentially commercialize a cure for HBV and HPV utilizing the underlying patents and technologies developed by the universities. This agreement includes a non-refundable $100,000 license fee payable to Duke upon a determination of rights letter from the U.S. Veterans Administration with respect to patents and know-how that disclaims any ownership interest. Future royalties may be payable to Duke, ranging from 2-5% of net sales depending on achieving certain sales milestones, if commercial products are developed using this know-how. One of Cocrystal’s Directors, Dr. Raymond Schinazi, is also a faculty member at Emory University and may share in these royalty payments with Emory.

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Organization and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. Reference is made to the audited annual financial statements of Cocrystal Pharma, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 30, 2017 (“Annual Report”), which contain information useful to understanding the Company’s business and financial statement presentations. The condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. Our significant accounting policies and practices are presented in Note 2 to the financial statements included in the Form 10-K.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has not yet implemented this guidance. However, based on the Company’s current operating lease arrangements, the Company does not expect the adoption of this standard to have a material impact on its financial statements based upon current obligations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this standard as of January 1, 2017. The Company has elected to adopt the provisions of ASU No. 2016-09 that allow for stock option forfeitures to be recorded as they occur; however, adoption of this provision had no impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350). This standard simplifies how an entity is required to test for goodwill impairment. ASU 2017-04 will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted after January 1, 2017. We are currently evaluating the impact of this new guidance on our Condensed Consolidated Financial Statements.

In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features and Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this ASU addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of future equity offerings. Current accounting guidance requires financial instruments with down round features to be accounted for at fair value. Part II of the Update applies only to nonpublic companies and is therefore not applicable to the Company. The amendments in Part I of the Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. This Update is effective for public entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company has not yet determined when it will adopt the provisions of this Update and has not yet determined the impact on its consolidated financial statements upon adoption.

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Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Summary of Fair Values of Assets and Liabilities Measured at Fair Value on Recurring and NonRecurring Basis

The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of June 30, 2017 and December 31, 2016, and their placement within the fair value hierarchy as discussed above (in thousands):

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	June 30, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,451	$	3,451	$	-	$	-
Total assets	$	3,451	$	3,451	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	707	$	-	$	-	$	707
Total liabilities	$	707	$	-	$	-	$	707

			Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	3,640	$	3,640	$	-	$	-
Total assets	$	3,640	$	3,640	$	-	$	-
Liabilities:
Warrants potentially settleable in cash	$	1,476	$	-	$	-	$	1,476
Total liabilities	$	1,476	$	-	$	-	$	1,476

Schedule of Reconciliation of the Beginning and Ending Level 3 Liabilities

The Company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2017 or 2016. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2017 and 2016 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		June 30, 2017			June 30, 2016
Balance, January 1,	$	1,476		$	4,115
Estimated fair value of warrants exchanged for common shares		-			(35	)
Change in fair value of warrants		(769	)		(2,211	)
Balance at June 30,	$	707		$	1,869

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Common Stock Reserved Future Issuance

Shares of common stock authorized for future issuance as follows as of June 30, 2017 (in thousands):

	As of June 30, 2017
Stock options issued and outstanding		23,051
Authorized for future option grants		49,668
Warrants outstanding		6,275
Total		78,994

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Warrants (Tables)

6 Months Ended

Jun. 30, 2017

Warrants

Summary of Warrant Activity

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2016 (in thousands):

	Warrants accounted for as: Equity		Warrants accounted for as: Liabilities
	April 2013 warrants		October 2013 Series A warrants		January 2014 warrants		Total
Outstanding, December 31, 2016		1,500		775		4,000		6,275
Warrants Expired		-		-		-		-
Warrants exercised		-		-		-		-
Outstanding, June 30, 2017		1,500		775		4,000		6,275
Expiration date		April 25, 2018		October 24, 2023		January 16, 2024

Schedule of Fair Value of the Warrants Classified as Liabilities

The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2017:

	October 2013 warrants			January 2014 warrants
Strike price	$	0.50		$	0.50
Expected term (years)		6.3			6.6
Cumulative volatility %		90	%		91	%
Risk-free rate %		2.10	%		2.11	%

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

The following schedule presents activity in the Company’s outstanding stock options for the six months ended June 30, 2017 (in thousands, except per share amounts):

	Number of shares available for grant		Total options outstanding			Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance at December 31, 2016		48,368		24,351		$	0.30	$	5,457
Exercised		-		-			-		-
Granted		-		-			-		-
Cancelled		1,300		(1,300	)		0.96		-
Balance at June 30, 2017		49,668		23,051		$	0.26	$	2,352

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Calculations of Net Loss Per Share

The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Options to purchase common stock		23,051		43,051		23,051		43,059
Warrants to purchase common stock		6,275		1,350		6,275		1,242
Total		29,326		44,401		29,326		44,301

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Organization and Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Accounting Policies [Abstract]
Accumulated deficit	$ 140,981		$ 140,981		$ 137,430
Loss from operations	$ 1,200	$ 4,204	4,321	$ 9,539
Cash used in operating activities			$ 3,137	$ 9,208

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Fair Value Measurement - Summary of Fair Values of Assets and Liabilities Measured at Fair Value On Recurring and NonRecurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016	Dec. 31, 2015
Cash and cash equivalents	$ 3,451	$ 3,640	$ 5,022	$ 9,276
Total assets	124,340	124,883
Warrants potentially settleable in cash	707	1,476
Total liabilities	22,304	22,564
Quoted Prices in Active Markets Level 1 [Member]
Cash and cash equivalents	3,451	3,640
Total assets	3,451	3,640
Warrants potentially settleable in cash
Total liabilities
Significant Other Observable Inputs Level 2 [Member]
Cash and cash equivalents
Total assets
Warrants potentially settleable in cash
Total liabilities
Unobservable Inputs Level 3 [Member]
Cash and cash equivalents
Total assets
Warrants potentially settleable in cash	707	1,476
Total liabilities	$ 707	$ 1,476

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Fair Value Measurement - Schedule of Reconciliation of the Beginning and Ending Level 3 Liabilities (Details) - Unobservable Inputs Level 3 [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Balance - January 1	$ 1,476	$ 4,115
Estimated fair value of warrants exchanged for common shares		(35)
Change in fair value of warrants	(769)	(2,211)
Balance at June 30,	$ 707	$ 1,869

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Stockholder's Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
	Apr. 20, 2017	Jun. 30, 2017	Dec. 31, 2016	Apr. 20, 2015
Common stock authorized		800,000,000	800,000,000
Common stock par value		$ 0.001	$ 0.001
Common stock issued		726,532,000	714,032,000
Common stock outstanding		726,532,000	714,032,000
Number of common stock issued		$ 3,000
Private Placement [Member] | Three Accredited Investor [Member]
Number of common stock issued	$ 3,000
Number of common stock issued, shares	12,500,000
Common stock purchase price, per share				$ 0.24

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Stockholders' Equity - Common Stock Reserved Future Issuance (Details)	Jun. 30, 2017 shares
Equity [Abstract]
Stock options issued and outstanding	23,051,000
Authorized for future option grants	49,668,000
Warrants outstanding	6,275,000
Total	78,994,000

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Warrants (Details Narrative)	6 Months Ended
	Jun. 30, 2017
Equity [Abstract]
Risk free interest	0.00%
Dividend Yield	0.00%

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Warrants - Summary of Warrant Activity (Details)	6 Months Ended
	Jun. 30, 2017 shares
Warrants to Purchase Common Stock [Member]
Number of warrants outstanding, beginning	6,275,000
Number of warrants expired
Number of warrants exercised
Number of warrants outstanding, ending	6,275,000
April 2013 Warrants [Member] | Equity [Member]
Number of warrants outstanding, beginning	1,500,000
Number of warrants expired
Number of warrants exercised
Number of warrants outstanding, ending	1,500,000
Warrant expiration date	Apr. 25, 2018
October 2013 Warrants Series A [Member] | Liabilities [Member]
Number of warrants outstanding, beginning	775,000
Number of warrants expired
Number of warrants exercised
Number of warrants outstanding, ending	775,000
Warrant expiration date	Oct. 24, 2023
January 2014 Warrants [Member] | Liabilities [Member]
Number of warrants outstanding, beginning	4,000,000
Number of warrants expired
Number of warrants exercised
Number of warrants outstanding, ending	4,000,000
Warrant expiration date	Jan. 16, 2024

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Warrants - Schedule of Fair Value of the Warrants Classified as Liabilities (Details)	6 Months Ended
	Jun. 30, 2017 $ / shares
Strike price	$ 0.223
Risk-free rate %	0.00%
October 2013 Warrants [Member]
Strike price	$ 0.50
Expected term (years)	6 years 3 months 19 days
Cumulative volatility %	90.00%
Risk-free rate %	2.10%
January 2014 Warrants [Member]
Strike price	$ 0.50
Expected term (years)	6 years 7 months 6 days
Cumulative volatility %	91.00%
Risk-free rate %	2.11%

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Stock-Based Compensation (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Stock-based compensation related to employee	$ 54,000	$ 719,000	$ 268,000	$ 1,436,000
Unrecognized compensation cost related to outstanding options	$ 751,000		$ 751,000
Weighted average period			1 year 9 months
Option to purchase common stock vested or expected to vest	23,051,200		23,051,200
Aggregate intrinsic value vested or expected to be vest	$ 2,352,000		$ 2,352,000
Stock option vesting period			4 years 1 month 6 days
Stock option to purchase common stock			21,521,709
Aggregate intrinsic value	$ 2,306,000		$ 2,306,000
Weighted average exercise price	$ 0.23		$ 0.23
Weighted average contractual term			3 years 7 months 6 days
Share price	$ 0.223		$ 0.223
Equity Incentive Plans [Member] | Maximum [Member]
Stock option vesting period			5 years

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Stock-Based Compensation - Schedule of Share-based Compensation, Stock Options, Activity (Details)	6 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Number of shares available for grant, ending	49,668,000
Aggregate Intrinsic Value, ending | $	$ 2,352,000
Warrants to Purchase Common Stock [Member]
Number of shares available for grant, beginning	48,368,000
Number of shares available for grant, Exercised
Number of shares available for grant, Granted
Number of shares available for grant, Cancelled	1,300,000
Number of shares available for grant, ending	49,668,000
Total options outstanding, beginning	24,351,000
Total options outstanding, Exercised
Total options outstanding, Granted
Total options outstanding, Cancelled	(1,300,000)
Total options outstanding, ending	23,051,000
Weighted Average Exercise Price, outstanding | $ / shares	$ 0.30
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Cancelled | $ / shares	0.96
Weighted Average Exercise Price, ending | $ / shares	$ 0.26
Aggregate Intrinsic Value, outstanding | $	$ 5,457
Aggregate Intrinsic Value, ending | $	$ 2,352

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Net Loss Per Share - Schedule of Antidilutive Securities Excluded from Calculations of Net Loss Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Anti-dilutive securities	29,326,000	44,401,000	29,326,000	44,301
Options to Purchase Common Stock [Member]
Anti-dilutive securities	23,051,000	43,051,000	23,051,000	43,059,000
Warrants to Purchase Common Stock [Member]
Anti-dilutive securities	6,275,000	1,350,000	6,275,000	1,242,000

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Mortgage Note Receivable (Details Narrative) - USD ($)	1 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2017
Impairment of mortgage note receivable		$ 1,176,000
Mortgage Note [Member]
Mortgage note receivable	$ 2,626,290
Mortgage note receivable		$ 1,294,000
Debt instrument maturity date	Aug. 01, 2032
Debt instrument interest rate	7.24%

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Income Taxes (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Net deferred tax liability	$ 20,462	$ 20,462
Unrecognized tax benefits

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Contingencies (Details Narrative) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Carrying amount of the mortgage note receivable	$ 1,294

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Transactions with Related Parties (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Nov. 30, 2014
Rent expenses	$ 63	$ 46	$ 111	$ 92
Royalty payment rate	3.50%		3.50%
Duke [Member]
Non-refundable license fee	$ 100		$ 100
License Agreement [Member] | One Year [Member]
Royalty payable	25		25
License Agreement [Member] | Five Year [Member]
Royalty payable	$ 400		$ 400
Minimum [Member] | Duke [Member]
Royalty payment rate	2.00%		2.00%
Minimum [Member] | License Agreement [Member]
Royalty payable	$ 40	$ 500	$ 40	$ 500
Maximum [Member] | Duke [Member]
Royalty payment rate	5.00%		5.00%
Dr. Raymond Schinazi [Member]
Annual lease expense					$ 209
Lease expiration			Jun. 30, 2017