10-Q

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 Exchange Act). Yes ☐ No ☒

The number of shares of Registrant’s common stock outstanding as of August 3, 2023 was 9,947,915.

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

The accompanying notes are an integral part of these condensed unaudited interim financial statements.

1. Organization and description of business

Coya Therapeutics, Inc. (“Coya”, or the “Company”) is a clinical-stage biotechnology company focused on developing proprietary new therapies to enhance the function of Regulatory T cells (“Tregs”). Coya’s initial developmental programs are focused on neurodegenerative, chronic inflammatory, autoimmune, and metabolic diseases of high unmet medical need.

Going Concern and Liquidity

The Company has incurred losses and negative cash flows from operations since inception and has an accumulated deficit of $23,700,384 as of June 30, 2023. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates. No assurance can be given that any such financing will be available when needed or that the Company’s research and development efforts will be successful.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued (or when applicable, one year after the date that the financial statements are available to be issued). As of June 30, 2023, the Company had cash and cash equivalents of $13,102,392, which is expected to enable the Company to fund its operating expenses and capital expenditure requirements into the second quarter of 2024, at which time the Company will need to secure additional funding. If the Company is unable to obtain additional financing, the lack of liquidity could have a material adverse effect on the Company’s future prospects. As a result of these factors, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued.

The accompanying condensed unaudited interim financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Management is currently evaluating different strategies to obtain the required funding of future operations. These strategies may include, but are not limited to, additional funding from current investors, funding from new investors including strategic corporate investors, and additional registrations of the Company’s common stock. There can be no assurance these future funding efforts will be successful.

On January 3, 2023, the Company completed its initial public offering (“IPO”) in which the Company sold 3,050,000 shares of its common stock and accompanying warrants to purchase 1,525,000 shares of common stock. The warrants were sold at the rate of one warrant for every two shares of common stock purchased in the IPO, with each full warrant having an exercise price of $7.50 per share. Each share of common stock and accompanying warrant was sold at a combined offering price of $5.00 for net proceeds of $13,432,500 after deducting underwriting discounts, commissions, and other offering expenses paid by the Company. On January 25, 2023, the underwriters exercised their overallotment option in part and thereby purchased an additional 237,804 shares of common stock and 145,000 warrants to purchase common stock at a combined offering price of $5.00 per share. The warrants have an exercise price of $7.50 per share. In total the Company raised $16,439,020 in gross proceeds and $14,136,428 in net proceeds in its IPO (as discussed in detail in Note 6).

Risks and uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from similar products and larger companies, volatility of the industry, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.

2. Basis of presentation and significant accounting policies

Basis of presentation

The accompanying condensed unaudited condensed financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates (“ASU”) of the FASB.

In the opinion of management, the accompanying unaudited interim financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s balance sheet as of June 30, 2023, its statements of operations and stockholders’ equity (deficit) for the three and six months ended June 30, 2023 and 2022, and its cash flows for the six months ended June 30, 2023. Operating results for the three and six months ended June 30, 2023 and 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The condensed unaudited interim financial statements, presented herein do not contain the required disclosures under GAAP for annual financial statements. The accompanying condensed unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2022 found in the Annual Report filed in the Form 10-K.

Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.

Significant areas that require management’s estimates include fair value of the Company’s convertible promissory notes, the fair value of the Company's equity, prior to being publicly traded, and related inputs, including discount for lack of marketability and volatility, the grant date fair value of stock options (Note 7), and accrued research and development expenses.

Fair value of financial instruments

Management believes that the carrying amounts of the Company’s cash equivalents, accounts payable, and accrued expenses approximate fair value due to the short-term nature of those instruments.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company deposits its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash balances may exceed the current insured amounts provided by the FDIC. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash and cash equivalents.

Research and development costs

Research and development costs are expensed as incurred and consist primarily of funds paid to third parties for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing costs, regulatory compliance costs, and personnel and stock-based compensation expenses. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record a net prepaid or accrued expense relating to these costs.

Upfront milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered. Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.

In-Process Research and Development

Research and development costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility which includes manufacturing, clinical, intellectual property and/or regulatory success which has no alternative future use. The licenses purchased by the Company, which are further described in Note 5, require substantial completion of research and development and regulatory and marketing approval efforts in order to reach technological feasibility. As such, since inception, the purchase price of licenses acquired is classified as acquired in-process research and development expenses in the statements of operations.

Stock-based compensation

The Company measures share-based employee and nonemployee awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company accounts for forfeitures in the period in which they occur.

Estimating the fair value of share-based awards requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock, prior to being a publicly-traded company, and, for stock options, the expected life of the options and stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in estimating the fair value of share-based awards represent management’s estimates and involve inherent uncertainties and the application of management’s judgments. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.

The expected term of the stock options is estimated using the “simplified method” as the Company has no historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting period and the contractual term of the option. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants. The risk-free rate is based on the U.S. Treasury yield curve commensurate with the expected term of the option. The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

Income taxes

Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities, and the expected benefits of net operating loss and income tax credit carryforwards. The impact of changes in tax rates and laws on deferred taxes, if any, applied during the period in which temporary differences are expected to be settled, is reflected in the Company's financial statements in the period of enactment. The measurement of deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. As of June 30, 2023, the Company has concluded that a full valuation allowance is necessary for all of its net deferred tax assets. The Company had no amounts recorded for uncertain tax positions, interest, or penalties in the accompanying financial statements. Although there are no unrecognized income tax benefits, when applicable, the Company’s policy is to report interest and penalties related to unrecognized income tax benefits as a component of income tax expense.

Net loss per share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock, common stock warrants and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, potentially dilutive securities are not included in the calculation when the impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive (unaudited):


	As of June 30,
	2023		2022
Series A Convertible Preferred Stock		-		1,316,926
Convertible promissory notes (as converted)		-		1,044,498
Common stock warrants		2,174,737		92,184
Stock options		1,129,543		506,728
		3,304,280		2,960,336

Amounts in the above table reflect the common stock equivalents.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. The Company adopted the guidance using a modified retrospective approach as of January 1, 2023 which resulted in no cumulative-effect adjustment to retained earnings.

3. Fair value measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

•

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

In accordance with the fair value hierarchy described above, the following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis:

June 30, 2023 (unaudited)

Note
Reference

Input Level

Fair Value

Carrying
Value

Assets:

Cash and cash equivalents (money market funds)

Level 1

13,102,392

13,102,392


December 31, 2022
	Note Reference	Input Level	Fair Value		Carrying Value
Assets:
Cash and cash equivalents (money market funds)		Level 1	$	5,933,702	$	5,933,702
Liabilities:
Convertible promissory notes	Note 6	Level 3	$	12,965,480	$	12,965,480

In connection with the IPO, the Company's convertible promissory notes converted into an aggregate of 2,736,488 shares of common stock. As a result, the remaining convertible promissory note balance, including accrued interest, was eliminated, increasing additional paid-in capital.


Balance at December 31, 2022	$	12,965,480
Conversion of convertible promissory notes upon IPO		(12,965,480	)
Balance at June 30, 2023	$	—

5. Commitments and Contingencies

License Agreements

Dr. Reddy's License and Supply Agreement

In March 2023, the Company entered into an exclusive License and Supply Agreement (the "DRL Agreement") with Dr. Reddy's Laboratories ("DRL"). The DRL Agreement became effective on April 1, 2023. Pursuant to the terms of the DRL Agreement, the Company will in-license DRL’s proposed abatacept biosimilar for use in the development of Coya’s combination product for neurodegenerative diseases ("COYA 302"). COYA 302 is a dual biologic intended to suppress neuroinflammation via multiple immunomodulatory pathways, for the treatment of neurodegenerative conditions. The DRL Agreement also provides for the license of the Company's low dose IL-2 ("COYA 301") to DRL to permit the commercialization by DRL of COYA 302 in territories not otherwise granted to Coya. In consideration for the license the Company has paid a non-refundable upfront fee of $350,000. The Company will pay to DRL up to an aggregate of approximately $2,900,000 of pre-approval regulatory milestone payments for the first indication in the Field (as defined in the DRL Agreement) and an additional approximately $20,000,000 if all other development, regulatory approval and sales milestones are incurred under the DRL Agreement. The Company will also pay to DRL a low-six figure milestone payment per additional indication. Further, pursuant to the DRL Agreement, the Company will pay to DRL single-digit royalties on Net Sales (as defined in the DRL Agreement).

ARScience License Agreement

In August 2022, the Company entered into a License Agreement (the “ARS License Agreement”) with ARScience Biotherapeutics, Inc. (“ARS”) pursuant to which ARS granted the Company an option to acquire an exclusive, royalty-bearing license for two patents regarding certain formulations of IL-2, with the right to grant sublicenses through multiple tiers under these patents (the “ARS Option”).

The Company may owe tiered payments to ARS based on its achievement of certain developmental milestones. Under the ARS License Agreement, the Company will pay an aggregate of $13,250,000 in developmental milestone payments for the first Combination Product (as defined in the ARS License Agreement) in a new indication. The Company will then pay an aggregate of $11,600,000 in developmental milestone payments for each Combination Product in each subsequent new indication. Further, for the first Mono Product (as defined In the ARS License Agreement) the Company will pay an aggregate of $11,750,000 in developmental milestone payments. The Company will then pay an aggregate of $5,850,000 in developmental milestone payments for each Mono Product in each subsequent new indication, and an aggregate of $5,850,000 if all developmental milestones are achieved for each new indication. The Company will also owe royalties on net sales of licensed products ranging from low to mid-single digit percentages. In the event the Company sublicenses its rights under the ARS License Agreement, the Company will owe royalties on sublicense income within the range of 10% to 20%.

Houston Methodist Agreements

In September 2022, the Company entered into an Amended and Restated Patent Know How and License Agreement, effective as of October 2020 (the “Methodist License Agreement”), with The Methodist Hospital (“Methodist”) to make, sell and sublicense products and services using the intellectual property and know-how of Methodist. As part of the Methodist License Agreement, the Company will pay Methodist a four-figure license maintenance fee annually until the first sale of licensed product occurs. The term of the Methodist License Agreement is effective until no intellectual property patent rights remain, unless terminated sooner by (1) bankruptcy or insolvency, (2) the failure by the Company to monetize the intellectual property within five years of the date of the agreement (further discussed below), (3) due to breach of contract, or (4) at our election for any or no reason.

In addition to the equity issuance and reimbursement of patent related expenses, the Methodist License requires the Company to make payments of up to $425,000 per product candidate in aggregate upon the achievement of specific development and regulatory milestone events by such licensed product. The Company is also required to pay Methodist, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) equal to high-single digit to low-double digit percentages of annual worldwide net sales of such licensed product during a defined royalty term. The Company is also required to pay a low single digit percentage for certain licensed services. Commencing on January 1, 2025, the minimum amount which will be owed by the Company once commercialization occurs is $50,000 annually.

The Methodist License Agreement provides that in the event the Company sublicense products and services covered by the Methodist License Agreement, then royalties owed to Houston Methodist would be computed as a percentage of payments received by the Company from the sublicensee. In addition, the termination provisions provide that Houston Methodist may only terminate the Methodist License Agreement, among other things, in the event that after five years the Company is not “Actively Attempting to Develop or Commercialize,” as such term is defined in the Methodist License Agreement.

Sponsored Research Agreement

In February 2021, the Company entered into a one-year Sponsored Research Agreement (“SRA”) with Houston Methodist Research Institute (“HMRI”), a Texas nonprofit corporation and an affiliate of Methodist, which can be extended or renewed by mutual agreement. Under the SRA, the Company agreed to fund up to $1,547,094 in research in the area of neurodegenerative diseases performed by HRMI. In return, the Company will gain expanded access to data methods and know-how per the SRA, and, if the research produces intellectual property, the Company will have all first rights to the intellectual property. As of September 15, 2022, the Company provided notice to HMRI regarding termination of the SRA in expectation that a reduced yearly budget be negotiated post termination. On May 4, 2023, the Company executed the SRA with HMRI, in which the Company agreed to fund $0.5 million through May 2024. The Company received a refund from HMRI of $74,778 in May 2023 due to paying in excess of HMRI's expenses during the three months ended June 30, 2023, resulting in a $27,596 credit to research and development expenses under the SRA during the three months ended June 30, 2023. The Company incurred $736,015 in research and development expenses under the SRA during the three months ended June 30, 2022. The Company incurred $102,404 and $987,281 in research and development expenses under the SRA during the six months ended June 30, 2023 and 2022, respectively.

Employment contracts

The Company has entered into employment contracts with its officers and certain employees that provide for severance and continuation of benefits in the event of termination of employment either by the Company without cause or by the employee for good reason, both as defined in the agreements. In addition, in the event of termination of employment following a change in control, as defined in each agreement, either by the Company without cause or by the employee for good reason, any unvested portion of the employee’s initial stock option grant becomes immediately vested.

6. Convertible promissory notes, convertible preferred stock and stockholders’ equity (deficit)

Initial Public Offering

On January 3, 2023, the Company completed its IPO in which the Company sold 3,050,000 shares of its common stock and accompanying warrants to purchase 1,525,000 shares of common stock. The warrants were sold at the rate of one warrant for every two shares of common stock purchased in the IPO, with each full warrant having an exercise price of $7.50 per share. Each share of common stock and accompanying warrant was sold at a combined offering price of $5.00. The Company received net proceeds of $13,030,639 after deducting underwriting discounts, commissions, and other offering expenses paid by the Company, including additional costs incurred during the three months ended March 31, 2023. In connection with the closing of the IPO, (i) all of the Company's outstanding shares of Series A converted into an aggregate of 1,316,926 shares of common stock, (ii) the Company's Notes converted into an aggregate of 2,736,488 shares of common stock, and (iii) the Company filed an amended and restated certificate of incorporation to,

among other things, increase the number of authorized shares of common stock to 200,000,000 and increase the number of authorized shares of preferred stock to 10,000,000.

In connection with the IPO, the Company granted its underwriters a 30-day over-allotment option ("Over-Allotment") to purchase up to an additional 290,000 shares of common stock and warrants to purchase 145,000 shares of common stock to cover over-allotments at a combined offering price of $5.00, less underwriting discount. The warrants have an exercise price of $7.50 per share. On January 25, 2023, the underwriters purchased 237,804 shares of common stock and 145,000 warrants to purchase common stock at a combined offering price of $5.00 per share in connection with Over-Allotment. Upon the sale of the Over-Allotment, the Company issued its underwriters an additional 16,646 warrants with an exercise price of $6.25 per warrant and a contractual life of four years. The Company received net proceeds of $1,105,789 after deducting underwriting discounts for the common stock and warrants issued in connection with the Over-Allotment.

Common Stock Warrants

During its evaluation of equity classification for the Company's common stock warrants, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity. The conditions within ASC 815-40 are not subject to a probability assessment. The warrants do not fall under the liability criteria within ASC 480 Distinguishing Liabilities from Equity as they are not puttable and do not represent an instrument that has a redeemable underlying security. The warrants do meet the definition of a derivative instrument under ASC 815, but are eligible for the scope exception as they are indexed to the Company’s own stock and would be classified in permanent equity if freestanding.

As of June 30, 2023, the Company had the following warrants outstanding to acquire shares of its common stock (unaudited):


Warrant Type	Outstanding		Exercise price per share		Expiration date
Common stock warrants issued related to the IPO		1,525,000	$	7.50	December 2024
Common stock warrants issued related to the Over-Allotment option		145,000	$	7.50	December 2024
Common stock warrants issued to underwriters as compensation for IPO		230,146	$	6.25	December 2026
Common stock warrants issued to placement agent as part of the convertible promissory notes conversion		182,407	$	6.00	January 2028
Common stock warrants issued in connection with the Series A convertible preferred stock issued in 2020		92,184	$	9.15	December 2025
		2,174,737

7. Stock-based compensation

In January 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”). The 2021 Plan provides for the granting of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, equity appreciation rights, performance awards, and other equity-based awards. The Company's employees, officers, independent directors, and other persons are eligible to receive awards under the 2021 Plan. As of June 30, 2023, 1,244,859 shares of the Company’s common stock were authorized to be issued, of which 114,879 shares were available for future issuance.

The amount, terms of grants, and exercisability provisions are determined and set by the Company's Board of Directors or compensation committee. The Company measures employee stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. The Company has recorded stock-based compensation related to its options and RSU's in the accompanying statements of operations as follows (unaudited):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
General and administrative	$	112,291	$	28,776	$	244,505	$	35,637
Research and development		78,819		15,882		126,992		30,446
	$	191,110	$	44,658	$	371,497	$	66,083

Stock options

The Company has issued service-based stock options that generally have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the Board of Directors. Vesting generally occurs over a period of not greater than four years.

The following table summarizes the activity for the periods indicated (unaudited):


					Weighted
			Weighted average		average remaining		Aggregate
			exercise		contractual		intrinsic
	Options		price		term (years)		value
Outstanding at January 1, 2023		478,570	$	1.85		8.7
Granted		650,973	$	3.89
Outstanding at June 30, 2023		1,129,543	$	3.02		9.0	$	1,184,445
Exercisable at June 30, 2023		401,061	$	1.98		8.3	$	837,204
Vested and expected to vest at June 30, 2023		1,129,543	$	3.02		9.0	$	1,184,445

As of June 30, 2023, the unrecognized compensation cost was $1.9 million, and will be recognized over an estimated weighted-average amortization period of 2.55 years.

The fair value of options is estimated using the Black-Scholes option pricing model, which takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at the grant date, expected term, estimated stock price volatility, risk-free interest rate, and dividend yield. The fair value of stock options granted during the period ended June 30, 2023 was determined using the methods and assumptions discussed below.

•

The expected term of employee stock options with service-based vesting is determined using the “simplified” method, as prescribed in SEC’s Staff Accounting Bulletin (“SAB”) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data.

•

The expected stock price volatility is based on historical volatility of comparable public entities within the Company’s industry, which were commensurate with the expected term assumption as described in SAB No. 107.

•

The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the expected term.

•

The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

•

The Company's common stock became publicly traded on December 29, 2022. However, prior to the Company's common stock being publicly traded, its Board of Directors periodically estimated the fair value of the Company’s common stock considering, among other things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

The grant date fair value of each option grant for the period ended June 30, 2023 was estimated using the Black-Scholes option-pricing model using the following weighted-average assumptions (unaudited):


	Six Months Ended June 30,
	2023			2022
Risk-free interest rate		4.0	%		3.3	%
Expected term (years)		5.8			5.6
Expected volatility		89.80	%		83.48	%
Expected dividend yield		-			-

Restricted Stock Unit Awards

During the six months ended June 30, 2023, the Company issued restricted stock ("RSU") to external consultants which immediately vested upon grant. The fair value of an RSU is equal to the fair market value price of the Company's common stock on the date of grant. The Company recorded stock-based compensation expense of $76,080 for the six months ended June 30, 2023.

The following table summarizes activity related to RSU stock-based payment awards (unaudited):


			Weighted average
	Number of		grant date
	Shares		fair value
Outstanding at January 1, 2023		-	$	-
Granted and Vested		16,500		4.61
Outstanding at June 30, 2023		16,500	$	4.61

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and operating results together with our unaudited interim consolidated financial statements and the notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of this Quarterly Report on Form 10-Q captioned “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking statements.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs, or projections will result or be achieved or accomplished.

We are a clinical-stage biotechnology company focused on developing proprietary new therapies to enhance the function of Tregs. Tregs are a subpopulation of T-lymphocytes consisting of CD4+CD25high hFOXP3+ cells that suppress inflammatory responses. Tregs were first discovered in 1995 by Dr. Shimon Sakaguchi and since their discovery, multiple lines of research have contributed to elucidate Treg biology and its role in health and disease. Tregs and their transcription factors have been shown to be essential to maintaining cellular homeostasis by regulating autoimmune and inflammatory responses and maintaining self-tolerance in mammals. Dysfunctional Tregs underlie numerous disease states, and this cellular dysfunction is driven by the chronic inflammatory environment and high levels of oxidative stress commonly observed in certain diseases. Further, the degree of Treg dysfunction is correlated with the severity and progression of serious and life-threatening conditions. These and other recent advances in the understanding of Treg biology, have made this subset of T lymphocytes an important therapeutic target, which we believe may provide new treatments for serious diseases.

We have built a diversified product candidate pipeline that includes both ex vivo and in vivo approaches intended to restore the suppressive and immunomodulatory functions of Tregs. Our product candidate pipeline is based on our three distinct therapeutic modalities: autologous Treg cell therapy, allogeneic Treg-derived exosomes and Treg-enhancing biologics. “Autologous” means the treatment of a patient with human cells derived from the patient itself, whereas “Allogeneic” means the treatment of a patient with human cells derived from a donor other than the patient, where such donor is genetically non-identical. We are initially focused on developing our Treg-based therapies for neurodegenerative, autoimmune and metabolic diseases where Treg dysfunction has been identified to be an important pathophysiological component of the disease and where new and effective therapies are urgently needed.

Since our inception in 2020, we have generated preclinical and clinical data in multiple models and diseases. Our autologous Treg cell therapy program has completed a Phase 1 and Phase 2a studies in amyotrophic lateral sclerosis, or ALS. The clinical data from these initial studies has served as an important confirmation of the underlying immunomodulatory properties of Tregs and their potential therapeutic benefits. These studies have also significantly expanded our own foundational knowledge of the biological activity of Tregs, which we believe will be critical for the design of our future clinical and preclinical studies, the selection of future targeted diseases and the overall advancement of our development pipeline.

Our operations have consisted of developing our clinical and preclinical product candidates and we have devoted substantially all of our resources to developing product and technology rights, conducting research and development, organizing and staffing our company, business planning and raising capital. We have funded our operations primarily through private convertible preferred stock offerings, a convertible debt financing and the public offering of our securities that closed in January 2023. Our net losses were $3.1 million and $3.4 million for the three months ended June 30, 2023 and 2022, respectively. Our net losses were $5.8 million and $5.1 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $23.7 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions. The financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

During the first half of 2023, our combination product for neurodegenerative diseases, or COYA 302, and our low dose IL-2, or COYA 301, showed positive results in a proof of concept, or POC, open label study in amyotrophic lateral sclerosis, or ALS, patients and in Alzheimer’s Disease, or AD, patients, respectively. Both POC studies were conducted with commercially available products as investigator-initiated trials.

The POC study in support of COYA 302, an open label study conducted in 4 ALS patients, evaluated the safety and tolerability, function of regulatory T-cells, biomarkers, and preliminary efficacy (as measured by the ALSFRS-R scale) utilizing commercially available IL-2 and abatacept. Study data showed no decline or minimal decline at 24 and 48 weeks respectively after initiation of treatment and appeared to be well tolerated in all study patients as no serious adverse events were reported. Twenty-four weeks is an important timepoint as this is the period that ALS studies are usually benchmarked to measure differences in the ALSFRS-R scale for a treatment versus placebo. Based on this POC data, we intend to design a well-powered and well-controlled study to demonstrate the safety and efficacy of COYA 302 (COYA 301 or low dose IL-2, plus an abatacept proposed biosimilar, licensed from Dr. Reddy's Laboratories, or DRL_AB) in patients with ALS and are now preparing for a pre-IND meeting with the FDA in the fall of 2023. We intend to initiate a Phase 2 trial after the acceptance of our IND application by the FDA. We recently appointed Dr. Merit Cudkowicz as a Clinical Advisor to help support our development of COYA 302.

The POC study in support of COYA 301, an open label study conducted in 8 patients with AD, evaluated the safety and tolerability, biological activity, blood biomarkers, and preliminary efficacy of commercially available IL-2. Study data found that (i) cognitive function, as measured by 3 validated tools, either improved or did not decline, (ii) Treg function was significantly enhanced, (iii) pro-inflammatory blood cytokines and chemokines were significantly reduced with evidence of reduced neuroinflammation in the brain and (iv) COYA 301 appeared to be well tolerated as no serious adverse events were reported. Currently, an ongoing academic Phase 2 double blind, placebo controlled, randomized trial for use of low dose IL-2 in mild to moderate AD patients is underway at Houston Methodist and we anticipate reporting top line data in Q2 2024. The study is enrolling up to 46 patients and assessing Treg function, blood biomarkers, cerebrospinal fluid biomarkers, Positron Emission Tomography pre and post imaging scans, cognitive function, and safety. To further support the development of COYA 301 in AD and other diseases, we appointed immunologist Dr. Guillaume Dorothee to our Scientific Advisory Board in Q2 2023.

During the second quarter of 2023, Dr. Adrian Hepner announced his resignation from his position of Chief Medical Officer, effective July 17, 2023. On July 3, 2023, we appointed Dr. Fred Grossman, President and Chief Medical Officer, effective July 17, 2023.

On January 3, 2023, we closed our initial public offering, or IPO, of 3,050,000 shares of our common stock and accompanying warrants to purchase up to 1,525,000 shares of common stock. The warrants were offered and sold at the rate of one warrant for every

two shares of common stock purchased in the offering, with each full warrant having an exercise price of $7.50 per share. Each share of common stock and accompanying warrant were sold at a combined offering price of $5.00, for gross proceeds of approximately $15.25 million, before deducting underwriting discounts and offering expenses. We granted the underwriters a 30-day over-allotment option to purchase up to an additional 290,000 shares of common stock and/or warrants to purchase 145,000 shares of common stock at the IPO price, less the underwriting discount. On January 25, 2023, we sold an additional 237,804 shares of common stock and accompanying warrants to purchase up to 145,000 shares of common stock upon the underwriters’ exercise in part of their over-allotment option for additional gross proceeds of approximately $1.1 million, before deducting underwriting discounts and offering expenses. Our shares of common stock began trading on the Nasdaq Capital Market under the ticker symbol “COYA” on December 29, 2022.

To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our therapeutic candidates. We expense research and development costs as incurred, including:

We classify and evaluate our research and development expenses in two dimensions: clinical and preclinical, and external and internal. We do not further classify or evaluate our internal research and development expenses by product candidate or by Series as these expenses primarily relate to compensation, materials and supplies, and other costs which are deployed across multiple therapeutic modalities, multiple product candidates, and multiple therapeutic areas under development.

Once a product candidate has received approval from the FDA of its IND application, we consider it a clinical product candidate. For each of our clinical product candidates, we report or will report external development costs and other external research and development costs attributable to such clinical product candidates. These external development costs include: fees paid to CROs, CMOs and research laboratories, process development, manufacturing and clinical development activities. Any internal research and development expenses associated with clinical product candidates are captioned as internal research and development costs as described in the paragraph above.

Until such time as a product candidate has received approval of its IND application, we consider it a preclinical product candidate. Each of our preclinical product candidates is being developed on one of our three therapeutic modalities: (1) Treg-enhancing biologics; (2) Treg-derived exosomes; and (3) autologous Treg cell therapy. The product candidates utilizing our Treg-enhancing biologics are collectively referred to as the “300 Series.” The product candidates utilizing our Treg-derived exosomes are collectively referred to as the “200 Series.” The product candidates utilizing our autologous Treg cell therapy are collectively referred to as the “100 Series.” Currently, our 300 Series product candidates include COYA 301 and COYA 302, our 200 Series product candidates include COYA 201 and COYA 206, and our 100 Series product candidate is COYA 101. For our preclinical candidates we report external development costs and other external research and development costs collectively by Series. These external development costs include:

fees paid to CROs, CMOs and research laboratories, process development, manufacturing and clinical development activities. Preclinical research and development activities often benefit more than one preclinical product candidate within a given Series and so disaggregating the data would neither be practicable or meaningful.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our clinical trials, including later-stage clinical trials, for current and future product candidates and prepare regulatory filings for our product candidates. In addition, we expect spending in 2023 to increase over 2022 spending levels and will be focused primarily on advancing COYA 301 and COYA 302. As described in the notes to financial statements contained elsewhere in this Quarterly Report on Form 10-Q, under the terms of our license we may be required to make payments to Methodist if certain milestones are achieved. This could result in significant charges to research and development in the period such milestones become probable of being achieved.

Research and development costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility which includes manufacturing, clinical, intellectual property and/or regulatory success which has no alternative future use. The licenses purchased by us require substantial completion of research and development and regulatory and marketing approval efforts in order to reach technological feasibility. As such, and since our inception, the purchase price of licenses acquired is classified as acquired in-process research and development expenses in the statements of operations.

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for employees and consultants in executive, finance and accounting, legal, operations support, information technology and human resource functions. General and administrative expense also includes corporate facility costs not otherwise included in research and development expense, including rent, utilities, depreciation and maintenance, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.

We expect that our general and administrative expense will increase in the future to support our continued research and development activities, potential commercialization efforts and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, legal support and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of the Nasdaq Capital Market and the Securities and Exchange Commission, or SEC, director and officer insurance, investor and public relations costs. If any of our current or future product candidates obtains U.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team.

Depreciation expense relates to the fixed assets which consist mainly of lab equipment. The lab equipment is depreciated over its estimated useful life of five years.

Under the fair value election as prescribed by ASC 815, we recognize the qualifying change in fair value of our convertible promissory notes each reporting period until the notes are settled. Changes in fair value attributable to changes in instruments specific credit risk are recorded in other comprehensive income to the extent they are material.

Other income, net consists primarily of interest earned on our excess cash and federal tax credits.

Since our inception, we have not recorded any income tax benefits for the net operating losses, or NOLs, we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized. As such, we have a full valuation allowance against all NOLs and tax credits for all periods presented.

Research and development expenses decreased by $0.3 million from $1.4 million for the three months ended June 30, 2022 to $1.1 million for the three months ended June 30, 2023. The decrease was mainly due to a $0.7 million decrease in costs attributable to our sponsored research agreement with Houston Methodist Hospital, partially offset by a $0.4 million increase in our preclinical expenses. For our product candidates (COYA 101), we track our external research and development expenses on a candidate-by-candidate basis. For our preclinical product candidates, we track our external research and development expenses in aggregate by Series. External research and development expenses include fees paid to CROs, CMOs and research laboratories in connection with our pre-clinical development, process development, manufacturing and clinical development activities. We do not further classify or evaluate our internal research and development expenses by product candidate or by Series as these expenses primarily relate to compensation, materials and supplies, and other costs which are deployed across multiple therapeutic modalities, multiple product candidates, and multiple therapeutic areas under development.

Research and development expenses disaggregated and classified by clinical and preclinical, and external and internal expenses are summarized in the table below:

Under the terms of our exclusive License and Supply Agreement, or DRL Agreement, with Dr. Reddy’s Laboratories, or DRL, we paid a license fee of $0.4 million, which was expensed as in-process research and development expense during the three months ended June 30, 2023. We had no such in-process research and development license fees during the three months ended June 30, 2022.

General and administrative expenses decreased by $0.2 million from $2.0 million for the three months ended June 30, 2022 compared to $1.8 million for the three months ended June 30, 2023. The decrease was primarily due to $1.0 million in costs attributable to the convertible note financing completed in the second quarter of 2022, partially offset by a $0.8 million increase due to additional costs associated with being a public company including investor and public relations, director and officer insurance, and audit and compliance.

Other income, net increased by $0.1 million from the three months ended June 30, 2022 compared to the three months ended June 30, 2023. The increase is primarily due to interest and dividend income earned on cash balances received from our IPO.

Research and development expenses decreased by $0.1 million from $2.4 million for the six months ended June 30, 2022 to $2.3 million for the six months ended June 30, 2023. The decrease was due to a $0.8 million decrease in costs attributable to our sponsored research agreement with Houston Methodist Hospital, and a $0.3 million decrease in our clinical product candidate, partially offset by a $1.0 million increase in our preclinical product candidates.

Research and development expenses disaggregated and classified by clinical and preclinical, and external and internal expenses are summarized in the table below:

Under the terms of our DRL Agreement we paid a license fee of $0.4 million, which was expensed as in-process research and development expense during the six months ended June 30, 2023. We had no such in-process research and development license fees during the six months ended June 30, 2022.

General and administrative expenses increased by $0.8 million from $2.7 million for the six months ended June 30, 2022 compared to $3.5 million for the six months ended June 30, 2023. The increase was primarily due to $1.8 million in additional costs associated with being a public entity such as increased investor and public relations, director and office insurance, and audit and compliance, partially offset by $1.0 million in costs attributable to the convertible note financing completed in the second quarter of 2022.

Other income, net increased by $0.3 million from the six months ended June 30, 2022 compared to the six months ended June 30, 2023. The increase is primarily due to interest and dividend income earned on cash balances received from our IPO.

Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. Since our inception through June 30, 2023 we have funded our operations through the sale of convertible promissory notes, convertible preferred stock, our initial public offering, and the exercise of the underwriter's over-allotment option. We incurred a net loss of $3.1 million and $3.4 million for the three months ended June 30, 2023 and 2022 and $5.8 million and $5.1 million for the six months ended June 30, 2023 and 2022, respectively, and had an accumulated deficit of $23.7 million as of June 30, 2023. As of June 30, 2023 we had $13.1 million in cash and cash equivalents. We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

We will need significant additional funds to meet operational needs and capital requirements for clinical trials, other research and development expenditures, and business development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to

relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. Our ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions, potential future global pandemics or health crises, and the recent disruptions to, and volatility in, the credit, banking and financial markets in the United States. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

The following table shows a summary of our cash flows for the periods indicated:

During the six months ended June 30, 2023, we used $6.7 million of cash in operating activities. Cash used in operating activities reflected our net loss of $5.8 million and a $1.6 million net decrease in our operating assets and liabilities, partially offset by noncash charges of $0.7 million related to stock-based compensation and acquired in-process research and development. The primary use of cash was to fund our operations related to the development of our product candidates.

During the six months ended June 30, 2022, we used $3.4 million of cash in operating activities. Cash used in operating activities reflected our net loss of $5.1 million, offset by a $0.6 million net increase in our operating assets and liabilities and noncash charges of $1.0 million, which consisted of debt issuance costs, depreciation and stock-based compensation. The primary use of cash was to fund our operations related to the development of our product candidates.

During the six months ended June 30, 2023, investing activities used $0.4 million of cash for the purchase of in-process research and development relating to the DRL Agreement. We had no such in-process research and development license fees during the six months ended June 30, 2022.

During the six months ended June 30, 2023, financing activities provided $14.3 million of cash resulting from the issuance of common stock upon our initial public offering, net of deferred financing costs.

During the six months ended June 30, 2022, financing activities provided $9.5 million of cash primarily resulting from the issuance of convertible promissory notes, net of issuance costs. The convertible promissory notes automatically converted into shares of common stock in connection with the closing of our IPO.

During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

During the six months ended June 30, 2023, there were no material changes to our critical accounting policies and estimates from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report filed on Form 10-K.

Commitments and contingencies, including license and sponsored research agreements

In September 2022, we entered into the Methodist License Agreement with Methodist to make, sell and sublicense products and services using the intellectual property and know-how of Methodist. As part of the Methodist License Agreement, we will pay Methodist a four-figure license maintenance fee annually until the first sale of licensed product occurs. The term of the Methodist License Agreement is effective until no intellectual property patent rights remain, unless terminated sooner by (1) bankruptcy or insolvency, (2) the failure by us to monetize the intellectual property within five years of the date of the agreement (further discussed below), (3) due to breach of contract, or (4) at our election for any or no reason.

In addition to the equity issuance and reimbursement of patent related expenses, we agreed to make contingent milestone payments to Methodist on a Licensed Product-by-Licensed Product or Licensed Service-by-Licensed Service basis upon the achievement of certain development, approval and sales milestones (i) related to the treatment of ALS totaling up to $325,000 in the aggregate, and (ii) related to the treatment of each other indication (that is not ALS) totaling between $212,500 and up to $425,000 in the aggregate per indication. We are also required to pay Methodist, on a licensed product-by-licensed product and country-by-country basis, royalties (subject to customary reductions) equal to 1% to 10% of annual worldwide net sales of such licensed product during a defined royalty term. The applicable royalty percentage increases as Licensed Products are used to treat from one to more than three indications and if a given Licensed Product utilizes only T-reg cell therapy or is a combination of both T-reg cell therapy and exosomes. Therefore, the lowest tier is paid when there is only a single indication being addressed with a single product. The highest tier is paid only on combination products where there are three or more indications being served. We are also required to pay a low single digit percentage for certain licensed services. We are required to pay royalties at between 10%-20% of sublicense revenue. Commencing on January 1, 2025, the minimum amount which will be owed by us once commercialization occurs is $50,000 annually.

The Methodist License Agreement provides that in the event we sublicense products and services covered by the Methodist License Agreement, then royalties owed to Houston Methodist would be computed as a percentage of payments received by us from the sublicensee. In addition, the termination provisions provide that Houston Methodist may only terminate the Methodist License Agreement, among other things, in the event that after five years we are not “Actively Attempting to Develop or Commercialize,” as such term is defined in the Methodist License Agreement.

In February 2021, we executed the SRA with HMRI. Pursuant to the SRA, we agreed to fund $1.5 million in research in the area of neurodegenerative diseases through February 2022. We subsequently amended the SRA to extend the term through February 2025, which includes an annual funding commitment of $1.5 million per year. As of September 15, 2022, we have provided notice to HMRI regarding termination of the SRA in expectation that a reduced yearly budget be negotiated post termination. On May 4, 2023, we executed the SRA with HMRI, in which we agreed to fund $0.5 million through May 2024.

In August 2022, we entered into the ARS License Agreement with ARS pursuant to which ARS granted us an option to, if we choose to exercise such option, to acquire an exclusive, royalty-bearing license for two patents regarding certain formulations of IL-2 (the product that serves as the basis for COYA 301), with the right to grant sublicenses through multiple tiers under these patents. In consideration for the ARS Option, we paid ARS a one-time, non-refundable, non-creditable option fee of $100,000.

On December 1, 2022, we exercised the ARS Option by written notice to ARS, or the Option Exercise Notice. Upon the delivery of the Option Exercise Notice (such date of delivery, the “Effective Date”), ARS automatically was deemed to have granted to us the licenses and all provisions of the ARS License Agreement and the ARS License Agreement became effective as of the Effective Date. Pursuant to the terms of the ARS License Agreement, we paid to ARS a mid-six-figure up-front fee.

In addition, we may also owe tiered payments to ARS based on our achievement of certain developmental milestones. Under the ARS License Agreement, we will pay an aggregate of $13.25 million in developmental milestone payments for the first Combination Product (as defined in the ARS License Agreement) in a new indication. We will then pay an aggregate of $11.6 million in developmental milestone payments for each Combination Product in each subsequent new indication. Further, for the first Mono Product (as defined

in the ARS License Agreement), we will pay an aggregate of $11.75 million in developmental milestone payments. We will then pay an aggregate of $5.85 million in developmental milestone payments for each Mono Product in each subsequent new indication, and we will owe an aggregate of $5.85 million if all developmental milestones are achieved for each new indication. We will also owe royalties on net sales of licensed products ranging from low to mid-single digit percentages. In the event we sublicense our rights under the ARS License Agreement, we will owe royalties on sublicense income within the range of 10% to 20%. To date, the $100,000 option fee and the mid-six-figure up-front fee (upon exercise of the ARS Option) are the only payments made to ARS under ARS License Agreement.

In March 2023, we entered into the DRL Agreement with DRL. The DRL Agreement became effective on April 1, 2023. Pursuant to the terms of the DRL Agreement, we will in-license DRL_AB to be used in the development and commercialization of COYA 302 in the U.S., Canada, Mexico, South America, the European Union, the United Kingdom, and Japan. In consideration for the license, we paid a one-time, non-refundable upfront fee of $350,000. We will pay to DRL up to an aggregate of approximately $2.9 million of pre-approval regulatory milestone payments for the first indication in the Field (as defined in the DRL Agreement) and an additional approximately $20.0 million if all other development, regulatory approval and sales milestones are incurred under the DRL Agreement. We will also pay to DRL a low-six figure milestone payment per additional indication. Further, pursuant to the DRL Agreement, we will pay to DRL single-digit royalties on Net Sales (as defined in the DRL Agreement).

See Note 2 in our condensed unaudited interim financial statements found elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are 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 recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. 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. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. From time to time, we make changes to our internal control over financial reporting that are intended to enhance its effectiveness and which do not have a material effect on our overall internal control over financial reporting.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission, or SEC, on March 29, 2023, as amended on May 1, 2023. Any of these factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional risk factors not presently known to us may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

On December 28, 2022, our registration statement on Form S-1 (Registration No. 333-268482) was declared effective by the SEC for our initial public offering pursuant to which we sold an aggregate of 3,050,000 shares of our common stock and accompanying warrants to purchase up to 1,525,000 shares of our common stock. Each share of common stock was sold together with one warrant to purchase one share of our common stock with an exercise price of $7.50 per share at a combined offering price of $5.00, for gross proceeds of approximately $15.3 million, before deducting expenses. Chardan Capital Markets, LLC acted as the representative of the several underwriters for the offering. On January 3, 2023, we closed the sale of the shares of our common stock and accompanying warrants to purchase shares of our common stock, resulting in net proceeds to us of approximately $13.4 million, after deducting underwriting discounts and commissions and other offering expenses. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates.

In connection with our initial public offering, we granted the underwriters a 30-day over-allotment option to purchase up to an additional 290,000 shares of our common stock and accompanying warrants to purchase 145,000 shares of our common stock to cover over-allotments at $5.00 per share and accompanying warrant, less underwriting discounts. On January 25, 2023, the underwriters purchased 237,804 shares of common stock and 145,000 warrants to purchase our common stock at $5.00 per share and accompanying warrant in connection with the over-allotment. Upon the sale of the over-allotment, we issued our underwriters an additional 16,646 warrants with an exercise price of $6.25 per warrant and a contractual life of five years. We received net proceeds of approximately $1.1 million, after deducting underwriting discounts for the common stock and warrants issued in connection with the over-allotment.

There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on December 30, 2022 pursuant to Rule 424(b).

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.


Delaware	85-4017781
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5850 San Felipe St., Suite 500 Houston, TX	77057
(Address of principal executive offices)	(Zip Code)


		Page
PART I	Financial Information	3

Item 1.	Financial Statements	3

	Condensed Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	3
	Condensed Unaudited Interim Statements of Operations for the Three and Six Months ended June 30, 2023 and 2022	4
	Condensed Unaudited Interim Statements of Stockholders’ Equity (Deficit) for the Six Months ended June 30, 2023 and 2022	5
	Condensed Unaudited Interim Statements of Cash Flows for the Six Months ended June 30, 2023 and 2022	6
	Notes to the Condensed Unaudited Interim Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II	Other Information	26

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

	Signatures	29


	June 30,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,102,392		$	5,933,702
Prepaids and other current assets		1,287,213			1,251,264
Total current assets		14,389,605			7,184,966
Fixed assets, net		79,630			93,310
Deferred financing costs		-			1,117,290
Total assets	$	14,469,235		$	8,395,566

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable	$	237,579		$	1,815,270
Accrued expenses		983,633			2,008,361
Total current liabilities		1,221,212			3,823,631
Convertible promissory notes		-			12,965,480
Total liabilities		1,221,212			16,789,111

Commitments and contingencies (Note 5)

Stockholders' equity (deficit):
Series A convertible preferred stock, $0.0001 par value: 10,000,000 shares authorized, none and 7,500,713 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		-			8,793,637
Common stock, $0.0001 par value; 200,000,000 shares authorized; 9,947,915 and 2,590,197 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		996			259
Additional paid-in capital		36,947,411			681,106
Accumulated deficit		(23,700,384	)		(17,868,547	)
Total stockholders' equity (deficit)		13,248,023			(8,393,545	)
Total liabilities and stockholders' equity (deficit)	$	14,469,235		$	8,395,566


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	1,067,952		$	1,447,373		$	2,299,664		$	2,426,177
In-process research and development		350,000			—			350,000			—
General and administrative		1,829,553			1,994,783			3,491,097			2,712,307
Depreciation		6,840			4,033			13,680			8,066
Total operating expenses		3,254,345			3,446,189			6,154,441			5,146,550
Loss from operations		(3,254,345	)		(3,446,189	)		(6,154,441	)		(5,146,550	)
Other income:
Change in fair value of convertible promissory notes		—			22,345			—			22,345
Other income, net		158,970			10,940			322,604			7,923
Net loss	$	(3,095,375	)	$	(3,412,904	)	$	(5,831,837	)	$	(5,116,282	)

Per share information:
Net loss per share of common stock, basic and diluted	$	(0.31	)	$	(1.32	)	$	(0.59	)	$	(1.98	)
Weighted-average shares of common stock outstanding, basic and diluted		9,947,915			2,590,197			9,835,505			2,590,148


	Convertible Preferred Stock										Additional					Total
	Series A						Common Stock				Paid-In		Accumulated			Stockholders'
	Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit) Equity
Balance, December 31, 2022		7,500,713		$	8,793,637			2,590,197	$	259	$	681,106	$	(17,868,547	)	$	(8,393,545	)
Conversion of convertible preferred stock upon initial public offering		(7,500,713	)		(8,793,637	)		1,316,926		132		8,793,505		-			-
Conversion of convertible promissory notes upon initial public offering		-			-			2,736,488		274		12,965,206		-			12,965,480
Sale of common stock in initial public offering and overallotment option, net of issuance costs of $2.3 million		-			-			3,287,804		329		14,136,099		-			14,136,428
Stock-based compensation expense and vesting of restricted stock units		-			-			16,500		2		180,385		-			180,387
Net loss		-			-			-		-		-		(2,736,462	)		(2,736,462	)
Balance, March 31, 2023		-			-			9,947,915		996		36,756,301		(20,605,009	)		16,152,288
Stock-based compensation expense		-			-			-		-		191,110		-			191,110
Net loss		-			-			-		-		-		(3,095,375	)		(3,095,375	)
Balance as of June 30, 2023		-		$	-			9,947,915	$	996	$	36,947,411	$	(23,700,384	)	$	13,248,023


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


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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒


	For the Six Months Ended June 30,
	2023		2022
External costs:
Clinical product candidates:
COYA 101	$	-	$	277,361
Preclinical product candidates:
COYA 200 Series		7,684		404,043
COYA 300 Series		1,478,693		117,345
Sponsored research		102,404		987,281
Internal costs:
Internal research and development expenses, including stock-based compensation		710,883		640,147
Total	$	2,299,664	$	2,426,177


Exhibit Number		Description
10.1		Amended and Restated Employment Agreement, dated July 11, 2023, between the Company and Dr. Fred Grossman (incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2023).
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.


101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	Coya Therapeutics, Inc.

Date: August 8, 2023	By:	/s/ Howard Berman
		Howard Berman
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 8, 2023	By:	/s/ David Snyder
		David Snyder
		Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Accounting Officer)