財政季度：2026年第一季度（截至2026年3月31日）

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UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549

 

FORM
10-Q

 

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

 
 

For
the quarterly period ended March 31, 2026

 

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: 001-38418

 

COCRYSTAL
PHARMA, INC.

(Exact
name of registrant as specified in its charter)

 

 
 Delaware
  
 35-2528215

 
 (State
 or Other Jurisdiction of
  
 (I.R.S.
 Employer

 
 Incorporation
 or Organization)
  
 Identification
 No.)

 
  
  
  

 
 19805
 North Creek Parkway Bothell, WA
  
 98011

 
 (Address
 of Principal Executive Office)
  
 (Zip
 Code)

 
 

Registrant’s
telephone number, including area code: 877-262-7123

 

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 ☒ No ☐

 

Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes ☒ No ☐

 

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

 

 
 Large
 accelerated filer 
 ☐
 Accelerated
 filer 
 ☐

 
  
  
  
  

 
 Non-accelerated
 filer 
 ☒
 Smaller
 reporting company 
 ☒

 
  
  
  
  

 
 Emerging
 growth company
 ☐
  
  

 
 

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

Securities
registered pursuant to Section 12(b) of the Act:

 

 
 Title
 of Each Class
  
 Trading
 Symbol(s)
  
 Name
 of each exchange on which registered

 
 Common
 Stock
  
 COCP
  
 The
 Nasdaq Stock Market LLC

 (The
 Nasdaq Capital Market)

 
 

As
of May 15, 2026, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was approximately
13,787,453.

 

 

 

  

  

 

 

COCRYSTAL
PHARMA, INC.

 

FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 2026

 

INDEX

 

 
 Part
 I - FINANCIAL INFORMATION
  

 
 Item
 1. 
  

 
 Condensed
 Consolidated Balance Sheets
 F-1

 
 Condensed
 Consolidated Statements of Operations
 F-2

 
 Condensed
 Consolidated Statements 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
 10

 
 Item
 4. Controls and Procedures
 10

 
 Part
 II - OTHER INFORMATION
  

 
 Item
 1. Legal Proceedings
 11

 
 Item
 1. A. Risk Factors
 11

 
 Item
 2. Unregistered Sales of Equity Securities and Use of Proceeds
 11

 
 Item
 3. Defaults Upon Senior Securities
 11

 
 Item
 4. Mine Safety Disclosures
 11

 
 Item
 5. Other Information
 11

 
 Item
 6. Exhibits
 12

 
 SIGNATURES
 13

 
 

 2

  

 

 

Part
I – FINANCIAL INFORMATION

 

COCRYSTAL
PHARMA, INC.

 

CONDENSED
CONSOLIDATED BALANCE SHEETS

(in
thousands, except per share data)

 

 
   
 March
 31, 2026  
 December
 31, 2025 

 
   
 (unaudited)  
   

 
 Assets 
     
    

 
 Current assets: 
     
    

 
 Cash 
 $4,685  
 $7,025 

 
 Restricted cash 
  75  
  75 

 
 Grant receivable 
  70  
  - 

 
 Tax credit receivable 
  691  
  706 

 
 Prepaid
 expenses and other current assets 
  418  
  328 

 
 Total current assets 
  5,939  
  8,134 

 
 Property and equipment, net 
  81  
  93 

 
 Deposits 
  95  
  95 

 
 Operating lease right-of-use
 assets, net (including $89 and $152 to related party) 
  1,311  
  1,390 

 
 Total assets 
 $7,426  
 $9,712 

 
   
     
    

 
 Liabilities and stockholders’ equity 
     
    

 
 Current liabilities: 
     
    

 
 Accounts payable and accrued
 expenses 
 $1,886  
 $1,876 

 
 Current
 maturities of operating lease liabilities (including $58 and $49 to related party) 
  343  
  334 

 
 Total current liabilities 
  2,229  
  2,210 

 
 Long-term liabilities: 
     
    

 
   
     
    

 
 Operating
 lease liabilities (including $32 and $104 to related party) 
  1,081  
  1,171 

 
 Total long-term liabilities 
  1,081  
  1,171 

 
 Total liabilities 
  3,310  
  3,381 

 
   
     
    

 
 Commitments and contingencies 
  -   
  -  

 
   
     
    

 
 Stockholders’ equity: 
     
    

 
 Common stock, $0.001 a par value: 100,000 shares authorized as of March
 31, 2026 and December 31, 2025; 13,787 and 13,784 shares issued and outstanding as of March 31, 2026 and December 31, 2025 
  13  
  13 

 
 Additional paid-in capital 
  348,651  
  348,567 

 
 Accumulated deficit 
  (344,548) 
  (342,249)

 
 Total stockholders’
 equity 
  4,116  
  6,331 

 
 Total liabilities and
 stockholders’ equity 
 $7,426  
 $9,712 

 

 

See
accompanying notes to condensed consolidated financial statements.

 

 F-1

  

 

 

COCRYSTAL
PHARMA, INC.

 

CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in
thousands, except per share data)

 

 
   
 2026  
 2025 

   
 Three
 months ended March 31, 

 
   
 2026  
 2025 

 
 Revenues and grant income: 
     
    

 
 Grant
 income 
  225  
  - 

 
 Operating expenses: 
     
    

 
 Research and development 
  1,371  
  1,360 

 
 General
 and administrative 
  1,210  
  981 

 
 Total operating expenses 
  2,581  
  2,341 

 
   
     
    

 
 Loss from operations 
  (2,356) 
  (2,341)

 
 Other income: 
     
    

 
 Interest income, net 
  22  
  37 

 
 Foreign
 exchange gain, net 
  35  
  3 

 
 Total
 other income, net 
  57  
  40 

 
 Net loss 
 $(2,299) 
 $(2,301)

 
 Net loss per common
 share, basic and diluted 
 $(0.17) 
 $(0.23)

 
   
     
    

 
 Weighted average number of common shares,
 basic and diluted 
  13,786  
  10,174 

 

 

See
accompanying notes to condensed consolidated financial statements.

 

 F-2

  

 

 

COCRYSTAL
PHARMA, INC.

 

CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For
the three months ended March 31, 2026 and 2025

(unaudited)

(in
thousands)

 

 
   
 Shares  
 Amount  
 Capital  
 Deficit  
 Equity 

   
 Common
 Stock  
 Additional
 
 Paid-in  
 Accumulated  
 Total 

 Stockholders’ 

 
   
 Shares  
 Amount  
 Capital  
 Deficit  
 Equity 

 
 Balance as of December 31, 2025 
  13,784  
 $13  
 $348,567  
 $(342,249) 
 $         6,331 

 
 Stock-based compensation 
  -  
  -  
  84  
     
  84 

 
 Shares issued from RSU Award 
  3  
  -  
  -  
  -  
  - 

 
 Net loss 
  -  
  -  
  -  
  (2,299) 
  (2,299)

 
 Balance as of March 31, 2026 
  13,787  
 $13  
 $348,651  
 $(344,548) 
 $4,116 

 

 

 
   
 Common
 Stock  
 Additional
 
 Paid-in  
 Accumulated  
 Total 

 Stockholders’ 

 
   
 Shares  
 Amount  
 Capital  
 Deficit  
 Equity 

 
 Balance as of December 31, 2024 
  10,174  
 $10  
 $342,931  
 $(333,418) 
 $         9,523 

 
 Balance 
  10,174  
 $10  
 $342,931  
 $(333,418) 
 $         9,523 

   
     
     
     
     
    

 
 Stock-based compensation 
  -  
  -  
  82  
  -  
  82 

 
 Net loss 
  -  
  -  
  -  
  (2,301) 
  (2,301)

 
 Balance as of March 31, 2025 
  10,174  
 $10  
 $343,013  
 $(335,719) 
 $7,304 

 
 Balance 
  10,174  
 $10  
 $343,013  
 $(335,719) 
 $7,304 

 

See
accompanying notes to condensed consolidated financial statements.

 

 F-3

  

 

 

COCRYSTAL
PHARMA, INC.

 

CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in
thousands)

 

 
   
 2026  
 2025 

   
 Three
 months ended March 31, 

 
   
 2026  
 2025 

 
 Operating activities: 
     
    

 
 Net loss 
 $(2,299) 
 $(2,301)

 
 Adjustments to reconcile net loss to net cash
 used in operating activities: 
     
    

 
 Depreciation and amortization
 expense 
  12  
  25 

 
 Stock-based compensation 
  84  
  82 

 
 Decrease right of use assets 
  79  
  74 

 
   
     
    

 
 Changes in operating assets
 and liabilities: 
     
    

 
 Grant receivable 
  (70) 
  - 

 
 Prepaid expenses and other
 current assets 
  (90) 
  45 

 
 Tax credit receivable 
  15  
  (229)

 
 Deposits 
  -  
  (57)

 
 Accounts payable and accrued
 expenses 
  10  
  (505)

 
 Operating lease liabilities 
  (81) 
  (73)

 
   
     
    

 
 Net cash used in operating
 activities 
  (2,340) 
  (2,939)

 
   
     
    

 
 Net decrease in cash and restricted cash 
  (2,340) 
  (2,939)

 
 Cash and restricted cash
 at beginning of period 
  7,100  
  9,935 

 
 Cash and restricted
 cash at end of period 
 $4,760  
 $6,996 

 

 

See
accompanying notes to condensed consolidated financial statements.

 

 F-4

  

 

 

COCRYSTAL
PHARMA, INC.

 

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

(unaudited)

 

1.
Organization and Business

 

Cocrystal
Pharma, Inc. (“we”, the “Company” or “Cocrystal”), a clinical stage biopharmaceutical company incorporated
in Delaware, has been developing novel technologies and approaches to create first-in-class or 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 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’s activities since inception have principally consisted of acquiring product and technology rights, raising capital, and
performing research and development. Successful completion of the Company’s development programs, obtaining regulatory approvals
of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things,
its ability to access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel,
and develop strategic alliances.

 

Liquidity
and going concern

 

The
Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of
America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has incurred net losses and negative operating cash flows since inception. For the three months ended
March 31, 2026, the Company recorded a net loss of approximately $2,299,000 and used approximately $2,340,000 of cash in operating activities.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s
independent registered public accounting firm, in its report on the Company’s December 31, 2025 financial statements, has expressed
substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

On
March 31, 2026, the Company had cash and restricted cash of approximately $4,760,000. Restricted cash represents amounts pledged as collateral
for financing arrangements that are currently limited to the issuance of business credit cards. The restriction will end upon the conclusion
of these financing arrangements. We believe that our current resources will not be sufficient to fund our operations beyond the next
12 months. This estimate is based, in part, upon our currently projected expenditures.

 

The
Company’s activities since inception have principally consisted of acquiring product and technology rights, raising capital, and
performing research and development. Successful completion of the Company’s development programs, obtaining regulatory approvals
of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things,
its ability to develop, obtain approval and commercialize antiviral drug candidates, including access potential markets, secure financing,
develop a customer base, and to attract, retain and motivate qualified personnel, and develop strategic alliances. Through March 31,
2026, the Company has primarily funded its operations through equity offerings and limited revenue.

 

 F-5

  

 

 

The
Company will need to continue obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no
assurances that the additional capital it is able to raise, if any, will be sufficient to meet its needs, or that any such financing
will be obtainable on acceptable terms. Our future cash requirements, and the timing of those requirements, will depend on a number of
factors, including economic conditions, the approval and success of our products in development, the continued progress of research and
development of our product candidates, the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing,
filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the status of competitive
products, the availability of financing, our success in developing markets for our product candidates and legal proceedings that may
arise. We have historically not generated sustained positive cash flow and if we are not able to secure additional funding when needed,
we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs. If the
Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail its drug development activities.
The Company expects to continue incurring substantial operating losses and negative cash flows from operations over the next several
years during its pre-clinical and clinical development phases.

 

2.
Basis of Presentation and Significant Accounting Policies

 

Basis
of Presentation

 

The
accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X
set forth by the Securities and Exchange Commission (“SEC”). They do not include all of the information and notes required
by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of operations for the interim periods presented are unaudited
and are not necessarily indicative of the results of operations for the entire fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31,
2025 filed on March 31, 2026 (“Annual Report”).

 

Principles
of Consolidation

 

The
consolidated financial statements include the accounts of Cocrystal Pharma, Inc. and its wholly owned subsidiaries: Cocrystal Discovery,
Inc., Cocrystal Pharma Australia Pty Ltd. (“Cocrystal Australia”), RFS Pharma, LLC and Cocrystal Merger Sub, Inc. Intercompany
transactions and balances have been eliminated. Cocrystal Discovery, Inc. conducts all of the Company’s research and development
activities and oversees ongoing clinical trials conducted by others. Cocrystal Australia operates clinical trials in Australia. The other
two subsidiaries are inactive.

 

Segments

 

The
Company’s Co-Chief Executive Officer and President (“CEO”) is our chief operating decision maker (“CODM”)
and evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated
basis. Because our CODM evaluates financial performance on a consolidated basis, the Company has determined that it operates as a single
reportable segment composed of the consolidated financial results of Cocrystal Pharma, Inc. The measure of segment assets is reported
on the consolidated balance sheets as total assets (see Note 9).

 

 F-6

  

 

 

Use
of Estimates

 

Preparation
of the Company’s consolidated financial statements in conformance with U.S. GAAP requires the Company’s management to make
estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

 

The
most significant estimates in the Company’s consolidated financial statements relate to clinical trial costs and accruals and the
fair value of stock-based compensation. The Company bases estimates and assumptions on historical experience, when available, and on
various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an
ongoing basis, and its actual results may differ from estimates made under different assumptions or conditions.

 

Concentrations
of Credit Risk

 

Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposited in
accounts held at two U.S. financial institutions, which may, at times, exceed federally insured limits of $250,000 for each institution
where accounts are held. At March 31, 2026 and December 31, 2025, our primary operating accounts held approximately $4,685,000 and $7,025,000,
respectively, and our collateral account balance was $75,000 during both periods and held at a different institution. The Company
has not experienced any losses in such accounts and believes it is not exposed to significant risks thereof.

 

Risks
and uncertainties

 

The
Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s
future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological
change, ability to obtain regulatory approvals, competition from currently available treatments and therapies, competition from larger
companies, effective protection of proprietary technology, maintenance of strategic relationships, and dependence on key individuals.

 

Products
developed by the Company will require clearances from the U.S. Food and Drug Administration (the “FDA”) and other international
regulatory agencies prior to commercial sales in their respective markets. The Company’s products may not receive the necessary
clearances and if they are denied clearance, clearance is delayed, or the Company is unable to maintain clearance, the Company’s
business could be materially, adversely impacted.

 

See
Item 1A- Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 for more information on the risks and uncertainties
we face.

 

Foreign
Currency Transactions

 

The
Company and its subsidiaries use the U.S. dollar as functional currency. Foreign currency transactions are initially measured and recorded
in the functional currency using the exchange rate on the date of the transaction. Foreign exchange gains and losses arising from settlement
of foreign currency transactions are recognized in profit and loss.

 

Cocrystal
Australia maintains its records in Australian dollars. The monetary assets and liabilities of Cocrystal Australia are remeasured into
the functional currency using the closing rate at the end of every reporting period. All nonmonetary assets and liabilities and related
profit and loss accounts are remeasured into the functional currency using the historical exchange rates. Profit and loss accounts, other
than those that are remeasured using the historical exchange rates, are remeasured into the functional currency using the average exchange
rate for the period. Foreign exchange gains and losses arising from the remeasurement into the functional currency is recognized in profit
and loss.

 

Fair
Value Measurements

 

FASB
Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under
U.S. GAAP 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.

 
 

 F-7

  

 

 

 
  
 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.

 
 

At
March 31, 2026 and December 31, 2025, the carrying amounts of financial assets and liabilities, such as cash, grant receivable, tax
receivable, other assets, and accounts payable and accrued expenses approximate their fair values due to their short-term nature.
The carrying values of leases payable approximate their fair values due to the fact that the interest rates on these obligations are
based on prevailing market interest rates.

 

Long-Lived
Assets

 

The
Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to determine
whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used
for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and
positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should
an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value.

 

Research
and Development Expenses

 

Research
and development costs consist primarily of fees paid to consultants and outside service providers, and other expenses relating to the
acquisition, design, development and testing of the Company’s clinical products. All research and development costs are expensed
as incurred. Research and development costs are presented net of tax credits.

 

The
Company’s Australian subsidiary is entitled to receive government assistance in the form of refundable and non-refundable research
and development tax credits (“Refundable Tax Credits”) from the federal and provincial taxation authorities, based on qualifying
expenditures incurred during the fiscal year. The Refundable Tax Credits are from the provincial taxation authorities and are not dependent
on its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records Refundable Tax
Credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely
than not, they will be received. As of March 31, 2026, the balance of Refundable Tax Credits was approximately $691,000.

 

Income
Taxes

 

The
Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and
laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets
is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of
a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company
recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be
sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will
measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely
than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change
in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties
related to income taxes as part of its income tax expense.

 

 F-8

  

 

 

As
of March 31, 2026, the Company assessed its income tax expense based on its projected future taxable income for the year ending December
31, 2025 and therefore recorded no amount for income tax expense for the three months ended March 31, 2026. In addition, the Company
has significant deferred tax assets available to offset income tax expense due to net operating loss carry forwards which are currently
subject to a full valuation allowance based on the Company’s assessment of future taxable income. Refer to our Annual Report on
Form 10-K for the year ended December 31, 2025 for more information.

 

Stock-Based
Compensation

 

The
Company recognizes compensation expense using a fair value-based method for costs related to stock-based payments, including stock options.
The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized
as expense over the requisite service period on a straight-line basis. Recognition of compensation expense for non-employees is in the
same period and manner as if the Company had paid cash for the services.

 

Use
of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term,
and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as
that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility
of its own. The expected term of the options is estimated by using the SEC Staff Bulletin No. 107’s Simplified Method for Estimate
Expected Term. The risk-free interest rate is estimated using comparable published federal funds rates.

 

Grant
Income 

 

The
Company accounts for government grant funding by analogy to ASC 958-605 because U.S. GAAP does not contain specific guidance for business
entities receiving government grants.

 

Grant
income is recognized as the Company incurs qualifying research and development expenditures and satisfies the conditions associated with
the grant arrangement.

 

In
October 2025, the Company announced that it had received a $500,000 Small Business Innovation Research (“SBIR”) Phase I award
(the “Award”) from the National Institutes of Health (“NIH”) and the National Institute of Allergy and Infectious
Diseases (“NIAID”). The Award supports the Company’s development of a novel oral broad-spectrum antiviral candidate
for the treatment of influenza A and B infections. The Award is subject to the terms and provisions of Contract No. 75N93025C00038 entered
into with NIAID, covering a performance period from September 2025 through September 2026.

 

During
the three months ended March 31, 2026, the Company recognized grant income of $225,000 under the Award related to qualifying expenditures
incurred during the period. Of the total grant income recognized, $70,000 remained outstanding as of March 31, 2026 and was recorded
as a grant receivable in the accompanying balance sheet. The grant receivable was subsequently collected in April 2026.

 

Net
Income (Loss) per Share

 

The
Company accounts for and discloses net income (loss) per common share in accordance with FASB ASC Topic 260, Earnings Per Share.
Basic income (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average
number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing net income (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 stock for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon
the exercise of stock options and restricted stock units.

 

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):

 Schedule of Anti-dilutive Securities Excluded from Calculations of Net Loss Per Share 

 
   
 2026  
 2025 

   
 March
 31, 

 
   
 2026  
 2025 

 
 Outstanding options to purchase
 common stock 
  838  
  549 

 
 Warrants to purchase common stock 
  7,223  
  - 

 
 Unvested restricted stock
 units 
  77  
  155 

 
 Total 
  8,138  
  704 

 

 

Recent
Accounting Pronouncements

 

In
November 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-03, Income Statement—Reporting Comprehensive
Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments
that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases
of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where
such expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early
adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU
to determine its impact on the Company’s disclosures.

 

Other
authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants,
and the SEC did not, or are not expected to, have a material impact on the Company’s consolidated financial statements and related
disclosures.

 

 F-9

  

 

 

3.
Property and Equipment

 

Property
and equipment are recorded at cost and depreciated over the estimated useful lives of the underlying assets (3three to five years) using
the straight-line method. As of March 31, 2026, and December 31, 2025, property and equipment consist of (table in thousands):

 Schedule of Property and Equipment 

 
   
 March
 31, 2026  
 December
 31, 2025 

 
 Lab equipment (excluding equipment
 under finance leases) 
 $1,777  
 $1,777 

 
 Finance lease right-of-use lab equipment obtained
 in exchange for finance lease liabilities, net 
  162  
  162 

 
 Computer and office equipment 
  155  
  155 

 
 Total property and equipment 
  2,094  
  2,094 

 
 Less: accumulated depreciation
 and amortization 
  (2,013) 
  (2,001)

 
 Property and equipment,
 net 
 $81  
 $93 

 

 

Total
depreciation and amortization expense were approximately $12,000 and $25,000 for the three months ended March 31, 2026 and 2025, For
additional finance leases information, refer to Note 7 – Commitments and Contingencies.

 

4.
Accounts Payable and Accrued Expenses

 

Accounts
payable and accrued expenses consisted of the following (in thousands) as of:

 Schedule of Accounts Payable and Accrued Expenses 

 
   
 March
 31, 2026  
 December
 31, 2025 

 
 Accounts payable 
 $1,371  
 $890 

 
 Accrued compensation 
  101  
  85 

 
 Accrued other expenses 
  414  
  901 

 
 Total accounts payable
 and accrued expenses 
 $1,886  
 $1,876 

 

 

Accounts
payable and accrued expenses contain unpaid general and administrative expenses and costs related to research and development that have
been billed and estimated unbilled, respectively, as of period-end.

 

5.
Common Stock and Warrants

 

As
of March 31, 2026, the Company has authorized 100,000,000 shares of common stock, $0.001 par value per share. The Company had 13,787,000
and 13,784,000 shares issued and outstanding as of March 31, 2026 and December 31, 2025.

 

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

 

On
September 12, 2025, the Company, entered into a securities purchase agreement with certain accredited investors, pursuant to which the
Company sold to the investors (i) in a registered direct offering, an aggregate of 2,764,710 shares of the Company’s
common stock, at a price of $1.70 per share and (ii) in a concurrent private placement, warrants to purchase up to an aggregate
of 5,529,420 shares of common stock (“the Investor Warrants”), at an initial exercise price of $1.50 per share.
The Investor Warrants are exercisable upon issuance and will expire on September 27, 2027. Wainwright acted as the Company’s placement
agent in connection with this offering. The Company paid Wainwright consideration consisting of (i) a cash fee equal to 7.0% of
the aggregate gross proceeds in the offering, (ii) a management fee equal to 1.0% of the aggregate gross proceeds in the offering, (iii)
reimbursement of certain expenses and (iv) warrants to acquire up to an aggregate of 207,353 shares of common stock (the “Placement
Agent Warrants”). The Placement Agent Warrants are similar to the Investor Warrants, except that the initial exercise price
of the Placement Agent Warrants is $2.125 per share. The Company received net proceeds of $4,183,000 from the sale of its common
shares and warrants in the direct offering.

 

Warrant
Activity Table:

 Schedule
of Warrants Activity

 
   
 Total 
 Options 
 Outstanding  
 Weighted 
 Average 
 Exercise 
 Price  
 Aggregate 
 Intrinsic 
 Value 

 
 Balance at December 31, 2025 
  7,222,821  
 $1.46  
 $    - 

 
 Granted 
  -  
  -  
  - 

 
 Exercised 
  -  
  -  
  - 

 
 Forfeited 
  -  
  -  
  - 

 
 Outstanding at March 31, 2026 
  7,222,821  
 $1.46  
 $- 

 

 

6.
Stock Based Awards

 

Equity
Incentive Plans

 

The
Company adopted an equity incentive plan in 2015 (the “2015 Plan”) under which 833,333 shares of common stock have been reserved
for issuance to employees, and non-employee directors and consultants of the Company. Recipients of incentive stock options granted under
the 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the
estimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 Plan is ten years.
On June 16, 2021, the Company’s stockholders voted to approve an amendment to the 2015 Plan to increase the number of shares of
common stock authorized for issuance under the 2015 Plan from 416,667 to 833,333 shares. As of March 31, 2026, no shares remained available
for future grants under the 2015 Plan. The 2015 Plan expired on June 29, 2025.

 

 F-10

  

 

 

On
April 2, 2025, the Board of Directors of the Company approved and adopted an Equity Incentive Plan (the “2025 Plan”), which
has an effective date of March 31, 2025. On June 25, 2025, the 2025 Plan was approved by our stockholders at our annual meeting of stockholders.
The 2025 Plan provides for the grant of incentive stock options, qualified stock options, restricted stock awards, restricted stock units,
stock appreciation rights, and performance shares or units and cash awards. Awards may be granted under the 2025 Plan to our employees,
directors and independent contractors. the aggregate number of shares of Common Stock which shall be available for grants or payments
of Awards under the 2025 Plan during its term shall initially be 1,500,000 (the “Total Plan Shares”). The Total Plan Shares
will automatically increase on January 1st of each year, for a period of nine years commencing on January 1, 2026, in an amount equal
to 5% of the total number of shares of Common Stock outstanding as of December 31 of the preceding calendar year on a fully diluted basis.

 

The
2025 Plan also provides that, notwithstanding the annual increase provision, in no event will the increase in Total Plan Shares available
under the 2025 Plan pursuant to the increase provision exceed 2,500,000 additional shares (or a total of up to 4,000,000 Total Plan Shares),
subject to adjustment as provided under the 2025 Plan.

 

As
of March 31, 2026, 1,893,940 shares remained available for future grants under the 2025 Plan.

 

Common
Stock Reserved for Future Issuance

 

The
following table presents information concerning common stock available for future issuance (in thousands) as of March 31, 2026:

 Schedule of Common Stock Available for Future Issuance 

 
   
 Shares
 Available 

 for Grant 

 
 Stock options issued and outstanding 
  838 

 
 Restricted stock units issued and outstanding 
  221 

 
 Shares authorized for future option grants 
  1,894 

 
 Warrants outstanding 
  7,223 

 
 Balance at March 31, 2026 
 $10,176 

 
 Total 
 $10,176 

 

Stock
Options

 

The
following table summarizes stock option transactions for the 2015 and 2025 Plan, collectively, for the three months ended March 31, 2026
(in thousands, except per share amounts):

 Schedule of Stock Option Transactions 

 
   
 Total
 
 Options 
 Outstanding  
 Weighted
 
 Average 
 Exercise 
 Price  
 Aggregate

 Intrinsic 
 Value 

 
 Balance at December 31, 2025 
  537  
 $8.91  
 $        - 

 
 Exercised 
  -  
  -  
  - 

 
 Granted 
  319  
  1.1  
  - 

 
 Cancelled 
  (18) 
  1.24  
  - 

 
 Balance at March 31, 2026 
  838  
 $6.10  
 $- 

 

 

In
January 2026, the Compensation Committee of the Company’s Board of Directors granted a total of 318,966 stock options
with a fair value of $299,000 effective as of January 9, 2026. The Company granted stock options to directors, executives, employees,
and consultants. The options are ten-year incentive stock options exercisable at $1.10 per share and vesting as follows: one-half
vest on the one-year anniversary of the grant date and the remainder vest in eight equal quarterly instalments commencing on March 31,
2027.

 

The
fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

 

 Schedule
of Fair Value of Share Option Award

 
   
    
   

 
   
 Three months ended March 31, 

 
   
 2026  
 2025 

 
 Risk-Free interest rate 
  3.83% 
  0.00%

 
 Expected dividend yield 
  0.00% 
  0.00%

 
 Expected volatility 
  106.3  
  - 

 
 Expected term (in years) 
  5.77  
  - 

 

 

Restricted
Stock Units

 

On
August 12, 2024, the Company’s Compensation Committee approved the issuance of 256,000 restricted stock unit (“RSU”)
awards to non-employee directors, officers, consultants and employees. The aggregate fair value of the restricted stock unit awards granted
was estimated to be $451,000 using the market price of the stock on the date of the grant which is expensed using the straight-line method
over the vesting period.

 Schedule of Restricted Stock Units 

 
   
 Total
 
 Restricted Stock Units Outstanding  
 Weighted
 
 Average 
 Fair Value  
 Aggregate
 
 Intrinsic 
 Value 

 
 Unvested December 31, 2025 
  97  
 $1.76  
 $        - 

 
 Granted 
  -  
  -  
  - 

 
 Forfeited 
  (6) 
  -  
  - 

 
 Vested 
  (15) 
  -  
  - 

 
 Unvested and expected
 to vest at March 31, 2026 
  76  
 $1.76  
 $- 

 

 

 F-11

  

 

 

The
Company accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions of ASC
718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07,
Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable
updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite
service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures
when they occur. For the three months ended March 31, 2026 and 2025, equity-based compensation expense recorded was approximately $84,000
and $82,000, respectively.

 

As
of March 31, 2026, there was approximately $279,000 of total unrecognized compensation expense related to non-vested stock options that
is expected to be recognized over a weighted average period of 1.3 years. For options granted and outstanding, there were 838,351 options
outstanding which were fully vested or expected to vest, with an aggregate intrinsic value of $ 0.00, a weighted average exercise price
of $6.10 and weighted average remaining contractual term of 7.14 years at March 31, 2026. For vested and exercisable options, outstanding
shares totaled 823,840, with an aggregate intrinsic value of $ 0.00. These options had a weighted average exercise price of $ 9.07 per
share and a weighted-average remaining contractual term of 5.61 years at March 31, 2026.

 

The
aggregate intrinsic value of outstanding and exercisable options at March 31, 2026 was calculated based on the closing price of the Company’s
common stock as reported on The Nasdaq Capital Market on March 31, 2026 of $1.01 per share less the exercise price of the options. The
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.

 

7.
Commitments and Contingencies

 

Commitm